<PAGE>
As filed with the Securities and Exchange Commission on August 10, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
EXCEL REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Maryland 6798 33-0160389
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
16955 Via Del Campo, Suite 110
San Diego, California 92127
(619) 485-9400
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
Gary B. Sabin
Chairman of the Board, President
and Chief Executive Officer
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 110
San Diego, California 92127
(619) 485-9400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Scott N. Wolfe, Esq. Norman M. Gold, Esq.
Latham & Watkins Altheimer & Gray
701 "B" Street, Suite 2100 10 South Wacker, Suite 4000
San Diego, CA 92101 Chicago, IL 60606
(619) 236-1234 (312) 715-4000
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effectiveness of this Registration Statement.
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. ____
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ____
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ____
1
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Each Class of Securities Amount Proposed Maximum Proposed Maximum Amount of
to be Registered to be Offering Price Aggregate Offering Registration
Registered(1) Per Share(2) Price(2) Fee(2)(3)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share................ 63,450,124 shares $20.96875 $1,330,469,788
7.8% Series D Cumulative Voting Step-Up Premium Rate
Preferred Stock, par value $.01 per share............ 150,000 shares $ 500.00 $ 75,000,000 $414,614
Depositary Shares (4)................................. 1,500,000 shares
====================================================================================================================================
</TABLE>
(1) This Registration Statement relates to the Common Stock and Preferred Stock
represented by the Depositary Shares of the Registrant issuable to the
holders of Shares of Beneficial Interest and Preferred Shares represented
by Depositary Shares of New Plan Realty Trust, a Massachusetts business
trust ("New Plan"), in the proposed merger (the "Merger") of a wholly-owned
subsidiary of the Registrant with and into New Plan and the related
transactions described herein.
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the Shares of Beneficial Interest and Depositary Shares
of New Plan to be exchanged in the Merger, computed in accordance with Rule
457(c) on the basis of the average of the high and low prices per share of
such stock on the New York Stock Exchange and the OTC Bulletin Board
respectively, on August 7, 1998.
(3) $332,524 of the registration fee was previously paid with the preliminary
joint proxy statement/prospectus filing made by the Registrant and New Plan
on July 14, 1998 pursuant to Rule 457(b).
(4) Each Depositary Share of the Registrant represents a one-tenth fractional
interest in a share of a new issue of the Registrant's 7.8% Series D
Cumulative Voting Step-Up Premium Rate Preferred Stock, par value $.01 per
share.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
2
<PAGE>
NEW PLAN REALTY TRUST
1120 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
August 12, 1998
DEAR FELLOW NEW PLAN SHAREHOLDER,
I am writing to you not only as a Founder and the CEO and Chairman of our
company, but also as someone who, like you, has a significant investment in
it.
I place a high value on your investment as well as on mine. Therefore, I ask
that you approve the merger involving New Plan Realty Trust and Excel Realty
Trust. The merger would create a strong new force in our industry, a company
to be known as New Plan Excel Realty Trust. I urge you to read the full
description of the transaction as it is described in the Joint Proxy
Statement/Prospectus that accompanies this letter. But, meanwhile, allow me to
make a few points here:
. The Board of each company has unanimously approved the merger, which
would form one of the nation's largest owner/managers of community
shopping centers and other properties.
. I will serve as Chairman, and Arnold Laubich, our President, will serve
as CEO of the combined company.
. New Plan shareholders will own about 65%--almost two-thirds--of the
merged company, New Plan Excel Realty Trust.
. The nine present members of our Board of Trustees will hold 9 of 15 seats
on the Board of the merged company.
. The combination of the two companies will allow us to raise your dividend
immediately--initially to an annualized rate of $1.60 per share from the
present annualized rate of $1.50. New Plan has consistently increased the
dividend each quarter for 19 years. The combined company anticipates
continuing this practice.
. I truly believe that Excel Realty is a company whose experienced,
energetic management team shares the same values and objectives--growth
with safety--that New Plan Realty has long held. In 1997, among all REITs
that focus on community shopping centers (as we do), Excel Realty led the
industry with a 32.9% total return to shareholders.
As you review the prospectus, you will see a number of other reasons why I
believe that votes "FOR" the merger and the trust amendments that go with it
are in the best interest of all New Plan Realty shareholders.
Our principal goal remains what it has always been: to safeguard and
maximize the investment that all of us have in New Plan. In my own case, it
goes beyond my personal stake in the company, which represents most of my
family's net worth and the college trust funds of my grandchildren. (I still
hold every share of New Plan stock I have ever purchased or earned.)
Of equal importance, to me, is the investment of more than 50 years of
effort that I have put into our company and its predecessors. The time and
labor went toward building an enterprise that would grow and reward all of us.
At all times, my responsibility to the shareholders--including friends and
relatives--who entrusted me with their hard-earned dollars has been uppermost
in my mind. Today, along with many others who now share the responsibility, I
take considerable pride in the gains made thus far and the momentum that we
have going forward. I believe growth will result from our merger with Excel
that will further justify the confidence placed in us.
Thank you for taking time to read this letter. Because each and every vote
is very important, I again urge you to (1) read the Joint Proxy
Statement/Prospectus, and (2) sign and promptly return the enclosed white
proxy card to cast your votes "FOR" both the merger and the trust amendments
that go with it.
Most sincerely,
William Newman
Chairman and Chief Executive Officer
PS: Please do not fail to vote. Not voting counts the same as a "No" vote when
ballots are totaled. If you have questions, please call our proxy solicitor
MacKenzie Partners at 1-800-322-2885.
<PAGE>
NEW PLAN REALTY TRUST
1120 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 25, 1998
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the "New
Plan Special Meeting") of New Plan Realty Trust, a Massachusetts business
trust ("New Plan"), will be held on Friday, September 25, 1998 at 11:00 a.m.,
New York City time, at the Baruch College Conference Center, Room 750, 151
East 25th Street, New York, New York for the following purposes:
1. To consider and vote upon a proposal to approve certain amendments to
the Amended and Restated Declaration of Trust of New Plan Realty Trust,
dated as of January 15, 1996, a copy of which proposed trust amendments are
included as Annex II to the Joint Proxy Statement/Prospectus accompanying
this Notice (the "New Plan Trust Amendments"). The New Plan Trust
Amendments are required to permit the merger described below.
2. To consider and vote upon a proposal to approve the merger (the
"Merger"), pursuant to the Agreement and Plan of Merger, dated as of May
14, 1998 (the "Merger Agreement"), among New Plan Realty Trust, Excel
Realty Trust, Inc., a Maryland corporation ("Excel"), and ERT Merger Sub,
Inc., a Maryland corporation and a wholly-owned subsidiary of Excel, as
amended as of August 7, 1998. Copies of the original merger agreement and
the amendment thereto are included as Annex I and Annex I-A, respectively,
to the Joint Proxy Statement/Prospectus accompanying this Notice. The
details of the Merger and the Merger Agreement are described in the Joint
Proxy Statement/Prospectus accompanying this Notice.
3. To transact such other business as properly may come before the New
Plan Special Meeting or any adjournment or postponement thereof, including
any proposal to adjourn or postpone such meeting.
Only holders of record of shares of beneficial interest, no par value, of
New Plan at the close of business on August 12, 1998, the record date for the
New Plan Special Meeting, are entitled to notice of and to vote at the New
Plan Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE NEW PLAN SPECIAL
MEETING REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING POSTAGE-
PAID ENVELOPE OR SEND THE PROXY CARD VIA FACSIMILE TO NEW PLAN AT (212) 869-
9585, ATTENTION: STEVEN F. SIEGEL, SO THAT YOUR SHARES WILL BE REPRESENTED AT
THE NEW PLAN SPECIAL MEETING. SHAREHOLDERS WHO ARE PRESENT AT THE NEW PLAN
SPECIAL MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON, IF THEY SO
DESIRE.
BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE
NEW PLAN SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN
SHAREHOLDERS TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL
RESULT IN THE MERGER NOT OCCURRING.
By Order of the Board of Trustees,
William Newman
Chairman of the Board
New York, New York
August 12, 1998
<PAGE>
[LETTERHEAD OF EXCEL]
August 12, 1998
Dear Fellow Stockholder:
As many of you are aware, the board of directors (the "Excel Board") of
Excel Realty Trust, Inc. ("Excel") has unanimously approved a merger agreement
(the "Merger Agreement") with New Plan Realty Trust ("New Plan") to create one
of the nation's largest community and neighborhood shopping center REITs. If
approved by the shareholders of New Plan and the stockholders of Excel, the
name of the combined company will be "New Plan Excel Realty Trust, Inc." (the
"Combined Company"). Pursuant to the merger contemplated by the Merger
Agreement (the "Merger"), existing Excel stockholders will hold approximately
35% of the common stock of the Combined Company and the board of directors of
the Combined Company will initially consist of the six current directors of
the Excel Board and the nine current members of the New Plan board of
trustees. I will serve as President; William Newman, New Plan's current
Chairman and Chief Executive Officer, will serve as Chairman of the Combined
Company's board of directors; and Arnold Laubich, New Plan's current President
and Chief Operating Officer, will serve as Chief Executive Officer of the
Combined Company. In addition, Richard B. Muir, Excel's current Executive Vice
President, and James M. Steuterman, New Plan's current Executive Vice
President, will each serve as Executive Vice President and Co-Chief Operating
Officer of the Combined Company.
Accordingly, you are cordially invited to attend a special meeting of the
stockholders of Excel (the "Excel Special Meeting") to be held at the Rancho
Bernardo Inn, 17550 Bernardo Oaks Drive, San Diego, California, on Friday,
September 25, 1998, at 9:00 a.m. (PDT). As described in the enclosed Joint
Proxy Statement/Prospectus, at the Excel Special Meeting, the holders of
outstanding shares of common stock, par value $.01 per share, of Excel (the
"Excel Common Stock") will be asked to consider and vote upon (a) a proposal
to approve the issuance by Excel (the "Share Issuance") to existing New Plan
shareholders of Excel Common Stock and depositary shares, each depositary
share representing a one-tenth fractional interest in a share of a new issue
of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock, par
value $.01 per share, with a liquidation preference of $50.00 per depositary
share, (b) a proposal to approve certain amendments to the Excel Charter to,
among other things, change the name of Excel to "New Plan Excel Realty Trust,
Inc." and to increase the number of authorized shares of capital stock of
Excel to 275,000,000 (the "Charter Amendments") and (c) the election of ten
nominees to the Combined Company board of directors, such that the Combined
Company board of directors will consist of the six current directors of Excel
and the nine current members of the New Plan board of trustees (the "Election
of Directors").
THE EXCEL BOARD BELIEVES THAT THE MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF EXCEL AND ITS STOCKHOLDERS. THE EXCEL BOARD HAS UNANIMOUSLY
APPROVED AND DECLARED ADVISABLE THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND
THE ELECTION OF DIRECTORS, AND RECOMMENDS THAT YOU VOTE FOR AUTHORIZATION OF
THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
The accompanying Joint Proxy Statement/Prospectus provides a detailed
description of the Share Issuance, the Charter Amendments, the Election of
Directors and other information regarding matters to be considered at the
Excel Special Meeting. A copy of the proposed Articles of Amendment, which
would effect and reflect the Charter Amendments, is attached to the Joint
Proxy Statement/Prospectus as Annex III and a copy of the Merger Agreement is
attached to the Joint Proxy Statement/Prospectus as Annex I.
<PAGE>
The investment banking firm of Prudential Securities Incorporated
("Prudential Securities") has delivered its opinion to the Excel Board, dated
May 13, 1998, to the effect that, as of such date and based upon the
assumptions made, matters considered and limits of review set forth therein,
the exchange ratio in the Merger is fair to Excel from a financial point of
view. A copy of Prudential Securities' opinion is attached to the Joint Proxy
Statement/Prospectus as Annex VI.
Your vote on these matters is very important. The Share Issuance must be
approved by a majority of the total votes cast at the Excel Special Meeting. A
plurality of the votes cast at the Excel Special Meeting in favor of the
election of a director, assuming a quorum is present, is sufficient to elect a
director to the Combined Company board of directors. The Charter Amendments
must be approved by holders of at least 50% of the outstanding Excel Common
Stock.
We urge you to review carefully the enclosed materials and to return your
proxy promptly. STOCKHOLDERS WITH QUESTIONS REGARDING THE MERGER OR OTHER
TRANSACTIONS OR MATTERS DESCRIBED HEREIN MAY CONTACT GRAHAM R. BULLICK, SENIOR
VICE PRESIDENT, EXCEL REALTY TRUST, INC., AT (619) 485-9400.
Whether or not you plan to attend the Excel Special Meeting, please
complete, sign, date and promptly return your proxy card in the enclosed
postage paid envelope or via facsimile at (619) 485-8530, attention: Graham R.
Bullick. If you attend the meeting, you may vote in person if you wish, even
though you have previously returned your proxy.
Sincerely,
Gary B. Sabin
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
EXCEL REALTY TRUST, INC.
16955 VIA DEL CAMPO, SUITE 110
SAN DIEGO, CALIFORNIA 92127
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 25, 1998
TO THE STOCKHOLDERS OF EXCEL REALTY TRUST, INC.:
Notice is hereby given that a special meeting of the stockholders (the
"Excel Special Meeting") of Excel Realty Trust, Inc., a Maryland corporation
("Excel"), will be held at the Rancho Bernardo Inn, 17550 Bernardo Oaks Drive,
San Diego, California, on Friday, September 25, 1998, at 9:00 a.m. (PDT), for
the following purposes:
1. To consider and vote upon a proposal to approve the issuance by Excel
(the "Share Issuance") of shares of its common stock, par value $.01 per
share, and depositary shares, each of which represents a one-tenth
fractional interest in a share of a new issue of 7.8% Series D Cumulative
Voting Step-Up Premium Rate Preferred Stock, par value $.01 per share, with
a liquidation preference of $50.00 per depositary share, in connection with
the Agreement and Plan of Merger dated as of May 14, 1998 (the "Merger
Agreement"), among Excel, ERT Merger Sub, Inc., a Maryland corporation and
wholly-owned subsidiary of Excel ("Merger Sub"), and New Plan Realty Trust,
a Massachusetts business trust ("New Plan"), as amended as of August 7,
1998 pursuant to which Merger Sub will be merged with and into New Plan
with New Plan surviving as a wholly-owned subsidiary of Excel, all as
described in the accompanying Joint Proxy Statement/Prospectus. Excel after
the merger, together with New Plan as its wholly-owned subsidiary, will be
called "New Plan Excel Realty Trust, Inc." (the "Combined Company").
2. To consider and vote upon a proposal to approve certain amendments to
the Excel Charter to, among other things, change the name of Excel to "New
Plan Excel Realty Trust, Inc." and to increase the number of authorized
shares of capital stock of Excel to 275,000,000 (the "Charter Amendments"),
all as described in the accompanying Joint Proxy Statement/Prospectus.
3. To consider and vote upon a proposal to elect ten nominees to the
Combined Company board of directors, such that the Combined Company board
of directors will consist of the six current directors of Excel and the
nine current members of the New Plan board of trustees (the "Election of
Directors"), all as described in the accompanying Joint Proxy
Statement/Prospectus.
4. To transact such other business as properly may come before the Excel
Special Meeting or any adjournment or postponement thereof, including any
proposal to adjourn or postpone such meeting.
Only holders of record of Excel Common Stock at the close of business on
August 12, 1998, the record date for the Excel Special Meeting, are entitled
to notice of and to vote at the Excel Special Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE EXCEL SPECIAL
MEETING. PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY IN
THE ACCOMPANYING POSTAGE-PAID ENVELOPE OR SEND THE PROXY CARD VIA FACSIMILE TO
EXCEL AT (619) 485-8530, ATTENTION: GRAHAM R. BULLICK, SO THAT YOUR SHARES
WILL BE REPRESENTED AT THE EXCEL SPECIAL MEETING. STOCKHOLDERS WHO ARE PRESENT
AT THE EXCEL SPECIAL MEETING MAY WITHDRAW THEIR PROXY AND VOTE IN PERSON, IF
THEY SO DESIRE.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
By Order of the Board of Directors,
Gary B. Sabin
Chairman of the Board, President and
Chief Executive Officer
San Diego, California
August 12, 1998
<PAGE>
LOGO
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 10, 1998
NEW PLAN REALTY TRUST EXCEL REALTY TRUST, INC.
PROXY STATEMENT PROXY
STATEMENT/PROSPECTUS
This Joint Proxy Statement/Prospectus is being furnished to holders of shares
of beneficial interest, no par value, of New Plan Realty Trust (the "New Plan
Common Shares"), a Massachusetts business trust ("New Plan"), in connection
with the solicitation of proxies by the Board of Trustees of New Plan (the "New
Plan Board") for use at the special meeting of the shareholders of New Plan
(the "New Plan Special Meeting") to be held on September 25, 1998, at Baruch
College Conference Center, Room 750, 151 East 25th Street, New York, New York
and any postponements or adjournments thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
shares of common stock, par value $.01 per share, of Excel Realty Trust, Inc.
(the "Excel Common Stock"), a Maryland corporation ("Excel"), in connection
with the solicitation of proxies by the Board of Directors of Excel (the "Excel
Board") for use at the special meeting of stockholders of Excel (the "Excel
Special Meeting" and, together with the New Plan Special Meeting, the "Special
Meetings"), to be held on September 25, 1998, at the Rancho Bernardo Inn, 17550
Bernardo Oaks Drive, San Diego, California and any postponements or
adjournments thereof.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
Excel, which upon consummation of the merger (the "Merger") described herein
and transactions related thereto will be called "New Plan Excel Realty Trust,
Inc." ("New Plan Excel" or the "Combined Company"), with respect to up to
63,450,124 shares of common stock, par value $.01 per share, of the Combined
Company ("Combined Company Common Stock") and 1,500,000 voting depositary
shares ("Series D Depositary Shares") with a liquidation preference of $50.00
per depositary share each representing a one-tenth fractional interest in a
share of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock,
par value $.01 per share, of the Combined Company (the "Series D Preferred
Stock") to be issued pursuant to the Agreement and Plan of Merger dated May 14,
1998, among New Plan, ERT Merger Sub, Inc., a Maryland corporation and a wholly
owned subsidiary of Excel ("Merger Sub"), and Excel, as amended as of August 7,
1998 (the "Merger Agreement"). The Combined Company Common Stock and the Series
D Depositary Shares are sometimes collectively referred to as the "Combined
Company Shares." Excel has filed a registration statement with the Securities
and Exchange Commission (the "Commission") with respect to the Combined Company
Shares to be so issued.
This Joint Proxy Statement/Prospectus and the accompanying proxy cards are
first being mailed to shareholders of New Plan and stockholders of Excel on or
about August 12, 1998.
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 19 OF THIS JOINT PROXY
STATEMENT/PROSPECTUS FOR A DISCUSSION OF THE MATERIAL RISKS THAT SHOULD BE
CONSIDERED IN EVALUATING THE MERGER DESCRIBED HEREIN AND THE SECURITIES OFFERED
HEREBY.
-----------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT/PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMIS-
SION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS AUGUST , 1998.
<PAGE>
TABLE OF CONTENTS
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AVAILABLE INFORMATION..................................................... i
FORWARD-LOOKING STATEMENTS................................................ ii
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE......................... iii
SUMMARY................................................................... 1
The Companies........................................................... 1
The Combined Company.................................................... 1
The Merger.............................................................. 5
New Plan Special Meeting................................................ 6
Excel Special Meeting................................................... 7
Risk Factors............................................................ 8
Reasons for the Merger; Recommendations of the Boards................... 8
Other Terms of the Merger Agreement..................................... 10
Regulatory Matters...................................................... 11
Federal Income Tax Consequences of the Merger........................... 11
Securities Law Considerations........................................... 11
No Appraisal Rights..................................................... 11
New Plan Trust Amendments............................................... 11
Charter Amendments...................................................... 12
Election of Directors................................................... 12
Summary Historical Consolidated Financial Information of New Plan....... 13
Summary Historical Consolidated Financial Information of Excel.......... 14
The Combined Company Consolidated Condensed Summary Pro Forma Operating
and Financial Information.............................................. 15
Comparative Per Share Data.............................................. 17
Comparative Market Prices............................................... 18
RISK FACTORS.............................................................. 19
Risk Factors Relating to the Merger..................................... 19
Potential Adverse Effects of Combining New Plan and Excel............. 19
Potential Changes in Stock Prices..................................... 19
Termination Payments if Merger Fails to Occur......................... 20
No Appraisal Rights................................................... 20
Benefits to Certain Trustees, Directors and Officers; Possible
Conflicts of Interest................................................ 20
Dependence on Key Personnel........................................... 20
Decrease in Distributions Per Share to Holders of Excel Common Stock.. 21
Risk Factors Relating to Operations..................................... 21
Economic Performance and Value of Centers Dependent on Many Factors... 21
Dependence on Rental Income from Real Property........................ 21
Illiquidity of Real Estate Investments................................ 21
Risk of Bankruptcy of Major Tenants................................... 22
Environmental Risks................................................... 22
Reliance on Major Tenants............................................. 22
Adverse Effects of Changes in Market Interest Rates................... 22
Competition........................................................... 22
Staggered Board....................................................... 23
Shareholders Rights Plan.............................................. 23
Limitations on Share Acquisitions and Changes in Control.............. 22
No Limitation in Organizational Documents on Incurrence of Debt....... 23
</TABLE>
<PAGE>
<TABLE>
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Adverse Impact on Distributions of Failure to Qualify as a REIT........ 23
Possible Conflicts with Legacy......................................... 24
Year 2000 Compliance................................................... 25
NEW PLAN SPECIAL MEETING................................................... 26
Time, Place and Purpose.................................................. 26
Voting and Revocation of Proxies......................................... 26
Solicitation of Proxies.................................................. 26
Record Date, Quorum and Vote Required.................................... 26
Share Ownership of Board and Management.................................. 27
Recommendation........................................................... 27
Other Matters............................................................ 27
EXCEL SPECIAL MEETING...................................................... 28
Time, Place and Purpose.................................................. 28
Voting and Revocation of Proxies......................................... 28
Solicitation of Proxies.................................................. 28
Record Date, Quorum and Vote Required.................................... 28
Share Ownership of Board and Management.................................. 29
Recommendation........................................................... 29
Other Matters............................................................ 29
THE MERGER................................................................. 30
General Description of the Merger........................................ 30
Background of the Merger................................................. 30
Joint Reasons for the Merger............................................. 33
New Plan's Reasons for the Merger; Positive and Negative Factors
Considered.............................................................. 34
Opinion of Financial Advisor to New Plan Board........................... 36
Excel's Reasons for the Merger; Positive and Negative Factors Considered. 40
Opinion of Financial Advisor to Excel Board.............................. 42
Certain Transactions..................................................... 45
Interests of Certain Persons in the Merger............................... 46
Stock Option Plans....................................................... 49
Regulatory Matters....................................................... 49
Federal Income Tax Consequences of the Merger............................ 50
THE MERGER AGREEMENT....................................................... 52
The Merger............................................................... 52
Excel Stock Dividend..................................................... 52
Conversion of Shares..................................................... 52
New Plan Options......................................................... 53
Exchange of Certificates................................................. 53
Fractional Shares........................................................ 55
No Appraisal Rights...................................................... 55
Representations and Warranties........................................... 55
No Solicitation by New Plan.............................................. 55
No Solicitation by Excel................................................. 57
Conduct of Business Pending the Merger................................... 58
Indemnification.......................................................... 61
Employees................................................................ 62
Conditions Precedent to the Merger....................................... 62
Termination.............................................................. 63
Expenses and Termination Fees............................................ 64
Amendment and Waiver..................................................... 66
</TABLE>
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COMBINED COMPANY OPERATIONS AND MANAGEMENT................................. 67
Investment Highlights.................................................... 67
Board of Directors....................................................... 69
Executive Officers After the Merger...................................... 70
Headquarters............................................................. 71
Accounting............................................................... 71
Support Agreements....................................................... 71
Percentage Ownership Interests of the Combined Company................... 71
Trading Markets.......................................................... 72
Dividend Policy.......................................................... 72
Legacy Arrangements...................................................... 72
Dividend Reinvestment Plan............................................... 73
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF NEW PLAN......... 74
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF EXCEL............ 75
EXCEL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 76
Nature of Business....................................................... 76
Results of Operations.................................................... 76
Liquidity and Capital Resources.......................................... 77
Economic Conditions...................................................... 79
UNAUDITED PRO FORMA OPERATING AND FINANCIAL INFORMATION.................... 81
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS--UNAUDITED................. 81
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED For the
Year Ended July 31, 1997.................................................. 82
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED For the
Nine Months Ended April 30, 1998.......................................... 83
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION--UNAUDITED ......................................... 84
PRO FORMA CAPITALIZATION................................................... 89
FEDERAL INCOME TAX CONSEQUENCES RELATED TO THE COMBINED COMPANY............ 90
Taxation of the Combined Company as a REIT............................... 90
REIT Qualification Requirements.......................................... 91
Other Tax Matters........................................................ 96
Taxation of Taxable U.S. Stockholders Generally.......................... 97
DESCRIPTION OF EXCEL AND COMBINED COMPANY SECURITIES....................... 101
General.................................................................. 101
Common Stock............................................................. 101
Series D Depositary Shares............................................... 102
Series D Preferred Stock................................................. 104
Outstanding Preferred Stock.............................................. 109
Preferred Share Purchase Rights.......................................... 113
Restrictions on Ownership of Capital Stock............................... 116
Transfer Agent and Registrar............................................. 118
COMPARISON OF SHAREHOLDER AND STOCKHOLDER RIGHTS........................... 119
Authorized and Issued Shares............................................. 119
New Plan Preferred Shares/Series D Preferred Stock....................... 120
Shareholder Rights Plans................................................. 120
Shareholder and Stockholder Meetings..................................... 121
</TABLE>
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Record Date for Meetings.................................................. 121
Board of Trustees/Directors............................................... 122
Powers of the Board of Trustees/Directors................................. 123
Restrictions on Activities................................................ 123
Indemnification........................................................... 124
Standard of Conduct....................................................... 124
Limitation of Liability................................................... 124
Interested Party Transactions............................................. 125
Amendments................................................................ 125
Restriction on Transfer, Acquisition and Redemption of Shares............. 125
Shareholder Voting........................................................ 126
Informal Actions.......................................................... 127
Dividends and other Distributions......................................... 127
Limitations on Dissenters' Appraisal Rights............................... 128
Business Combinations..................................................... 128
Control Share Acquisitions................................................ 129
NEW PLAN TRUST AMENDMENTS................................................... 130
EXCEL CHARTER AMENDMENTS.................................................... 131
General................................................................... 131
Name Change............................................................... 131
Change in Authorized Capital.............................................. 132
Increase in Number of Excel Directors..................................... 132
Removal Requirements of Directors......................................... 132
Restriction on Amendment of Charter or Bylaws............................. 133
Modifications to Restrictions and Limitations on Ownership................ 133
Restated Bylaws........................................................... 133
ELECTION OF DIRECTORS....................................................... 135
New Plan Directors........................................................ 135
Excel Directors........................................................... 135
Nominees for Election..................................................... 136
Vote Required............................................................. 137
BUSINESS OF NEW PLAN........................................................ 138
General................................................................... 138
Acquisition, Financing and Operating Strategies........................... 138
Developments During the 1998 Fiscal Year through April 30, 1998........... 139
Competition............................................................... 139
Employees................................................................. 139
Qualification as a Real Estate Investment Trust........................... 139
BUSINESS OF EXCEL........................................................... 140
General................................................................... 140
Recent Developments....................................................... 141
Growth Strategy........................................................... 141
Financing Strategy........................................................ 146
Property Portfolio........................................................ 146
Principal Lessees......................................................... 155
Environmental Conditions.................................................. 156
Legal Proceedings......................................................... 157
Excel's Policies with Respect to Certain Activities....................... 157
MANAGEMENT OF EXCEL......................................................... 161
Directors and Executive Officers.......................................... 161
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Certain Committees of Excel Board; Meetings............................... 162
Compensation of the Directors of Excel.................................... 163
Compensation of the Executive Officers.................................... 163
Employment Agreements..................................................... 165
Compensation Plans........................................................ 165
Compensation Committee Interlocks and Insider Participation............... 166
Compensation Committee Report............................................. 166
Performance Graph......................................................... 168
Certain Relationships and Related Transactions............................ 169
Compliance With Section 16(a) of the Exchange Act......................... 169
PRINCIPAL STOCKHOLDERS OF EXCEL............................................. 170
LEGAL MATTERS............................................................... 171
EXPERTS..................................................................... 171
SHAREHOLDER PROPOSALS....................................................... 171
OTHER MATTERS............................................................... 171
INDEX TO FINANCIAL STATEMENTS............................................... F-1
ANNEXES TO THE JOINT PROXY STATEMENT/PROSPECTUS
ANNEX I The Merger Agreement
ANNEX I-A Amendment to Merger Agreement
ANNEX II New Plan Trust Amendments
ANNEX III Charter Amendments
ANNEX IVSeries D Preferred Stock
ANNEX V Opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
ANNEX VIOpinion of Prudential Securities Incorporated
</TABLE>
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AVAILABLE INFORMATION
Both New Plan and Excel are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information
filed by New Plan and Excel with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, at its Regional Offices at Suite
1300, 7 World Trade Center, New York, New York 10048 and at Suite 1400, 500
West Madison Street, Chicago, Illinois 60661 and can also be inspected and
copied at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20
Broad Street, New York, New York 10005. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees. The
Commission maintains a Web site that contains reports, proxy statements and
other information regarding New Plan and Excel that have been filed
electronically with the Commission. The address of such site is
http://www.sec.gov.
This Joint Proxy Statement/Prospectus incorporates documents by reference
that are not presented herein or delivered herewith. These documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available without charge to any person,
including any beneficial owner, to whom this Joint Proxy Statement/Prospectus
is delivered, upon request from the Office of the Secretary, New Plan Realty
Trust, 1120 Avenue of the Americas, New York, New York 10036 (telephone (212)
869-3000; fax (212) 869-9585). In order to allow adequate time for delivery of
the documents, any request should be made by September 18, 1998.
This Joint Proxy Statement/Prospectus is part of a registration statement on
Form S-4 (together with all amendments and exhibits, the "Registration
Statement") filed by Excel with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Combined Company
Shares to be issued pursuant to the Merger Agreement. This Joint Proxy
Statement/Prospectus does not contain all the information set forth or
incorporated by reference in the Registration Statement and the exhibits and
schedules relating thereto, certain parts of which are omitted in accordance
with the rules of the Commission. For further information, reference is made
to the Registration Statement and the exhibits filed or incorporated as a part
thereof, which are on file at the offices of the Commission and may be
obtained upon payment of the fee prescribed by the Commission, or which may be
examined without charge at the offices of the Commission. Statements contained
in this Joint Proxy Statement/Prospectus, or in any document incorporated in
this Joint Proxy Statement/Prospectus by reference, as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement or such
other document; each such statement is qualified in its entirety by such
reference.
All information contained in this Joint Proxy Statement/Prospectus with
respect to New Plan and its subsidiaries has been supplied by New Plan, and
all information with respect to Excel and its subsidiaries has been supplied
by Excel. Unless the context otherwise requires, all references in this Joint
Proxy Statement/Prospectus to "New Plan" will mean New Plan Realty Trust and
its subsidiaries on a consolidated basis or, where the context so requires,
New Plan Realty Trust only, and as the context may require, their
predecessors; and all references in this Joint Proxy Statement/Prospectus to
"Excel" will mean Excel Realty Trust, Inc. and its subsidiaries on a
consolidated basis or, where the context so requires, Excel Realty Trust, Inc.
only and, as the context may require, their predecessors.
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FORWARD-LOOKING STATEMENTS
This Joint Proxy Statement/Prospectus includes certain statements that may
constitute "forward looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking
statements in certain circumstances. Certain statements in the Summary, under
the captions "Risk Factors," "The Merger," "Combined Company Operations and
Management," "Excel Management Discussion and Analysis of Financial Condition
and Results of Operations," "Pro Forma Operating and Financial Information,"
"Pro Forma Capitalization," "Business of New Plan" and "Business of Excel" and
elsewhere in this Joint Proxy Statement/Prospectus and the documents
incorporated by reference herein contain or may contain information that is
forward-looking, including, without limitation: statements regarding the
effect of the Merger; other acquisitions; the Combined Company's future
financial performance; and the effect of government regulations. Such
statements may be identified by the use of forward-looking terminology such as
"may," " will," "expect," "anticipate," "estimate," "project," "should" or
"continue" or the negative thereof or other comparable terminology. Actual
results may differ materially from those described in the forward-looking
statements and will be affected by a variety of risks and factors including,
without limitation: national and local economic conditions; the general level
of interest rates; terms of governmental regulations that affect the Combined
Company and interpretations of those regulations; the competitive environment
in which the Combined Company will operate; financing risks; real estate
risks, including variations of real estate values and the general economic
climate in local markets and competition for tenants in such markets;
acquisition and development risks, including the failure of acquisitions to
perform in accordance with projections; and possible environmental
liabilities, including costs which may be incurred due to necessary
remediation of contamination of properties owned, acquired or previously owned
by New Plan, Excel or the Combined Company. In addition, the Combined
Company's continued qualification as a real estate investment trust ("REIT")
involves the application of highly technical and complex provisions of the
Internal Revenue Code of 1986, as amended (the "Code"). Readers should
carefully review the New Plan Incorporated Documents (as defined herein), New
Plan's and Excel's financial statements and the notes thereto, the pro forma
financial statements of the Combined Company and the risk factors described
herein.
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INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents (the "New Plan Incorporated Documents") filed by New
Plan with the Commission (File No. 001-08459) under the Exchange Act are
hereby incorporated by reference in this Joint Proxy Statement/Prospectus: (i)
New Plan's Annual Report on Form 10-K for the year ended July 31, 1997; (ii)
New Plan's Quarterly Report on Form 10-Q for the quarter ended October 31,
1997; (iii) New Plan's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1998; (iv) New Plan's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1998; (v) New Plan's Current Report on Form 8-K filed
on January 23, 1998; (vi) New Plan's Current Report on Form 8-K filed on April
24, 1998; (vii) New Plan's Current Report on Form 8-K filed on May 19, 1998;
(viii) New Plan's Current Report on Form 8-K filed on May 22, 1998 and (ix)
New Plan's Definitive Proxy Statement relating to New Plan's 1997 Annual
Meeting of Shareholders held on December 10, 1997.
All documents and reports subsequently filed by New Plan pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Joint
Proxy Statement/Prospectus and prior to the New Plan Special Meeting shall be
deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
This Joint Proxy Statement/Prospectus incorporates documents by reference
that are not presented herein or delivered herewith. These documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available without charge to any person,
including any beneficial owner, to whom this Joint Proxy Statement/Prospectus
is delivered, upon request from the Office of the Secretary, New Plan Realty
Trust, 1120 Avenue of the Americas, New York, New York 10036 (telephone (212)
869-3000; fax (212) 869-9585). In order to allow adequate time for delivery of
the documents, any request should be made by September 18, 1998.
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SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding the Merger Agreement and the Merger, nor is it
intended to be a complete description of all material facts regarding New Plan,
Excel or the Combined Company or the matters to be considered at the Special
Meetings and is qualified in all respects by the information appearing
elsewhere or incorporated by reference in this Joint Proxy
Statement/Prospectus, the Annexes hereto and the documents referred to herein
and therein (including, without limitation, the consolidated financial
statements of New Plan and Excel).
THE COMPANIES
New Plan. New Plan is a self-administered and self-managed equity REIT, which
was organized on July 31, 1972 as a business trust under the laws of the
Commonwealth of Massachusetts. New Plan is primarily engaged in the business of
managing, operating, leasing, acquiring, developing and investing in shopping
centers, factory outlet centers and apartment communities. As of April 30,
1998, New Plan owned fee or leasehold interests in 132 shopping centers
containing an aggregate of approximately 18.9 million square feet of gross
leaseable area ("GLA"), six factory outlet centers containing an aggregate of
approximately 1.8 million square feet of GLA and 52 apartment communities
containing approximately 12,400 units. Such properties of New Plan are
primarily located in the eastern half of the United States. The average
occupancy rates at April 30, 1998 for the shopping centers, factory outlet
centers and apartment communities were approximately 91%, 92% and 92%,
respectively.
New Plan's principal executive offices are located at 1120 Avenue of the
Americas, New York, New York 10036, and its telephone number is (212) 869-3000.
For further information concerning New Plan, see "Business of New Plan."
Excel. Excel is a self-administered and self-managed equity REIT, which was
incorporated under the laws of the State of California in 1985 and
reincorporated as a Maryland corporation in July 1993. Excel is primarily
engaged in the business of managing, operating, leasing, acquiring, developing
and investing in (i) multi-tenant retail properties (the "Shopping Centers");
(ii) single tenant net leased retail properties (the "Single Tenant
Properties"); and (iii) commercial properties and office buildings (the
"Commercial Properties"). As of March 31, 1998, Excel owned 82 Shopping Centers
containing an aggregate of approximately 12.2 million square feet of GLA, 53
Single Tenant Properties containing an aggregate of approximately 1.6 million
square feet of GLA and four Commercial Properties containing an aggregate of
approximately 113,000 square feet of GLA. The average occupancy rates at March
31, 1998 for the Shopping Centers, Single Tenant Properties and the Commercial
Properties were approximately 96.2%, 90.7% and 98.7%, respectively.
Excel's principal executive offices are located at 16955 Via Del Campo, Suite
110, San Diego, California 92127, and its telephone number is (619) 485-9400.
For further information concerning Excel, see "Business of Excel."
Merger Sub. Merger Sub was organized on May 13, 1998 by Excel as a Maryland
corporation for the purpose of effecting the Merger. Merger Sub has no material
assets and has not engaged in any business except in connection with the
Merger. Its principal executive offices are located at 16955 Via Del Campo,
Suite 110, San Diego, California 92127, and its telephone number is (619) 485-
9400.
THE COMBINED COMPANY
Upon consummation of the Merger, New Plan and Excel will operate under the
name "New Plan Excel Realty Trust, Inc." The Combined Company will be one of
the nation's largest community and neighborhood shopping center REITs (based
upon market capitalization, square footage of GLA and total revenue) with a
total, as of April 30, 1998, of 329 properties (267 retail properties, 52
apartment communities and 10 commercial properties) in 31 states comprising
over 34.6 million square feet of GLA and approximately 12,400 apartment units.
As a strategic combination, the Merger allows New Plan shareholders and Excel
stockholders to become stockholders of the Combined Company.
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Investment Highlights. The Merger brings together two strong companies to
create a national real estate company with greater size, financial strength and
market capitalization than either company could achieve by itself in the near
future. Among the key features of the Combined Company will be:
GREATER MARKET CAPITALIZATION. The Combined Company will have a total
equity market capitalization of approximately $2.1 billion (based on a
closing price of $21.1875 per New Plan Common Share, $25.25 per share of 8
1/2% Series A Cumulative Convertible Preferred Stock, par value $.01 per
share, of Excel ("Series A Preferred Stock"), $24.6875 per depositary share
of 8 5/8% Series B Cumulative Redeemable Preferred Stock, par value $.01
per share, of Excel ("Series B Preferred Stock") and a value of $50.00 per
depositary share of a 7.8% Series A Cumulative Step-Up Premium Rate
Preferred Share, par value $1.00 per share, of New Plan (a "New Plan
Preferred Share") on August 7, 1998). This level of market capitalization
is expected to enhance the attractiveness of the Combined Company to
institutional investors who perceive REIT securities as important real
estate investment vehicles. A greater market capitalization is also
expected to lead to greater visibility and increased coverage in the
investment community and should also create greater liquidity for
stockholders and a more attractive currency to effect acquisitions.
FOCUSED GROWTH STRATEGY. The Combined Company will continue the respective
growth strategies of New Plan and Excel in the context of a larger
organization with greater resources than either company would have
individually. The Combined Company will focus on acquiring, owning and
managing a diverse portfolio of commercial retail properties and apartment
communities in select markets throughout the United States that will
generate stable cash flows and present the opportunity for capital
appreciation. This growth strategy will be executed under the conservative
financial strategies employed by New Plan and Excel in the past while
taking advantage of New Plan's strong credit rating and lower cost of
capital and Excel's flexible investment structure.
NATIONAL PROPERTY PORTFOLIO. The Combined Company will be a national real
estate company with concentrations of retail properties and apartment
communities in local and urban markets in 31 states. Geographic
diversification will enable the Combined Company to increase or decrease
investments in various regions to take advantage of the relative strength
and investment opportunities in diverse local markets and reduce exposure
to regional and local economic cycles. The Combined Company will have a
diverse group of high quality retail tenants with the total fixed minimum
annual rentals of its largest tenant and second largest tenant accounting
for less than 5.4% and 2.0%, respectively, of the Combined Company's
scheduled annualized base rent ("ABR") as of April 30, 1998.
FINANCIAL STRENGTH. The Combined Company has been advised that it will
likely retain at the outset the strong credit ratings of New Plan of A+ and
A2 from Standard and Poor's Corporation ("Standard & Poor's") and Moody's
Investors Service, Inc. ("Moody's"), respectively, with negative
implications in view of the Merger. These credit ratings would continue to
be the highest combined credit ratings for any public REIT. On a pro forma
basis, as of April 30, 1998, the Combined Company would have a ratio of
debt to total market capitalization of 27.4% (which is below the industry
average), a ratio of debt to total assets of 34.4% (which is also below the
industry average) and a total of 264 unencumbered properties with total
undepreciated book value of $1.9 billion to support the Combined Company's
outstanding unsecured debt. On a pro forma basis, for the year ended July
31, 1997, the Combined Company would have had total revenues of $383.7
million and net income of $140.2 million.
HIGHLY REGARDED MANAGEMENT TEAM. The management teams of New Plan and Excel
have consistently been regarded as leaders and innovators in the REIT
industry and have enjoyed reputations for management excellence. These two
management teams have over the last five years successfully acquired a
total of 165 retail properties for an aggregate purchase price (including
assumed mortgages) of approximately $1.4 billion representing over
approximately 22.2 million square feet of GLA, in addition to New Plan's
acquisition of 10,588 apartment units for an aggregate purchase price
(including assumed mortgages) of approximately $298.8 million. Together,
the Combined Company management team will reflect the consistent management
philosophies of New Plan and Excel, New Plan's long-held status as a
pioneer in the community and neighborhood shopping center industry and
Excel's reputation for entrepreneurialism.
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COMPETITIVE ADVANTAGES. The Combined Company is expected to enjoy
competitive advantages resulting from (i) its national portfolio which will
permit it to compete effectively for national and regional tenants by
offering a wide selection of sites, (ii) significant concentrations of
properties in certain markets and favorable current market trends which
will create opportunities to negotiate favorable lease terms with existing
and prospective tenants, and (iii) the potential synergies resulting from
complementary property management offices and teams and operating
efficiencies expected to be realized which will enhance the overall
competitiveness of the Combined Company.
POSITIONED FOR GROWTH. With a greater market capitalization, experienced
management and financial strength, the Combined Company is positioned as an
industry leader to take advantage of opportunities emerging and expected to
emerge in a consolidating industry. As a consolidator, these factors,
together with an extensive network of industry contacts, will enable the
Combined Company to continue an aggressive acquisition program and seek out
larger opportunities.
See "Combined Company Operations and Management--Investment Highlights."
Board of Directors. The Board of Directors of the Combined Company (the
"Combined Company Board") will be comprised of the nine current members of the
New Plan Board and the six current members of the Excel Board. William Newman,
currently Chairman of the New Plan Board and Chief Executive Officer of New
Plan, will be Chairman of the Combined Company Board. The Combined Company will
have a staggered board consisting of three classes and members of the Combined
Company Board will be elected to the various classes as provided in the Merger
Agreement. See "Combined Company Operations and Management--Board of Directors"
and "Election of Directors."
Executive Officers. Arnold Laubich, currently President and Chief Operating
Officer of New Plan, will be Chief Executive Officer of the Combined Company,
and Gary Sabin, currently Chief Executive Officer and President of Excel, will
be President of the Combined Company. James M. Steuterman, currently Executive
Vice President of New Plan, and Richard B. Muir, currently Executive Vice
President and Secretary of Excel, each will serve as Executive Vice President
and Co-Chief Operating Officer of the Combined Company.
The Combined Company intends and expects that Mr. Laubich will eventually
succeed Mr. Newman as Chairman of the Combined Company Board at such time as
Mr. Newman is no longer serving in such capacity and that Mr. Sabin will
eventually succeed Mr. Laubich as Chief Executive Officer of the Combined
Company at such time as Mr. Laubich is no longer serving in such capacity. See
"Combined Company Operations and Management--Executive Officers After the
Merger."
Investment Committee. The Amended and Restated Bylaws of the Combined Company
(the "Combined Company Bylaws") will provide for, among other matters, the
formation of a four member Investment Committee of the Combined Company Board.
The Investment Committee will have the power, within prescribed limits, to
effect certain acquisitions and dispositions and related financing
transactions, without approval of the Combined Company Board. The members of
the Investment Committee will be Arnold Laubich, Gary Sabin, James Steuterman
and Richard Muir. Mr. Sabin will be the Chairman of the Investment Committee.
See "Combined Company Operations and Management--Board of Directors--Investment
Committee."
Headquarters. The Combined Company will have its corporate headquarters in
New York, New York with operational headquarters in New York, New York and San
Diego, California. See "Combined Company Operations and Management--
Headquarters."
Accounting. The Merger will be accounted for in accordance with Accounting
Principles Board Opinion No. 16 as a reverse merger for financial reporting
purposes as if New Plan was acquiring Excel. Accordingly, upon consummation of
the Merger, the assets and liabilities of Excel will be revalued to reflect
their estimated fair value. Because the Merger will be accounted for as an
acquisition of Excel by New Plan, the Combined Company financial statements
prior to the consummation of the Merger will include only the historical
financial results of New Plan. The Combined Company financial statements
subsequent to the Merger will include the financial results of Excel.
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Support Agreements. Each of William Newman, Arnold Laubich and Gary Sabin
have agreed, following the consummation of the Merger and continuing until he
no longer beneficially owns any voting securities of the Combined Company or
serves as a director or officer of the Combined Company, to (a) vote all of his
shares of the Combined Company Common Stock in accordance with the
recommendations of the Combined Company Board on all matters submitted to
stockholders and (b) not take any position contrary to the positions of the
Combined Company Board. See "Combined Company Operations and Management--
Support Agreements."
Percentage Ownership Interests of the Combined Company. Based on the number
of shares of Excel Common Stock and New Plan Common Shares outstanding on
August 12, 1998, and assuming the issuance of (a) approximately 4,688,068
shares of Excel Common Stock pursuant to the .20 dividend to be declared and
paid by Excel on the Excel Common Stock prior to the consummation of the Merger
(the "Excel Stock Dividend") and (b) approximately 59,874,174 million shares of
the Combined Company Common Stock in connection with the Merger, upon
consummation of the Merger there will be approximately 88,002,580 million
shares of the Combined Company Common Stock outstanding. Upon such issuance,
the former shareholders of New Plan will own approximately 65% and the
stockholders of Excel will own approximately 35% of the Combined Company Common
Stock, assuming conversion of Excel's convertible preferred stock into
2,643,008 shares of Excel Common Stock and Excel's Down REIT units into
approximately 2,179,193 shares of Excel Common Stock. See "Combined Company
Operations and Management--Percentage Ownership Interests of the Combined
Company."
Trading Markets. Following the effectiveness of the Merger (the "Effective
Time"), the shares of Combined Company Common Stock will trade on the NYSE
under the new symbol "NXL," and Series D Depositary Shares will trade on the
NYSE under the new symbol "NXLprD." The outstanding shares of preferred stock,
par value $.01 per share, of Excel (the "Excel Preferred Stock") will continue
to trade on the NYSE as follows: shares of Series A Preferred Stock will trade
on the NYSE under the new symbol "NXLprA," and the current depositary shares
(the "Series B Depositary Shares") of Excel, each representing a one-tenth
fractional interest in a share of Series B Preferred Stock, will trade on the
NYSE under the new symbol "NXLprB."
Dividend Policy. The Merger Agreement provides that the initial quarterly
dividend to be paid on the Combined Company Common Stock will be at the
annualized rate of $1.60 per share ($.40 per share for the first quarter) and,
after anticipated minimum quarterly increases of at least $.0025 per share,
each stockholder of the Combined Company is expected to receive aggregate
dividend distributions of $1.625 per share for the 12-month period immediately
following the initial quarterly dividend payment of $.40 per share. Thereafter,
it is anticipated that the quarterly dividend will continue to be increased by
a minimum of at least $.0025 per share (which quarterly increases amount to
$.01 per share on an annualized basis and effectively increase the annualized
dividend rate by $.04 per share for each share held over a 12-month period)
until the annualized quarterly dividend on the Combined Company Common Stock is
at least $1.67 per share. The dividend of $1.625 per share represents an
increase in the dividend to be received by the New Plan shareholders and a
decrease in the dividend to be received by the Excel stockholders. With respect
to the currently outstanding Excel Common Stock, the $1.625 dividend is
equivalent to $1.95 per share after giving effect to the 20% Excel Stock
Dividend (as compared to the current annualized Excel dividend of $2.00 per
share).
The maintenance of this dividend policy will be subject to various factors
including the payment of the New Plan Pre-Merger Dividend (as defined herein)
and the discretion of the Combined Company Board, the exercise by the Combined
Company Board of its duties to the stockholders of the Combined Company, the
ability to pay dividends under applicable law and the effect which the payment
of dividends may have from time to time on the maintenance by the Combined
Company of its status as a REIT. See "--Other Terms of the Merger Agreement--
Interim Dividends" below in this "Summary" section. The dividend rate on the
Series D Preferred Stock and the Series D Depositary Shares will be the same as
on the New Plan Preferred Shares (as defined herein) and the New Plan
Depositary Shares (as defined herein). See "Combined Company Operations and
Management--Dividend Policy."
Legacy Arrangements. Excel and Excel Legacy Corporation ("Legacy"), which was
recently spun off by Excel to its stockholders, are parties to a number of
agreements relating to such spinoff and the ongoing
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relationship between Excel and Legacy, including certain agreements which
govern the provision of services by Excel employees to Legacy and provide for
the resolution of potential intercompany conflicts with respect to certain
types of investment opportunities. In connection with the Merger Agreement,
Excel has entered into amendments to certain agreements with Legacy to be
effective as of the Effective Time which (i) clarify that Legacy will pay to
the Combined Company 23% of the salary and bonus of certain Combined Company
executive officers, including Gary Sabin, as compensation for their services to
Legacy, (ii) clarify that the Merger does not result in a change of control
permitting termination of such agreements and (iii) change certain procedures
relating to potential investment opportunities of Legacy.
In connection with the execution of the Merger Agreement, New Plan acquired
an option for the Combined Company to purchase from Legacy at the Effective
Time a number of shares of common stock, par value $.01 per share, of Legacy
(the "Legacy Shares") which when issued would equal between 5.0% and 9.8% of
the outstanding Legacy Shares at a price equal to the average of the closing
trading prices of the Legacy Shares for the ten trading days ending two days
prior to the Effective Time (but not less than $5.00 per share). If Legacy
Shares are so purchased, the Combined Company would then be entitled to
designate one member to the board of directors of Legacy, and such right would
continue for so long as the Combined Company owns at least 5.0% of the
outstanding Legacy Shares. See "Combined Company Operations and Management--
Legacy Arrangements."
Dividend Reinvestment Plan. The Combined Company will offer its stockholders
an opportunity to participate in a Distribution Reinvestment and Share Purchase
Plan (the "New Plan Excel DRIP") which will initially be substantially similar
to the current New Plan distribution reinvestment and share purchase plan
(including its 5% discount feature). The New Plan Excel DRIP will provide the
Combined Company's stockholders with an opportunity to reinvest cash
distributions and purchase additional shares of Combined Company Common Stock,
without paying any brokerage commission, service charge or other expense.
Participants in the New Plan Excel DRIP will be able to have cash
distributions on all or any portion of the Combined Company Common Stock owned
by them automatically reinvested in shares of newly issued Combined Company
Common Stock at a price which reflects a five percent (5%) discount to the
market price of shares of Combined Company Common Stock on the dividend payment
date. Participants will also be able to purchase additional shares of Combined
Company Common Stock within prescribed limits at 100% of the market price.
Participation in the New Plan Excel DRIP will be optional. The Combined
Company will furnish stockholders with a prospectus and related documents
describing in detail the terms and conditions of the New Plan Excel DRIP.
Stockholders should not consider participating in the New Plan Excel DRIP until
they have carefully reviewed such prospectus. If a stockholder of the Combined
Company does not wish to participate in the New Plan Excel DRIP, such
stockholder will receive distributions, as declared, by check as usual. See
"Combined Company Operations and Management--Dividend Reinvestment Plan."
THE MERGER
Excel, Merger Sub and New Plan have entered into the Merger Agreement. At the
Effective Time, (a) each New Plan Common Share outstanding immediately prior to
the Effective Time (other than shares held in New Plan's treasury or owned by
Excel, if any, which shares will be cancelled) will be converted into the right
to receive one share of Combined Company Common Stock (the "Exchange Ratio"),
(b) each New Plan Preferred Share outstanding immediately prior to the
Effective Time (other than shares held by New Plan as treasury stock or owned
by Excel, if any, which shares will be cancelled) will be converted into one
share of Series D Preferred Stock, and each depositary share (a "New Plan
Depositary Share") representing a one-tenth fractional interest in a New Plan
Preferred Share outstanding immediately prior to the Effective Time will be
converted into the right to receive one voting Series D Depositary Share and
(c) Merger Sub will be merged with and into New Plan with New Plan surviving as
a wholly owned subsidiary of Excel. The Series D Preferred Stock will have the
terms set forth on Annex IV hereto, will have ten votes per share (or 20 votes
per share when voting only
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with other Combined Company Preferred Stock (as defined herein) ranking on a
parity therewith as to dividends and upon liquidation, dissolution or winding
up of the Combined Company and having similar voting rights), with each Series
D Depositary Share having one vote (voting together with the Combined Company
Common Stock), and two votes when voting with such parity stock, and will
accrue dividends from the end of the last period with respect to which the New
Plan Preferred Shares received a dividend payment. The Exchange Ratio assumes
that prior to the Effective Time, Excel will have declared and paid on each
share of Excel Common Stock the Excel Stock Dividend. See "The Merger
Agreement--Conversion of Shares."
Each New Plan Common Share to be converted in the Merger shall be converted
together with its associated share purchase right (a "New Plan Right").
References herein to New Plan Common Shares to be converted in the Merger are
deemed to include the associated New Plan Rights. Each share of Combined
Company Common Stock issued to holders of New Plan Common Shares in the Merger
will be issued together with one associated preferred stock purchase right (a
"Combined Company Right") per share in accordance with the Rights Agreement
dated as of May 15, 1998 (the "Rights Agreement") between Excel and BankBoston,
N.A., as rights agent (the "Rights Agent"). See "The Merger Agreement--
Conversion of Shares."
The Merger will not result in the acceleration of any outstanding stock
options. At the Effective Time, to the extent not prohibited by the terms of
the relevant governing instrument, New Plan's obligations with respect to each
option to purchase New Plan Common Shares (each, a "New Plan Option") that is
outstanding and unexercised immediately prior thereto shall be assumed by the
Combined Company. Each New Plan Option shall cease to represent a right to
purchase New Plan Common Shares and shall instead represent a right to purchase
an equal number of shares of Combined Company Common Stock at the same exercise
price. Each such assumed New Plan Option shall be subject to the same terms and
conditions (including expiration date, vesting and exercise provisions) as were
applicable to New Plan Options outstanding and unexercised immediately prior to
the Effective Time. All outstanding options to purchase Excel Common Stock will
remain outstanding and be unaffected by the Merger (except as adjusted to
account for the Excel Stock Dividend). See "The Merger Agreement--New Plan
Options."
NEW PLAN SPECIAL MEETING
Time, Place and Purpose. The New Plan Special Meeting will be held on Friday,
September 25, 1998, at 11:00 a.m., New York City time, at Baruch College
Conference Center, Room 750, 151 East 25th Street, New York, New York. At the
New Plan Special Meeting, shareholders will consider and vote upon (a) a
proposal to approve certain amendments to the Amended and Restated Declaration
of Trust of New Plan Realty Trust dated as of January 15, 1996 (the "New Plan
Declaration of Trust") necessary to permit the Merger (the "New Plan Trust
Amendments"), (b) a proposal to approve the Merger contemplated by the Merger
Agreement and (c) such other matters that may properly come before the New Plan
Special Meeting including any motion or proposal to adjourn or postpone to a
later date to permit further solicitation of proxies. See "New Plan Special
Meeting--Time, Place and Purpose."
Record Date, Quorum and Vote Required. Only holders of record of New Plan
Common Shares at the close of business on August 12, 1998 (the "New Plan Record
Date") are entitled to receive notice of and to vote at the New Plan Special
Meeting. At the close of business on the New Plan Record Date, there were
59,874,174 New Plan Common Shares outstanding, each of which entitles the
registered holder thereof to one vote. The holders of a majority of the New
Plan Common Shares entitled to vote, present in person or by proxy, will
constitute a quorum for purposes of the New Plan Special Meeting. Approval of
the proposals to approve and adopt the New Plan Trust Amendments and the Merger
require the affirmative vote of the holders of at least 66 2/3% of the
outstanding New Plan Common Shares on the New Plan Record Date. Approval of
both the New Plan Trust Amendments and the Merger by the requisite vote of New
Plan shareholders is a condition to, and is required for, consummation of the
Merger. Dissenting holders of New Plan Common Shares will not have appraisal
rights in connection with the Trust Amendments, the Merger or any other matters
presented for consideration at the New Plan Special Meeting. See "New Plan
Special Meeting--Record Date, Quorum and Vote Required."
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Share Ownership of Board and Management. As of the New Plan Record Date,
members of the New Plan Board, executive officers of New Plan and their
respective affiliates beneficially owned 3,735,568 New Plan Common Shares
(which includes 1,262,750 shares which may be acquired upon the exercise of
stock options exercisable within 60 days from the New Plan Record Date),
representing approximately 6.1% of the outstanding shares at such date. As of
the New Plan Record Date, William Newman and Arnold Laubich collectively owned
1,701,658 outstanding New Plan Common Shares and have each agreed to vote such
New Plan Common Shares in favor of the New Plan Trust Amendments and the
Merger. See "New Plan Special Meeting--Share Ownership of Board and
Management."
EXCEL SPECIAL MEETING
Time, Place and Purpose. The Excel Special Meeting will be held on Friday,
September 25, 1998, at 9:00 a.m., Pacific Daylight Time, at the Rancho Bernardo
Inn, 17550 Bernardo Oaks Drive, San Diego, California. At the Excel Special
Meeting, stockholders of Excel will consider and vote upon (a) a proposal to
approve the issuance of approximately 59,874,174 shares of the Combined Company
Common Stock and 1,500,000 Series D Depositary Shares (the "Share Issuance"),
(b) a proposal to approve certain amendments (the "Charter Amendments") to the
current Articles of Amendment and Restatement of Excel (the "Articles of
Amendment and Restatement") which comprise a portion of the charter of Excel
(the "Excel Charter") to, among other matters, change the name of Excel to New
Plan Excel Realty Trust, Inc. and increase the authorized capital stock of
Excel such that the Combined Company will have authorized 250,000,000 shares of
Combined Company Common Stock and 25,000,000 shares of preferred stock, par
value $.01 per share (the "Combined Company Preferred Stock") (the Excel
Charter as amended by the Charter Amendments is referred to herein as the
"Combined Company Charter"), (c) the election of ten nominees to the Combined
Company Board, such that the Combined Company Board will consist of the six
current directors of Excel and the nine current members of the New Plan Board
(the "Election of Directors") and (d) such other matters as may properly come
before the Excel Special Meeting including any motion or proposal to adjourn or
postpone to a later date to permit further solicitation of proxies. See "Excel
Special Meeting--Time, Place and Purpose."
Record Date, Quorum and Vote Required. Only holders of record of shares of
Excel Common Stock at the close of business on August 12, 1998 (the "Excel
Record Date") are entitled to receive notice of and to vote at the Excel
Special Meeting. At the close of business on the Excel Record Date, there were
23,440,338 shares of Excel Common Stock outstanding, each of which entitles the
registered holder thereof to one vote. The holders of a majority of the issued
and outstanding Excel Common Stock as of the Excel Record Date will constitute
a quorum for purposes of the Excel Special Meeting. Approval of the Share
Issuance will require the affirmative vote of a majority of the vote cast at
the Excel Special Meeting; provided that the total vote cast at the Excel
Special Meeting represents over 50% in interest of all Excel Common Stock
entitled to vote on such proposal. Approval of the Share Issuance by the
holders of Excel Common Stock is required by the rules of the NYSE. A plurality
of votes cast at the Excel Special Meeting is sufficient to elect each director
nominated by the Excel Board, assuming the presence of a quorum. Approval of
the Charter Amendments will require the affirmative vote of the holders of a
majority of the outstanding shares of Excel Common Stock. Approval of each of
the Share Issuance, the Charter Amendments and the Election of Directors by the
requisite vote of the Excel stockholders is a condition to, and is required
for, consummation of the Merger. Dissenting holders of Excel Common Stock will
not have appraisal rights in connection with the Merger or any other matters
presented for consideration at the Excel Special Meeting. See "Excel Special
Meeting--Record Date, Quorum and Vote Required."
Share Ownership of Board and Management. As of the Excel Record Date, members
of the Excel Board, executive officers of Excel and their respective affiliates
beneficially owned 2,724,362 shares of Excel Common Stock (which includes
1,547,150 shares which may be acquired upon the exercise of stock options
exercisable within 60 days from the Excel Record Date), representing
approximately 10.9% of the outstanding shares at such date. As of the Excel
Record Date, Gary Sabin owned 823,225 outstanding shares of Excel Common Stock
and has agreed to vote such shares of Excel Common Stock in favor of the Share
Issuance, the Charter Amendments and the Election of Directors. See "Excel
Special Meeting--Share Ownership of Board and Management."
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RISK FACTORS
New Plan shareholders and Excel stockholders should consider carefully
certain risks relating to the Merger, the shares of Combined Company Common
Stock and Series D Depositary Shares to be issued in the Merger and the
business of each of New Plan, Excel and the Combined Company. Factors to be
considered include the risks associated with combining two previously
independent companies, the dependence on key personnel and the risks associated
with investments in and management of shopping centers, factory outlet centers
and apartment communities. Shareholders of New Plan and stockholders of Excel
should carefully evaluate the matters set forth under "Risk Factors" beginning
on page 19 of this Joint Proxy Statement/Prospectus.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS
Joint Reasons. In reaching their respective decisions to approve the
transactions contemplated by the Merger Agreement, the New Plan Board and the
Excel Board each considered the benefits to be derived from combining two
complementary real estate companies and creating one of the largest community
and neighborhood shopping center REITs in the United States (based upon market
capitalization, square footage of GLA and total revenue). Each board also
considered that the Merger represents a strategic combination of New Plan and
Excel and that the New Plan shareholders and Excel stockholders would be in a
position to realize the expected benefits of this combination. Each board
determined that by combining two strong companies with complementary businesses
and business strategies, portfolios and management strengths, a combined
company would be created with greater size, market capitalization, liquidity,
financial strength, potential for growth and, over time, industry leadership
and growth in FFO, than either New Plan or Excel would have on a stand-alone
basis. See "The Merger--Joint Reasons for the Merger."
Recommendation of the New Plan Board. The New Plan Board has unanimously
determined that the New Plan Trust Amendments and the Merger are advisable and
fair to and in the best interests of New Plan and its shareholders and has
unanimously approved the New Plan Trust Amendments and the Merger. THE NEW PLAN
BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF NEW PLAN VOTE "FOR" THE
NEW PLAN TRUST AMENDMENTS AND THE MERGER AT THE NEW PLAN SPECIAL MEETING. BOTH
THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE NEW PLAN
SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN SHAREHOLDERS
TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL RESULT IN THE
MERGER NOT OCCURRING. See "The Merger--New Plan's Reasons for the Merger;
Positive and Negative Factors Considered" and "The New Plan Trust Amendments."
Opinion of New Plan's Financial Advisor. Merrill Lynch Pierce Fenner & Smith
Incorporated ("Merrill Lynch") acted as financial advisor to New Plan in
connection with the Merger and delivered its written opinion dated May 13, 1998
to the New Plan Board that, based upon and subject to the various
considerations set forth therein, as of the date of such opinion, the Exchange
Ratio is fair to the holders of New Plan Common Shares from a financial point
of view. The full text of the written opinion of Merrill Lynch, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken, is attached hereto as Annex V and should be read carefully in its
entirety. See "The Merger--Opinion of Financial Advisor to New Plan Board."
Recommendation of the Excel Board. The Excel Board has unanimously determined
that the Share Issuance, the Charter Amendments and the Election of Directors
are advisable and in the best interests of Excel and its stockholders and has
unanimously approved and declared advisable the Share Issuance, the Charter
Amendments and the Election of Directors. THE EXCEL BOARD UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS OF EXCEL VOTE "FOR" THE SHARE ISSUANCE, THE
CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS AT THE EXCEL SPECIAL MEETING.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
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DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE ISSUANCE,
THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN THE MERGER
NOT OCCURRING. See "The Merger--Excel's Reasons for the Merger; Positive and
Negative Factors Considered," "The Merger--Recommendation of the Excel Board,"
"Excel Charter Amendments" and "Election of Directors."
Opinion of Excel's Financial Advisor. Prudential Securities Incorporated
("Prudential Securities") acted as financial advisor to Excel in connection
with the Merger and delivered its written opinion dated May 13, 1998 to the
Excel Board to the effect that, based upon and subject to certain conditions
stated therein, as of the date of such opinion, the Exchange Ratio is fair to
Excel from a financial point of view. The full text of the Prudential
Securities written opinion, which sets forth a description of the assumptions
made, matters considered and limitations on the review undertaken, is attached
hereto as Annex VI and should be read carefully in its entirety. See "The
Merger--Opinion of Financial Advisor to Excel Board."
Interests of Certain Persons in the Merger. In considering the
recommendations of the New Plan Board with respect to the New Plan Trust
Amendments and the Merger and the recommendations of the Excel Board with
respect to the Share Issuance, the Charter Amendments and the Election of
Directors, shareholders of New Plan and stockholders of Excel should be aware
that members of the management of New Plan and Excel have certain interests in
the Merger that are in addition to the interests of shareholders of New Plan
and stockholders of Excel generally. William Newman, currently Chief Executive
Officer of New Plan and Chairman of the New Plan Board, has entered into a
consulting agreement, to be effective at the Effective Time, which provides for
a five-year term, subject to automatic renewal for additional one-year periods
unless terminated by either party, annual compensation of $350,000, certain
benefits and the right to be considered for bonuses and other incentives.
Arnold Laubich, currently President and Chief Operating Officer of New Plan,
has entered into an employment agreement to be effective as of the Effective
Time, which provides for his appointment as Chief Executive Officer of the
Combined Company through December 31, 2002, subject to automatic renewal for
additional one-year periods unless terminated by either party, an annual salary
of not less than $525,000 per year (which is the same as his current salary as
President and Chief Operating Officer of New Plan), a bonus of up to 50% of his
base salary ($262,500 in the first year, which is essentially the same as Mr.
Laubich's most recent bonus) and certain other benefits, including a severance
payment of $2.5 million payable if he is terminated without "cause" or if he
terminates his employment for "good reason," as defined in the agreement. Gary
Sabin, currently Chief Executive Officer and President of Excel, has entered
into an employment agreement to be effective as of the Effective Time, which
provides for his appointment as President and Chairman of the Investment
Committee of the Combined Company through December 31, 2002, subject to
automatic renewal for additional one-year periods unless terminated by either
party, an annual salary of not less than the annual salary paid to the Chief
Executive Officer of the Combined Company, but in no event less than $525,000
per year, a bonus of up to 50% of his base salary ($262,500 in the first year)
and certain other benefits, including a severance payment of $2.5 million
payable if he is terminated without "cause" or if he terminates his employment
for "good reason," as defined in the agreement. In addition, New Plan and Excel
have agreed on a form of employment agreement for the other executive officers
of the Combined Company. The aggregate salary and bonus initially payable under
such agreements will not be less for any individual in the aggregate than the
total of such individual's salary as of the date of the Merger Agreement and
the amount of such individual's most recent bonus. For a more detailed summary
of such employment agreements, see "The Merger--Interests of Certain Persons in
the Merger."
Pursuant to the Merger Agreement, the Combined Company will indemnify each
officer, trustee, employee or agent of New Plan against certain liabilities.
The Combined Company will keep in effect, subject to certain limitations,
policies of directors' and officers' liability insurance comparable to those
currently maintained by New Plan. See "The Merger Agreement--Indemnification."
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OTHER TERMS OF THE MERGER AGREEMENT
Interim Dividends. Prior to the Effective Time, New Plan will continue to pay
regular quarterly dividends (including normal increases) on the New Plan Common
Shares and regular quarterly dividends on the New Plan Depositary Shares. New
Plan may, in its discretion, accelerate the declaration date, record date and
payment date for any regular quarterly dividend payable prior to the Effective
Time. Accordingly, New Plan has declared a quarterly dividend of $.375 per New
Plan Common Share payable to holders of record as of September 1, 1998. In
addition, but only if required, New Plan will prior to the Effective Time pay
an additional one-time partial dividend (the "New Plan Pre-Merger Dividend")
with respect to New Plan Common Shares in the amount that is necessary or
appropriate to satisfy the dividend payment requirements imposed on New Plan as
a REIT and to eliminate or reduce federal income or excise taxes imposed on New
Plan as a REIT.
Prior to the Effective Time, Excel will continue to pay regular quarterly
dividends of $.50 per share on the Excel Common Stock and regular quarterly
dividends on the Series A Preferred Stock and the Series B Preferred Stock. If
New Plan has accelerated its declaration date, record date and payment date for
any regular quarterly dividend payable prior to the Effective Time as described
above, Excel will also accelerate the declaration date, record date and payment
date for its immediately following regular quarterly dividend. Accordingly,
Excel has declared a quarterly dividend of $.50 per share on the Excel Common
Stock payable to holders of record as of September 1, 1998. To the extent that
New Plan is required to pay the New Plan Pre-Merger Dividend, Excel will prior
to the Effective Time and prior to the Excel Stock Dividend pay an additional
one-time partial dividend (the "Excel Pre-Merger Dividend") with respect to the
Excel Common Stock in the amount equal to 1.20 times the per share New Plan
Pre-Merger Dividend.
To the extent that the New Plan Pre-Merger Dividend is required, the amount
of the initial quarterly dividend to be paid on the Combined Company Common
Stock following the Effective Time (i.e., $.40 per share) will be reduced by
the amount of the New Plan Pre-Merger Dividend, however, such reduced dividend
when aggregated with the amount of the New Plan Pre-Merger Dividend will equal
the full $.40 per share initial quarterly dividend.
Conditions Precedent to the Merger. The obligations of Excel and New Plan to
consummate the Merger, and the other transactions contemplated by the Merger
Agreement, are subject to various conditions, including, but not limited to:
(i) obtaining requisite approval of the Share Issuance, the Charter Amendments
and the Election of Directors by the holders of Excel Common Stock; (ii)
obtaining requisite approval of the New Plan Trust Amendments and Merger by the
holders of New Plan Common Shares; (iii) the absence of any order, ruling or
injunction by any court and any statute or regulation which prohibits or makes
illegal the consummation of any of the transactions contemplated by the Merger
Agreement; (iv) obtaining authorization for listing on the NYSE of the Combined
Company Common Stock and the Series D Depositary Shares representing the Series
D Preferred Stock constituting the Share Issuance and the Combined Company
Common Stock issuable upon exercise of New Plan Options; (v) obtaining any
requisite third party approvals and authorizations; (vi) the absence of any
Material Adverse Effect (as defined in the Merger Agreement) with respect to
the other party; and (vii) receipt of customary opinions of counsel. Any or all
of these conditions may be waived to the extent permitted by applicable law.
See "The Merger Agreement--Conditions Precedent to the Merger."
No Solicitation. New Plan has agreed that it will not, directly or indirectly
through another person, (i) solicit, initiate or encourage any inquiries or
proposal relating to a New Plan Takeover Proposal (as herein defined) or (ii)
participate in any discussions or negotiations regarding or relating to any New
Plan Takeover Proposal except in certain circumstances as necessary for the New
Plan Board to comply with its fiduciary duties to the shareholders of New Plan.
Similarly, Excel has agreed that it will not, directly or indirectly through
another person, (x) solicit, initiate or encourage any inquiries or proposal
relating to an Excel Takeover Proposal (as herein defined) or (y) participate
in any discussions or negotiations regarding or relating to any Excel Takeover
Proposal except in certain circumstances as necessary for the Excel Board to
comply with its duties to the stockholders of Excel. See "The Merger
Agreement--No Solicitation by New Plan" and "The Merger Agreement--No
Solicitation by Excel."
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Termination Payments. Excel may be required to pay New Plan a fee of $32.5
million plus expenses of up to $2.5 million if the Merger Agreement is
terminated under certain circumstances. Similarly, New Plan may be required to
pay Excel a fee of $32.5 million plus expenses of up to $2.5 million if the
Merger Agreement is terminated under certain circumstances. In addition, New
Plan and Excel may be required to reimburse the other party for its expenses of
up to $2.5 million if such party terminates the Merger Agreement under certain
circumstances. See "The Merger Agreement--Expenses and Termination Fees."
REGULATORY MATTERS
New Plan and Excel believe that the Merger may be consummated without
notification being given or information being furnished to the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "Antitrust Division") pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and that no waiting
period requirements under the HSR Act are applicable to the Merger. See "The
Merger--Regulatory Matters."
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Excel and New Plan have conditioned the Merger on receipt of opinions to the
effect that the Merger should qualify as a tax-free reorganization for federal
income tax purposes. If the Merger so qualifies, no gain or loss should be
recognized by New Plan's shareholders, except in respect of cash received in
lieu of fractional shares. With respect to the New Plan Pre-Merger Dividend,
New Plan shareholders will recognize dividend income (a portion of which may
qualify for capital gain treatment) to the extent it is paid out of New Plan's
current or accumulated earnings and profits. For a more detailed discussion of
the material U.S. federal income tax consequences of the Merger and certain
other matters related thereto, see "The Merger--Federal Income Tax Consequences
of the Merger."
SECURITIES LAW CONSIDERATIONS
The shares of Combined Company Common Stock to be issued in connection with
the Merger will be freely transferable under the Securities Act, except that
shares issued to any person who is deemed to be an "affiliate" (as used in
paragraphs (c) and (d) of Rule 145 under the Securities Act, including, without
limitation, trustees and certain executive officers) of New Plan for purposes
of such Rule 145 may not be resold except in transactions permitted by such
Rule 145 or as otherwise permitted under the Securities Act. Pursuant to the
Merger Agreement, affiliates and certain other executive officers of each of
New Plan and Excel will agree not to sell, pledge, transfer or otherwise
dispose of any shares of the Combined Company Common Stock for a period of six
months following the Effective Time.
NO APPRAISAL RIGHTS
Neither dissenting holders of New Plan Common Shares nor holders of Excel
Common Stock will have appraisal rights as a result of the Merger or any other
matters presented for consideration at the Special Meetings. See "The Merger
Agreement--No Appraisal Rights" and "Comparison of Shareholder and Stockholder
Rights--Limitations on Dissenters' Appraisal Rights." Neither the holders of
New Plan Preferred Shares nor the holders of Excel's Preferred Stock have
voting or appraisal rights in connection with the Merger or any other matters
presented for consideration at the Special Meetings.
NEW PLAN TRUST AMENDMENTS
The New Plan Board has adopted, subject to approval by holders of New Plan
Common Shares at the New Plan Special Meeting, certain amendments to the New
Plan Declaration of Trust which are designed to enable New Plan to effect the
Merger. Under the existing New Plan Declaration of Trust, the New Plan Board,
after receiving the affirmative vote of at least 66 2/3% of all outstanding New
Plan Common Shares, has authority to merge New Plan into or with a successor
organization in exchange for shares or securities of such successor
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organization and thereupon terminate New Plan and distribute the shares or
securities of the successor organization among the New Plan shareholders in
redemption of their shares according to their respective rights. The New Plan
Trust Amendments add an immediately following section to the New Plan
Declaration of Trust, which authorizes New Plan, subject to a like vote of
holders of New Plan Common Shares, to merge with another entity in a
reorganization or business combination transaction ("Alternative Business
Combination Transaction") pursuant to which (a) New Plan shares are exchanged
for securities of a person of which such other entity is a subsidiary and (b)
New Plan is not terminated but remains in existence as a subsidiary of such
person. The New Plan Trust Amendments identify the Merger as an Alternative
Business Combination Transaction to which the provisions of the new section
will apply, subject to approval of the Merger by the holders of at least 66
2/3% of the outstanding New Plan Common Shares. In the event that the Merger is
not consummated for any reason, the New Plan Trust Amendments authorize the New
Plan Board to recommend and implement an Alternative Business Combination
Transaction with some other person subject to prior approval of that other
transaction by at least 66 2/3% of all outstanding New Plan Common Shares.
Finally, the New Plan Trust Amendments authorize consummation of any
Alternative Business Combination Transaction (including the Merger) so
approved. See "New Plan Trust Amendments." The New Plan Board unanimously
recommends a vote FOR approval of the New Plan Trust Amendments. The approval
of the New Plan Trust Amendments will require the affirmative vote of at least
66 2/3% of the outstanding New Plan Common Shares entitled to vote thereon. The
approval of the New Plan Trust Amendments is necessary to consummate the
Merger.
CHARTER AMENDMENTS
Pursuant to the Merger Agreement, Excel is required to amend the Excel
Charter. The Charter Amendments include, among others, the following changes to
the Excel Charter: (i) to change the name of Excel to New Plan Excel Realty
Trust, Inc., (ii) to increase the authorized capital stock of Excel to
275,000,000 shares, (iii) to increase the maximum number of directors to 21,
(iv) to modify the requirements for removal of a director, and (v) to add a
restriction on certain amendments to the Excel Charter and the Excel Bylaws
affecting the indemnification rights of directors and officers entitled to such
rights. See "Excel Charter Amendments." The Excel Board unanimously approved
and declared advisable the Charter Amendments and recommends a vote FOR
approval of the Charter Amendments. The affirmative vote of the holders of a
majority of the issued and outstanding shares of Excel Common Stock is required
to approve the Charter Amendments. The approval and adoption of the Charter
Amendments is a condition precedent to New Plan's obligation to consummate the
Merger.
ELECTION OF DIRECTORS
It is a condition of the Merger that the Excel stockholders approve the
Election of Directors, such that the Combined Company Board will consist of 15
directors, including New Plan's nine current trustees and Excel's six current
directors. Five of Excel's six current directors will continue to serve on the
Combined Company Board in their current classes. One of Excel's current
directors, Gary B. Sabin, is a director nominee to be elected into a new class.
Accordingly, at the Excel Special Meeting the stockholders of Excel will be
asked to elect Gary B. Sabin into a new class of the Combined Company Board and
to elect the nine current trustees on the New Plan Board onto the Combined
Company Board. See "Election of Directors." The Excel Board unanimously
recommends a vote FOR approval of the Election of Directors. Any proxy
submitted and directing that the shares represented thereby be voted FOR the
Election of Directors will result in the proxy holder voting such shares at the
Excel Special Meeting in favor of the election of each director recommended for
election by the Excel Board. Any Excel stockholder present in person at the
Excel Special Meeting will have the option to vote for or abstain from voting
for each individual nominee for election to the Combined Company Board.
Assuming the presence of a quorum, a plurality of the votes cast at the Excel
Special Meeting is required to elect each director so recommended. The approval
of the Election of Directors is a condition precedent to New Plan's obligation
to consummate the Merger.
12
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF NEW PLAN
The following table sets forth summary historical consolidated financial and
operating information for New Plan. The summary historical consolidated
financial information for the years ended July 31, 1997, 1996, 1995, 1994 and
1993 is derived from the audited consolidated financial statements of New Plan
for such periods. The summary historical consolidated financial information of
New Plan as of and for the nine-month periods ended April 30, 1998 and 1997 is
derived from the unaudited consolidated financial statements of New Plan for
such periods. In the opinion of New Plan management, the unaudited consolidated
financial information included herein has been prepared on a basis consistent
with the audited financial information included herein, and incorporated by
reference herein, and includes all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the financial
position and results of operations as of and for the nine-month periods ended
April 30, 1998 and 1997. Operating results for the nine-month period ended
April 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1998. The information set forth below
should be read in conjunction with New Plan's "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
consolidated financial statements of New Plan and notes thereto incorporated by
reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30, YEARS ENDED JULY 31,
---------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $ 184,833 $ 150,996 $ 206,821 $167,606 $130,576 $100,955 $ 76,309
Expenses................ 117,813 93,673 129,781 97,484 68,088 49,628 34,020
Other gain (loss)....... (59) (68) (3) 399 228 990 940
---------- ---------- ---------- -------- -------- -------- --------
Net income.............. $ 66,961 $ 57,255 $ 77,037 $ 70,521 $ 62,716 $ 52,317 $ 43,229
========== ========== ========== ======== ======== ======== ========
Net income per common
share:
Basic ................. $ 1.06 $ .98 $ 1.31 $ 1.25 $ 1.19 $ 1.06 $ .89
Diluted................ $ 1.05 $ .98 $ 1.30 $ 1.25 $ 1.18 $ 1.05 $ .88
Weighted average number
of common shares
outstanding:
Basic.................. 59,248 58,353 58,461 56,484 52,894 49,502 48,838
Diluted................ 59,691 58,617 58,735 56,642 53,040 49,768 49,128
Balance Sheet Data (at
period end):
Net real estate......... $1,280,192 $1,031,275 $1,171,909 $895,418 $701,074 $572,240 $350,045
Total assets............ $1,355,175 $1,100,631 $1,261,144 $945,394 $796,636 $616,993 $534,248
Debt.................... $ 555,431 $ 401,345 $ 478,207 $238,426 $206,652 $ 28,060 $ 23,321
Shareholders' equity.... $ 759,676 $ 669,068 $ 744,955 $659,354 $570,529 $565,493 $500,571
Other Data:
Distributions per common
share.................. $ 1.1025 $ 1.0725 $ 1.435 $ 1.395 $ 1.355 $ 1.315 $ 1.275
Funds from operations
(a).................... $ 85,687 $ 75,576 $ 101,584 $ 90,127 $ 77,543 $ 62,669 $ 49,863
Number of properties
owned at the end of the
period................. 190 165 176 150 132 121 91
</TABLE>
- --------
(a) Defined as net income plus depreciation of real estate and amortization
less gains from sales of securities and real estate properties less
preferred stock dividend requirements. FFO is presented because industry
analysts and New Plan consider FFO to be an appropriate supplemental
measure of performance of REITs. FFO is not a substitute for cash flow
generated from operating activities or net income, as determined in
accordance with generally accepted accounting principles, or as a measure
of profitability or liquidity.
13
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF EXCEL
The following table sets forth summary historical consolidated financial and
operating information for Excel. The summary historical consolidated financial
information for the years ended December 31, 1997, 1996, 1995, 1994 and 1993 is
derived from the audited consolidated financial statements of Excel for such
periods. The summary historical consolidated financial information of Excel as
of and for the three-month periods ended March 31, 1998 and 1997 is derived
from the unaudited consolidated financial statements of Excel for such periods.
In the opinion of Excel management, the unaudited consolidated financial
information included herein has been prepared on a basis consistent with the
audited financial information included herein and includes all adjustments
(which include only normal recurring adjustments) necessary for a fair
presentation of the financial position and results of operations as of and for
the three-month periods ended March 31, 1998 and 1997. Operating results for
the three-month period ended March 31, 1998 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998. The
information set forth below should be read in conjunction with the "Selected
Historical Consolidated Financial Information of Excel," "Excel Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Consolidated Financial Statements of Excel" included elsewhere herein. Per
share data set forth below does not reflect the Excel Stock Dividend which will
be paid prior to the Effective Time.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- -------- ---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $ 37,212 $ 20,204 $ 105,458 $ 63,135 $ 59,370 $ 42,259 $ 23,082
Expenses................ 20,425 9,894 54,681 37,562 44,861 28,355 20,250
Other gain (loss)....... (428) -- (1,815) (1,777) 3,683 (108) 399
---------- -------- ---------- -------- -------- -------- --------
Net income.............. $ 16,359 $ 10,310 $ 48,962 $ 23,796 $ 18,192 $ 13,796 $ 3,231
========== ======== ========== ======== ======== ======== ========
Net income per common
share:
Basic................. $ 0.52 $ 0.48 $ 2.06 $ 1.66 $ 1.51 $ 1.27 $ 0.55
Diluted............... $ 0.49 $ 0.46 $ 1.97 $ 1.62 $ 1.51 $ 1.27 $ 0.55
Weighted average number
of common shares
outstanding:
Basic................. 21,787 18,300 19,521 14,312 12,031 10,877 5,873
Diluted............... 23,966 18,736 20,708 14,531 12,038 10,881 5,877
Balance Sheet Data (at
period end):
Net real estate......... $ 881,650 $459,691 $ 891,582 $457,502 $372,016 $349,255 $273,362
Total assets............ $1,043,863 $590,859 $1,076,197 $558,628 $428,307 $375,100 $290,226
Debt.................... $ 362,738 $156,028 $ 514,408 $238,748 $210,797 $201,172 $120,062
Stockholders' equity.... $ 619,822 $428,162 $ 502,516 $312,654 $208,678 $163,898 $161,962
Other Data:
Distributions per common
share.................. $ 0.50 $ 0.46 $ 1.92 $ 1.81 $ 1.32(a) $ 1.71 $ 1.42
Funds from operations
(b).................... $ 17,846 $ 12,507 $ 62,596 $ 33,367 $ 26,536 $ 21,964 $ 8,891
Number of properties
owned at the end of the
period................. 139 114 148 112 112 110 98
</TABLE>
- --------
(a) In April 1995, Excel adopted a policy of declaring distributions to
stockholders of record on the first day of the succeeding quarter, instead
of the last day of the current quarter. The payment date of 15 days
following each quarter remained unchanged. In 1996, a distribution of
$0.445 per share was declared on January 1 and paid on January 15. Had
Excel not changed its distribution declaration date, the distributions
would have been $1.77 in 1995.
(b) Defined as net income plus depreciation of real estate and amortization
less gains from sales of securities and real estate properties less
preferred stock dividend requirements. FFO is presented because industry
analysts and Excel consider FFO to be an appropriate supplemental measure
of performance of REITs. FFO is not a substitute for cash flow generated
from operating activities or net income, as determined in accordance with
generally accepted accounting principles, or as a measure of profitability
or liquidity.
14
<PAGE>
THE COMBINED COMPANY CONSOLIDATED CONDENSED SUMMARY PRO FORMA OPERATING AND
FINANCIAL INFORMATION
The following tables set forth summary consolidated pro forma operating and
financial information of the Combined Company for the nine months ended April
30, 1998 and the year ended July 31, 1997 as if the Merger and each respective
company's property acquisitions during its current fiscal year had occurred on
April 30, 1998 for balance sheet data and August 1, 1996 for income statement
data. Information with respect to Excel is as of March 31, 1998 for balance
sheet data and for the year ended June 30, 1997 and the nine months ended March
31, 1998 for income statement data. The pro forma data included herein may not
be indicative of the actual results or financial position had the Merger and
property acquisitions occurred on the dates indicated. The summary consolidated
pro forma operating and financial information set forth below should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements and notes thereto of New Plan and Excel, as
well as the "Unaudited Pro Forma Operating and Financial Information" included
or incorporated by reference herein.
SUMMARY PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, 1998
--------------
(IN THOUSANDS)
<S> <C>
Pro Forma Consolidated Condensed Balance Sheet Data:
ASSETS
Real estate, net................................................. $2,463,856
Cash............................................................. 26,063
Accounts receivable, net......................................... 17,378
Notes receivable--affiliates..................................... 106,910
Notes receivable--other.......................................... 42,513
Other assets..................................................... 43,321
----------
Total assets................................................. $2,700,041
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages and other notes payable.............................. $ 900,681
Capital leases................................................. 26,850
Accounts payable, accrued expenses and other liabilities....... 59,941
----------
Total liabilities............................................ 987,472
----------
Minority interest in partnership................................. 41,430
----------
Stockholders' Equity:
Preferred stock................................................ 29
Common stock................................................... 878
Additional paid-in capital..................................... 1,738,078
Accumulated distributions in excess of net income.............. (66,533)
Loans receivable--purchase of shares........................... (2,344)
Unrealized gain on securities.................................. 1,031
----------
Total stockholders' equity................................... 1,671,139
----------
Total liabilities and stockholders' equity................... $2,700,041
==========
</TABLE>
- --------
See "Notes and Management's Assumptions to Pro Forma Consolidated Condensed
Financial Information--Unaudited" found elsewhere in this Joint Proxy
Statement/Prospectus.
15
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED CONDENSED FINANCIAL DATA (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 JULY 31, 1997
-------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Pro Forma Consolidated Condensed Income Statement
Data:
Revenues:
Rentals......................................... $283,388 $363,319
Interest and other.............................. 18,237 20,390
-------- --------
Total revenue................................. 301,625 383,709
-------- --------
Expenses:
Property expenses............................... 87,283 110,965
Interest........................................ 49,443 70,899
Depreciation and amortization................... 42,029 54,344
General and administrative...................... 5,950 6,873
-------- --------
Total expenses................................ 184,705 243,081
-------- --------
Income before real estate sales, minority
interest and other............................. 116,920 140,628
Minority interest................................. (1,151) (70)
Gains on sales of securities and other............ (1,514) 7
Gain (loss) on sale of real estate................ 140 (396)
-------- --------
Net income.................................... $114,395 $140,169
======== ========
Net income applicable to common shares:
Basic........................................... $ 96,430 $120,804
Diluted......................................... $ 97,581 $121,201
Basic net income per common share................. $ 1.10 $ 1.40
======== ========
Diluted net income per common share............... $ 1.08 $ 1.36
======== ========
Pro forma basic weighted average number of common
shares outstanding............................... 87,345 86,558
Pro forma diluted average number of common shares
outstanding...................................... 90,230 89,274
</TABLE>
- --------
See "Notes and Management's Assumptions to Pro Forma Consolidated Condensed
Financial Information--Unaudited" found elsewhere in this Joint Proxy
Statement/Prospectus.
16
<PAGE>
COMPARATIVE PER SHARE DATA
The following summary presents selected comparative unaudited per share
information for New Plan and Excel on an historical basis and the Combined
Company on a pro forma combined basis assuming the Merger had been effective
throughout the periods presented.
For each of New Plan and Excel, income statement information for the year
ended July 31, 1997 and December 31, 1997, respectively, and balance sheet
information as of July 31, 1997 and December 31, 1997, respectively, are based
on, and should be read in conjunction with, the consolidated audited financial
statements of New Plan and Excel incorporated by reference or included herein.
See "Selected Historical Financial Information of New Plan," "Selected
Historical Financial Information of Excel" and "Consolidated Financial
Statements of Excel." Also see the Consolidated Financial Statements of New
Plan incorporated herein by reference. The remaining financial information is
based on the respective historical and unaudited pro forma combined financial
statements of New Plan and Excel and the notes thereto. See "Pro Forma
Operating and Financial Information" and "Pro Forma Consolidated Financial
Statements of the Combined Company."
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, 1997 NINE MONTHS ENDED APRIL 30, 1998
---------------------------------- ----------------------------------
PRO FORMA PRO FORMA PRO FORMA PRO FORMA
HISTORICAL COMBINED EQUIVALENT(1) HISTORICAL COMBINED EQUIVALENT(1)
---------- --------- ------------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Book Value per common
share (2)
New Plan.............. $11.41 -- -- $ 11.51 $15.71 --
Excel................. $17.36 -- -- $ 17.77 -- $18.85
Cash Distributions per
common
share (3)
New Plan.............. $1.435 -- -- $1.1025 $ 1.60 --
Excel................. $1.840 -- -- $1.5000 -- $ 1.92
Net income per common
share (Basic)
New Plan.............. $ 1.31 $1.40 -- $ 1.06 $ 1.10 --
Excel................. $ 1.87 -- $1.68 $ 1.60 -- $ 1.32
Net income per common
share (Diluted)
New Plan.............. $ 1.30 $1.36 -- $ 1.05 $ 1.08 --
Excel................. $ 1.79 -- $1.63 $ 1.51 -- $ 1.30
</TABLE>
- --------
(1) The equivalent pro forma share amounts of Excel are calculated by
multiplying the pro forma book value per New Plan Common Share and pro
forma net income per New Plan Common Share by the exchange ratio of 1 to 1
after giving effect to the Excel Stock Dividend. The Excel equivalent pro
forma cash distributions per share of Excel Common Stock are calculated by
multiplying the pro forma cash distributions per New Plan Common Share by
the exchange ratio and giving effect to the Excel Stock Dividend.
(2) Book value per common share was calculated using shareholders' equity as
reflected in the historical and pro forma financial statements less the
book value of the preferred stock divided by the number of shares of
common stock outstanding.
(3) As described elsewhere in this document, the new distribution rate will be
$1.60 per share after the Merger. See "--Combined Company" section above
in this "Summary" section and "Combined Company Operations and
Management--Dividend Policy."
17
<PAGE>
COMPARATIVE MARKET PRICES
New Plan
The New Plan Common Shares are traded on the NYSE under the symbol "NPR." As
of the New Plan Record Date, there were approximately 13,485 holders of record
of the New Plan Common Shares. Set forth below are the high and low sales
prices per New Plan Common Share as reported on the NYSE for the periods
indicated, as well as the distributions declared by New Plan per New Plan
Common Share for each period.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------ ------ -------------
<S> <C> <C> <C>
1996
First Quarter............................... $23.00 $21.13 $0.3450
Second Quarter.............................. 22.13 20.75 0.3475
Third Quarter............................... 22.13 20.00 0.3500
Fourth Quarter.............................. 21.75 19.88 0.3525
1997
First Quarter............................... $22.00 $21.13 $0.3550
Second Quarter.............................. 25.63 21.63 0.3575
Third Quarter............................... 24.50 21.38 0.3600
Fourth Quarter.............................. 23.63 21.50 0.3625
1998
First Quarter............................... $24.75 $22.57 $0.3650
Second Quarter.............................. 26.00 23.57 0.3675
Third Quarter............................... 26.13 24.00 0.3700
Fourth Quarter.............................. 25.63 22.25 0.3725
</TABLE>
Excel
The Excel Common Stock is traded on the NYSE under the symbol "XEL." As of
the Excel Record Date, there were approximately 1,414 holders of record of the
Excel Common Stock. Set forth below are the high and low sales prices per share
of the Excel Common Stock as reported on the NYSE for the periods indicated, as
well as the distributions declared by Excel per share of Excel Common Stock for
each period. Such prices do not take into account the effects of the Excel
Stock Dividend which has been declared but not yet paid, and will be paid
immediately prior to the Effective Time.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS
------- -------- -------------
<S> <C> <C> <C>
1996
First Quarter............................ $20.875 $19.1250 $0.445
Second Quarter........................... 21.250 18.0000 0.445
Third Quarter............................ 22.500 19.5000 0.460
Fourth Quarter........................... 25.375 21.5000 0.460
1997
First Quarter............................ $25.875 $23.0000 $0.460
Second Quarter........................... 27.000 23.8750 0.460
Third Quarter............................ 31.875 26.5000 0.500
Fourth Quarter........................... 32.750 28.0625 0.500
1998
First Quarter............................ $35.625 $ 30.125 $0.500
Second Quarter(1)........................ 30.500 25.9375 0.500
</TABLE>
- --------
(1) The Legacy spin-off occurred on March 31, 1998.
Market Prices
On May 13, 1998, the last trading day prior to public announcement of the
Merger Agreement, the last reported sale prices per share of the New Plan
Common Shares, the Excel Common Stock, the Series A Preferred Stock and the
Series B Depositary Shares were $25.125, $28.50, $29.50 and $24.875,
respectively. On August 7, 1998, the last reported sales prices per share of
the New Plan Common Shares, the Excel Common Stock, the Series A Preferred
Stock and the Series B Depositary Shares were $21.1875, $24.125, $25.25 and
$24.6875, respectively.
18
<PAGE>
RISK FACTORS
In considering whether to approve the proposals being considered at the
Special Meetings, New Plan shareholders and Excel stockholders should
carefully consider, in addition to the other information set forth in this
Joint Proxy Statement/Prospectus, the matters set forth below.
RISK FACTORS RELATING TO THE MERGER
Potential Adverse Effects of Combining New Plan and Excel
The Merger involves the integration of two companies that have previously
operated independently. There can be no assurance that the integration of the
respective operations of New Plan and Excel can be completed without
encountering difficulties. Such difficulties could include integrating
different business strategies with respect to developing, owning, and leasing
real estate properties and integrating personnel with disparate business
backgrounds and corporate cultures. Further, the process of integrating
management services, administrative organizations, facilities, management
information systems and other aspects of operations, while managing a larger
and geographically expanded entity, will present a significant challenge to
the management of the Combined Company particularly in light of having co-
operational headquarters in New York and San Diego. There can be no assurance
that there will not be substantial costs associated with the integration
process, that such activities will not result in a decrease in revenues or
that there will not be other material adverse effects of these integration
efforts. Moreover, certain executive officers of the Combined Company
management team will continue to participate in the management of Legacy which
may further strain management resources. Such effects could reduce the short-
term earnings of the Combined Company from expected results. The Combined
Company does not expect to incur any material charge against earnings for
integration costs expected to result from the Merger. There can be no
assurance, however, that the Combined Company will not in the future incur
material charges to reflect costs associated with the Merger. In addition, the
Combined Company may potentially lose key New Plan or Excel personnel due to
the Merger and the possible relocation of certain functions. There can be no
assurance whether and to what extent the integration and consolidation will
achieve cost savings and operating synergies. The Combined Company may also be
subject to real estate transfer taxes and property tax reassessments as a
result of the Merger.
Potential Changes in Stock Prices
Upon completion of the Merger, each New Plan Common Share will be converted
into the right to receive one share of Combined Company Common Stock. The
Exchange Ratio is a fixed number and will not be adjusted in the event of any
increase or decrease, prior to the Effective Time, in the price of either New
Plan Common Shares or Excel Common Stock. As a result, the value of shares of
Combined Company Common Stock received by holders of New Plan Common Shares in
the Merger and the relationship of the market values of the shares of Combined
Company Common Stock so received to the market values of the New Plan Common
Shares being extinguished could vary depending on fluctuations in the value,
prior to the Effective Time, of New Plan Common Shares or Excel Common Stock.
Such fluctuations may be the result of changes in the business, operations or
financial prospects of New Plan or Excel, market assessments of the likelihood
that the Merger will be consummated or the perceived benefits of the Merger,
the timing thereof, general market and economic conditions, regulatory
considerations, tax laws, interest rates and other factors. Accordingly, there
can be no assurance that the value of the Combined Company Common Stock or its
relative value relationship to the New Plan Common Share value being
extinguished existing on the date of this Joint Proxy Statement/Prospectus
will be the same as on the date of the Special Meetings or the Effective Time.
Neither party to the Merger Agreement has the right to terminate such Merger
Agreement because of any change in the prevailing market price of New Plan
Common Shares or Excel Common Stock.
19
<PAGE>
Termination Payments if Merger Fails to Occur
The Merger Agreement provides for a fee payable by New Plan or Excel, as
applicable, of $32.5 million plus expenses of up to $2.5 million if the Merger
Agreement is terminated under certain circumstances. In addition, if the
Merger Agreement is terminated under certain other circumstances, New Plan or
Excel, as applicable, will be required to pay the other party's expenses of up
to $2.5 million. See "The Merger Agreement--Expenses and Termination Fees."
The obligation to pay the termination fee and/or expenses may adversely
affect the ability of either New Plan or Excel to engage in another
transaction in the event the Merger is not consummated.
No Appraisal Rights
Neither the holders of New Plan Common Shares nor the holders of Excel
Common Stock who dissent to the Merger or any other action to be authorized at
the Special Meetings will have any dissenter's appraisal rights.
Benefits to Certain Trustees, Directors and Officers; Possible Conflicts of
Interest
In considering the recommendation of the New Plan Board with respect to the
Merger and the transactions contemplated thereby, holders of the New Plan
Common Shares should be aware that certain members of the New Plan Board and
certain executive officers of New Plan have certain interests in the Merger in
addition to the interests of holders of New Plan Common Shares generally. See
"The Merger--Interests of Certain Persons in the Merger." The New Plan Board
was aware of these interests and considered them, among other matters, in
unanimously approving the Merger and the New Plan Trust Amendments. See "The
Merger--New Plan's Reasons for the Merger; Positive and Negative Factors
Considered."
In considering the recommendation of the Excel Board with respect to the
Merger and the transactions contemplated thereby, holders of the Excel Common
Stock should be aware that certain members of the Excel Board and executive
officers of Excel have certain interests in the Merger in addition to the
interests of holders of Excel Common Stock generally. See "The Merger--
Interests of Certain Persons in the Merger." The Excel Board was aware of
these interests and considered them, among other matters, in unanimously
approving and declaring advisable the Merger, the Share Issuance, the Charter
Amendments and the Election of Directors. See "The Merger--Excel's Reasons for
the Merger; Positive and Negative Factors Considered" and "Election of
Directors."
Dependence on Key Personnel
Following the Merger, the Combined Company will be dependent upon the
efforts of its executive officers. In particular, the Combined Company will
depend on the services of William Newman, Arnold Laubich and Gary Sabin, who
will serve as Chairman of the Combined Company Board, Chief Executive Officer
and President of the Combined Company, respectively. New Plan and Excel
believe that the loss of the services of any of these key personnel or of
other certain key personnel could have an adverse effect on the Combined
Company. William Newman has entered into an agreement for consulting services
with a five-year term and automatic one-year renewal periods thereafter unless
terminated. Arnold Laubich and Gary Sabin have entered into employment
agreements which provide terms through December 31, 2002, with automatic one-
year renewal periods thereafter unless terminated. In addition, in connection
with the Merger, the Combined Company expects to enter into employment
agreements with certain of the executive officers of the Combined Company
although currently no employment agreements have been entered into with these
individuals. See "Combined Company Operations and Management--Executive
Officers After the Merger." New Plan and Excel have not obtained "key man"
insurance with respect to any members of the Combined Company's executive
management team, and it is anticipated that the Combined Company will not
purchase such insurance in the future.
20
<PAGE>
Decrease in Distributions Per Share to Holders of Excel Common Stock
Stockholders of Excel, in considering whether to approve the Share Issuance,
the Charter Amendments and the Election of Directors, should consider that
subsequent to the Merger, the initial quarterly dividend to be paid on the
Combined Company Common Stock will be at the annualized rate of $1.60 per
share ($.40 per share for the first quarter) and, after anticipated minimum
quarterly increases of at least $.0025 per share, each stockholder of the
Combined Company is expected to receive aggregate dividend distributions of
$1.625 per share for the 12-month period immediately following the initial
quarterly dividend payment of $.40 per share. Thereafter, it is anticipated
that the quarterly dividend will continue to be increased by a minimum of at
least $.0025 per share (which quarterly increases amount to $.01 per share on
an annualized basis and effectively increase the annualized dividend rate by
$.04 per share for each share held over a 12-month period) until the
annualized quarterly dividend on the Combined Company Common Stock is at least
$1.67 per share. The dividend of $1.625 per share represents an increase in
the dividend to be received by the New Plan shareholders and a decrease in the
dividend to be received by the Excel stockholders. With respect to the
currently outstanding Excel Common Stock, the $1.625 dividend is equivalent to
$1.95 per share after giving effect to the 20% Excel Stock Dividend (as
compared to the current annualized Excel dividend of $2.00 per share).
RISK FACTORS RELATING TO OPERATIONS
Economic Performance and Value of Centers Dependent on Many Factors
Real property investments are subject to varying degrees of risk. The
economic performance and values of real estate can be affected by many
factors, including changes in the national, regional and local economic
climates, local conditions such as an oversupply of space or a reduction in
demand for real estate in the area, the attractiveness of the properties to
tenants, competition for other available space, the ability of the owner to
provide adequate maintenance and insurance, and increased operating costs. In
recent years, there has been a proliferation of new retailers, changes in
retailing formats and a growing consumer preference for value-oriented
shopping alternatives that have, among other factors, heightened competitive
pressures. As a consequence, many companies in all sectors of the retailing
industry have encountered significant financial difficulties. A substantial
portion of the Combined Company's income will be derived from rental revenues
from retailers in neighborhood and community shopping centers. Accordingly, no
assurance can be given that the Combined Company's financial results will not
be adversely affected by these developments in the retail industry.
Dependence on Rental Income from Real Property
Since substantially all of the Combined Company's income will be derived
from rental income from real property, the Combined Company's income and funds
for distribution would be adversely affected if a significant number of the
Combined Company's tenants were unable to meet their obligations to the
Combined Company or if the Combined Company were unable to lease a significant
amount of space in its portfolio on economically favorable lease terms. There
can be no assurance that any tenant whose lease expires in the future will
renew such lease or that the Combined Company will be able to release space on
economically advantageous terms.
Illiquidity of Real Estate Investments
Equity real estate investments are relatively illiquid and therefore could
tend to limit the ability of the Combined Company to vary its portfolio
promptly in response to changes in economic or other conditions. In addition,
mortgage payments and, to the extent the properties are not subject to triple
net leases, certain significant expenditures such as real estate taxes and
maintenance costs, are generally not reduced when circumstances cause a
reduction in income from the investment, and should such events occur, the
Combined Company's income and funds for distribution would be adversely
affected. A portion of the Combined Company's properties are, and may be,
mortgaged to secure payment of indebtedness, and if the Combined Company were
unable to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on such properties by the mortgagee.
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Risk of Bankruptcy of Major Tenants
The bankruptcy or insolvency of a major tenant or a number of smaller
tenants may have an adverse impact on the properties of the Combined Company
and on the income produced by such properties. Under bankruptcy law, a tenant
has the option of affirming (continuing) or rejecting (terminating) any
unexpired lease. If the tenant affirms its lease with the Combined Company,
the tenant must cure all defaults under the lease and provide the Combined
Company with adequate assurance of its future performance under the lease. If
the tenant rejects the lease, the Combined Company's claim for breach of the
lease would (absent collateral securing the claim) be treated as a general
unsecured claim. The amount of the claim would be capped at the amount owed
for unpaid pre-petition lease payments unrelated to the rejection, plus the
greater of one years' lease payments or 15% of the remaining lease payments
payable under the lease (but not to exceed the amount of three years' lease
payments).
Environmental Risks
Under various federal, state and local laws, ordinances and regulations, the
Combined Company may be considered an owner or operator of real property or
may have arranged for the disposal or treatment of hazardous or toxic
substances and, therefore, may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its property or
disposed of by it, as well as certain other potential costs which could relate
to hazardous or toxic substances (including governmental fines and injuries to
persons and property). Such liability may be imposed whether or not the
Combined Company knew of, or was responsible for, the presence of such
hazardous or toxic substances.
Reliance on Major Tenants
The Combined Company's two largest tenants will be Kmart Corporation
("Kmart") and The Kroger Company ("Kroger"), which will account for
approximately 5.4% and 2.0%, respectively, of the Combined Company's scheduled
ABR as of April 30, 1998. The financial position of the Combined Company and
its ability to make distributions may be adversely affected by financial
difficulties experienced by either of such tenants, or any other major tenant
of the Combined Company, including a bankruptcy, insolvency or general
downturn in the business of any such tenant, or in the event any such tenant
does not renew its leases as they expire.
Adverse Effects of Changes in Market Interest Rates
The trading prices of equity securities issued by REITs have historically
been affected by changes in broader market interest rates, with increases in
interest rates resulting in decreases in trading prices, and decreases in
interest rates resulting in increases in such trading prices. An increase in
market interest rates could therefore adversely affect the trading prices of
any equity securities issued by the Combined Company, including the Combined
Company Common Stock.
Competition
The real estate industry is highly competitive. The Combined Company's
principal competitors will include national REITs. The principal means of
competition are rents charged, location, services provided, desirability of
tenants and tenant mix and the nature and condition of the facilities to be
leased. The Combined Company will directly compete with lessors and developers
of similar space in the areas in which its properties are located. Demand for
retail space may be impacted by the bankruptcy of retail companies and
consolidation in the retail industry which could adversely affect the ability
of the Combined Company to attract and retain tenants.
Limitations on Share Acquisitions and Changes in Control
Ownership Limit. In order for the Combined Company to maintain its
qualification as a REIT, not more than 50% in value of the outstanding shares
of the Combined Company stock may be owned, actually or constructively, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half
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of a taxable year. Furthermore, the Combined Company stock must be held by a
minimum of 100 persons for at least 335 days of a 12-month taxable year (or
proportionate part of a short tax year). In addition, if the Combined Company,
or an actual or constructive owner of 10% or more of the Combined Company
stock, actually or constructively owns 10% or more of a tenant of the Combined
Company (or a tenant of any partnership in which the Combined Company is a
partner), the rent received by the Combined Company (either directly or
through any such partnership) from such tenant will not be qualifying income
for purposes of the REIT gross income tests of the Code. See "Federal Income
Tax Consequences--REIT Qualification Requirements." In order to protect the
Combined Company against the risk of losing REIT status due to a concentration
of ownership among its stockholders, the Combined Company Charter will provide
for limitation of actual or constructive ownership of the outstanding shares
of the Combined Company's capital stock by a single person to 9.8% (by value
or by number of shares, whichever is more restrictive, except only by value in
the case of any Series A Preferred Stock and Series B Preferred Stock) of the
outstanding shares of each class or series of stock of the Combined Company
(except in the case of the Series A Preferred Stock and the Series D Preferred
Stock, where the prohibition relates to the stated percentage of all
outstanding equity stock of the Combined Company) (the "Ownership Limit").
Although there is no intention of doing so, the Combined Company Board could
waive this restriction with respect to a particular stockholder if it were
satisfied, based upon the advice of tax counsel or otherwise, that ownership
by such stockholder in excess of the Ownership Limit would not jeopardize the
Combined Company's status as a REIT.
The Combined Company Charter will further provide that actual or
constructive ownership of shares of capital stock in excess of the Ownership
Limit will cause the violative transfer of ownership to be void with respect
to the transferee as to that number of shares in excess of the Ownership Limit
and such shares will be automatically transferred to a trust for the benefit
of a qualified charitable organization. Such purported transferee would have
no right to vote such shares or be entitled to dividends or other
distributions with respect to such shares.
Staggered Board. The Combined Company Board will be divided into three
classes, with the number of directors in each class to be as equal in number
as is practicable. Directors of each class are elected for a term of three
years, and the term of office of one class will expire annually.
Shareholders Rights Plan. The Combined Company will have a preferred stock
purchase rights plan which is designed to deter certain abusive takeover
tactics and encourage potential acquirors to negotiate with the board of
directors. The rights will be attached to each share of Combined Company
Common Stock. See "Description of Excel and Combined Company Securities--
Preferred Share Purchase Rights."
The Ownership Limit, the staggered board and the shareholders rights plan
may have the effect of (i) delaying or preventing a change in control of the
Combined Company even if a change in control were in the stockholders'
interest, (ii) deterring tender offers for the Combined Company Common Stock
that may be beneficial to the stockholders and (iii) limiting the opportunity
for stockholders to receive a premium for their Combined Company Common Stock
that might otherwise exist if an investor attempted to assemble a block of
shares of the Combined Company Common Stock in excess of the Ownership Limit
or otherwise to effect a change in control of the Combined Company.
No Limitation in Organizational Documents on Incurrence of Debt
The organizational documents of the Combined Company will not contain any
limitation on the amount or percentage of indebtedness the Combined Company
may incur. Accordingly, the Combined Company, subject to covenants in its debt
instruments, could become more highly leveraged, resulting in an increase in
debt service that could adversely affect the Combined Company's FFO and
ability to make expected distributions to stockholders and in an increased
risk of default on its obligations.
Adverse Impact on Distributions of Failure to Qualify as a REIT
New Plan has elected to be taxed as a REIT for federal income tax purposes
commencing with its taxable year ended July 31, 1972, and believes that,
commencing with such taxable year, it has been organized and has operated in
conformity with the requirements for qualification as a REIT under the Code.
Excel has elected to be taxed as a REIT for federal income tax purposes
commencing with its taxable year ended December 31, 1987,
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and believes that, commencing with such taxable year, it has been organized
and has operated in conformity with the requirements for qualification as a
REIT under the Code. Although New Plan and Excel believe that the Combined
Company will continue to operate in such a manner, no assurance can be given
that the Combined Company will remain qualified as a REIT. Qualification as a
REIT involves the satisfaction of numerous requirements (some on an annual and
others on a quarterly basis) established under highly technical and complex
Code provisions for which there are only limited judicial and administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within the Combined Company's control. For example,
in order to qualify as a REIT, at least 95% of the Combined Company's gross
income in any year must be derived from qualifying sources and the Combined
Company must pay distributions to stockholders aggregating annually at least
95% of its REIT taxable income (determined without regard to the dividends-
paid deduction and by excluding net capital gains). The complexity of these
provisions and of the applicable treasury regulations that have been
promulgated under the Code (the "Treasury Regulations") is greater in the case
of a REIT that holds assets in partnership form. No assurance can be given
that legislation, new regulations, administrative interpretations or court
decisions will not significantly change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of such
qualification.
The Combined Company intends to make distributions to its stockholders to
comply with the 95% of REIT taxable income distribution requirements, although
it may, from time to time, retain capital gains and thereby incur a
nondeductible excise tax. There may also be differences in timing between the
recognition of taxable income and the actual receipt of cash that may require
the Combined Company to borrow funds, issue capital stock or sell assets on a
short-term basis to meet the 95% of REIT taxable income distribution
requirement. This distribution requirement could cause the Combined Company
(i) to sell assets in adverse market conditions, (ii) to distribute amounts
that represent a return of capital, or (iii) to distribute amounts that would
otherwise be spent on future acquisitions, unanticipated capital expenditures
or repayment of debt. Gain from the disposition of any asset treated as being
held primarily for sale to its customers in the ordinary course of business
generally will be subject to a 100% tax.
Among the requirements for REIT qualification is that the value of any one
issuer's securities held by a REIT may not exceed 5% of the REIT's total
assets on certain testing dates. The aggregate value of the securities of ERT
Development Corporation ("EDV") currently held by Excel is presently less than
5% of Excel's total assets and is expected to be less than 5% of the value of
the Combined Company's total assets.
If the Combined Company were to fail to qualify as a REIT in any taxable
year, the Combined Company would be subject to federal, state and other income
tax (including any applicable alternative minimum tax) on its taxable income
at regular corporate rates and would not be allowed a deduction in computing
its taxable income for amounts distributed to its stockholders. Moreover,
unless entitled to relief under certain statutory provisions, the Combined
Company also would be disqualified from treatment as a REIT for the four
taxable years following the year during which qualification is lost. This
treatment would reduce the net earnings of the Combined Company available for
investment or distribution to stockholders because of the additional tax
liability of the Combined Company for the years involved. In addition,
distributions to stockholders would no longer be required to be made.
Possible Conflicts with Legacy
Certain directors and executive officers of Excel who will be directors and
executive officers of the Combined Company will continue to serve as directors
and executive officers of Legacy following the Merger. As of the Excel Record
Date, such directors and executive officers held in the aggregate a total of
10,157,599 Legacy Shares (representing approximately 18.5% of the currently
outstanding Legacy Shares) and held options to purchase an additional
3,100,000 Legacy Shares. Excel and Legacy are also parties to agreements
providing for: (i) the orderly separation of Excel and Legacy which is
ongoing, (ii) the sharing of certain facilities and the provision of
management and administrative services to Legacy by Excel and (iii) the
allocation of certain tax and other liabilities. Because certain officers and
directors of the Combined Company will continue to serve as
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managers of, and have significant equity interests in, Legacy, conflicts may
arise with respect to the operation and effect of these agreements and
relationships which could have an adverse effect on the Combined Company if
not properly resolved. In this regard, Excel and Legacy previously adopted
certain policies and procedures to be followed by the board of directors of
each company to address potential conflicts of interest. In addition, the
certificate of incorporation of Legacy contains a specific purpose clause
which identifies at the outset which types of investment opportunities will be
pursued by Legacy. This clause provides that Legacy's purpose includes
complying with an intercompany agreement, which prohibits Legacy from
investing in traditional neighborhood and community shopping centers, power
centers, malls or other conventional retail properties unless Excel was first
offered the opportunity and declined to pursue such investments.
Year 2000 Compliance
Many currently installed computer systems, software products, time clocks
and other similar devices of New Plan and Excel are coded to accept only two
digit entries in the date code field. These date code fields will need to
accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, in less than two years, computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements. Uncertainty exists concerning the potential effects associated
with such compliance. Additionally, even if the Combined Company's equipment
is Year 2000 compliant, equipment used by other parties interconnected with
the Combined Company's network may not be Year 2000 compliant. However, the
Combined Company does not expect future expenditures to be material in
connection with Year 2000 compliance.
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NEW PLAN SPECIAL MEETING
TIME, PLACE AND PURPOSE
This Joint Proxy Statement/Prospectus is being mailed to holders of record
of New Plan Common Shares as of the New Plan Record Date and is accompanied by
a form of proxy, which is being solicited by the New Plan Board for use at the
New Plan Special Meeting to be held on Friday, September 25, 1998 at 11:00
a.m., New York City time, at the Baruch College Conference Center, Room 750,
151 East 25th Street, New York, New York. Only holders of record of New Plan
Common Shares on the New Plan Record Date are entitled to receive notice of
and to vote at the New Plan Special Meeting. At the New Plan Special Meeting,
holders of New Plan Common Shares will consider and vote upon (a) a proposal
to approve the New Plan Trust Amendments, (b) a proposal to approve the Merger
and (c) any and all other business that may properly come before the New Plan
Special Meeting, including any adjournment or postponement thereof.
VOTING AND REVOCATION OF PROXIES
Any holder of New Plan Common Shares who has executed and delivered a proxy
may revoke it at any time before it is voted by attending and voting in person
at the New Plan Special Meeting or by giving written notice of revocation or
submitting a signed proxy bearing a later date to New Plan, to the attention
of the "Secretary," provided such notice or proxy is actually received by New
Plan prior to the vote of shareholders at the New Plan Special Meeting. A
proxy will not be revoked by the death or incapacity of the shareholder
executing it unless, before the shares are voted, notice of such death or
supervening incapacity is filed with the Secretary or other person authorized
to tabulate the votes on behalf of New Plan. The New Plan Common Shares
represented by properly executed proxies received at or before the New Plan
Special Meeting and not subsequently revoked will be voted as directed by the
shareholders submitting such proxies. IF INSTRUCTIONS ARE NOT GIVEN, PROXIES
WILL BE VOTED FOR THE NEW PLAN TRUST AMENDMENTS AND THE MERGER.
SOLICITATION OF PROXIES
New Plan will bear the costs of soliciting proxies from the holders of New
Plan Common Shares. In addition to use of the mails, proxies may be solicited
personally or by telephone or facsimile by trust managers, officers and other
employees of New Plan who will not be specially compensated for such
solicitation activities. Arrangements also will be made with brokerage firms
and other custodians, nominees and fiduciaries for the forwarding of
solicitation materials to the beneficial owners of shares held of record by
such persons, and such persons will be reimbursed for their reasonable
expenses incurred in that effort by New Plan. New Plan has retained MacKenzie
Partners, Inc. to aid in the solicitation of proxies from its shareholders.
Such solicitations may include solicitation of authority to execute the proxy
on behalf of the record holder. The fees of MacKenzie Partners, Inc. to be
paid by New Plan are estimated to be $15,000, plus reimbursement of out-of-
pocket expenses.
RECORD DATE, QUORUM AND VOTE REQUIRED
As of the New Plan Record Date, there were 59,874,174 New Plan Common Shares
outstanding and entitled to vote at the New Plan Special Meeting, with each
share being entitled to one vote. The holders of a majority of the New Plan
Common Shares entitled to vote, present in person or by proxy, constitute a
quorum for purposes of the New Plan Special Meeting. A holder of a New Plan
Common Share will be treated as being present at the New Plan Special Meeting
if the holder of such share is (i) present in person at the meeting or (ii)
represented at the meeting by a valid proxy, whether the instrument granting
such proxy is marked as casting a vote or abstaining, is left blank or does
not empower such proxy to vote with respect to some or all matters to be voted
upon at the New Plan Special Meeting. The proposals to approve the New Plan
Trust Amendments and the Merger will require approval by the affirmative vote
of holders of 66 2/3% or more of the outstanding New Plan Common Shares on the
New Plan Record Date. Abstentions and broker non-votes will not be counted as
votes cast and, therefore, will have the same effect as votes cast against the
New Plan Trust Amendments and the Merger.
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SHARE OWNERSHIP OF BOARD AND MANAGEMENT
As of the New Plan Record Date, the members of the New Plan Board and the
executive officers of New Plan and their respective affiliates were deemed to
beneficially own a total of 3,735,568 New Plan Common Shares (which includes
1,262,760 shares which may be acquired upon the exercise of stock options
exercisable within 60 days from the New Plan Record Date), representing
approximately 6.1% of the outstanding New Plan Common Shares, all of which are
expected to be voted (excluding those shares which may be acquired upon the
exercise of stock options) in favor of the New Plan Trust Amendments and the
Merger. Concurrently with the execution of the Merger Agreement, William
Newman and Arnold Laubich entered into voting agreements pursuant to which
they, holding an aggregate of 1,701,658 outstanding New Plan Common Shares or
approximately 2.8% of the outstanding New Plan Common Shares as of the New
Plan Record Date, agreed to vote all of the New Plan Common Shares owned by
them in favor of the New Plan Trust Amendments and the Merger.
RECOMMENDATION
THE NEW PLAN BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF NEW PLAN VOTE
"FOR" THE NEW PLAN TRUST AMENDMENTS AND THE MERGER.
BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE
NEW PLAN SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN
SHAREHOLDERS TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL
RESULT IN THE MERGER NOT OCCURRING.
OTHER MATTERS
New Plan is unaware of any matter to be presented at the New Plan Special
Meeting other than the New Plan Trust Amendments and the Merger. If any other
business is brought before the New Plan Special Meeting, the proxies named in
the proxy card will vote in their discretion the shares represented by the
proxy with respect to such matters. Should the Chairman of the New Plan
Special Meeting deem it advisable to adjourn or postpone the New Plan Special
Meeting in order to allow additional time to solicit proxies and to maximize
the number of holders of New Plan Common Shares casting votes at the meeting,
the holders of proxies will vote the New Plan Common Shares so represented in
favor of such adjournment or postponement, except that any New Plan Common
Shares with respect to which votes were cast against the New Plan Trust
Amendments or the Merger will not be voted in favor of such adjournment or
postponement.
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EXCEL SPECIAL MEETING
TIME, PLACE AND PURPOSE
This Joint Proxy Statement/Prospectus is being mailed to holders of record
of Excel Common Stock as of the Excel Record Date and is accompanied by a form
of proxy, which is being solicited by the Excel Board for use at the Excel
Special Meeting to be held on Friday, September 25, 1998 at the Rancho
Bernardo Inn, 17550 Bernardo Oaks Drive, San Diego, California, commencing at
9:00 a.m., Pacific Daylight Time. Only holders of record of Excel Common Stock
on the Excel Record Date are entitled to receive notice of and to vote at the
Excel Special Meeting. At the Excel Special Meeting, holders of Excel Common
Stock will be asked to vote upon (a) a proposal to approve the Share Issuance,
which provides for the issuance of Combined Company Common Stock and Series D
Depositary Shares in the Merger, (b) a proposal to approve the Charter
Amendments, (c) the Election of Directors and (d) any and all other business
that may properly come before the Excel Special Meeting, including any
adjournment or postponement thereof.
Although neither Maryland law nor the Excel Charter requires that Excel
obtain approval of the Merger from the holders of Excel Common Stock because
New Plan is merging with a subsidiary of Excel, rather than Excel itself, due
to the number of shares of Combined Company Common Stock to be issued in the
Merger, the rules of the NYSE require Excel to obtain approval of the issuance
of such shares from the current holders of Excel Common Stock.
VOTING AND REVOCATION OF PROXIES
Any holder of Excel Common Stock who has executed and delivered a proxy may
revoke it at any time before it is voted by attending and voting in person at
the Excel Special Meeting or by giving written notice of revocation or
submitting a signed proxy bearing a later date to Excel, to the attention of
the "Secretary," provided such notice or proxy is actually received by Excel
prior to the vote of stockholders at the Excel Special Meeting. A proxy will
not be revoked by the death or incapacity of the stockholder executing it
unless, before the shares are voted, notice of such death or supervening
incapacity is filed with the Secretary or other person authorized to tabulate
the votes on behalf of Excel. The Excel Common Stock represented by properly
executed proxies received at or before the Excel Special Meeting and not
subsequently revoked will be voted as directed by the stockholders submitting
such proxies. IF INSTRUCTIONS ARE NOT GIVEN, PROXIES WILL BE VOTED FOR THE
SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS.
SOLICITATION OF PROXIES
Excel will bear the costs of soliciting proxies from the holders of Excel
Common Stock. In addition to the use of the mails, proxies may be solicited by
directors, officers and regular employees of Excel, who will not be
specifically compensated for such services, by means of personal calls upon,
or telephonic or telegraphic communications with, stockholders or their
representatives. Arrangements also will be made with brokerage firms and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of shares held of record by such persons,
and such persons will be reimbursed for their reasonable expenses incurred in
that effort by Excel.
RECORD DATE, QUORUM AND VOTE REQUIRED
As of the Excel Record Date, there were 23,440,338 shares of Excel Common
Stock outstanding and entitled to vote at the Excel Special Meeting, with each
share being entitled to one vote. The holders of a majority of the shares of
Excel Common Stock entitled to vote, present in person or by proxy, constitute
a quorum for purposes of the Excel Special Meeting. A holder of a share of
Excel Common Stock will be treated as being present at the Excel Special
Meeting if the holder of such share is (i) present in person at the meeting or
(ii) represented at the meeting by a valid proxy, whether the instrument
granting such proxy is marked as casting a vote or abstaining, is left blank
or does not empower such proxy to vote with respect to some or all matters to
be
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voted upon at the Excel Special Meeting. The Share Issuance requires approval
by the affirmative vote of the holders of a majority of the votes cast at the
Excel Special Meeting; provided that the total vote cast on the proposal at
the Excel Special Meeting represents over 50% in interest of all Excel Common
Stock entitled to vote on such proposal. The approval of the Charter
Amendments requires the affirmative vote of the holders of a majority of the
issued and outstanding shares of Excel Common Stock. A plurality of the votes
cast at the Excel Special Meeting in favor of the election of a director,
assuming that a quorum is present, is sufficient to elect a director. Any
proxy submitted and directing that the shares represented thereby be voted FOR
the Election of Directors will result in the proxy holder voting such shares
at the Excel Special Meeting in favor of the election of each director
recommended for election by the Excel Board. Any Excel stockholder present in
person at the Excel Special Meeting will have the option to vote for or
abstain from voting for each nominee for election to the Combined Company
Board. For purposes of the vote on the Share Issuance, abstentions and broker
non-votes will have the effect of votes against such proposal, unless holders
of more than 50% in interest of all Excel Common Stock entitled to vote on
such proposal cast votes, in which event neither an abstention nor a broker
non-vote will have any effect on the result of such vote. Abstentions and
broker non-votes will have no effect on the election of directors. Abstentions
and broker non-votes will have the effect of votes cast against the Charter
Amendments at the Excel Special Meeting.
SHARE OWNERSHIP OF BOARD AND MANAGEMENT
As of the Excel Record Date, the members of the Excel Board and the
executive officers of Excel and their respective affiliates were deemed to
beneficially own a total of 2,724,362 shares of Excel Common Stock (which
includes 1,547,150 shares which may be acquired upon the exercise of stock
options exercisable within 60 days from the Excel Record Date, representing
approximately 10.9% of the outstanding shares of Excel Common Stock, all of
which are expected to be voted (excluding those shares which may be acquired
upon the exercise of stock options) in favor of the Share Issuance, the
Charter Amendments and the Election of Directors. Concurrently with the
execution of the Merger Agreement, Gary Sabin entered into a voting agreement
pursuant to which he, holding an aggregate of 823,225 outstanding shares of
Excel Common Stock or approximately 3.5% of the outstanding shares of Excel
Common Stock as of the Excel Record Date, agreed to vote all of the Excel
Common Stock owned by him (other than certain shares owned by the Sabin
Children's Foundation) in favor of the Share Issuance, the Charter Amendments
and the Election of Directors.
RECOMMENDATION
THE EXCEL BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF EXCEL VOTE "FOR"
THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
OTHER MATTERS
Excel is unaware of any matter to be presented at the Excel Special Meeting
other than the Share Issuance, the Charter Amendments and the election of
directors. If any other business is brought before the Excel Special Meeting,
the proxies named in the proxy card will vote in their discretion the shares
represented by the proxy with respect to such matters. Should the Chairman of
the Excel Special Meeting deem it advisable to adjourn or postpone the Excel
Special Meeting in order to allow additional time to solicit proxies and to
maximize the number of holders of Excel Common Stock casting votes at the
meeting, the holders of proxies will vote the shares of Excel Common Stock so
represented in favor of such adjournment or postponement, except that any
shares of Excel Common Stock with respect to which votes were cast against the
Share Issuance, the Charter Amendments or the Election of Directors will not
be voted in favor of such adjournment or postponement.
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THE MERGER
GENERAL DESCRIPTION OF THE MERGER
On May 14, 1998, New Plan, Excel and Merger Sub entered into the Merger
Agreement which was subsequently amended as of August 7, 1998. Pursuant to the
Merger Agreement, Merger Sub will be merged with and into New Plan, with New
Plan surviving as a wholly-owned subsidiary of Excel. The Merger will become
effective at the Effective Time. Upon consummation of the Merger, (a) each New
Plan Common Share (other than shares held by New Plan as treasury stock or
owned by Excel, which shares will be cancelled) outstanding immediately prior
to the Effective Time will be converted into the right to receive one share of
Combined Company Common Stock, (b) each New Plan Preferred Share outstanding
immediately prior to the Effective Time will be converted into a share of
Series D Preferred Stock and each New Plan Depositary Share will be converted
into the right to receive one Series D Depositary Share and (c) each share of
common stock, par value $.01 per share, of Merger Sub outstanding immediately
prior to the Effective Time will be cancelled and converted into the right to
receive one New Plan Common Share. The Merger is subject to a number of
conditions, including the approval of the New Plan Trust Amendments and the
Merger by the shareholders of New Plan and the Share Issuance, the Charter
Amendments and the Election of Directors by the stockholders of Excel. The
Exchange Ratio assumes that Excel will have declared and paid the Excel Stock
Dividend prior to the consummation of the Merger.
Upon consummation of the Merger, (a) the former shareholders of New Plan
will own in the aggregate approximately 65% of the outstanding shares of the
Combined Company Common Stock and the stockholders of Excel will own in the
aggregate approximately 35% of the outstanding shares of the Combined Company
Common Stock (assuming conversion of Excel's convertible preferred stock and
Excel's Down REIT units), and (b) the Combined Company Board will consist of
15 members, nine of whom are designated by New Plan and six of whom are
designated by Excel.
The New Plan Board and the Excel Board each believe the terms of the Merger
Agreement are fair to and in the best interests of the parties and their
respective shareholders and stockholders and unanimously recommend that the
New Plan shareholders and Excel stockholders vote for their respective
proposals at the Special Meetings.
BACKGROUND OF THE MERGER
The New Plan Board has had a long term commitment of growth through an
aggressive program to acquire and manage neighborhood and community shopping
centers, factory outlet centers and apartment communities. These acquisitions
have been accretive to earnings and FFO due in large part to New Plan's low
cost of capital stemming from its strong financial position and its management
and leasing expertise. In mid 1997 the New Plan Board observed a growing trend
towards consolidation in the regional mall shopping center industry and other
sectors of the real estate market and began to consider strategies for
consolidation in its largest core business, community and neighborhood
shopping centers, with the objective of realizing the benefits of being a
leader in the industry.
In late 1997 Robert Davis, a managing partner of Triton Pacific Capital LLC
("Triton Pacific"), financial advisor to Excel, met with James Steuterman, New
Plan's Executive Vice President, to discuss various general industry items.
During the course of this meeting, Mr. Davis observed that the strategic
philosophies and objectives of New Plan were very similar to those of Excel.
At Mr. Steuterman's request, Mr. Davis and Mr. Steuterman met again on
February 20, 1998. During the course of this meeting, Mr. Steuterman inquired
about Excel's strategy with respect to the recently announced taxable spinoff
of Legacy, and the concept of a strategic combination between New Plan and
Excel was also discussed. Following this meeting, Mr. Steuterman discussed his
meetings with Mr. Davis with William Newman, New Plan's Chairman, and Arnold
Laubich, New Plan's President, and it was agreed that Mr. Steuterman should
contact Mr. Davis to arrange a meeting between Mr. Steuterman and Gary Sabin,
Excel's Chief Executive Officer.
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On March 23, Mr. Steuterman met with Mr. Sabin and Mr. Davis. At this
meeting, Mr. Sabin and Mr. Steuterman discussed a wide range of topics
relating to their respective companies including their property portfolios,
management philosophies, acquisition criteria, long-term goals and strategic
interests. At the conclusion of this meeting, Mr. Sabin and Mr. Steuterman
agreed to pursue discussions concerning the possibility of a strategic
combination.
At a regularly scheduled meeting of the New Plan Board on March 24, Mr.
Steuterman reported on his meeting with Mr. Sabin, and with Mr. Newman and Mr.
Laubich, discussed with the New Plan Board the opportunities offered by a
strategic combination with Excel. The New Plan Board considered these reports
in the context of its ongoing external growth strategy and existing
objectives. The New Plan Board agreed that management should proceed with
further discussions with Excel. Subsequent to this meeting of the New Plan
Board, Mr. Davis advised New Plan that Mr. Sabin had received informal
authority from members of the Excel Board to further explore discussions
regarding a strategic combination with New Plan.
On March 31, Mr. Laubich and Mr. Steuterman met with Mr. Sabin and Mr. Davis
in San Diego. The participants discussed their respective companies and
strategic interests, as well as trends affecting the REIT industry generally
and the community shopping center, factory outlet center and apartment
community sectors in particular. The participants also discussed how a merger-
of-equals would be structured with respect to management, various operational
issues and board composition, and the mutual benefits of such a transaction.
Following a discussion of these topics, a working consensus emerged with
respect to the broad outline of the business aspects of a strategic
combination. Also on March 31, Excel engaged Triton Pacific as its financial
advisor in connection with the potential combination.
At the April 2 Excel Board meeting Richard Muir, Excel's Executive Vice
President, reported that Mr. Sabin and various members of New Plan's
management had begun informal discussions to explore a potential merger of the
two companies. At such meeting, Mr. Muir discussed with the Excel Board the
opportunities offered by a strategic combination with New Plan. The Excel
Board directed Excel management to continue discussions with New Plan to
further explore the proposed merger with New Plan. On April 6 Mr. Sabin
advised Mr. Laubich and Mr. Steuterman that the Excel Board had authorized
further consideration of the proposed transaction.
Between April 6 and April 10 New Plan management and Excel management had
numerous telephone negotiations regarding various structuring, pricing and
operational issues relating to the Combined Company. Messrs. Newman, Laubich
and Steuterman considered these issues and the interests of the parties and,
on April 10, agreed with Mr. Sabin and Mr. Muir on the outline of a merger of
Excel into New Plan with a preliminary indication of an exchange ratio of 1.2
New Plan Common Shares for each share of Excel Common Stock. The parties also
began discussions of the process which might lead to the conclusion of a
transaction.
Following this discussion, New Plan engaged Morgan Stanley & Co. ("Morgan
Stanley") to assist New Plan in considering the proposed transaction and
Merrill Lynch to render a fairness opinion should an agreement be reached with
Excel.
On April 7 Excel selected Prudential Securities to render a fairness opinion
to the Excel Board should an agreement with New Plan be concluded.
On April 13 the New Plan Board held a previously scheduled meeting at which
the trustees received a report on the status of the Excel transaction and gave
informal approval to continue with the process.
On April 14, 15 and 16 New Plan management and Excel management held
discussions by telephone concerning pricing structures, management of the
Combined Company, due diligence, conduct of interim operations and related
details concerning the combination. The respective senior management of New
Plan and Excel thereafter concluded that there was sufficient basis for
proceeding with a strategic combination and bringing the matter before their
respective boards for appropriate action.
On April 16 counsel for Excel submitted a draft merger agreement and counsel
for the parties began analyzing alternative structures for the Combined
Company. In addition, on April 16 Mr. Muir and Eric Ottesen, Excel's General
Counsel, met in New York with Messrs. Newman, Laubich, and Steuterman to
discuss due diligence issues and begin exchanging due diligence information.
At this meeting New Plan and Excel also executed a mutual confidentiality and
standstill agreement.
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On April 23 a special meeting of the New Plan Board was held, at which Mr.
Laubich advised the New Plan Board on the status of the possible strategic
combination with Excel and the major unresolved issues. The New Plan Board
received presentations from its counsel concerning the draft merger agreement,
which had been distributed to the trustees, and concerning the New Plan
Board's duties with respect to consideration of a merger transaction, and from
Morgan Stanley and management concerning various aspects of the proposed
combination. The New Plan Board indicated its position on the open issues and
authorized management to continue the process subject to appropriate
resolution of the open issues.
Between April 24 and May 6, New Plan and Excel conducted additional due
diligence and exchanged limited internal financial and property information,
including certain projections. Also during this period the parties negotiated
the draft merger agreement and the details of the entity structure of the
Combined Company and methodology for the merger, the structure of the Combined
Company Board, appropriate bylaw provisions and committee structures,
methodology for making investments, location of management headquarters,
relations between Legacy and the Combined Company, and employment
arrangements. During this period the parties agreed that in lieu of Excel
merging into New Plan, the optimal structure of the Combined Company would be
to operate the Combined Company under the Excel corporate structure with New
Plan becoming a wholly-owned subsidiary of Excel. The parties determined that
the mechanics of the Merger should consist of a 1 to 1 exchange ratio with
Excel declaring a 20% stock dividend prior to the Merger. The parties also
agreed that each New Plan Preferred Share would be converted into a
substantially identical share of preferred stock (with added voting rights) of
the Combined Company.
A special meeting of the Excel Board was held on May 4, at which Mr. Sabin
advised the Excel Board on the status of the possible strategic combination
with New Plan and the major unresolved issues relating to such transaction. In
addition, the Excel Board received presentations from its counsel concerning
the draft merger agreement, the status of due diligence, the proposed merger
structure and the Excel Board's duties with respect to consideration of a
merger transaction. Triton Pacific provided an overview as to the rationale
for the merger and the potential benefits to the Excel stockholders.
Prudential Securities provided a status report to the Excel Board stating it
was highly confident it would be prepared to opine as to the fairness of the
Exchange Ratio at the time of the next scheduled Excel Board meeting, pending
further due diligence and review.
The New Plan Board met on May 11 and was presented the proposed terms and
structure of the Merger and the results of management's due diligence. At such
meeting, counsel to New Plan described the terms of a draft merger agreement,
revised structure and its benefits, the terms of the preferred stock to be
issued to the holders of New Plan Preferred Shares and the need for an
enabling amendment to the New Plan Declaration of Trust. Counsel also
discussed the duties of the New Plan Board. Merrill Lynch and Morgan Stanley
made presentations outlining the preliminary results of their financial
analyses and Merrill Lynch indicated that it would be prepared to opine that
the proposed Exchange Ratio under the revised structure of the combination
would be fair, from a financial point of view, to the holders of New Plan
Common Shares. After considering these presentations, the New Plan Board
indicated that it would be prepared to approve a strategic combination with
Excel subject to appropriate resolution of certain outstanding issues.
The Excel Board also met on May 11, at which time Excel management updated
the Excel Board on the results of due diligence, the structure of the
combination and the details of the management and board of the Combined
Company. The Excel Board was updated by its counsel on the possible terms of
the combination and the current draft merger agreement. Counsel also discussed
the duties of the Excel Board. The Excel Board considered the Share Issuance,
the Charter Amendments and the Election of Directors required in connection
with the Merger Agreement. Prudential Securities made a presentation outlining
the results of the financial analyses it had conducted to assess the fairness
of the proposed Exchange Ratio to Excel under the revised structure. At this
time, Prudential Securities indicated that it was highly confident that the
proposed Exchange Ratio was fair to Excel from a financial point of view,
assuming no significant change in the proposed terms. Triton Pacific also made
a presentation regarding the Merger. After considering these presentations,
the Excel Board indicated that it would be prepared to approve a strategic
combination with New Plan subject to appropriate resolution of certain
outstanding issues. The Excel Board also received a presentation from its
legal counsel and financial advisors concerning a shareholder rights plan
which would be adopted in connection with the proposed transaction.
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Negotiations of the final terms of the combination and the Merger Agreement
continued on May 11, 12 and 13.
The New Plan Board met again on May 13. At the meeting, the New Plan Board
received an update on the resolution of remaining open issues, reviewed the
status of the transaction and again was advised as to its legal duties. The
New Plan Board received a report from Morgan Stanley and counsel. Merrill
Lynch presented additional information and delivered its written opinion that
the Exchange Ratio was fair, from a financial point of view, to the holders of
New Plan Common Shares. Following such reports and presentations and the
deliberations of the trustees, the New Plan Board unanimously approved the New
Plan Trust Amendments and the Merger.
The Excel Board also met again on May 13. At that meeting, the Excel Board
received an update on business due diligence, reviewed the proposed terms of
the Merger and again was advised as to its legal duties. Prudential Securities
presented additional information and delivered its written opinion that the
Exchange Ratio was fair to Excel from a financial point of view. Triton
Pacific gave its recommendation regarding the Merger. The Excel Board approved
and declared advisable the Merger, the Share Issuance, the Charter Amendments
and the Election of Directors. Further, the Excel Board approved the
previously presented shareholder rights plan.
Excel and New Plan completed negotiations the evening of May 13 within the
parameters approved by the Excel Board and New Plan Board. On the morning of
May 14, Excel, Merger Sub and New Plan executed the definitive Merger
Agreement and issued a press release announcing the execution of the Merger
Agreement.
JOINT REASONS FOR THE MERGER
In reaching their respective decisions to approve the transactions
contemplated by the Merger Agreement, the New Plan Board and the Excel Board
each considered that the Merger would create one of the largest community and
neighborhood shopping center REITs in the United States in terms of market
capitalization, square feet of GLA and total revenue. By combining the
strengths of two quality companies, the Merger is expected to create a
national real estate company with the size, management depth and financial
capability to compete effectively in its core businesses and capitalize on
opportunities emerging in a consolidating and changing industry. In assessing
the desirability of combining the two companies, each board made the following
observations:
. the respective portfolios have a high degree of geographic overlap which
will enhance the Combined Company's ability to manage properties
efficiently and compete for, and negotiate with, local, regional and
national tenants;
. the companies have generally employed similar acquisition criteria and
property management and leasing approaches so that the quality of the
combined portfolio will be of consistent grade and provide a solid base
from which to grow;
. the respective management teams have similar operating philosophies and
strategic objectives as well as substantial experience in executing
their respective acquisition programs which provides a consistent
management philosophy for the Combined Company to build upon; and
. their respective strengths are complementary to a significant degree so
that the Combined Company will be able to capitalize on a broader range
of opportunities than would be available to either company separately.
Each board also considered that the Merger represents a strategic
combination of New Plan and Excel and that the New Plan shareholders and Excel
stockholders would be in a position to realize the expected benefits of the
Merger. These benefits include:
. the future earnings, dividends and FFO of the Combined Company;
. the increased attractiveness of the Combined Company to institutional
investors resulting from the greater market capitalization and liquidity
of the Combined Company;
. the greater financial strength of the Combined Company and the resulting
enhanced ability to invest in properties and seek out new opportunities
for growth;
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. the potential for increased corporate acquisitions and the benefits to
be derived from becoming a consolidator in the community and
neighborhood shopping center sector;
. the potential business synergies resulting from combining two
experienced and motivated management teams with similar operating
philosophies operating in a larger company environment;
. the potential future economies of scale and operating cost savings in
the areas of property management, administrative services and public
company expenses; and
. the potential positive effect of the perception of the Combined Company
by the rating agencies and the financial markets in general.
Each board determined that by combining two strong companies with
complementary businesses and business strategies, portfolios and management
strengths together with their individual strengths, a national real estate
company would be created with greater size, market capitalization, liquidity,
FFO, financial strength and potential for growth and industry leadership than
either New Plan or Excel could achieve on a stand-alone basis. Each board
believes strongly in the quality and potential of its own company and
considered carefully the risks and uncertainties inherent in any such
combination as well as those attendant to this particular combination. Each
board concluded that the potential benefits of the Merger discussed above,
together with the individual company reasons discussed below, outweighed such
risks and the benefits of standing alone.
NEW PLAN'S REASONS FOR THE MERGER; POSITIVE AND NEGATIVE FACTORS CONSIDERED
THE NEW PLAN BOARD HAS UNANIMOUSLY APPROVED THE NEW PLAN TRUST AMENDMENTS
AND THE MERGER AND BELIEVES THAT THE NEW PLAN TRUST AMENDMENTS AND THE MERGER
ARE IN THE BEST INTERESTS OF NEW PLAN AND ITS SHAREHOLDERS. THE NEW PLAN BOARD
UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NEW PLAN TRUST
AMENDMENTS AND THE MERGER.
BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE
NEW PLAN SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN
SHAREHOLDERS TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL
RESULT IN THE MERGER NOT OCCURRING.
In reaching its conclusion to approve the Merger Agreement and approve and
recommend the New Plan Trust Amendments and the Merger, the New Plan Board
consulted with management, as well as with its financial and legal advisors,
and considered the factors described above under "The Merger--Joint Reasons
for the Merger" and a number of additional factors, including the following:
(i) The effectiveness of the Merger in implementing and accelerating New
Plan's basic growth strategy consistent with its business goals.
(ii) The financial condition, businesses and prospects of New Plan and
Excel, including, but not limited to, information with respect to their
respective recent and historic stock and earnings performance and their
strong financial and credit position and access to the capital markets. The
New Plan Board considered the detailed financial analyses, pro forma and
other information, with respect to New Plan and Excel individually and the
Combined Company, discussed by Merrill Lynch and Morgan Stanley, as well as
its own knowledge of New Plan. In making its determination, the New Plan
Board took into account the results of New Plan's due diligence review of
Excel's business. The New Plan Board also considered that Excel produced a
total return to stockholders of 32.9% for 1997, which was believed to be
the highest among all REITs that focus on community shopping centers.
(iii) The terms of the Merger Agreement, which are in all material
respects reciprocal in nature. The New Plan Board also considered certain
other information regarding the Merger, including the terms and structure
of the Merger, the proposed arrangements with respect to the Combined
Company Board and the Combined Company management structure following the
Merger, and that the corporate headquarters of the Combined Company would
be located in New York, with operational headquarters in New York and San
Diego.
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(iv) The effect on New Plan shareholders' value of New Plan continuing as
a stand-alone entity compared to the effect of combining with Excel in
light of the factors summarized above with respect to the financial
condition and prospects of the two companies on a stand-alone basis and of
the Combined Company, the trend toward consolidation in the REIT industry
and the current economic and financial environment for real estate
investment.
(v) The total market capitalization of the Combined Company would be
approximately $3.4 billion and its shareholders' equity would be
approximately $2.5 billion as compared to $2.12 billion and $1.57 billion,
respectively, for New Plan. Having a larger company was viewed as desirable
in light of industry trends and the economic environment.
(vi) The oral opinion of Merrill Lynch, subsequently confirmed in
writing, that, as of May 13, 1998, the Exchange Ratio was fair to holders
of New Plan Common Shares from a financial point of view.
(vii) The terms of the Merger Agreement which it believed to be
attractive in that the terms allow New Plan shareholders to become
stockholders in a combined REIT which will be one of the largest community
and neighborhood shopping center REITs in the United States, the Combined
Company Board would have nine of its 15 directors designated by New Plan,
William Newman would be Chairman of the Combined Company Board and Arnold
Laubich would be Chief Executive Officer of the Combined Company.
(viii) The annual dividend rate on the shares of Combined Company Common
Stock following the Merger initially will be $1.60 per share, an increase
of $0.11 over the current annual dividend rate on the New Plan Common
Shares.
(ix) The benefits to New Plan shareholders of the management team created
through the Merger and the opportunities for economies of scale and
operating efficiencies that should result from the Merger.
(x) The positive views and recommendation of New Plan's management with
respect to the proposed transaction.
(xi) The Merger will be a tax-free transaction to New Plan and its
shareholders.
The New Plan Board and management also considered certain potentially
negative factors and risks that could arise or do arise from the Merger. These
included, among others: (a) the significant costs involved in consummating the
Merger and the substantial time and effort required to effectuate the Merger
and integrate the businesses of New Plan and Excel; (b) the potential
difficulties of integrating the two companies particularly in view of having
co-operational headquarters in New York and San Diego; (c) the higher risk
associated with possible increased development activities; (d) that if the
Merger Agreement is terminated, under certain circumstances, New Plan would
have to pay a termination fee of $32.5 million and in certain cases expenses
of up to $2.5 million; (e) the continuing potential conflicts associated with
the continuing relationship between the Combined Company and Legacy including
the time that will be required of some of the Combined Company management to
manage Legacy and the significant equity interests of Excel management in
Legacy; and (f) the risk that the anticipated benefits of the Merger might not
be fully realized. The New Plan Board believed that the benefits and
advantages of the Merger far outweighed the negative factors and risks.
The foregoing discussion of the information and factors considered by the
New Plan Board is not intended to be exhaustive but includes the material
factors considered by the New Plan Board. In reaching its determination to
approve the Merger and approve and recommend the New Plan Trust Amendments and
the Merger, the New Plan Board did not assign any relative or specific weights
to the foregoing factors, and individual trustees may have given differing
weights to different factors. After deliberating with respect to the Merger
and the other transactions contemplated by the Merger Agreement, considering,
among other things, the matters discussed above and the opinion of Merrill
Lynch referred to above, the New Plan Board unanimously approved and adopted
the Merger Agreement and the transactions contemplated thereby as being in the
best interests of New Plan and its shareholders. The New Plan Board is
unanimous in its recommendation that holders of New Plan Common Shares vote
"FOR" approval of the New Plan Trust Amendments and the Merger.
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OPINION OF FINANCIAL ADVISOR TO NEW PLAN BOARD
Merrill Lynch was retained by New Plan on May 7, 1998 to render a fairness
opinion to the New Plan Board regarding the Exchange Ratio. At the meeting of
the New Plan Board held on May 13, 1998, Merrill Lynch delivered a written
opinion (the "Merrill Lynch Opinion") to the New Plan Board stating that, as
of such date, and based upon the assumptions made, matters considered and
limits of review set forth in the Merrill Lynch Opinion, the Exchange Ratio
was fair to the New Plan shareholders from a financial point of view. This
analysis, as presented to the New Plan Board, is summarized below. All of the
members of the New Plan Board were present at the meeting on May 13, 1998 and
had an opportunity to ask questions regarding Merrill Lynch's presentation.
Merrill Lynch has not been requested to, and will not, update its opinion
prior to the Effective Time.
THE FULL TEXT OF THE MERRILL LYNCH OPINION, WHICH SETS FORTH THE ASSUMPTIONS
MADE, MATTERS CONSIDERED AND CERTAIN LIMITATIONS ON THE SCOPE OF REVIEW
UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS ANNEX V TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. EACH HOLDER OF NEW PLAN COMMON SHARES IS URGED TO READ
SUCH OPINION IN ITS ENTIRETY. THE MERRILL LYNCH OPINION WAS INTENDED FOR THE
USE AND BENEFIT OF THE NEW PLAN BOARD, WAS DIRECTED ONLY TO THE FAIRNESS OF
THE EXCHANGE RATIO TO THE HOLDERS OF NEW PLAN COMMON SHARES FROM A FINANCIAL
POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS
TO HOW SUCH SHAREHOLDER SHOULD VOTE WITH RESPECT TO THE NEW PLAN PROPOSALS OR
ANY TRANSACTION RELATED THERETO. THE EXCHANGE RATIO WAS DETERMINED ON THE
BASIS OF NEGOTIATIONS BETWEEN NEW PLAN AND EXCEL AND WAS APPROVED BY THE NEW
PLAN BOARD. THE SUMMARY OF THE MERRILL LYNCH OPINION SET FORTH IN THIS JOINT
PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other things:
(i) reviewed certain publicly available business and financial information
relating to New Plan and Excel which Merrill Lynch deemed to be relevant; (ii)
reviewed certain information, including financial forecasts, relating to the
business, earnings, FFO, adjusted FFO, cash flow, assets, liabilities and
prospects of New Plan and Excel furnished to Merrill Lynch by New Plan and
Excel, (iii) conducted discussions with members of senior management of Excel
and New Plan concerning the matters described in clauses (i) and (ii) above,
as well as their respective businesses and prospects before and after giving
effect to the Merger; (iv) reviewed the market prices and valuation multiples
for New Plan Common Shares and the Excel Common Stock and compared them with
those of certain publicly traded companies that Merrill Lynch deemed relevant;
(v) reviewed the results of operations of New Plan and Excel and compared them
with those of certain publicly traded companies that Merrill Lynch deemed
relevant; (vi) compared the proposed financial terms of the Merger with the
financial terms of certain other transactions which Merrill Lynch deemed
relevant; (vii) participated in certain discussions among representatives of
New Plan and Excel and their financial and legal advisors; (viii) reviewed a
draft, dated May 11, 1998, of the Merger Agreement; and (ix) reviewed such
other financial studies and analyses and took into account such other matters
as Merrill Lynch deemed necessary, including Merrill Lynch's assessment of
general economic, market and monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch assumed and relied on
the accuracy and completeness of all information supplied or otherwise made
available to Merrill Lynch, discussed with or reviewed by or for Merrill
Lynch, or publicly available. Merrill Lynch also did not assume any
responsibility for independently verifying such information or for undertaking
an independent evaluation or appraisal of any of the assets or liabilities of
New Plan or Excel, and Merrill Lynch has not been furnished with any such
evaluation or appraisal. In addition, Merrill Lynch did not assume any
obligation to conduct any physical inspection of the properties or facilities
of New Plan or Excel. With respect to the financial forecast information
furnished to or discussed with Merrill Lynch by New Plan and Excel, Merrill
Lynch assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of New Plan's or Excel's management
as to the expected future financial performance of New Plan or Excel. Merrill
Lynch has conservatively assumed that there are no synergies resulting from
the Merger. Furthermore, Merrill Lynch assumed that the Surviving
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Trust (as herein defined) will qualify as a qualified REIT subsidiary, under
all relevant provisions of the Code. Merrill Lynch further assumed that the
Merger will qualify as a tax-free reorganization for United States federal
income tax purposes.
The Merrill Lynch Opinion is necessarily based upon market, economic and
other conditions as they exist and can be evaluated on the information made
available to Merrill Lynch as of the date of the Merrill Lynch Opinion.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the Merger, no
restrictions, including any divestiture requirements or amendments or
modifications, will be imposed that would have a material adverse effect on
the contemplated benefits of the Merger.
At the meeting of the New Plan Board held on May 13, 1998, Merrill Lynch
presented certain financial analyses in connection with the delivery of the
Merrill Lynch Opinion. The following is a summary of the material financial
and comparative analyses performed by Merrill Lynch in arriving at the Merrill
Lynch Opinion.
For purposes of the Merrill Lynch Opinion, Merrill Lynch has viewed New Plan
as the "acquiror" in that its shareholders will receive 65% of Combined
Company Common Stock and that nine of the fifteen members of the Combined
Company Board are designated by New Plan. Furthermore, for purposes of valuing
New Plan, Merrill Lynch has converted its financial results to a calendar
year-end.
Merrill Lynch also reviewed the Exchange Ratio and, on the basis thereof,
calculated an aggregate value for the shares of Excel Common Stock (the "Excel
Value") of $790.8 million. Using an estimation of Excel's debt balances as of
December 31, 1998 provided by Excel's management, Merrill Lynch also
calculated an aggregate transaction value (the "Transaction Value") of
$1,350.2 million which consisted of the Excel Value plus debt of $462.2
million, preferred stock of $157.5 million, less an estimation of Excel's cash
balance at December 31, 1998 of $80.0 million. With respect to the Excel
Value, Merrill Lynch calculated FFO multiples for 1998 and 1999 of 11.4x and
10.4x, respectively, and AFFO multiples for 1998 and 1999 of 11.6x and 10.7x,
respectively.
Valuation of New Plan
Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for New Plan and, on the basis thereof,
calculated its market value, market capitalization and trading multiples based
on its stock price, as of May 8, 1997, of $24.81. For this purpose, Merrill
Lynch defined "total market capitalization" as the market value of New Plan's
common equity. Merrill Lynch then calculated the market value of New Plan as a
multiple of projected FFO (based on mean estimates of FFO provided by First
Call, an industry service provider of earnings estimates based on an average
of earnings estimates published by various investment banking firms ("First
Call")), and FFO less recurring capital expenditures ("AFFO"). New Plan's FFO
multiples for 1998 and 1999 were 12.9x and 11.8x, respectively, and AFFO
multiples for 1998 and 1999 were 13.6x and 12.3x, respectively.
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call, and taken from Merrill Lynch Equity Research, Merrill Lynch
compared certain financial and operating information and ratios for New Plan
with the corresponding financial and operating information for a group of
publicly traded companies engaged primarily in the ownership, management,
operation and acquisition of shopping centers. For the purpose of its
analysis, the following companies were used as comparable companies to New
Plan: Developers Diversified Realty Corporation, Excel Realty Trust, Inc.,
Federal Realty Investment Trust, Kimco Realty Corporation, Regency Realty
Corporation and Weingarten Realty Investors (collectively, the "New Plan
Comparable Companies").
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Merrill Lynch's calculations resulted in the following relevant ranges for
the New Plan Comparable Companies and for New Plan as of May 8, 1998: a range
of debt to total market capitalization of 25.1% to 34.6%, with a mean of 30.1%
(as compared to New Plan at 25.6%); a range of market value as a multiple of
projected 1998 FFO of 10.8x to 13.0x, with a mean of 11.6x (as compared to New
Plan at 12.9x); a range of market value as a multiple of projected 1999 FFO of
9.9x to 11.6x, with a mean of 10.6x (as compared to New Plan at 11.8x); a
range of market value as a multiple of projected 1998 AFFO of 11.1x to 13.5x,
with a mean of 12.3x (as compared with New Plan at 13.9x); and a range of
market value as a multiple of projected 1999 AFFO of 10.2x to 12.1x, with a
mean of 11.2x (as compared to New Plan at 12.7x). Based upon projected 1998
FFO multiples, the implied per share valuation of the New Plan Common Shares
is between $23.50 and $26.00.
None of the New Plan Comparable Companies is, of course, identical to New
Plan. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the New Plan Comparable Companies
and other factors that could affect the public trading volume of the New Plan
Comparable Companies, as well as that of New Plan. In addition, the multiples
of market value to estimated 1998 and projected 1999 FFO and AFFO for the New
Plan Comparable Companies are based on projections prepared by research
analysts using only publicly available information. Accordingly, such
estimates may or may not prove to be accurate.
Comparable Transaction Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of selected other mergers and
strategic transactions involving REITs. These transactions were The Rouse
Company's and Westfield America, Inc.'s acquisition of the TrizecHahn
Corporation's Shopping Mall Portfolio, Simon DeBartolo Group, Inc.'s
acquisition of Corporate Property Investors, Kimco Realty Corporation's merger
with The Price REIT, Inc., and Simon DeBartolo Group, Inc.'s acquisition of
Retail Property Trust (collectively, the "Merrill Comparable Transactions").
Using publicly available information and estimates of financial results as
published by First Call, Merrill Lynch calculated the premium of the implied
offer prices relative to the acquired company's stock price on the day before
the announcement of the respective transaction and the implied offer value per
share for the acquired company, as of the day before the announcement of the
respective transaction, as a multiple of the projected FFO per share for such
company. For purposes of this analysis, Merrill Lynch relied primarily on the
transaction between Kimco Realty Corporation and The Price REIT, Inc. as the
others involved regional shopping centers and were thus deemed not as
comparable. Therefore, Merrill Lynch utilized a range of FFO multiples of
10.5x to 11.5x. This results in an implied per share valuation of between
$21.00 and $23.00 for the New Plan Common Shares.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted cash flow
analyses (i.e., an analysis of the present value of the projected levered cash
flows for the periods using the discount rates indicated) of New Plan based
upon projections provided by New Plan's management for the years 1998 through
2002, inclusive, using discount rates reflecting an equity cost of capital
ranging from 13.0% to 15.0% and terminal value multiples of calendar year 2002
FFO ranging from 12.5x to 14.5x. The range of implied present values per share
of New Plan Common Shares was approximately $22.27 to $27.05 using the
discounted dividend method, approximately $24.68 to $29.59 based upon the
discounted FFO method and approximately $24.19 to $29.08 based upon the
discounted AFFO method.
Valuation of Excel
Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for Excel and, on the basis thereof,
calculated its market value, market capitalization and trading multiples based
on its stock price as of May 8, 1998 of $28.00. For this purpose, Merrill
Lynch defined "total market capitalization" as the market value of Excel's
common equity (including the assumed conversion of all outstanding operating
partnership units into shares of Excel Common Stock and all convertible
preferred shares into shares of Excel Common Stock) plus preferred stock at
liquidation value plus total debt. Merrill Lynch then calculated the market
value of Excel as a multiple of projected FFO (based on mean estimates of FFO
provided by First Call) and AFFO. Excel's FFO multiples for 1998 and 1999 were
10.7x and 9.8x, respectively, and the AFFO multiples for 1998 and 1999 were
10.9x and 10.0x, respectively.
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Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call and taken from Merrill Lynch Equity Research, Merrill Lynch
compared certain financial and operating information and ratios for Excel with
the corresponding financial and operating information for a group of publicly
traded companies engaged primarily in the ownership, management, operation and
acquisition of shopping centers. For the purpose of its analysis, the
following companies were used as comparable companies to Excel: Developers
Diversified Realty Corporation, Federal Realty Investment Trust, Kimco Realty
Corporation, New Plan Realty Trust, Regency Realty Corporation and Weingarten
Realty Investors Trust (collectively, the "Merrill Excel Comparable
Companies").
Merrill Lynch's calculations resulted in the following relevant ranges for
the Merrill Excel Comparable Companies and for Excel (i) as of December 31,
1997: a range of debt to total market capitalization of 25.1% to 34.2%, with a
mean of 28.6% (as compared to Excel at 34.6%) (adjusted for the Legacy spin-
off) and (ii) as of May 8, 1998: a range of market value as a multiple of
projected 1998 FFO of 11.2x to 13.0x, with a mean of 12.0x (as compared to
Excel at 10.8x); a range of market value as a multiple of projected 1999 FFO
of 10.0x to 11.8x, with a mean of 10.9x (as compared to Excel at 9.9x); a
range of market value as a multiple of projected 1998 AFFO of 11.6x to 13.9x,
with a mean of 12.8x (as compared with Excel at 11.1x); and a range of market
value as a multiple of projected 1999 AFFO of 10.4x to 12.7x, with a mean of
11.6x (as compared to Excel at 10.2x). Based upon projected 1998 FFO
multiples, the implied per share valuation of the Excel Common Stock is
between $28.20 and $31.00.
None of the Merrill Excel Comparable Companies is, of course, identical to
Excel. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Merrill Excel Comparable
Companies and other factors that could affect the public trading volume of the
Merrill Excel Comparable Companies, as well as that of Excel. In addition, the
multiples of market value to estimated 1998 and projected 1999 FFO and AFFO
for the Merrill Excel Comparable Companies are based on projections prepared
by research analysts using only publicly available information. Accordingly,
such estimates may or may not prove to be accurate.
Comparable Transaction Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of the Merrill Comparable
Transactions. Using publicly available information and estimates of financial
results as published by First Call, Merrill Lynch calculated with respect to
the Merrill Comparable Transactions the premiums of the implied offer prices
relative to the acquired company's stock price on the day before the
announcement of the respective transaction and the implied offer value per
share for the acquired company, as of the day before the announcement of the
respective transaction, as a multiple of the projected FFO per share for such
company. Utilizing the same methodology as described above for New Plan, the
analysis yielded a range of transaction FFO multiples of 10.5x to 11.5x. This
results in an implied per share valuation of Excel Common Stock of between
$27.40 and $30.01.
Discounted Cash Flow Analyses. Merrill Lynch performed discounted cash flow
analyses (i.e., an analysis of the present value of the projected levered cash
flows for the periods using the discount rates indicated) of Excel based upon
projections provided by Excel's management for the years 1998 through 2002,
inclusive, using discount rates reflecting an equity cost of capital ranging
from 14.1% to 16.1% and terminal value multiples of calendar year 2002 FFO
ranging from 12.0x to 13.0x. The range of implied present values per share of
Excel Common Stock was approximately $26.13 to $29.99 using the discounted
dividend method, approximately $28.84 to $32.86 based upon the discounted FFO
method and approximately $28.59 to $32.59 based upon the discounted AFFO
method.
Pro Forma Merger Consequences. Merrill Lynch analyzed the pro forma effects
resulting from the Merger, including the potential impact on the Combined
Company's projected FFO per share and the anticipated accretion (i.e., the
incremental increase) to Excel's stand-alone per share FFO resulting from the
Merger. In order to equate this to New Plan shareholders, Merrill Lynch
converted the Combined Company's projected FFO into
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that which is attributable to New Plan's shareholders. In this case, because
New Plan shareholders receive one Combined Company share for each New Plan
share, the resulting company's FFO/share equates to the FFO a New Plan
shareholder will receive per share. Merrill Lynch observed that the Merger
would be accretive to the Combined Company's projected FFO per share in each
of the years 1998 through 2002, inclusive, and that the year-over-year annual
growth rates for FFO per share in each of the years 1999 through 2002,
inclusive, exceeded such comparable results for Excel on a stand-alone basis.
Merrill Lynch calculated the accretion to New Plan shareholders as
approximately 1.0% in 1998 growing to approximately 3.0% by 2002.
The summary set forth above does not purport to be a complete description of
the analysis performed by Merrill Lynch in arriving at the Merrill Lynch
Opinion. The preparation of a fairness opinion is a complex process and not
necessarily susceptible to partial or summary description. Merrill Lynch
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create a misleading view of the
process underlying the Merrill Lynch Opinion. In its analyses, Merrill Lynch
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
New Plan's, Excel's and Merrill Lynch's control. Any estimates contained in
Merrill Lynch's analyses are not necessarily indicative of actual values,
which may be significantly more or less favorable than as set forth therein.
Estimated values do not purport to be appraisals and do not necessarily
reflect the prices at which businesses or companies may be sold in the future,
and such estimates are inherently subject to uncertainty.
The New Plan Board selected Merrill Lynch to render a fairness opinion
because Merrill Lynch is an internationally recognized investment banking firm
with substantial experience in transactions similar to the Merger and because
it is familiar with New Plan and its business. Merrill Lynch is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated underwritings,
secondary distributions of listed and unlisted securities and private
placements.
Pursuant to a letter agreement dated May 12, 1998, New Plan has agreed to
pay Merrill Lynch a fee, inclusive of all expenses, of $600,000. In addition,
New Plan has agreed under certain circumstances to indemnify Merrill Lynch and
certain related persons against certain liabilities, including certain
liabilities under the federal securities laws, arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory services to New
Plan and Excel and may continue to do so and has received, and may receive,
fees for the rendering of such services. In addition, in the ordinary course
of its business, Merrill Lynch may actively trade in the securities of New
Plan, Excel or the Combined Company for its own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position
in such securities
EXCEL'S REASONS FOR THE MERGER; POSITIVE AND NEGATIVE FACTORS CONSIDERED
THE EXCEL BOARD HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS AND BELIEVES
THAT THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS
ARE IN THE BEST INTERESTS OF EXCEL AND ITS STOCKHOLDERS. THE EXCEL BOARD
UNANIMOUSLY RECOMMENDS THAT EXCEL STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE
SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
In reaching its conclusion to approve the Merger Agreement and approve,
declare advisable and recommend the Share Issuance, the Charter Amendments and
the Election of Directors, the Excel Board consulted with management, as well
as with its financial and legal advisors, and considered the factors described
above under "The Merger--Joint Reasons for the Merger" and a number of
additional factors, including the following:
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(i) The effectiveness of the Merger in implementing and accelerating
Excel's basic growth strategy consistent with its business goals.
(ii) The financial condition, businesses and prospects of New Plan and
Excel, including, but not limited to, information with respect to their
respective recent and historic stock and earnings performance and their
relative financial and credit position and access to the capital markets.
The Excel Board considered the detailed financial analyses, pro forma and
other information, with respect to New Plan and Excel individually and the
Combined Company, discussed by Prudential Securities and Triton Pacific, as
well as its own knowledge of Excel. In making its determination, the Excel
Board took into account the results of Excel's due diligence review of New
Plan's business.
(iii) The terms of the Merger Agreement, which are in all material
respects reciprocal in nature. The Excel Board also considered certain
other information regarding the Merger, including the terms and structure
of the Merger, the proposed arrangements with respect to the board of
directors and management structure of the Combined Company following the
Merger, and that the corporate headquarters of the Combined Company would
be located in New York, with operational headquarters in New York and San
Diego.
(iv) The effect on Excel stockholders' value of Excel continuing as a
stand-alone entity compared to the effect of combining with New Plan in
light of the factors summarized above with respect to the financial
condition and prospects of the two companies on a stand-alone basis and of
the Combined Company, the trend toward consolidation in the REIT industry
and the current economic and financial environment for real estate
investment.
(v) The total market capitalization of the Combined Company would be
approximately $3.4 billion and its stockholders' equity would be
approximately $2.5 billion as compared to $1.3 billion and $930 million,
respectively, for Excel. Having a larger company was viewed as desirable in
light of industry trends and the economic environment.
(vi) The oral opinion of Prudential Securities, subsequently confirmed in
writing, that as of May 13, 1998, the Exchange Ratio pursuant to the Merger
was fair to Excel from a financial point of view.
(vii) The terms of the Merger Agreement which it believed to be
attractive in that the terms allow Excel stockholders to continue as
stockholders in a combined REIT which is expected to be one of the largest
community and neighborhood shopping center REITs in the United States, the
Combined Company Board will have six of its fifteen members designated by
Excel, Gary Sabin will be President and Chairman of the Investment
Committee of the Combined Company, and it is expected that Mr. Sabin will
eventually succeed Mr. Laubich as Chief Executive Officer of the Combined
Company.
(viii) The benefits to Excel stockholders of the management team created
through the Merger and the opportunities for economies of scale and
operating efficiencies that should result from the Merger.
(ix) The positive views and recommendation of Excel's management with
respect to the proposed transaction.
(x) The Excel Board's view that the overall terms of the Merger Agreement
are fair to Excel and its stockholders.
The Excel Board also considered certain potentially negative factors and
risks that could arise or do arise from the proposed Merger. These included,
among others: (a) the significant costs involved in connection with
consummating the Merger and the substantial management time and effort
required to effectuate the Merger and integrate the businesses of Excel and
New Plan; (b) the potential difficulties of integrating two companies
particularly in view of having co-operational headquarters in New York and San
Diego; (c) the decrease in the dividend initially payable on Excel Common
Stock; (d) the possible adverse effects upon the market for Excel Common Stock
and upon Excel's ability to raise capital and issue equity in both the public
and private markets that might result if the Merger were not consummated; (e)
that if the Merger Agreement is terminated, under certain circumstances, Excel
could have to pay to New Plan a fee of $32.5 million and, in certain
instances, expenses of up to $2.5 million; and (f) the risk that the
anticipated benefits of the Merger might not be fully realized. In the view of
the Excel Board, the negative factors were not sufficient, either individually
or collectively, to outweigh the advantages of the Merger.
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The foregoing discussion of the information and factors considered by the
Excel Board is not intended to be exhaustive but includes the material factors
considered by the Excel Board. In reaching its determination to approve the
Merger and approve, declare advisable and recommend the Share Issuance, the
Charter Amendments and the Election of Directors, the Excel Board did not
assign any relative or specific weights to the foregoing factors, and
individual directors may have given differing weights to different factors.
After deliberating with respect to the Merger and the other transactions
contemplated by the Merger Agreement, considering, among other things, the
matters discussed above and the opinion of Prudential Securities referred to
above, the Excel Board unanimously approved and adopted the Merger Agreement
and the transactions contemplated thereby as being in the best interests of
Excel and its stockholders. The Excel Board is unanimous in its recommendation
that holders of Excel Common Stock vote "FOR" approval and adoption of the
Share Issuance, the Charter Amendments and the Election of Directors.
OPINION OF FINANCIAL ADVISOR TO EXCEL BOARD
On May 13, 1998, Prudential Securities delivered its oral opinion to the
Excel Board to the effect that, as of such date, the Exchange Ratio was fair,
from a financial point of view, to Excel (the "Prudential Securities
Opinion"). Prudential Securities made a presentation of the financial analysis
underlying its oral opinion at a meeting of the Excel Board on May 13, 1998.
This analysis, as presented to the Excel Board, is summarized below. All of
the members of the Excel Board were present at the meeting on May 13, 1998 and
had an opportunity to ask questions regarding Prudential Securities'
presentation. Prudential Securities subsequently confirmed its opinion in
writing on May 13, 1998.
In requesting the Prudential Securities Opinion, the Excel Board did not
give any special instructions to Prudential Securities or impose any
limitation upon the scope of the investigation that Prudential Securities
deemed necessary to enable it to deliver the Prudential Securities Opinion. A
copy of the Prudential Securities Opinion, which sets forth the assumptions
made, matters considered and limits on the review undertaken, is attached to
this Joint Proxy Statement/Prospectus as Annex VI and is incorporated herein
by reference. The summary of the Prudential Securities Opinion set forth below
is qualified in its entirety by reference to the full text of the Prudential
Securities Opinion. Excel stockholders are urged to read the Prudential
Securities Opinion in its entirety.
THE OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO TO EXCEL
FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE MEETING OR AS TO ANY
OTHER ACTION SUCH STOCKHOLDER SHOULD TAKE REGARDING THE MERGER.
In conducting its analysis and arriving at the Prudential Securities Opinion
dated May 13, 1998, Prudential Securities reviewed such information and
considered such financial data and other factors as Prudential Securities
deemed relevant under the circumstances, including, among others, the
following: (i) a draft dated May 11, 1998 of the Merger Agreement; (ii)
certain publicly-available historical financial and operating data of Excel
including, but not limited to, (a) the Annual Report to Stockholders and
Annual Report on Form 10-K of Excel for the three fiscal years ended December
31, 1997, 1996 and 1995, (b) the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997, (c) the Proxy Statement for the Annual Meeting of
Stockholders to be held on May 28, 1998, (d) the Form 10 dated December 12,
1997 relating to the spin-off of Legacy, (e) the Prospectus dated January 7,
1998 relating to the sale of 6,000,000 depositary shares of Series B Preferred
Stock, (f) the Prospectus dated December 12, 1996 relating to the sale of
2,600,000 shares of Excel Common Stock and (g) the Prospectus dated June 20,
1995 relating to the sale of 2,000,000 shares of Excel Common Stock; (iii)
certain publicly-available historical financial and operating data of New Plan
including, but not limited to, (a) the Annual Report to Shareholders and an
Annual Report on Form 10-K of New Plan for the three fiscal years ended July
31, 1997, 1996 and 1995, (b) the Quarterly Report on Form 10-Q for the quarter
ended January 31, 1998, (c) the Proxy Statement for the Annual Meeting of
Shareholders held on December 10, 1997 and (d) the Prospectus dated November
8, 1995 relating to the sale of 4,000,000 New Plan Common Shares; (iv) certain
information relating to New Plan, including financial forecasts for the fiscal
years ending July 31, 1998 and 1999 prepared
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by the management of New Plan and a schedule of future investment projects and
acquisitions; (v) publicly available financial, operating and stock market
data concerning certain companies engaged in businesses Prudential Securities
deemed comparable to Excel and New Plan, respectively, or otherwise relevant
to Prudential Securities' inquiry; (vi) the financial terms of certain recent
comparable transactions Prudential Securities deemed relevant to the inquiry;
(vii) the historical stock prices and trading volumes of Excel Common Stock
and New Plan Common Shares; and (viii) such other financial studies, analyses
and investigations as Prudential Securities deemed appropriate. Prudential
Securities assumed, with Excel's consent, that the draft of the Merger
Agreement which Prudential Securities reviewed (as referred to above) will
conform in all material respects to that document in final form.
Prudential Securities met with the senior management of Excel and New Plan
to discuss (i) the prospects for their respective businesses, (ii) their
estimates of such businesses' future financial performance, (iii) the
financial impact of the Merger on the respective companies, and (iv) such
other matters as Prudential Securities deemed relevant.
In connection with its review and analysis and in arriving at the Prudential
Securities Opinion, Prudential Securities relied upon the accuracy and
completeness of the financial and other information provided to Prudential
Securities by Excel and New Plan and has not undertaken any independent
verification of such information or any independent valuation or appraisal of
any of the assets or liabilities of Excel or New Plan. With respect to certain
financial forecasts provided to Prudential Securities by the management of New
Plan, Prudential Securities assumed such information (and the assumptions and
bases therefor) represents the best currently available estimates and
judgments of New Plan's management as to the future financial performance of
New Plan. The Prudential Securities Opinion is predicated on the Merger
qualifying as a tax-free reorganization within the meaning of Section 368(a)
of the Code. Further, the Prudential Securities Opinion is necessarily based
on economic, financial and market conditions as they exist, and can only be
evaluated as of May 13, 1998.
The Prudential Securities Opinion does not address nor should it be
construed to address the relative merits of the Merger and alternative
business strategies which may be available to Excel. In addition, the
Prudential Securities Opinion does not in any manner address the prices at
which the Combined Company Common Stock will actually trade following
consummation of the Merger.
In addition, the Prudential Securities Opinion and the presentation to the
Excel Board was one of the many factors taken into consideration by the Excel
Board in making its determination to recommend approval of the Merger
Agreement. Consequently, the analyses of Prudential Securities described below
should not be viewed as determinative of the opinion of the Excel Board with
respect to the Exchange Ratio in connection with the Merger. The Exchange
Ratio was determined through arm's length negotiations between Excel and New
Plan and was approved by the Excel Board.
In arriving at the Prudential Securities Opinion, Prudential Securities
performed a variety of financial analyses, including those summarized herein.
The summary set forth below of the analyses presented to the Excel Board at
the May 13, 1998 meeting does not purport to be a complete description of the
analyses performed. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analyses and the application of these methods to the
particular circumstance and, therefore, such an opinion is not necessarily
susceptible to partial analysis or summary description. Prudential Securities
believes that its analysis must be considered as a whole and that selecting
portions thereof or portions of the factors considered by it, without
considering all analyses and factors, could create an incomplete view of the
evaluation process underlying the Prudential Securities Opinion. Prudential
Securities made numerous assumptions with respect to industry performance,
general business, economic, market and financial conditions and other matters,
many of which are beyond the control of Excel and New Plan. Any estimates
contained in Prudential Securities' analyses are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses. Additionally, estimates of the
values of businesses and securities do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities may be sold.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty. Subject to the foregoing, the following is a summary of the
material financial analyses presented by Prudential Securities to the Excel
Board in connection with the Prudential Securities Opinion dated May 13, 1998.
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Comparable Companies Analysis. A comparable companies analysis was employed
by Prudential Securities to establish implied ranges for the Exchange Ratio.
Prudential Securities analyzed publicly-available historical and projected
financial results, including multiples of current stock price to projected
1998 funds from operations per share ("1998 Projected FFO") (defined as net
income plus depreciation and amortization, excluding gains on sales of
property, non-recurring charges, and other extraordinary items) and projected
1999 funds from operations per share ("1999 Projected FFO") of certain
companies considered by Prudential Securities to be reasonably similar to
Excel. The companies analyzed included: Burnham Pacific Properties, Inc.,
Developers Diversified Realty Corp., Federal Realty Investment Trust, JDN
Realty Corporation, Kimco Realty Corporation, Regency Realty Corporation, and
Weingarten Realty Investors (the "Prudential Securities Excel Comparable
Companies"). All of the trading multiples of the Prudential Securities Excel
Comparable Companies were based on closing stock prices on May 12, 1998 (the
"May 12th Closing Price") and all FFO per share estimates were published by
First Call. The estimates published by First Call were not prepared in
connection with the Merger or at the request of Prudential Securities.
The Prudential Securities Excel Comparable Companies were found to have a
May 12th Closing Price estimated to be equal to 9.8x to 13.1x 1998 Projected
FFO and 8.6x to 11.4x 1999 Projected FFO. Applying such multiples to Excel's
estimated 1998 FFO per share ($2.61) and estimated 1999 FFO per share ($2.85)
resulted in implied ranges for the Exchange Ratio of 1.018 to 1.366 and 0.986
to 1.296, respectively, based on New Plan's closing price of $25.00 on May 12,
1998. The Exchange Ratio is within the ranges for the exchange ratio implied
by Prudential Securities' comparable companies analysis.
Comparable Transactions Analysis. Prudential Securities also analyzed the
consideration paid in several recent merger and acquisition transactions
deemed by Prudential Securities to be reasonably similar to the Merger, and
considered the multiple of the equity purchase price (defined as the purchase
price of the acquired entity's equity) to the acquired entity's latest twelve
months funds from operations ("LTM FFO") and to the acquired entity's forward
twelve months funds from operations ("F-FFO"), based upon publicly available
information for such transactions. The transactions considered were the
combinations of: (i) the then pending merger of Kimco Realty Corporation and
The Price REIT, Inc., (ii) Prime Realty and Horizon Group, (iii) Simon
Property Group, Inc. and DeBartolo Realty Corp., (iv) Glimcher Realty Trust
and Retail Property Investors, Inc., and (v) Bradley Real Estate, Inc. and
Tucker Properties Corp. (the "Prudential Securities Comparable Transactions").
The Prudential Securities Comparable Transactions were found to imply for the
acquired entity an equity purchase price within a range of 6.5x to 13.4x LTM
FFO and 6.0x to 12.0x F-FFO. Applying such multiples to Excel's LTM FFO per
share ($2.54) and F-FFO per share ($2.61) resulted in implied ranges for the
Exchange Ratio of 0.664 to 1.362 and 0.630 to 1.250, respectively. The
Exchange Ratio is within the ranges for the exchange ratio implied by
Prudential Securities' comparable transaction analysis. None of the companies
or acquired entities utilized in the above Prudential Securities Excel
Comparable Companies analysis and Prudential Securities Comparable
Transactions analysis for comparative purposes is, of course, identical to
Excel. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the Prudential Securities Excel
Comparable Companies and the acquired entities in the Prudential Securities
Comparable Transactions and other factors that could affect the public trading
value and consideration paid for each of the Prudential Securities Excel
Comparable Companies and the acquired entities, respectively, as well as that
of Excel.
Contribution Analysis. Prudential Securities observed that Excel
stockholders would own 35.5% of the Combined Company Common Stock outstanding
after the Merger (after giving effect to the 20% stock dividend payable to
Excel stockholders prior to the consummation of the Merger). Prudential
Securities reviewed certain projected operating and financial information,
including, among other things, actual and projected FFO and revenues for
Excel, New Plan, and the pro forma Combined Company without giving effect to
potential transaction synergies. Prudential Securities observed that in 1997,
1998 and 1999 Excel would contribute (without giving effect to potential
transaction synergies) 38.1%, 37.2% and 37.9% to the Combined Company's FFO,
respectively, and 31.5%, 34.8% and 33.5% to the Combined Company's revenues.
Prudential Securities also reviewed the relative contributions to the pro
forma combined net asset valuation. The analysis indicated
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that Excel would contribute 33.5% of the combined net asset value. Projected
financial and other information concerning Excel and New Plan and the impact
of the Merger upon the holders of Excel Common Stock are not necessarily
indicative of future results. All projected financial information is subject
to numerous contingencies, many of which are beyond the control of management
of Excel and New Plan.
Premiums Paid Analysis. Prudential Securities also analyzed historical stock
and trading volumes of Excel Common Stock and New Plan Common Shares.
Prudential Securities observed that between May 12, 1997 and May 12, 1998,
Excel Common Stock traded in the range of $23.875 and $35.625 per share.
Additionally, Prudential Securities noted that based upon a May 12, 1998
closing price of New Plan Common Shares and an implied price per share of
$30.00 for Excel Common Stock, the Exchange Ratio results in a premium of 5.7%
over Excel's closing price of $28.38 one day prior to the announcement of the
transaction (the "Announcement"), a premium of 10.1% over Excel's closing
price of $27.25 one month prior to the Announcement, and a premium of 11.9%
over Excel's closing price of $26.81 three months prior to the Announcement.
By way of comparison, Prudential Securities observed that the range of
premiums over the acquired entity's closing stock price one month prior to the
Announcement was -16.0% to 22.8% for the acquired entities in the Prudential
Securities Comparable Transactions.
Prudential Securities has, in the past, provided financial advisory services
to Excel and New Plan and may continue to do so and has received, and may
receive, fees for the rendering of such services. Excel selected Prudential
Securities to provide a fairness opinion because it is a nationally recognized
investment banking firm engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions and for other purposes
and has substantial experience in transactions similar to the Merger. Pursuant
to an engagement letter with Prudential Securities, Excel has paid Prudential
Securities an advisory fee of $500,000 upon the delivery of the Prudential
Securities Opinion. In addition, the engagement letter with Prudential
Securities provides that Excel will reimburse Prudential Securities for its
reasonable out-of-pocket expenses and will indemnify Prudential Securities and
certain related persons against certain liabilities, including liabilities
under securities laws, arising out of the Merger or its engagement. In the
ordinary course of business, Prudential Securities may actively trade the
shares of Excel Common Stock, the New Plan Common Shares and the shares of
Combined Company Common Stock for its own account and for the accounts of
customers, and accordingly, may at any time hold a long or short position in
such securities.
CERTAIN TRANSACTIONS
The following is a summary of the material provisions of voting agreements
entered into in connection with the Merger and the transactions contemplated
thereby (the "Voting Agreements"). Copies of the Voting Agreements are
available free of charge from the Combined Company, both prior and subsequent
to the Effective Time. This summary of the Voting Agreements does not purport
to be complete and is qualified in its entirety by reference to the Voting
Agreements.
New Plan Voting Agreements.
Pursuant to separate Voting Agreements between Excel and each of William
Newman and Arnold Laubich (the "New Plan Voting Agreements"), each of Messrs.
Newman and Laubich has agreed with Excel, among other things, to attend the
New Plan Special Meeting in person or by proxy and to vote his New Plan Common
Shares (a) for approval and adoption of the New Plan Trust Amendments and the
Merger and (b) against any recapitalization, merger, sale of assets or other
business combination or similar transaction involving New Plan or any of its
subsidiaries, securities or assets which is not endorsed in writing by Excel
or any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of
New Plan under the Merger Agreement or which could result in any of the
conditions of New Plan's obligations under the Merger Agreement not being
fulfilled. Mr. Newman and Mr. Laubich have also agreed with Excel in the New
Plan Voting Agreements to neither, directly or indirectly, (i) sell, offer to
sell, grant any option for the sale of or otherwise transfer or dispose of, or
enter into any agreement to sell, any New Plan Common Shares or (ii) solicit,
initiate or encourage any inquiries or the making of any proposals which may
reasonably be expected to lead to a New Plan Takeover Proposal (as herein
defined) or participate in any negotiations or discussions relating to a New
Plan Takeover Proposal. The New Plan Voting Agreements will terminate upon the
termination of the Merger Agreement in accordance with its terms.
As of the New Plan Record Date, Mr. Newman owned 1,383,788 outstanding New
Plan Common Shares, representing approximately 2.3% of the outstanding New
Plan Common Shares, and Mr. Laubich owned 317,870 outstanding New Plan Common
Shares, representing approximately 0.5% of the outstanding New Plan Common
Shares.
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Excel Voting Agreements.
Pursuant to the Voting Agreement between New Plan and Gary Sabin (the "Excel
Voting Agreement"), Mr. Sabin has agreed with New Plan, among other things, to
attend the Excel Special Meeting in person or by proxy and to vote his shares
of Excel Common Stock (other than certain shares owned by the Sabin Children's
Foundation) (a) for approval and adoption of the Share Issuance, the Charter
Amendments and the Election of Directors and (b) against any recapitalization,
merger, sale of assets or other business combination or similar transaction
involving Excel or any of its subsidiaries, securities or assets which is not
endorsed in writing by New Plan or any other action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of Excel under the Merger Agreement or which could
result in any of the conditions of Excel's obligations under the Merger
Agreement not being fulfilled. Mr. Sabin has also agreed with New Plan in the
Excel Voting Agreement to neither, directly or indirectly, (i) sell, offer to
sell, grant any option for the sale of or otherwise transfer or dispose of, or
enter into any agreement to sell, any of his shares of Excel Common Stock or
(ii) solicit, initiate or encourage any inquiries or the making of any
proposals which may reasonably be expected to lead to an Excel Takeover
Proposal or participate in any negotiations or discussions relating to an
Excel Takeover Proposal. The Excel Voting Agreement will terminate upon the
termination of the Merger Agreement in accordance with its terms.
As of the Excel Record Date, Mr. Sabin owned 823,225 outstanding shares of
Excel Common Stock, representing approximately 3.5% of the outstanding Excel
Common Stock.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the New Plan Board with respect to the
New Plan Trust Amendments and the Merger and the recommendation of the Excel
Board with respect to the Share Issuance, the Charter Amendments and the
Election of Directors, the shareholders of New Plan and the stockholders of
Excel should be aware that certain members of the management of New Plan and
Excel have certain interests in the Merger that are in addition to the
interests of shareholders of New Plan and stockholders of Excel generally.
Newman Agreement. In connection with the Merger Agreement, an agreement to
employ William Newman, New Plan's current Chairman and Chief Executive
Officer, as a consultant of the Combined Company will become effective at the
Effective Time. The agreement has a five year term, extending automatically
for additional one-year periods unless either the Combined Company or Mr.
Newman elect not to extend the term. The agreement provides for annual
compensation of $350,000, certain benefits and the right to be considered for
bonuses and other incentives. The agreement also requires him to be nominated
to the Combined Company Board, and, if he is serving on the Combined Company
Board, for him to be appointed as Chairman of the Board. If Mr. Newman is not
serving as a member of the Combined Company Board, he will be Chairman
Emeritus of the Combined Company Board. The agreement also restricts Mr.
Newman from competing with the Combined Company for one year following the
date of termination. If the Combined Company materially breaches the agreement
and does not correct the breach within ten days after written notice by Mr.
Newman, the payments for the remainder of the term under the agreement become
payable in one lump sum.
Arnold Laubich Employment Agreement. In connection with the Merger
Agreement, an employment agreement to employ Arnold Laubich, New Plan's
President and Chief Operating Officer, as Chief Executive Officer of the
Combined Company will become effective at the Effective Time. The employment
agreement provides for an initial term ending December 31, 2002, extending
automatically thereafter for additional one-year periods unless either the
Combined Company or Mr. Laubich elect not to extend the term. The employment
agreement also provides for him to be nominated to the Combined Company Board
and, if he is serving on the Combined Company Board, for him to be appointed
to the Investment Committee.
Mr. Laubich will receive an annual salary of not less than the annual salary
paid to the President of the Combined Company, but in no event less than
$525,000 (which is equal to his current salary), and an annual cash bonus of
up to 50% of his base salary as determined by the compensation committee of
the Combined Company. In the first year of the employment agreement, the bonus
will not be less than $262,500 (which is approximately equal to his most
recent bonus). Mr. Laubich will also receive certain fringe benefits in
connection with his employment.
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If the employment agreement is terminated by the Combined Company without
"cause" or by Mr. Laubich for "good reason," Mr. Laubich will be entitled to
severance benefits consisting of a lump sum payment of $2.5 million,
continuation for a period of three years of insurance coverage in effect at
the termination date, the full vesting of all stock options and other employee
benefits and the cancellation of any loans made by the Combined Company to
him. "Good reason" is defined to include either a change in control of the
Combined Company or the failure of Mr. Laubich to be appointed Chairman of the
Combined Company Board after William Newman eventually ceases to serve as
Chairman of the Combined Company Board. The employment agreement also provides
certain benefits upon his death or disability. If the employment agreement is
terminated by Mr. Laubich without "good reason" or by the Combined Company for
"cause," for one year following the date of termination, Mr. Laubich may not
(i) engage in any business which is competing with the Combined Company, (ii)
divert to any entity any business of the Combined Company or its affiliates,
or (iii) solicit any officer, employee or consultant of the Combined Company
or its affiliates to leave the Combined Company or its affiliates.
Gary Sabin Employment Agreement. In connection with the Merger Agreement, an
employment agreement to employ Gary Sabin, Excel's current Chief Executive
Officer, as President of the Combined Company will become effective at the
Effective Time. The employment agreement provides for an initial term ending
December 31, 2002, extending automatically for additional one-year periods
unless either the Combined Company or Mr. Sabin elect not to extend the term.
The employment agreement also provides for him to be nominated to the Combined
Company Board and, if he is serving on the Combined Company Board, for him to
be appointed as Chairman of the Investment Committee.
Mr. Sabin will receive an annual salary at the rate of not less than the
annual salary paid to the Chief Executive Officer of the Combined Company, but
in no event less than $525,000, and an annual cash bonus of up to 50% of his
base salary as determined by the compensation committee of the Combined
Company. In the first year of the employment agreement, the bonus will not be
less than $262,500. Mr. Sabin will also receive certain fringe benefits in
connection with his employment and an initial grant of 186,500 stock options
(which is a number equal to the difference between the number of stock options
held by Mr. Laubich and those held by Mr. Sabin as of the Effective Time).
If the employment agreement is terminated by the Combined Company without
"cause" or by Mr. Sabin for "good reason," Mr. Sabin will be entitled to
severance benefits consisting of a lump sum payment of $2.5 million,
continuation for a period of three years of insurance coverage in effect on
the termination date, the full vesting of all stock options and other employee
benefits and the cancellation of any loans made by the Combined Company to
him. "Good reason" is defined to include either a change in control of the
Combined Company or the failure of the Combined Company to appoint Mr. Sabin
as Chief Executive Officer after Arnold Laubich eventually ceases to serve as
Chief Executive Officer; provided that if Mr. Sabin is then an executive
officer of Legacy, in order to become Chief Executive Officer of the Combined
Company he would be required within six months to resign such position from
Legacy. Mr. Sabin is, however, permitted to continue as a director and
Chairman of the board of Legacy. The employment agreement also provides
certain benefits upon his death or disability. If the employment agreement is
terminated by Mr. Sabin without "good reason" or by the Combined Company for
"cause," for one year following the date of termination, he will not (i)
engage in any business which is competing with the Combined Company, (ii)
divert to any entity any business of the Combined Company or its affiliates,
or (iii) solicit any officer, employee or consultant of the Combined Company
or its affiliates to leave the Combined Company or its affiliates.
Other Executive Employment Agreements. New Plan and Excel have agreed to a
form of employment agreement for the executive officers of the Combined
Company, which agreements will be effective at the Effective Time. New Plan
and Excel have agreed that the aggregate salary and bonus initially payable
under such agreements will not be less for any individual in the aggregate
than the total of such individual's salary as of the date of the Merger
Agreement and the amount of such individual's most recent bonus. The fringe
benefits for all such individuals will be consistent in the aggregate with the
fringe benefits currently enjoyed by such individuals.
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The form employment agreement provides for an initial term ending December
31, 2001, extending automatically for additional one-year periods unless
terminated by either the Combined Company or the executive. If the employment
agreement is terminated by the Combined Company without "cause" or by the
executive for "good reason," the executive will be entitled to severance
benefits consisting of a lump sum payment equal to twice his average total
compensation (including bonus) for the two fiscal years ending prior to the
termination date, continuation for a period of three years of all insurance
coverage in effect for the executive on the termination date, the full vesting
of all stock options and other employee benefits and the cancellation of any
loans made by the Combined Company to the executive. "Good reason" is defined
to include (x) a change in control of the Combined Company, (y) in the case of
former New Plan executives, (1) the termination of Mr. Laubich's employment by
Mr. Laubich for "good reason" or by the Combined Company without "cause" and
(2) the failure of the Combined Company to provide for two automatic one-year
renewals of the employment term following the replacement of Arnold Laubich as
Chief Executive Officer of the Combined Company and (z) in the case of former
Excel executives, the termination of Gary Sabin's employment by Mr. Sabin for
"good reason" or by the Combined Company without "cause." The employment
agreement also provides for certain benefits upon the death or disability of
the executive. If the employment agreement is terminated by the executive
without "good reason" or by the Combined Company for "cause," for one year
following the date of termination, the executive will not (i) engage in any
business which is competing with the Combined Company, (ii) divert to any
entity the Combined Company's or its affiliates' business, or (iii) solicit
any officer, employee or consultant of the Combined Company or its affiliates
to leave the Combined Company or its affiliates.
The initial salaries under such employment agreements will be $325,000 for
each of James M. Steuterman and Richard B. Muir; $185,000 for David A. Lund;
$180,000 for Steven F. Siegel; $175,000 for each of Dean Bernstein, Graham R.
Bullick, Mark T. Burton, James DeCicco, Thomas J. Farrell, S. Eric Ottesen,
and Ronald H. Sabin; $165,000 for William Kirshenbaum; and $150,000 for John
Visconsi. See "Combined Company Operations and Management--Executive Officers
After the Merger" for a list of each individual's position and expected
responsibility.
Indemnification and Insurance. In the Merger Agreement, New Plan, Excel and
Merger Sub have agreed to cooperate and use their reasonable best efforts to
defend against any threatened or actual claim or proceeding, whether civil,
criminal or administrative, including any such claim or proceeding in which
any person who was or becomes a trustee, officer, employee or agent of New
Plan (an "Indemnified Party") is, or is threatened to be, made a party based
in whole or in part on, or arising in whole or in part out of, or pertaining
to (i) the fact that he, she or it is or was a trustee, officer, employee or
agent of New Plan, or is or was serving at the request of New Plan as a
trustee, officer, employee or agent of another corporation or enterprise or
(ii) the Merger Agreement.
The Merger Agreement also provides that New Plan will indemnify and hold
harmless and advance expenses relating to, and after the Effective Time the
Combined Company will indemnify and hold harmless and advance expenses
relating to, as and to the full extent permitted by applicable law, or the New
Plan Declaration of Trust, each Indemnified Party against any losses, claims,
damages, expenses (including attorneys' fees and expenses), judgments, fines
and amounts paid in settlements in connection with any such threatened or
actual claim, proceeding or investigation. New Plan and Excel will use their
respective reasonable best efforts to assist in the vigorous defense of any
such matter; provided that neither New Plan nor the Combined Company will be
liable for any settlement effected without its prior written consent; and
provided further that the Combined Company will have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction
ultimately and finally determines that indemnification of such Indemnified
Party in the manner contemplated by the Merger Agreement is prohibited by
applicable law.
Excel has agreed that all rights to indemnification existing in favor, and
all limitations on the personal liability, of the Indemnified Parties provided
for in New Plan's Declaration of Trust or similar organizational documents as
in effect as of the Effective Time with respect to matters occurring at or
prior to the Effective Time are contract rights and will survive the Merger
and will continue in full force and effect thereafter.
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For a period of six years after the Effective Time, the Combined Company is
obligated to maintain in effect policies of directors' and officers' liability
insurance, if available at a reasonable price, that are substantially no less
advantageous to the Indemnified Parties than the policies presently maintained
by New Plan, subject to certain maximum annual payments. See "The Merger
Agreement--Indemnification."
Agreements between Certain New Plan Executive Officers and New Plan.
Pursuant to an agreement dated June 3, 1982, Mr. William Newman, as nominee
for New Plan, purchased a cooperative apartment at 114 East 72nd Street to be
used to further New Plan business purposes for a price of $290,000. New Plan
has paid assessments, taxes and all other payments with respect to the use and
upkeep of the apartment, which has primarily been used by Mr. Newman. Such
payments totaled approximately $26,000, $20,000 and $20,000 in fiscal 1997,
1996 and 1995, respectively. Mr. Newman will exercise his option pursuant to
the June 3, 1982 agreement to purchase the apartment for the original $290,000
purchase price prior to the Effective Time.
New Plan leases an office building from Page Associates on a net lease basis
for a current rent of approximately $180,000 per year (rental payments of
approximately $180,000, $178,000 and $175,000 were made to Page Associates in
fiscal 1997, 1996 and 1995, respectively). New Plan has leased this building
from Page Associates since 1974. Page Associates is a partnership owned in
equal proportions by William Newman, Melvin Newman, the estate of Joseph
Newman and Arnold Laubich. New Plan subleases the office building which it
leases from Page Associates and has received rent in excess of all payments
made to Page Associates and other real estate expenses in each of the years it
has rented the building from Page Associates.
See "Management of Excel--Certain Relationships and Related Transactions"
for a discussion of certain agreements and other transactions involving Excel
and its executive officers and directors.
STOCK OPTION PLANS
As provided in the Merger Agreement, by virtue of the Merger, all New Plan
Options outstanding at the Effective Time under any New Plan stock option plan
(the "New Plan Employee Stock Plans"), whether or not then exercisable, will
be assumed by the Combined Company and represent an option to purchase the
same number of shares of Combined Company Common Stock (an "Assumed Option"),
at an exercise price per share equal to the per share exercise price of the
New Plan Common Shares subject to such New Plan Options immediately prior to
the Effective Time. After the Effective Time, each Assumed Option will be
exercisable upon the same terms and conditions as were applicable to the
related New Plan Option immediately prior to the Effective Time. The Merger
will not result in the acceleration of vesting of those New Plan Options which
are issued but not yet vested. As of the New Plan Record Date, employees (or
former employees) of New Plan owned New Plan Options to purchase an aggregate
of 3,669,850 New Plan Common Shares at a weighted average exercise price of
$21.66 per share (at exercise prices ranging from $18.875 to $25.25 per
share). The Combined Company will register under the Securities Act all
Assumed Options and all shares of Combined Company Common Stock issuable
pursuant to Assumed Options.
All options to purchase Excel Common Stock outstanding at the Effective Time
under any Excel stock option plan (the "Excel Option Plans") will remain
outstanding and will represent options to purchase shares of Combined Company
Common Stock. Such options will be unaffected by the Merger, except as
adjusted to give effect to the 20% stock dividend to be declared and paid by
Excel on the Excel Common Stock prior to the Effective Time.
REGULATORY MATTERS
New Plan and Excel believe that the Merger may be consummated without
notification being given or information being furnished to the FTC or the
Antitrust Division pursuant to the HSR Act, and that no waiting period
requirements under the HSR Act are applicable to the Merger.
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FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion is a summary of the material U.S. federal income
tax consequences of the Merger to a shareholder of New Plan. The discussion is
based on the Code, Treasury Regulations promulgated thereunder, administrative
rulings and pronouncements and judicial decisions as of the date hereof, all
of which are subject to change (possibly with retroactive effect). This
discussion does not address all aspects of U.S. federal taxation that may be
relevant to particular New Plan shareholders in light of their personal
investment circumstances or to New Plan shareholders subject to special
treatment under the Code (including banks, tax-exempt organizations, insurance
companies, dealers in securities or foreign currency, New Plan shareholders
who received their shares through the exercise of employee stock options or
otherwise as compensation, New Plan shareholders who are not U.S. persons
(under the Code) and New Plan shareholders who hold their shares as part of a
straddle, hedge or conversion transaction). In addition, this discussion does
not address any foreign, state or local tax consequences of the Merger. For
purposes of this discussion, a holder of depositary receipts will be treated
as holding a direct interest in the underlying securities.
EACH NEW PLAN SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO HIM OR HER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF U.S. FEDERAL, FOREIGN, STATE, LOCAL AND OTHER TAX
LAWS.
In the opinion of Latham & Watkins, counsel to Excel, and Altheimer & Gray,
counsel to New Plan, the Merger should be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and Excel and New Plan should each be a party to that reorganization within
the meaning of Section 368(b) of the Code. In that event,
(i) NO GAIN OR LOSS WILL BE RECOGNIZED BY A NEW PLAN SHAREHOLDER WHO
RECEIVES COMBINED COMPANY COMMON STOCK FOR NEW PLAN SHARES EXCHANGED
THEREFOR;
(ii) the tax basis of the Combined Company stock to be received by
holders of the New Plan shares pursuant to the Merger will be the same as
the tax basis in the New Plan shares exchanged therefor;
(iii) the holding period of the Combined Company stock to be received by
holders of the New Plan shares pursuant to the Merger will include the
holding period of the New Plan shares surrendered in exchange therefor,
provided that the New Plan shares were held as capital assets at the
Effective Time; and
(iv) no gain or loss will be recognized by New Plan or Excel as a result
of the Merger.
Notwithstanding the foregoing, cash received in lieu of a fractional share
interest in Combined Company stock will be treated under Section 302 of the
Code as if such fractional shares were actually received and then redeemed for
cash, and in general, gain or loss will be recognized, measured by the
difference between the amount of cash received and the basis of the New Plan
shares allocable to such fractional shares. In general, such gain or loss will
constitute capital gain or loss if the New Plan shares were held as capital
assets at the Effective Time. Any capital gain recognized as a result of the
Merger will be taxed at rates applicable to capital gains. The tax rate
applicable to capital gains of an individual taxpayer varies depending on the
taxpayer's holding period for the shares. In the case of an individual, any
such capital gain will be subject to a maximum federal income tax rate of (i)
20% if the individual's holding period in such stock was more than 18 months
on the date of the Effective Time or (ii) 28% if the individual's holding
period was more than one year but not more than 18 months on the date of the
Effective Time. Gains on the sale of capital assets held for one year or less
are subject to tax at ordinary income levels. The deductibility of capital
losses is subject to limitations for both individuals and corporations.
If the Merger did not qualify as a tax-free reorganization for federal
income tax purposes, the Merger would be treated as a taxable exchange and,
accordingly,
(i) a holder of New Plan shares would recognize gain or loss, measured by
the difference between the fair market value of the Combined Company stock
and cash received and the New Plan shareholder's basis in the New Plan
shares exchanged therefor. Such gain or loss would constitute capital gain
or loss if the New Plan shares were held as capital assets at the Effective
Time;
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(ii) the tax basis of the New Plan shares received in connection with the
Merger by a New Plan shareholder would be their fair market value at the
Effective Time; and
(iii) the holding period of the Combined Company stock received by a New
Plan shareholder pursuant to the Merger would commence on the day following
the date of the Effective Time.
Further, if the Merger did not qualify as a tax-free reorganization, New
Plan would recognize gain or loss equal to the difference between New Plan's
basis in its assets and the sum of the fair market value of the consideration
provided by the Combined Company in the Merger and the liabilities assumed by
the Combined Company. The consideration provided by the Combined Company would
be treated as distributed by New Plan in liquidation. In computing its taxable
income for its taxable year ended on the date of the Merger, New Plan would
generally be entitled to a dividends paid deduction equal to the fair market
value of the consideration provided by the Combined Company and received by
the New Plan shareholders. In addition, if New Plan would recognize built-in
gain with respect to certain assets previously acquired from a C corporation
in a carryover basis transaction, the gain would be subject to a corporate
level tax under a Treasury Regulation announced by the Internal Revenue
Service but not yet issued. However, New Plan does not believe that it has any
such built-in gain. The Combined Company will succeed to any tax liability of
New Plan in the Merger.
With respect to the New Plan Pre-Merger Dividend, whether or not tax-free
reorganization treatment applies, New Plan shareholders will recognize
dividend income (a portion of which may qualify for capital gains treatment)
to the extent it is paid out of New Plan's current or accumulated earnings and
profits.
See "Federal Income Tax Consequences Related to the Combined Company" for a
discussion of the federal income taxation of the Combined Company and its
stockholders.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement. Copies of the original merger agreement and the amendment thereto
are included as Annex I and Annex I-A, respectively, and are incorporated
herein by reference. This summary does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement. All New Plan
shareholders and Excel stockholders are urged to read the Merger Agreement in
its entirety. Capitalized terms used herein and not otherwise defined herein
have the same meaning as in the Merger Agreement.
THE MERGER
The Merger. On the terms and subject to the conditions of the Merger
Agreement, at the Effective Time, Merger Sub shall be merged with and into New
Plan in accordance with the Merger Agreement and the separate corporate
existence of Merger Sub shall cease. New Plan shall continue as the surviving
trust in the Merger (the "Surviving Trust"). The Merger shall have the effects
specified in Section 3-114 of the Maryland General Corporation Law (the
"MGCL") and in the New Plan Declaration of Trust as amended by the New Plan
Trust Amendments.
The Closing. On the terms and subject to the conditions of the Merger
Agreement, the closing of the Merger (the "Closing") will take place on the
third business day immediately following the day on which the shareholders of
New Plan approve the New Plan Trust Amendments and the Merger and the
stockholders of Excel approve the Share Issuance, the Charter Amendments and
the Election of Directors. The New Plan Trust Amendments shall become
effective after the filing of a certificate as to the adoption of the New Plan
Trust Amendments by the New Plan Board. Thereafter, the Merger shall become
effective upon the later of the acceptance for record of the Articles of
Merger by the State Department of Assessments and Taxation of Maryland (the
"SDAT") in accordance with the MGCL and the filing of a certificate of
amendment and merger with the Secretary of the Commonwealth of Massachusetts.
EXCEL STOCK DIVIDEND
Before the Effective Time, Excel will declare and pay the Excel Stock
Dividend. If any holder of Excel Common Stock would be entitled to receive a
fractional share, then (after taking into account all shares owned by such
holder), in satisfaction and redemption of such holder's right to receive such
fraction of one share, such holder will receive cash in an amount equal to
such fraction of the value of one share of Excel Common Stock, determined as
the average of the high and low trading prices of a share of Excel Common
Stock on the NYSE on the record date for the Excel Stock Dividend.
CONVERSION OF SHARES
New Plan Common Shares. At the Effective Time, each New Plan Common Share
together with its associated New Plan Rights outstanding immediately prior to
the Effective Time will, by virtue of the Merger be cancelled and converted
into, subject to the prior distribution of the Excel Stock Dividend, the right
to receive one (1) share of Combined Company Common Stock. The Exchange Ratio
and corresponding number of shares of Combined Company Common Stock to be
issued in the Merger shall be appropriately adjusted to reflect the effect of
any stock split, stock dividend (other than the Excel Stock Dividend),
reorganization, recapitalization, or other like change with respect to the
Excel Common Stock or New Plan Common Shares. Each New Plan Common Share to be
converted in the Merger will be converted, without further consideration
together with its associated share purchase right issued pursuant to the
Rights Agreement between New Plan and BankBoston, N.A., as rights agent ("New
Plan Rights"). References to New Plan Common Shares to be converted in the
Merger are deemed to include the associated New Plan Rights. Each share of
Combined Company Common Stock issued to holders of New Plan Common Shares in
the Merger will be issued together with one Combined Company Right in
accordance with the Rights Agreement between Excel and BankBoston, N.A., as
rights agent. References to shares of Combined Company Common Stock issuable
in connection with the Merger are deemed to include the associated Combined
Company Rights.
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Preferred Shares. At the Effective Time, each New Plan Preferred Share
outstanding immediately prior to the Effective Time will, by virtue of the
Merger, be cancelled and converted into the right to receive one share of
voting Series D Preferred Stock, and each New Plan Depositary Share
outstanding immediately prior to the Effective Time will, by virtue of the
Merger, be cancelled and converted into the right to receive one voting Series
D Depositary Share and will have a liquidation preference of $50.00 per
depositary share. The Series D Preferred Stock will have similar terms as the
New Plan Preferred Shares, will have ten votes per share (or 20 votes per
share when voting only with other Combined Company preferred stock ranking on
a parity therewith as to dividends and upon liquidation, dissolution or
winding up of the Combined Company), with each Series D Depositary Share
representing a one-tenth fractional interest in a share of Series D Preferred
Stock having one vote per depositary share (voting together with the Combined
Company Common Stock), and two votes when voting with such parity stock, and
will accrue dividends from the end of the last period with respect to which
the New Plan Preferred Shares received a dividend payment. The shares of
Combined Company Common Stock to be issued to holders of New Plan Common
Shares and the Series D Depositary Shares to be issued in the Merger to
holders of New Plan Preferred Shares are sometimes referred to collectively
herein as the "Merger Consideration." Reference is made to Annex IV attached
hereto for the Articles Supplementary establishing the Series D Preferred
Stock, to "Description of Excel and Combined Company Securities--Series D
Depositary Shares" and "--Series D Preferred Stock" and to "Comparison of
Shareholder and Stockholder Rights--New Plan Preferred Shares/Series D
Preferred Stock" for descriptions of the Series D Preferred Stock and
comparisons with the New Plan Preferred Shares.
Merger Sub Shares. At the Effective Time, each share of common stock, par
value $.01 per share, of Merger Sub outstanding immediately prior to the
Effective Time will, by virtue of the Merger, be cancelled and converted into
the right to receive one New Plan Common Share.
Certificates. At the Effective Time, each holder of a certificate (a
"Certificate") representing any New Plan Common Share or New Plan Preferred
Share will thereafter cease to have any rights with respect to such New Plan
Common Share or New Plan Preferred Share, except the right to receive, without
interest, the Merger Consideration and cash in lieu of fractional shares of
Combined Company Common Stock upon the surrender of such Certificate. Each
share of Combined Company Common Stock and Series D Preferred Stock issued in
connection with the Merger will be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights.
Treasury Shares. Each New Plan Common Share or New Plan Preferred Share
issued and held in New Plan's treasury at the Effective Time or owned of
record or beneficially by Excel, if any, will by virtue of the Merger cease to
be outstanding and will be cancelled and retired and will cease to exist
without payment of any consideration therefor.
NEW PLAN OPTIONS
New Plan has agreed not to cause acceleration of any New Plan Option. At the
Effective Time, to the extent not prohibited by the terms of the relevant
governing instrument, New Plan's obligations with respect to each New Plan
Option that is outstanding and unexercised immediately prior thereto shall be
assumed by the Combined Company. Each Assumed Option shall then represent a
right to purchase one share of Combined Company Common Stock (based on the
Exchange Ratio) in an amount and at the same exercise price applicable to the
New Plan Option (and otherwise subject to the terms of the relevant New Plan
stock plans). Each Assumed Option will be subject to the same terms and
conditions (including, without limitation, expiration date, vesting and
exercise provisions) as were applicable to the New Plan Options immediately
prior to the Effective Time. Excel will cause to be filed and become effective
one or more appropriate registration statements in order to register the
shares of Combined Company Common Stock issuable in connection with the
Assumed Options.
EXCHANGE OF CERTIFICATES
SHAREHOLDERS OF NEW PLAN SHOULD NOT FORWARD THEIR CERTIFICATES WITH THE
ENCLOSED PROXY CARD, NOR SHOULD THEY RETURN THEIR CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED A TRANSMITTAL LETTER FOLLOWING EFFECTIVENESS OF
THE MERGER.
Exchange Agent. As of the Effective Time, Excel will deposit with
BankBoston, N.A. (the "Exchange Agent"), for the benefit of the holders of New
Plan Common Shares and New Plan Preferred Shares, for
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exchange in accordance with the Merger Agreement, certificates representing
the Merger Consideration, cash in lieu of fractional shares of the Merger
Consideration and dividends and other distributions on the Merger
Consideration contemplated by the Merger Agreement (collectively, the "Merger
Payments").
Promptly after the Effective Time, Excel will cause the Exchange Agent to
mail to each holder of record of a Certificate or Certificates (i) a letter of
transmittal which specifies that delivery will be effected, and risk of loss
and title to the Certificates will pass, only upon delivery of the
Certificates to the Exchange Agent and will be in such form and have such
other provisions as Excel may reasonably specify and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing the Merger Consideration and the Merger Payments. Upon surrender
of a Certificate for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such Certificate will be entitled to
receive in exchange therefor (x) certificates representing the number of whole
shares of the Merger Consideration and (y) a check representing the amount of
cash in lieu of fractional shares of the Merger Consideration, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of the Certificate surrendered, and the Certificate so
surrendered will be cancelled. No interest will be paid on the cash in lieu of
fractional shares of the Merger Consideration and dividends and distributions
on the Merger Consideration. The letter of transmittal may, at New Plan's
election, provide for the ability of a holder of one or more Certificates to
elect that shares of Combined Company Common Stock to be received in exchange
for the New Plan Common Shares formerly represented by such surrendered
Certificates be issued in uncertificated form or to elect that such shares of
Combined Company Common Stock be credited to an appropriate book entry account
or, as applicable, an account established for the holder under the dividend
reinvestment and stock purchase plan of Excel.
No dividends or other distributions on the Merger Consideration with a
record date after the Effective Time shall be paid with respect to any
Combined Company Common Stock represented by a Certificate until such
Certificate is surrendered for exchange as provided in the Merger Agreement.
Following surrender of any such Certificate, there shall be paid to the holder
of the Certificates representing whole shares of the Merger Consideration
issued in exchange therefor, without interest, (i) the amount of dividends or
other distributions with a record date after the Effective Time subject to
applicable withholding taxes and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable subject to applicable withholding taxes.
After the Effective Time, there will be no transfers on the stock transfer
books of New Plan of New Plan Common Shares and New Plan Preferred Shares. If,
after the Effective Time, Certificates are presented to the Surviving Trust,
they will be cancelled and exchanged for certificates for the Merger
Consideration as provided above and fractional shares. Appropriate procedures
shall be established by Excel and the Exchange Agent so that each holder of a
Certificate at the Effective Time shall be entitled to vote on all matters
subject to the vote of holders of Combined Company Common Stock or Series D
Preferred Stock with a record date on or after the date of the Effective Time.
Any portion of the Merger Consideration held by the Exchange Agent (together
with any cash in lieu of fractional shares of the Merger Consideration and the
proceeds of any investments thereof) that remains unclaimed by the former
shareholders of New Plan one year after the Effective Time shall be delivered
to the Combined Company. Any former shareholders of New Plan who have not
theretofore complied with the provisions of the Merger Agreement shall
thereafter look only to the Combined Company for payment of the Merger
Consideration, cash in lieu of fractional shares of the Merger Consideration
and dividends and other distributions on the Merger Consideration, in each
case, without any interest thereon.
None of Excel, New Plan, the Combined Company, the Exchange Agent or any
other person shall be liable to any former holder of New Plan Common Shares or
New Plan Preferred Shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
In the event any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Excel, the
posting by such person of a bond in such reasonable amount as Excel may direct
as indemnity against any claim that
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may be made against it with respect to such Certificate, the Exchange Agent or
Excel will issue in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration and cash in lieu of fractional shares and unpaid
dividends and distributions on shares of the Merger Consideration as provided
in the Merger Agreement, deliverable in respect thereof pursuant to the Merger
Agreement.
FRACTIONAL SHARES
No fractional shares of the Merger Consideration will (after taking into
account all shares held by each record or beneficial owner of the Merger
Consideration) be issued. In lieu of the issuance of any fractional shares, a
cash adjustment will be paid equal to such fractional proportion of the
closing sale prices of the Combined Company Common Stock on the NYSE as
reported in The Wall Street Journal.
NO APPRAISAL RIGHTS
The holders of New Plan Common Shares and New Plan Preferred Shares who
dissent to the Merger will not be entitled to appraisal rights as a result of
the Merger.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of New
Plan and Excel relating, among other things, to: (i) their respective
existence, good standing, authority, compliance with applicable laws and other
similar matters; (ii) their authorization, execution and delivery of the
Merger Agreement, the enforceability of their obligations thereunder and
related matters; (iii) their capitalization; (iv) their subsidiaries; (v)
their interests and investments; (vi) the absence of conflicts, violations and
defaults under their declaration of trust or charter and bylaws and certain
other agreements and documents and certain consents and approvals; (vii) their
documents and reports filed with the Commission and the accuracy and
completeness of the information contained therein; (viii) the absence of
pending or threatened litigation and other proceedings involving either New
Plan or Excel or their respective subsidiaries that would have a material
adverse effect on the business of either party; (ix) the absence of certain
changes subsequent to January 31, 1998 for New Plan and December 31, 1997 for
Excel; (x) the timely filing and the accuracy of information of all material
tax returns and certain other matters relating to taxes and each party's
status as a REIT within the meaning of the Code; (xi) their books and records;
(xii) each party's ownership of real properties and the absence of certain
encumbrances and defects; (xiii) certain environmental matters; (xiv) employee
benefit plans; (xv) labor matters; (xvi) the absence of brokers or other
persons entitled to a fee as a result of the Merger, other than the financial
advisors of each of New Plan and Excel; (xvii) the receipt of opinions from
their financial advisors; (xviii) the absence of ownership of capital stock of
the other party; (xix) transactions with related parties; (xx) contracts and
commitments; (xxi) certain non-residential leases; (xxii) registration under
the Investment Company Act of 1940; (xxiii) certain payments resulting from
the transactions contemplated by the Merger Agreement; (xxiv) the
inapplicability of certain takeover defense mechanisms to the transaction
contemplated by the Merger Agreement; and (xxv) amendments to certain
arrangements between Excel and Legacy. All representations and warranties of
New Plan and Excel expire at the Effective Time.
NO SOLICITATION BY NEW PLAN
New Plan has agreed that New Plan will not, and will cause its subsidiaries
and its and their trustees, officers, employees, investment bankers, financial
advisors, attorneys, accountants and other representatives retained by it or
any of its subsidiaries not to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries
or the making of any proposal which constitutes or may reasonably be expected
to lead to any New Plan Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding or relating to any
New Plan Takeover Proposal; provided, however, that prior to the New Plan
Special Meeting, if the New Plan Board determines reasonably and in good
faith, based on the advice of its outside counsel, that it is necessary to do
so in order to comply with its fiduciary duties to the shareholders of New
Plan under applicable law, or, as applicable, its duties under the New Plan
Declaration of Trust, in each case in the context of the transactions
contemplated by the Merger Agreement, New Plan may, in response to a New Plan
Takeover Proposal which was not solicited by it and which did not result from
a breach of the Merger Agreement, provided
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New Plan shall provide prior written notice of its decision to take such
action to Excel, (x) furnish information with respect to New Plan and its
subsidiaries to any person making such a New Plan Takeover Proposal pursuant
to a customary confidentiality agreement (as determined by New Plan after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such New Plan Takeover Proposal. A "New Plan Takeover
Proposal" means any proposal made by a third party (other than Excel) to
acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
reorganization, liquidation, dissolution or similar transaction, more than 25%
of the combined voting power of the New Plan Common Shares or shares or equity
interests in any significant subsidiary of New Plan, in each case then
outstanding, or all or substantially all the assets of New Plan or any
significant subsidiary of New Plan.
Except as expressly permitted by the Merger Agreement, neither the New Plan
Board nor any committee thereof will (i) withdraw or propose publicly to
withdraw, or modify or propose to modify in a manner adverse to Excel, the
approval or recommendation by such board or such committee of the Merger or
the Merger Agreement, (ii) approve or recommend, or propose publicly to
approve or recommend, any New Plan Takeover Proposal or (iii) cause New Plan
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, a "New Plan Acquisition
Agreement") related to any New Plan Takeover Proposal. Notwithstanding the
foregoing, in the event that a majority of the New Plan Board determines
reasonably and in good faith (A) (based on the advice of a financial advisor
of nationally recognized reputation) that a pending New Plan Takeover Proposal
is more favorable to New Plan's shareholders than the Merger and the
transactions contemplated by the Merger Agreement, (B) that such New Plan
Takeover Proposal is reasonably capable of being consummated, (C) that there
is a substantial probability that the approval of the Merger by holders of New
Plan Common Shares will not be obtained due to the pending New Plan Takeover
Proposal, and (D) (based on the advice of outside counsel and taking into
account the matters in clause (A), (B) and (C) above) that it is necessary to
terminate the Merger Agreement to accept such New Plan Takeover Proposal in
order to comply with its fiduciary duties to the shareholders of New Plan
under applicable law or, as the case may be, its duties under the New Plan
Declaration of Trust, in each case in the context of the transactions
contemplated by the Merger Agreement, the New Plan Board may approve and
recommend such New Plan Takeover Proposal and, in connection therewith,
withdraw its approval or recommendation of the Merger Agreement and the
Merger, provided that in such case it simultaneously therewith terminates the
Merger Agreement and concurrently with such termination causes New Plan to
enter into a definitive acquisition agreement with respect to such New Plan
Takeover Proposal, but only at a time that is after the fifth business day
following Excel's receipt of written notice advising Excel that the New Plan
Board is prepared to accept a New Plan Takeover Proposal, specifying the
material terms and conditions of such New Plan Takeover Proposal and
identifying the person making such New Plan Takeover Proposal, provided that
(x) at all reasonable times during such five-day period New Plan shall have
cooperated with Excel with the objective of providing Excel a reasonable
opportunity to propose and negotiate a modification of the terms and
conditions of the Merger Agreement so that a business combination may be
effected between Excel and New Plan; (y) at the end of such five-day period
the New Plan Board shall continue to believe in good faith that clauses (A),
(B), (C) and (D) above apply to the New Plan Takeover Proposal; and (z)
simultaneously with any such withdrawal or termination, New Plan pays to Excel
the Break-Up Fee (as defined herein) and the Break-Up Expenses (as defined
herein) provided for in the Merger Agreement.
In addition, New Plan agreed to immediately cease any current discussions
and negotiations with respect to any New Plan Takeover Proposal and
immediately advise Excel orally and in writing of any request for information
or of any New Plan Takeover Proposal, the material terms and conditions of
such request or New Plan Takeover Proposal and the identity of the person
making such request or New Plan Takeover Proposal. New Plan will keep Excel
reasonably informed of the status and details of any such request or New Plan
Takeover Proposal.
Nothing contained in the Merger Agreement prohibits New Plan from taking and
disclosing to its shareholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
New Plan's shareholders if, in the good faith judgment of the New Plan Board,
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after consultation with outside counsel, failure so to disclose would be a
violation of its obligations under applicable law; provided, however, that
neither New Plan nor its board nor any committee thereof will withdraw or
modify, or propose publicly to withdraw or modify, its position with respect
to the Merger Agreement or the Merger or approve or recommend, or propose
publicly to approve or recommend, a New Plan Takeover Proposal, except in
accordance with the provisions of the Merger Agreement.
Notwithstanding any other provisions of the Merger Agreement to the
contrary, or any variation in the duties imposed upon trustees of a
Massachusetts business trust from those imposed on directors of a Maryland
corporation, the members of the New Plan Board will be permitted to take any
action which they would be permitted to take under the Merger Agreement if
they were directors of a Maryland corporation and New Plan was a Maryland
corporation.
NO SOLICITATION BY EXCEL
Excel has agreed that Excel will not, and will cause its subsidiaries and
its and their directors, officers, employees, investment bankers, financial
advisors, attorneys, accountants and other representatives retained by it or
any of its subsidiaries not to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries
or the making of any proposal which constitutes or may reasonably be expected
to lead to any Excel Takeover Proposal (as defined below) or (ii) participate
in any discussions or negotiations regarding or relating to any Excel Takeover
Proposal; provided, however, that prior to the Excel Special Meeting, if the
Excel Board determines reasonably and in good faith, based on the advice of
its outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the stockholders of Excel under applicable law in the
context of the transactions contemplated by the Merger Agreement, Excel may,
in response to an Excel Takeover Proposal which was not solicited by it and
which did not result from a breach of the Merger Agreement, and provided Excel
shall provide prior written notice of its decision to take such action to New
Plan, (x) furnish information with respect to Excel and its subsidiaries to
any person making such an Excel Takeover Proposal pursuant to a customary
confidentiality agreement (as determined by Excel after consultation with its
outside counsel) and (y) participate in discussions or negotiations regarding
such Excel Takeover Proposal. An "Excel Takeover Proposal" means any proposal
made by a third party (other than New Plan) to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, reorganization,
liquidation, dissolution or similar transaction, more than 25% of the combined
voting power of the shares of Excel Common Stock or shares or equity interests
in any significant subsidiary of Excel, in each case then outstanding or all
or substantially all the assets of Excel or any significant subsidiary of
Excel.
Except as expressly permitted by the Merger Agreement, neither the Excel
Board nor any committee thereof will (i) withdraw or propose publicly to
withdraw, or modify or propose publicly to modify in a manner adverse to New
Plan, the approval or recommendation by such board or such committee of the
Merger, the Merger Agreement or the matters to be considered at the Excel
Special Meeting in connection with the Merger, (ii) approve or recommend, or
propose publicly to approve or recommend, any Excel Takeover Proposal or (iii)
cause Excel to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement (each, an "Excel Acquisition
Agreement") related to any Excel Takeover Proposal. Notwithstanding the
foregoing, in the event that a majority of the Excel Board determines
reasonably and in good faith (A) (based on the advice of a financial advisor
of nationally recognized reputation) that a pending Excel Takeover Proposal is
more favorable to Excel's stockholders than the Merger and the transactions
contemplated by the Merger Agreement, (B) that such Excel Takeover Proposal is
reasonably capable of being consummated, (C) that there is a substantial
probability that the adoption of the Merger Agreement by holders of Excel
Common Stock will not be obtained due to the pending Excel Takeover Proposal,
and (D) (based upon the advice of outside counsel and taking into account the
matters in clause (A), (B) and (C)) that it is necessary to terminate the
Merger Agreement to accept such Excel Takeover Proposal in order to comply
with its duties to the stockholders of
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Excel under applicable law in the context of the transactions contemplated by
the Merger Agreement, the Excel Board may approve and recommend such Excel
Takeover Proposal and, in connection therewith, withdraw its approval or
recommendation of the Merger Agreement, the Merger, the Share Issuance, the
Charter Amendments and the Election of Directors, provided that in such case
it simultaneously therewith terminates the Merger Agreement and concurrently
with such termination causes Excel to enter into a definitive acquisition
agreement with respect to such Excel Takeover Proposal, but only at a time
that is after the fifth business day following New Plan's receipt of written
notice advising New Plan that the Excel Board is prepared to accept an Excel
Takeover Proposal, specifying the material terms and conditions of such Excel
Takeover Proposal and identifying the person making such Excel Takeover
Proposal, provided that (x) at all reasonable times during such five-day
period Excel shall have cooperated with New Plan with the objective of
providing New Plan a reasonable opportunity to propose and negotiate a
modification of the terms and conditions of the Merger Agreement so that a
business combination may be effected between Excel and New Plan; (y) at the
end of such five-day period the Excel Board shall continue to believe in good
faith that clauses (A), (B), (C) and (D) above apply to the Excel Takeover
Proposal; and (z) simultaneously with any such withdrawal or termination,
Excel pays New Plan the Break-Up Fee and Break-Up Expenses provided for in the
Merger Agreement.
In addition, Excel agreed to immediately cease any current discussions or
negotiations with respect to any Excel Takeover Proposal and immediately
advise New Plan orally and in writing of any request for information or of any
Excel Takeover Proposal, the material terms and conditions of such request or
Excel Takeover Proposal and the identity of the person making such request or
Excel Takeover Proposal. Excel will keep New Plan reasonably informed of the
status and details of any such request or Excel Takeover Proposal.
Nothing contained in the Merger Agreement prohibits Excel from taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Excel's stockholders if, in the good faith judgment of the Excel Board, after
consultation with outside counsel, failure so to disclose would be a violation
of its obligations under applicable law; provided, however, that neither Excel
nor its board nor any committee thereof will withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to the Merger
Agreement, the Merger, the Share Issuance, the Charter Amendments or the
Election of Directors or approve or recommend, or propose publicly to approve
or recommend, an Excel Takeover Proposal, except in accordance with the
provisions of the Merger Agreement.
CONDUCT OF BUSINESS PENDING THE MERGER
Conduct of Business by New Plan and Excel
Each of New Plan and Excel has agreed that during the period from the date
of the Merger Agreement until the earlier of the termination of the Merger
Agreement and the Effective Time, each of New Plan and Excel will:
(i) use their reasonable best efforts to preserve intact their business
organizations and goodwill and keep available the services of their
respective officers and employees;
(ii) confer on a regular basis with one or more representatives of the
other to report material operational matters and any proposals to engage in
material transactions;
(iii) coordinate the record date for the quarterly dividends payable with
respect to the Excel Common Stock, Series A Preferred Stock, Series B
Preferred Stock and New Plan Common Shares and New Plan Preferred Shares;
and
(iv) promptly deliver to the other true and correct copies of any report,
statement or schedule filed with the Commission.
Conduct of Business by New Plan
New Plan has agreed that during the period from the date of the Merger
Agreement until the earlier of the termination of the Merger Agreement and the
Effective Time, or as expressly contemplated by the Merger Agreement, New Plan
will:
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(i) conduct its operations in the ordinary course;
(ii) not acquire additional real property, encumber assets or commence
construction of (other than tenant concessions and pending transactions
disclosed to Excel) real estate projects, in an amount which exceeds $150
million in the aggregate;
(iii) not amend its organizational instruments;
(iv) not (1) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights or pursuant to New Plan's
distribution reinvestment plan, issue any shares of its capital stock
(except to New Plan), or options or other rights to acquire capital stock,
or effect any stock split or similar transaction, (2) increase any
compensation or enter into or amend any employment agreement with any of
its present or future officers or directors except as expressly
contemplated by the Merger Agreement or (3) adopt any new employee benefit
plan (including any stock plan) or amend any existing employee benefit plan
in any material respect, except for changes which are required by
applicable law or are less favorable to participants in such plans;
(v) not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock,
except (1) (x) regular quarterly dividends on the New Plan Common Shares
(which may be accelerated) and regular quarterly dividends on the New Plan
Depositary Shares representing a one-tenth fractional interest in a New
Plan Preferred Share, as well as any other required dividends,
distributions or payments with respect to such New Plan Preferred Shares
and (y) the New Plan Pre-Merger Dividend with respect to the New Plan
Common Shares in the amount that is necessary or appropriate to satisfy the
dividend payment requirements imposed on New Plan as a REIT, and to
eliminate or reduce federal income or excise taxes imposed on New Plan as a
REIT, for New Plan's taxable year ending on or before the Effective Time
and (2) in connection with the use of shares of capital stock to pay the
exercise price or tax withholding in connection with stock-based employee
benefit plans of New Plan, directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any
of its subsidiaries, or make any commitment for any such action; (it being
understood that New Plan's regular quarterly dividend will include
increases to prior quarterly dividend amounts consistent with New Plan's
past practice);
(vi) except in the ordinary course of business consistent with past
practice, not sell, mortgage or encumber or otherwise dispose of, except by
leasing in the ordinary course of business, any material New Plan
properties or assets or any of its capital stock of or other interests in
its subsidiaries;
(vii) not (1) incur, assume, guarantee or prepay any indebtedness for
borrowed money in an amount in excess of (A) $150 million and (B) the
amount necessary to consummate the pending New Plan transactions, in each
case in a manner consistent with New Plan's past practice or (2) make any
investments in any other person other than subsidiaries;
(viii) not pay or satisfy any claims, liabilities or obligations, other
than in the ordinary course of business consistent with past practice;
(ix) not enter into any contract which may result in total payments or
liability by or to it in excess of $200,000, except in the ordinary course
consistent with past practice;
(x) not enter into any contract with any officer, director, consultant or
affiliate (1) which is not in the ordinary course of business and
consistent with past practices or (2) where the amount involved exceeds
$50,000;
(xi) not acquire, enter into any contract, to acquire or announce any
proposed acquisition of, 25% or more of the equity interests or all or
substantially all of the assets, of another entity which has net assets in
excess of $25 million, subject to the limitation in clause (ii) above;
(xii) not make any changes in its accounting methods or policies except
as required by law, the Commission or generally accepted accounting
principles;
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(xiii) maintain insurance in such amounts and against such risks as are
customary for companies like New Plan; and
(xiv) not authorize, or commit or agree to take, any of the foregoing
actions.
Conduct of Business by Excel
Excel has agreed that during the period from the date of the Merger
Agreement until the earlier of the termination of the Merger Agreement and the
Effective Time or as expressly contemplated by the Merger Agreement, Excel
will:
(i) conduct its operations in the ordinary course;
(ii) not acquire additional real property, encumber assets or commence
construction of (other than tenant concessions and the pending transactions
disclosed to New Plan) real estate projects, in an amount which exceeds
$150 million in the aggregate;
(iii) not amend its organizational instruments;
(iv) not (1) except pursuant to the exercise of options, warrants,
conversion rights, Down REIT units and other contractual rights or pursuant
to its dividend reinvestment plan and disclosed pursuant to the Merger
Agreement or pursuant to the Excel Stock Dividend, issue any shares of its
capital stock (except to Excel), effect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction, (2)
other than the issuance of the Excel Rights, grant, confer or award any
option, warrant, conversion or other right to acquire any shares of its
capital stock or amend the terms or permit the acceleration of any such
option (except the issuance of Down REIT units in pending Excel
transactions), (3) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or
directors except as expressly contemplated by the Merger Agreement or (4)
adopt any new employee benefit plan (including any stock plan) or amend any
existing employee benefit plan in any material respect, except for changes
which are required by applicable law or are less favorable to participants
in such plans and except for changes proposed in the Excel Proxy Statement
for its 1998 Annual Meeting;
(v) not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock,
except (1) (x) regular quarterly dividends of $.50 per share on the Excel
Common Stock and regular quarterly dividends on the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock as well as any
other required dividends, distributions or payments with respect to such
Excel Preferred Stock, (y) if New Plan accelerates its regular quarterly
dividend on New Plan Common Shares, Excel may likewise accelerate its
regular quarterly dividend on Excel Common Stock and, to the extent
required, dividends (or the setting aside thereof) on the Excel Series A
Preferred Stock, Excel Series B Preferred Stock and Series C Preferred
Stock, and (z) to the extent New Plan is required to declare and pay the
New Plan Pre-Merger Dividend, a dividend per share of Excel Common Stock in
an amount equal to 1.20 times the New Plan Pre-Merger Dividend per New Plan
Common Share to be declared and paid prior to the declaration and payment
of the Excel Stock Dividend and prior to the Effective Time and, to the
extent required, dividends (or the setting aside thereof) on the Excel
Series A Preferred Stock, Excel Series B Stock and Series C Preferred Stock
and (2) in connection with the use of shares of capital stock to pay the
exercise price or tax withholding in connection with stock-based employee
benefit plans of Excel, directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any
of its subsidiaries, or make any commitment for any such action;
(vi) except in the ordinary course of business consistent with past
practice, not, sell, mortgage or encumber or otherwise dispose of, except
by leasing in the ordinary course of business, material Excel properties or
assets or any of its capital stock of or other interests in its
subsidiaries;
(vii) not (1) incur, assume or guarantee or prepay any indebtedness for
borrowed money in an amount in excess of (A) $150 million, and (B) the
amount necessary to consummate the pending Excel transactions, in each case
in a manner consistent with Excel's past practice, or (2) make any
investments in, any other person, other than to subsidiaries;
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(viii) not pay or satisfy any claims, other than in the ordinary course
of business consistent with past practice;
(ix) not enter into any contract which may result in total payments or
liability by or to it in excess of $200,000, except in the ordinary course
of business consistent with past practice;
(x) not enter into any contract with any officer, director, consultant or
affiliate (1) which is not in the ordinary course of business and
consistent with past practices or (2) where the amount involved exceeds
$50,000;
(xi) not acquire, enter into any contract, to acquire or announce any
proposed acquisition of, 25% or more of the equity interests or all or
substantially all of the assets, of another entity which has net assets in
excess of $25 million, subject to the limitations in clause (ii) above;
(xii) not make any changes in its accounting methods or policies except
as required by law, the Commission or generally accepted accounting
principles;
(xiii) maintain, insurance in such amounts and against such risks as are
customary for companies like Excel;
(xiv) not make any loan of money to or investment in, or purchase any
equity interest in, buy any property from or sell any property to, or enter
into any partnership or joint venture with Legacy and Excel will fully
enforce and not waive the provisions of each material agreement between
Excel and Legacy in effect on the date hereof; and
(xv) not, authorize, or commit or agree to take, any of the foregoing
actions.
INDEMNIFICATION
Pursuant to the Merger Agreement, New Plan, Excel and Merger Sub have agreed
to cooperate and use their reasonable best efforts to defend against any
threatened or actual claim or proceeding, whether civil, criminal or
administrative, including any such claim or proceeding in which any
Indemnified Party is, or is threatened to be, made a party based in whole or
in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he, she or it is or was a trustee, officer, employee or agent of New
Plan, or is or was serving at the request of New Plan as a trustee, officer,
employee or agent of another corporation or enterprise or (ii) the Merger
Agreement.
The Merger Agreement also provides that New Plan will indemnify and hold
harmless and advance expenses relating to, and after the Effective Time the
Combined Company will indemnify and hold harmless and advance expenses
relating to, as and to the full extent permitted by applicable law or the New
Plan Declaration of Trust, each Indemnified Party against any losses, claims,
damages, expenses (including attorneys' fees and expenses), judgments, fines
and amounts paid in settlements in connection with any such threatened or
actual claim, proceeding or investigation. New Plan and Excel will use their
respective reasonable best efforts to assist in the vigorous defense of any
such matter; provided that neither New Plan nor the Combined Company will be
liable for any settlement effected without its prior written consent; and
provided further that the Combined Company will have no obligation hereunder
to any Indemnified Party when and if a court of competent jurisdiction
ultimately and finally determines that indemnification of such Indemnified
Party in the manner contemplated by the Merger Agreement is prohibited by
applicable law.
Excel has agreed that all rights to indemnification existing in favor, and
all limitations on the personal liability, of the Indemnified Parties provided
for in New Plan's Declaration of Trust or similar organizational documents, in
effect as of the Effective Time with respect to matters occurring at or prior
to the Effective Time, are contract rights and will survive the Merger and
will continue in full force and effect thereafter.
From the Effective Time, Excel and the Surviving Trust will and Excel will
cause the Surviving Trust to keep in effect provisions in their respective
organizational documents providing for exculpation of director liability and
indemnification of trustees, directors, officers, employees and agents of New
Plan to the extent that such persons are entitled thereto thereunder on the
date of the Merger Agreement (or, if more favorable to such persons, at the
Effective Time as contemplated by the Merger Agreement), which provisions will
not be
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amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of any such individuals unless such modification is required by law.
For a period of six years after the Effective Time, the Surviving Trust will
cause to be maintained in effect the current policies of trustees' and
officers' liability insurance maintained by New Plan (provided that the
Surviving Trust may substitute therefor policies of New Plan at the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that in no event will
the Surviving Trust be required to expend an amount equal to 200% of current
annual premiums paid by New Plan for such insurance. In addition, the Combined
Company will, from and after the Effective Time, carry directors' and
officers' liability insurance which is no less favorable than the foregoing.
To the extent reasonably requested by New Plan, (i) Excel will amend the
bylaws of Excel (the "Excel Bylaws") to make more favorable to the persons
covered thereby the indemnification, exculpation and similar provisions of the
Excel Bylaws and (ii) if requested reasonably in advance of the effectiveness
of the Registration Statement, adopt and include in the Charter Amendments,
amendments to the Excel Charter to make more favorable to the persons covered
thereby the indemnification, exculpation and similar provisions of the Excel
Charter.
EMPLOYEES
Subject to considerations relating to the particular geographic region in
which the employee is located, it is the intent of the New Plan and Excel that
the employees of New Plan employed by the Surviving Trust after the Effective
Time (the "Former New Plan Employees") will in general receive credit with
respect to each employee benefit plan, program, policy or arrangement of the
Surviving Trust or the Combined Company, for service with New Plan or any of
its subsidiaries (as applicable) for purposes of determining eligibility to
participate (including waiting periods, and without being subject to any entry
date requirement after the waiting period has been satisfied), vesting (as
applicable) and entitlement to benefits. The term "employees" shall mean all
current employees of New Plan and its subsidiaries (including those on
disability or approved leave of absence, paid or unpaid).
CONDITIONS PRECEDENT TO THE MERGER
The respective obligations of each of the parties to effect the Merger is
subject to the fulfillment on or prior to the Effective Time of the following
conditions, any or all of which may be waived:
(i) The New Plan Trust Amendments and Merger having been approved by the
requisite vote of the New Plan shareholders, and the Share Issuance, the
Charter Amendments and the Election of Directors having been approved by
the requisite vote of the Excel stockholders.
(ii) Neither New Plan, Excel nor Merger Sub having been subject to any
order, ruling or injunction of a court of competent jurisdiction, and there
not having been enacted any statute or regulation, which prohibits or makes
illegal the consummation of the transactions contemplated by the Merger
Agreement.
(iii) The Registration Statement will have become effective and all
necessary state securities law permits or approvals required will have been
obtained and no stop order, with respect to any of the foregoing will be in
effect and no proceedings for that purpose, will have been initiated or
threatened by the Commission.
(iv) Excel will have obtained the approval for the listing of the
Combined Company Common Stock and Series D Depositary Shares representing
the Series D Preferred Stock issuable in the Merger or upon exercise of the
New Plan Options assumed by Excel hereunder, in each case on the NYSE,
subject to official notice of issuance.
(v) All governmental and third party consents and authorizations will
have been obtained except where the failure to have such consents or
authorizations would not have a material adverse effect on the business,
results of operations or financial condition of Excel or New Plan, as the
case may be.
The obligation of New Plan to effect the Merger to occur at the Effective
Time is subject to the fulfillment of the following conditions, unless waived
by New Plan:
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(i) Excel having performed in all material respects its covenants
contained in the Merger Agreement and Excel's representations and
warranties being true and correct.
(ii) New Plan will have received certain opinions of (a) its counsel with
respect to certain tax matters, (b) Excel's counsel with respect to the
status of Excel as a REIT under the Code, (c) the opinions of Excel's
Maryland counsel with respect to certain matters relating to the Merger
under Maryland law and (d) the opinion of its Massachusetts counsel with
respect to certain matters relating to the Merger under Massachusetts law.
(iii) The absence of any change in the financial condition, business or
operations of Excel and its subsidiaries, taken as a whole, that would have
or would be reasonably likely to have a material adverse effect on Excel
other than any such change that results from a decline or deterioration in
general economic conditions or in conditions in the real estate markets in
which either New Plan or Excel operate and that affects both New Plan and
Excel in a substantially similar manner.
(iv) The Excel Charter will have been amended as provided in the Merger
Agreement, and the Excel Bylaws will have been amended as provided in the
Merger Agreement, and such amendments will be in full force and effect.
(v) The Combined Company Board will be comprised of the six current
directors of Excel and the nine current trustees of New Plan as provided in
the Merger Agreement and the officers of the Combined Company will be
appointed in accordance with the Merger Agreement.
(vi) Gary Sabin will be serving as President of Excel as of the Effective
Time in accordance with his employment agreement.
(vii) Excel will have executed and delivered the consulting agreement
with William Newman.
(viii) The Legacy Intercompany Amendment will have remained in full force
and effect without waiver or modification of any of its provisions and the
Legacy Services Amendments and the Legacy Agreement will each have been
executed and delivered by Excel and Legacy and be in full force and effect.
The obligations of Excel to effect the Merger is subject to the fulfillment
at or prior to the Effective Time of the following conditions, unless waived
by Excel:
(i) New Plan having performed in all material respects its covenants
contained in the Merger Agreement and New Plan's representations and
warranties being true and correct.
(ii) Excel will have received certain opinions of (a) its counsel with
respect to certain tax matters, (b) New Plan's counsel with respect to the
status of New Plan as a REIT under the Code and (c) its Maryland counsel
with respect to certain matters relating to the Merger under Maryland law.
(iii) The absence of any change in the financial condition, business or
operations of New Plan and its subsidiaries, taken as a whole, that would
have or would be reasonably likely to have a material adverse effect on New
Plan other than any such change that results from a decline or
deterioration in general economic conditions or in conditions in the real
estate markets in which either New Plan or Excel operate and that affects
both New Plan and Excel in a substantially similar manner.
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the New Plan Special
Meeting or Excel Special Meeting:
(a) by the mutual written consent of Excel and New Plan.
(b) by New Plan or Excel if:
(i) the Merger shall not have been consummated by December 31, 1998
provided however that the right to terminate the Merger Agreement shall
not be available to the party whose failure to fulfill
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any covenant or other obligation under the Merger Agreement has caused
the failure of the Merger to occur on or before such date; or
(ii) a meeting of New Plan's shareholders shall have been duly
convened and held and the approval of New Plan's shareholders required
by the Merger Agreement shall not have been obtained; or
(iii) a meeting of Excel's stockholders shall have been duly convened
and held and the approval of Excel's stockholders required by the
Merger Agreement shall not have been obtained; or
(iv) a court or governmental or regulatory or administrative agency
or commission shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) by New Plan:
(i) with respect to a New Plan Takeover Proposal in accordance with
the New Plan "No Solicitation" provisions of the Merger Agreement; or
(ii) if Excel shall knowingly and materially breach the Excel "No
Solicitation" provisions of the Merger Agreement; or
(iii) if there has been a breach by Excel of any of its
representations or warranties which would have or be reasonably likely
to have a material adverse effect on Excel; or
(iv) if there has been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on the part of Excel; or
(v) if Gary Sabin shall not be serving as both the Chairman and Chief
Executive Officer of Excel at the Effective Time.
(d) by Excel:
(i) with respect to an Excel Takeover Proposal in accordance with the
Excel "No Solicitation" provisions of the Merger Agreement; or
(ii) if New Plan shall knowingly and materially breach the New Plan
"No Solicitation" provisions of the Merger Agreement; or
(iii) if there has been a breach by New Plan of any of its
representations or warranties which would have or be reasonably likely
to have a material adverse effect on New Plan; or
(iv) if there has been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on the part of New Plan.
EXPENSES AND TERMINATION FEES
If the Merger Agreement is terminated (A) by New Plan pursuant to clause
(c)(i) or by Excel pursuant to clause (d)(ii) under "--Termination" above,
then New Plan will pay Excel (provided New Plan was not entitled to terminate
the Merger Agreement at the time of such termination) a fee equal to the
Break-Up Fee (as defined below) or (B) by Excel pursuant to clause (d)(iii) or
(d)(iv) under "--Termination" above, then New Plan will pay Excel (provided
New Plan was not entitled to terminate the Merger Agreement at the time of
such termination) an amount equal to the Break-Up Expenses (as defined below).
If the Merger Agreement is terminated (A) by Excel pursuant to clause (d)(i)
or by New Plan pursuant to clause (c)(ii) under "--Termination" above, then
Excel will pay New Plan (provided Excel was not entitled to terminate the
Merger Agreement at the time of such termination) a fee equal to the Break-Up
Fee or (B) by New Plan pursuant to clause (c)(iii) or (c)(iv) under "--
Termination" above, then Excel will pay New Plan (provided Excel was not
entitled to terminate the Merger Agreement at the time of such termination) an
amount equal to the Break-Up Expenses.
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If the Merger is not consummated (other than in certain circumstances
including by mutual consent, the failure of the Excel stockholders to approve
at their stockholders' meeting the Share Issuance, the Charter Amendments and
the Election of Directors and certain breaches by Excel) and at the time of
the termination of the Merger Agreement a New Plan Takeover Proposal has been
received by New Plan, and either prior to the termination of the Merger
Agreement or within twelve months thereafter New Plan enters into any written
agreement to effect a New Plan Takeover Proposal which is subsequently
consummated (whether or not such agreement is related to the New Plan Takeover
Proposal which had been received at the time of the termination of the Merger
Agreement), then New Plan shall pay the Break-Up Fee to Excel. If the Merger
is not consummated (other than in certain circumstances including by mutual
consent, the failure of the New Plan shareholders to approve at their
shareholders' meeting the New Plan Trust Amendments and the Merger and certain
breaches of the Merger Agreement by New Plan) and at the time of the
termination of the Merger Agreement an Excel Takeover Proposal has been
received by Excel, and either prior to the termination of the Merger Agreement
or within twelve months thereafter Excel enters into any written agreement to
effect the Excel Takeover Proposal which is subsequently consummated (whether
or not such agreement is related to the Excel Takeover Proposal which had been
received at the time of the termination of the Merger Agreement), then Excel
shall pay the Break-Up Fee to New Plan.
The "Break-Up Fee" is an amount equal to the lesser of (i) $32.5 million
plus Break-Up Expenses (the "Base Amount") and (ii) the maximum amount that
can be paid to Excel or New Plan, as applicable, without causing it to fail to
meet the REIT income requirements of the Code determined as if the payment of
such amount did not constitute qualifying income under the Code, as determined
by independent accountants to either New Plan or Excel whichever becomes
entitled to the Break-Up Fee (the "Fee Recipient"). If the Fee Recipient later
receives a letter from outside counsel or ruling from the IRS to the effect
that the Fee Recipient's receipt of the Base Amount would either constitute
qualifying income or would otherwise not cause the Fee Recipient to fail to
meet the REIT income requirements, the Break-Up Fee shall be an amount equal
to the Base Amount and shall be payable in full. The obligation of the party
required to pay the Break-Up Fee to pay any unpaid portion of the Break-Up Fee
not payable by the REIT income requirements reason of clause (ii) above shall
terminate five years from the date of the Merger Agreement. The unpaid portion
of the Base Amount will be placed in escrow pending satisfaction of the REIT
income requirements. Amounts remaining in escrow after the obligation of a
party to pay the Break-Up Fee is satisfied or otherwise terminates shall be
released to the party making such escrow deposit.
The "Break-Up Expenses" payable to Excel or New Plan, as the case may be
(the "Expenses Recipient"), shall be an amount equal to the lesser of (i) $2.5
million and (ii) the maximum amount that can be paid to the Expenses Recipient
without causing it to fail to meet the REIT income requirements. In the event
the Expenses Recipient receives a letter from outside counsel or a ruling from
the IRS to the effect that the Expenses Recipient's receipt of the Break-Up
Expenses would either constitute qualifying income or would otherwise not
cause the Expenses Recipient to fail to meet the REIT income requirements, the
Break-Up Expenses shall be determined without regard to clause (ii) above. The
obligation of Excel or New Plan, as applicable ("Payor"), to pay any unpaid
portion of the Break-Up Expenses not payable by reason of clause (ii) above
shall terminate five years from the date of the Merger Agreement. The unpaid
amount of the Break-Up Expenses will be placed in escrow pending satisfaction
of the REIT requirements. Amounts remaining in escrow after the obligation of
a party to pay the Break-Up Expenses is satisfied or otherwise terminates
shall be released to the party making such escrow deposit.
In the event of termination of the Merger Agreement, the Merger Agreement
will become void without any liability thereunder and all obligations of New
Plan, Excel and Merger Sub shall terminate, except the obligations of the
parties described under this section and the "--Indemnification" section above
and except for certain procedural provisions of the Merger Agreement, provided
that no party shall be relieved from liability for a wilful and material
breach of the Merger Agreement. In the event either party is required to file
suit to seek all or a portion of the Break-Up Fee and/or Break-Up Expenses,
and it ultimately succeeds, it will be entitled to all expenses, including
attorneys' fees and expenses, which it has incurred in enforcing its rights.
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AMENDMENT AND WAIVER
The Merger Agreement may be further amended by the parties at any time
before or after receipt of the approvals to be obtained at the New Plan
Special Meeting or Excel Special Meeting in accordance with the Merger
Agreement and prior to the filing of the Articles of Merger with the SDAT or
the filing of the Certificate of Merger with the Secretary of the Commonwealth
of Massachusetts; provided, however, that after any such approval is obtained,
no amendment shall be made which by law requires the further approval of
shareholders or stockholders, as the case may be, without obtaining such
further approval.
The Merger Agreement also permits a party to (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations or warranties of the other party
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement or (c) waive compliance with any of the agreements or
conditions of the other party contained in the Merger Agreement.
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COMBINED COMPANY OPERATIONS AND MANAGEMENT
Upon consummation of the Merger, New Plan and Excel will operate as one
combined company under the name "New Plan Excel Realty Trust, Inc." The
Combined Company will be one of the nation's largest community and
neighborhood shopping center REITs (based upon market capitalization, square
footage of GLA and total revenues) with a total, as of April 30, 1998, of 329
properties (267 retail properties, 52 apartment communities and 10 commercial
properties) in 31 states comprising over 34.6 million square feet of GLA and
approximately 12,400 apartment units. As of July 31, 1998, the Combined
Company would have 340 properties. As a strategic combination, the Merger
allows New Plan shareholders and Excel stockholders to become stockholders of
the Combined Company.
INVESTMENT HIGHLIGHTS
The Merger brings together two strong real estate companies to create a
national real estate company with greater size, financial strength and market
capitalization than either company could achieve on a stand-alone basis in the
near future. Among the key features of the Combined Company are those
described below.
Greater Market Capitalization. The Combined Company will have a total equity
market capitalization of approximately $2.1 billion (based on a closing price
of $21.1875 per New Plan Common Share, $25.25 per share of Series A Preferred
Stock, $24.6875 per Series B Depositary Share and a value of $50.00 per New
Plan Depositary Share on August 7, 1998). This level of market capitalization
is expected to create a number of benefits for the Combined Company and its
stockholders. New Plan and Excel believe that real estate securities have
become increasingly important to institutional investors as compared to direct
investment in real estate. With a greater market capitalization and liquidity
for its shares, the Combined Company will be more attractive to the
institutional segment of the market which will enhance the overall market for
the Combined Company Common Stock. As a larger company, the Combined Company
also expects to generate a wider following among analysts and other market
professionals. Finally, New Plan and Excel expect that in light of these
factors the Combined Company Common Stock will be more attractive to potential
sellers of properties which will enhance the Combined Company's investment
options in the context of its growth strategy.
Focused Growth Strategy. New Plan and Excel have both concentrated their
investments in community and neighborhood shopping centers with New Plan also
investing in factory outlet centers and apartment communities. The Combined
Company will continue the respective growth strategies of New Plan and Excel
in the context of a larger organization with greater resources than either
company would have individually. The Combined Company will focus on acquiring,
owning and managing a diverse portfolio of commercial retail properties and
apartment communities in select markets throughout the United States that will
generate stable cash flows and present the opportunity for capital
appreciation. This growth strategy will be executed under the conservative
financial strategies employed by New Plan and Excel in the past while taking
advantage of New Plan's strong credit rating and lower cost of capital and
Excel's flexible investment structures.
The Combined Company will seek to meet its objectives by aggressively
managing and, where appropriate, redeveloping its existing portfolio,
continuing to acquire well-located community and neighborhood shopping
centers, factory outlet centers and apartment communities, maintaining a
conservative financial position and capitalizing on the benefits of combining
two strong real estate companies.
New Plan and Excel believe that a number of factors should enable the
Combined Company to achieve its business objectives, including: (i) the
opportunity to lease available space at attractive rental rates; (ii) the
quality and location of the properties of the Combined Company; (iii) the
Combined Company's access to development opportunities as a result of its
significant relationships with market participants and its long presence in
its markets; and (iv) its access to capital on favorable terms.
New Plan and Excel believe that increased focus on renovation and expansion
of value added properties, and development of well-located community and
neighborhood shopping centers, should provide the Combined Company with
attractive opportunities for higher rates of return than from fully leased,
renovated properties. The Combined Company will utilize the experience of the
combined management team to pursue renovation of well-located properties to
increase demand for space in its properties and add value to the portfolio.
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National Property Portfolio. The Combined Company will be a national real
estate company with concentrations of retail properties and apartment
communities in local and urban markets in 31 states. Geographic
diversification will enable the Combined Company to increase or decrease
investments in various regions to take advantage of the relative strength and
investment opportunities in diverse local markets and reduce exposure to
regional and local economic cycles. The Combined Company will benefit from a
diverse group of high quality retail tenants with the total fixed minimum
annual rental of its largest tenant and second largest tenant accounting for
less than 5.4% and 2.0%, respectively, of the Combined Company's scheduled ABR
as of April 30, 1998.
Financial Strength. The Combined Company has been advised that it will
likely retain at the outset the strong credit ratings of New Plan of A+ and A2
from Standard and Poor's and Moody's Investors Service, respectively, with
negative implications in view of the Merger, which is the highest combined
credit rating of any publicly traded REIT. On a pro forma basis, as of March
31, 1998, the Combined Company would have a ratio of debt to total market
capitalization of 27.4% (which is below the industry average), a ratio of debt
to total assets of 34.4% (which is also below the industry average) and a
total of 264 unencumbered properties with total undepreciated book value of
$1.9 billion to support the Combined Company's outstanding unsecured debt. On
a pro forma basis, for the year ended July 31, 1997, the Combined Company
would have had total revenues of $383.7 million and net income of $140.2
million.
Highly Regarded Management Team. The management teams of New Plan and Excel
have consistently been regarded as leaders and innovators in the REIT industry
and have enjoyed a reputation for management excellence. These two management
teams have over the last five years successfully acquired a total of 165
retail properties for an aggregate purchase price (including assumed
mortgages) of approximately $1.4 billion representing over approximately 22.2
million square feet of GLA, in addition to 10,588 apartment units with an
aggregate purchase price (including assumed mortgages) of approximately $298.8
million acquired by New Plan. Together, the Combined Company management team
will reflect the consistent management philosophies of New Plan and Excel, New
Plan's long-held status as pioneers in the community and neighborhood shopping
center industry and Excel's reputation for entrepreneurialism.
Competitive Advantages. The Combined Company is expected to enjoy
competitive advantages from (i) its national portfolio which will permit it to
compete effectively for national and regional tenants by offering a wide
selection of sites, (ii) significant concentrations of properties in certain
markets and favorable current market trends which will create opportunities to
negotiate favorable lease terms with existing and prospective tenants, and
(iii) the synergies resulting from complementary property management offices
and teams and operating efficiencies expected to be realized which will
enhance the overall competitiveness of the Combined Company.
Positioned for Growth. The factors described above provide the foundation
for the growth of the Combined Company in the future. New Plan and Excel have
each experienced and managed significant growth over the years and the
Combined Company expects to continue to experience growth. New Plan and Excel
have proven abilities to acquire, manage and develop properties which will be
carried over into the Combined Company.
New Plan and Excel believe that their segments of the REIT industry are
experiencing rapid change, consolidation and favorable market conditions. The
Merger will create a company with the market capitalization, experienced
management and financial strength necessary to capitalize on these trends. The
Combined Company will be positioned as an industry leader to take advantage of
opportunities emerging and expected to emerge in this environment and to
respond to future conditions as they develop. The Combined Company expects to
be a consolidator in its segment of the REIT industry.
New Plan and Excel have each developed an extensive network of industry
contacts which is expected to generate opportunities for new tenants and
property acquisitions. New Plan and Excel believe that a trend will continue
among institutional holders of real estate to shift from direct investment to
REIT securities which may have the effect of increasing the supply of
available properties. The existence of Excel's Down REIT operating partnership
will also provide opportunities to acquire properties from sellers who wish to
contribute their properties to the Combined Company on a tax-deferred basis.
The strength and size of the Combined Company
68
<PAGE>
will likely permit it to continue the aggressive acquisition programs of New
Plan and Excel and seek out opportunities for larger properties and real
estate companies.
BOARD OF DIRECTORS
Subject to approval of the Election of Directors by the Excel stockholders,
upon the consummation of the Merger, the Combined Company Board will consist
of fifteen members. Pursuant to the Merger Agreement, New Plan and Excel are
required to cause the Combined Company Board at the completion of the Merger
to consist of (i) the nine current New Plan trustees and (ii) the six current
Excel directors. The individuals serving on the Combined Company Board will
also serve on the board of trustees of the Surviving Trust which will operate
as a qualified REIT subsidiary of the Combined Company following the Merger.
The Combined Company Board will be divided into three classes designated
Class I, Class II and Class III. The initial term of office of the Class I
directors will expire at the annual meeting of the Combined Company in 1999.
The initial term of office of the Class II directors will expire at the annual
meeting of the Combined Company in 2000. The initial term of office of the
Class III directors will expire at the annual meeting of the Combined Company
in 2001. Set forth below is certain information about each person who is
anticipated to be a member of the Combined Company Board at the Effective
Time. For additional information regarding the directors designated by Excel
to serve on the Combined Company Board, see "Management of Excel--Directors
and Executive Officers." The tables set forth below indicate the principal
title or occupation and the class of each director anticipated to be a member
of the Combined Company Board at the Effective Time.
New Plan Designated Directors. Subject to approval of the Election of
Directors by the Excel stockholders, the nine current members of the New Plan
Board will become directors of the Combined Company at the Effective Time as
follows:
<TABLE>
<CAPTION>
NAME PRINCIPAL TITLE OR OCCUPATION CLASS
---- ----------------------------- -----
<S> <C> <C>
William Newman.......... Chairman of the Board and Chief Executive Officer, New Plan. III
Arnold Laubich.......... President and Chief Operating Officer, New Plan. III
James M. Steuterman..... Executive Vice President, New Plan. II
Dean Bernstein.......... Vice President--Administration and Finance, New Plan I
Raymond A. Bottorf...... Managing Director, ABN-AMRO Chicago Corp. I
Norman Gold............. Partner, Altheimer & Gray. III
Melvin Newman........... Private Investor. II
John Wetzler............ President, Nautica Retail USA, Inc. II
Gregory White........... Managing Director, Schroder Mortgage Associates. I
</TABLE>
Excel Designated Directors. Five of the six current members of the Excel
Board will continue to serve as directors of the Combined Company for the
terms of their elected classes. Subject to approval of the Election of
Directors by the Excel stockholders, Gary Sabin will be elected to serve as a
director of the Combined Company for a term expiring at the annual meeting of
the Combined Company in 2000 (Class II). Currently, Mr. Sabin's term expires
at the annual meeting of the Combined Company in 1999 (Class I). The current
Excel directors who will become directors of the Combined Company at the
Effective Time are as follows:
<TABLE>
<CAPTION>
NAME PRINCIPAL TITLE OR OCCUPATION CLASS
---- ----------------------------- -----
<S> <C> <C>
Gary B. Sabin........... Chairman of the Board, President and Chief
Executive Officer, Excel. II
Richard B. Muir......... Executive Vice President and Secretary, Excel. III
Boyd A. Lindquist....... President, Chief Executive Officer and Director, Republic Bank. I
Robert E. Parsons, Jr... Executive Vice President and Chief Financial Officer,
Host Marriott Corporation. I
Bruce A. Staller........ Owner, Bruce Atwater Staller Registered Investment Advisor. II
John H. Wilmot.......... President, Exeter Development. III
</TABLE>
Substitute Designation. If any party designated by either New Plan or Excel
is unable or unwilling to serve as a director of the Combined Company, then
New Plan or Excel, as applicable, is entitled to designate a substitute
nominee.
69
<PAGE>
The Investment Committee. New Plan and Excel have agreed on the creation of
an Investment Committee of the Combined Company Board consisting of Gary
Sabin, who will be the Chairman, Arnold Laubich, James Steuterman and Richard
Muir. Subject to the requirements of Maryland law, the Investment Committee
will have the power and authority, with the consent of at least three members
thereof, to approve on behalf of the Combined Company any acquisition or
disposition with a purchase price (taking into account purchase money
financing and assumption of existing mortgage indebtedness) of less than 5% of
the total assets (before accumulated depreciation and amortization) of the
Combined Company on a consolidated basis, determined in accordance with
generally accepted accounting principles at the time such transaction is
entered into. The Investment Committee also has authority to approve any such
transaction in an amount in excess of 5%, but less than 10%, of total assets
(before accumulated depreciation and amortization) of the Combined Company,
determined in accordance with generally accepted accounting principles, by the
consent of all four members of the Investment Committee and two additional
members of the Combined Company Board. The Investment Committee is not
authorized to approve any refinancing, unsecured financing or new financing,
other than purchase money financing or debt assumed as described above.
Other Committees. It is anticipated that the Combined Company Board will
also have an Audit Committee whose initial members will be Raymond A. Bottorf,
Gregory White and Robert E. Parsons, Jr. and an Executive Compensation and
Stock Option Committee whose initial members will be Norman Gold, John Wetzler
and John H. Wilmot.
Compensation and Benefits of Directors After the Merger. It is expected that
directors of the Combined Company who are not otherwise paid employees or
consultants of the Combined Company will receive annual compensation of
$15,000 plus a fee of $1,000 for attendance, in person, at each meeting of the
Combined Company Board. Directors will also receive $500 for each committee
meeting attended, in person, which is not on the same day as a Combined
Company Board meeting. No compensation is paid for telephonic meetings. Each
director will be reimbursed for expenses incurred in attending meetings,
including committee meetings. Officers of the Combined Company who are
directors are not expected to be paid director fees or committee meeting fees.
The Combined Company will continue Excel's Directors' 1994 Stock Option Plan
(the "Director Plan") which will provide that each duly elected and qualified
director is entitled to, on an annual basis, options to purchase shares of
Combined Company Common Stock in accordance with the following formula: 3,000
shares, plus 250 shares multiplied by the number of years of continuous
service beginning in 1997, including any portion of any fiscal year of service
as a full year. The option price will be the fair market value of the
underlying shares on the date of grant. Directors of the Combined Company from
New Plan will have New Plan service counted for purposes of stock option
eligibility.
EXECUTIVE OFFICERS AFTER THE MERGER
The following individuals are anticipated to be the executive officers of
the Combined Company at the Effective Time, with positions and expected
responsibilities indicated.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
William Newman...... Chairman of the Board
Arnold Laubich...... Chief Executive Officer
Gary B. Sabin....... President
James M. Steuterman. Executive Vice President and Co-Chief Operating Officer
Richard B. Muir..... Executive Vice President and Co-Chief Operating Officer
David A. Lund....... Chief Financial Officer
William Kirshenbaum. Treasurer
Dean Bernstein...... Senior Vice President--Finance and Multifamily
Graham R. Bullick... Senior Vice President--Capital Markets
Mark T. Burton...... Senior Vice President--Acquisitions
James DeCicco....... Senior Vice President--Leasing
Thomas J. Farrell... Senior Vice President--Acquisitions
S. Eric Ottesen..... Senior Vice President--Legal Affairs and Secretary
Ronald H. Sabin..... Senior Vice President--Asset Management
Steven F. Siegel.... Senior Vice President and General Counsel
John Visconsi....... Vice President--Leasing
</TABLE>
70
<PAGE>
HEADQUARTERS
The Combined Company will have its corporate headquarters in New York, New
York with operational headquarters in both New York, New York and San Diego,
California.
ACCOUNTING
The Merger will be accounted for in accordance with Accounting Principles
Board Opinion No. 16 as a reverse merger for financial reporting purposes as
if New Plan was acquiring Excel. Accordingly, upon consummation of the Merger,
the assets and liabilities of Excel will be revalued to reflect their
estimated fair value. Because the Merger will be accounted for as an
acquisition of Excel by New Plan, the Combined Company financial statements
prior to the consummation of the Merger will include only the historical
financial results of New Plan. The Combined Company financial statements
subsequent to the Merger will include the financial results of Excel.
SUPPORT AGREEMENTS
Each of Arnold Laubich and Gary Sabin has entered into a Support Agreement
which provides that from and after the Effective Time until the earlier of
such time as he (i) no longer owns any shares of Combined Company Common Stock
or (ii) is no longer employed by the Combined Company as a result of a
termination by the Combined Company without "cause" or his termination for
"good reason," he will:
(a) not, without the prior approval of the Combined Company Board (i)
submit any proposal for the vote of stockholders of the Combined Company,
(ii) become a member of a "group" within the meaning of Section 13(d)(3) of
the Exchange Act with respect to any shares of voting stock of the Combined
Company or (iii) initiate or assist in any takeover proposal or proxy
solicitation;
(b) be present in person or be represented by proxy at all stockholder
meetings of the Combined Company; and
(c) as a stockholder, vote all of his shares of Combined Company Common
Stock (i) for the Combined Company Board's nominees for election to the
Combined Company Board, (ii) in accordance with the recommendation of the
Combined Company Board on all other matters submitted to a vote of
stockholders of the Combined Company, and (iii) not take any position
contrary to the position of the Combined Company Board on any matter.
William Newman has also entered into a similar Support Agreement, but the
term of William Newman's agreement runs from the Effective Time until the
earlier of such time as he (i) no longer owns any shares of Combined Company
Common Stock or (ii) is no longer an officer or director of the Combined
Company. Immediately following the Merger, Messrs. Newman, Laubich and Sabin
will beneficially own in the aggregate approximately 2,708,174 shares of
Combined Company Common Stock, not including shares which may be acquired upon
exercise of stock options.
PERCENTAGE OWNERSHIP INTERESTS OF THE COMBINED COMPANY
Based on the number of New Plan Common Shares and shares of Excel Common
Stock outstanding on August 12, 1998 and assuming the issuance of (a)
approximately 4,688,068 shares of Excel Common Stock pursuant to the Excel
Stock Dividend prior to the consummation of the Merger and (b) approximately
59,874,174 million shares of Combined Company Common Stock in connection with
the Merger, upon consummation of the Merger there will be approximately
88,002,580 million shares of Combined Company Common Stock outstanding of
which the former shareholders of New Plan will own approximately 65% and the
stockholders of Excel will continue to own approximately 35%, assuming
conversion of Excel's convertible preferred stock into 2,643,008 shares of
Excel Common Stock and Excel's Down REIT units into 2,179,193 shares of Excel
Common Stock.
71
<PAGE>
TRADING MARKETS
Following the Effective Time, shares of Combined Company Common Stock
including shares issued in the Merger will continue to trade on the NYSE. The
Series D Depositary Shares will also trade on the NYSE. The symbols for these
securities and the other securities of the Combined Company to be outstanding
after the Merger will be:
<TABLE>
<S> <C>
Combined Company Common Stock.................................. "NXL"
Series A Preferred Stock....................................... "NXLprA"
Series B Depositary Shares..................................... "NXLprB"
Series D Depositary Shares..................................... "NXLprD"
</TABLE>
DIVIDEND POLICY
The Merger Agreement provides that the initial quarterly dividend to be paid
on the Combined Company Common Stock will be at the annualized rate of $1.60
per share ($.40 per share for the first quarter) and, after anticipated
minimum quarterly increases of at least $.0025 per share, each stockholder of
the Combined Company is expected to receive aggregate dividend distributions
of $1.625 per share for the 12-month period immediately following the initial
quarterly dividend payment of $.40 per share. Thereafter, it is anticipated
that the quarterly dividend will continue to be increased by a minimum of at
least $.0025 per share (which quarterly increases amount to $.01 per share on
an annualized basis and effectively increase the annualized dividend rate by
$.04 per share for each share held over a 12-month period) until the
annualized quarterly dividend on the Combined Company Common Stock is at least
$1.67 per share. The dividend of $1.625 per share represents an increase in
the dividend to be received by the New Plan shareholders and a decrease in the
dividend to be received by the Excel stockholders. With respect to the
currently outstanding Excel Common Stock, the $1.625 dividend is equivalent to
$1.95 per share after giving effect to the 20% Excel Stock Dividend (as
compared to the current annualized Excel dividend of $2.00 per share).
The maintenance of this dividend policy will be subject to various factors
including the payment of the New Plan Pre-Merger Dividend and the discretion
of the Combined Company Board, the exercise by the Combined Company Board of
its duties to the stockholders of the Combined Company, the ability to pay
dividends under applicable law and the effect which the payment of dividends
may have from time to time on the maintenance by the Combined Company of its
status as a REIT. The dividend rate on the Series D Preferred Stock and the
Series D Depositary Shares will be the same as on the New Plan Preferred
Shares and the New Plan Depositary Shares, although certain adjustments will
be made at the time of such dividend payments, in order that the dividends on
the Series D Preferred Stock and Series D Depositary Shares will be
coordinated with the dividend declaration and payment dates for the Series A
Preferred Stock and Series B Preferred Stock soon after the Effective Time.
For the twelve months ended July 31, 1997, New Plan paid total cash
dividends of $1.4350 per New Plan Common Share, and for the twelve months
ended December 31, 1997, Excel paid total cash dividends of $1.92 per share of
Excel Common Stock.
LEGACY ARRANGEMENTS
Excel and Legacy are parties to a number of agreements relating to the
spinoff and ongoing relationship between Legacy and Excel. Legacy owns and
manages a number of properties and projects formerly owned by Excel. Excel
agreed to provide to Legacy certain management and administrative services
pursuant to a number of agreements entered into by Legacy and Excel in
connection with the spinoff. See "Business of Excel--Excel's Policies with
Respect to Certain Activities--Conflicts of Interest Policies." Pursuant to
the Merger Agreement, Excel has entered into amendments to (i) the
Administrative Services Agreement to clarify that Legacy will pay to the
Combined Company 23% of the salary and bonus of certain Combined Company
executive officers, including Gary Sabin, as compensation for their services
to Legacy and (ii) the Intercompany Agreement which (a) clarify that the
Merger does not result in a "change of control" which would permit either
party to terminate the Intercompany Agreement, (b) provide that upon a change
of control of one party, only the other party can terminate the Intercompany
Agreement and (c) amend certain procedures relating to the process for
addressing investment opportunities available in the first instance to Legacy
which must first be presented to the Combined Company.
Pursuant to the Merger Agreement, New Plan has elected for the Combined
Company to acquire an option to purchase at the Effective Time from Legacy a
number of Legacy Shares equal to between 5% and 9.8% of the
72
<PAGE>
outstanding shares of Legacy at a price equal to the average price of Legacy
Shares for the ten trading days ending two days prior to the Effective Time
(but not less than $5.00 per share). If Legacy Shares are purchased, the
Combined Company will be entitled to designate one member to the board of
directors of Legacy for so long as the Combined Company continues to own at
least 5% of the outstanding Legacy Shares, and residential apartments will be
added as a class of property which is subject to the conflict procedures
between Legacy and Excel under the Intercompany Agreement.
Under Gary Sabin's employment agreement with the Combined Company, the
failure of Mr. Sabin to be appointed as Chief Executive Officer of the
Combined Company within 30 days following the time Mr. Laubich is no longer
serving as Chief Executive Officer constitutes "good reason" permitting Mr.
Sabin to terminate his employment and receive a payment of $2.5 million,
provided that Mr. Sabin will not be entitled to terminate his employment and
receive such payment if the reason his appointment as Chief Executive Officer
did not become effective is because he did not resign as an executive officer
of Legacy (but he need not resign as a director of Legacy or as the Chairman
of the Legacy board) within six months after his appointment as Chief
Executive Officer of the Combined Company.
DIVIDEND REINVESTMENT PLAN
The Combined Company will offer its stockholders an opportunity to
participate in the New Plan Excel DRIP. The New Plan Excel DRIP will provide
the Combined Company's stockholders with a way of reinvesting cash
distributions in, and making optional purchases of Combined Company Common
Stock, without in either case the payment of any brokerage commission, service
charge or other expense. The New Plan Excel DRIP will replace the existing
Excel DRIP.
Participants in the New Plan Excel DRIP can have cash distributions on all
or any number of shares of Combined Company Common Stock owned by them
automatically reinvested in additional newly issued shares of Combined Company
Common Stock. The New Plan Excel DRIP will also permit stockholders to
purchase additional shares of Combined Company Common Stock for cash subject
to a minimum purchase of $100 and maximum purchases of $20,000 per quarter.
The price per share of the Combined Company Common Stock for the additional
shares purchased with reinvested distributions will be 5% below the average of
the high and low sales prices for the Combined Company Common Stock on the
cash distribution payment date as reported in The Wall Street Journal (or if
The Wall Street Journal is not published, The New York Times or other
appropriate publication, each a "Published Authority") for New York Stock
Exchange Composite Transactions. The purchase price of the Combined Company
Common Stock purchased through additional cash purchases will be 100% of the
average of the aforementioned high and low sales prices on the investment date
as reported in the Published Authority.
The New Plan Excel DRIP will initially be substantially identical in terms
to the current Distribution Reinvestment and Share Purchase Plan of New Plan.
The New Plan Excel DRIP will differ from the current Excel Dividend
Reinvestment Plan ("Excel Plan"). Under the Excel Plan, the price per share
for additional shares purchased with reinvested distributions is 5% below the
average of the high and low sales price of the Excel Common Stock only if the
additional shares purchased are from newly issued shares of Excel Common
Stock, which is determined by Excel. If Excel determines that the additional
shares purchased with reinvested distributions should be purchased from the
open market, then the price per share is the average price of the Excel Common
Stock purchased for the Excel Plan by the plan administrator on the date
purchased and no 5% discount is applied. Also under the Excel Plan,
participants do not have the option of purchasing additional shares through
the plan.
Participation in the New Plan Excel DRIP will be optional. The Combined
Company will furnish stockholders with a prospectus and related documents
describing in detail the terms and conditions of, and process for
participating in, the New Plan Excel DRIP. Stockholders should not consider
participating in the New Plan Excel DRIP until they have carefully reviewed
such prospectus. Failure to enroll in the New Plan Excel DRIP will eliminate
participation in a dividend reinvestment and share purchase plan by each
shareholder and stockholder currently participating in such a plan. If a
stockholder of the Combined Company does not wish to participate in the New
Plan Excel DRIP, such stockholder will receive distributions, as declared, by
check as usual.
73
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF NEW PLAN
The following table sets forth selected historical consolidated financial
and operating information for New Plan. The selected historical consolidated
financial information for the years ended July 31, 1997, 1996, 1995, 1994 and
1993 is derived from the audited consolidated financial statements of New Plan
for such periods. The following selected historical consolidated information
of New Plan as of and for the nine-month periods ended April 30, 1998 and 1997
is derived from the unaudited consolidated financial statements of New Plan
for such periods. In the opinion of New Plan management, the unaudited
consolidated financial information included herein has been prepared on a
basis consistent with the audited financial information included herein, and
incorporated by reference herein, and includes all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations as of and for the nine-month
periods ended April 30, 1998 and 1997. Operating results for the nine-month
period ended April 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending July 31, 1998. The information set forth
below should be read in conjunction with New Plan's "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
historical consolidated financial statements of New Plan and notes thereto
incorporated by reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
APRIL 30, YEARS ENDED JULY 31,
---------------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- ---------- ---------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $ 184,833 $ 150,996 $ 206,821 $167,606 $130,576 $100,955 $ 76,309
Expenses................ 117,813 93,673 129,781 97,484 68,088 49,628 34,020
Other gain (loss) ...... (59) (68) (3) 399 228 990 940
---------- ---------- ---------- -------- -------- -------- --------
Net income.............. $ 66,961 $57,255 $ 77,037 $ 70,521 $ 62,716 $ 52,317 $ 43,229
========== ========== ========== ======== ======== ======== ========
Net income per common
share:
Basic.................. $ 1.06 $ .98 $ 1.31 $ 1.25 $ 1.19 $ 1.06 $ .89
Diluted................ $ 1.05 $ .98 $ 1.30 $ 1.25 $ 1.18 $ 1.05 $ .88
Weighted average number
of common shares
outstanding:
Basic.................. 59,248 58,353 58,461 56,484 52,894 49,502 48,838
Diluted................ 59,691 58,617 58,735 56,642 53,040 49,768 49,128
Balance Sheet Data (at
period end):
Net real estate......... $1,280,192 $1,031,275 $1,171,909 $895,418 $701,074 $572,240 $350,045
Total assets............ $1,355,175 $1,100,631 $1,261,144 $945,394 $796,636 $616,993 $534,248
Debt.................... $ 555,431 $ 401,345 $ 478,207 $238,426 $206,652 $ 28,060 $ 23,321
Shareholders' equity.... $ 759,676 $ 669,068 $ 749,955 $659,354 $570,529 $565,493 $500,571
Other Data:
Distributions per common
share.................. $ 1.1025 $ 1.0725 $ 1.435 $ 1.395 $ 1.355 $ 1.315 $ 1.275
Funds from
operations(a).......... $ 85,687 $ 75,576 $ 101,584 $ 90,127 $ 77,543 $ 62,669 $ 49,863
Number of properties
owned at the end of the
period................. 190 165 176 150 132 121 91
</TABLE>
- --------
(a) Defined as net income plus depreciation of real estate and amortization
less gains from sales of securities and real estate properties less
preferred stock dividend requirements. FFO is presented because industry
analysts and New Plan consider FFO to be an appropriate supplemental
measure of performance of REITs. FFO is not a substitute for cash flow
generated from operating activities or net income, as determined in
accordance with generally accepted accounting principles, or as a measure
of profitability or liquidity.
74
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF EXCEL
The following table sets forth selected historical consolidated financial
and operating information for Excel. The selected historical consolidated
financial information for the years ended December 31, 1997, 1996, 1995, 1994
and 1993 is derived from the audited consolidated financial statements of
Excel for such periods. The following selected historical consolidated
information of Excel as of and for the three-month periods ended March 31,
1998 and 1997 is derived from the unaudited consolidated financial statements
of Excel for such periods. In the opinion of Excel management, the unaudited
consolidated financial information included herein has been prepared on a
basis consistent with the audited financial information included herein and
includes all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position and results of
operations as of and for the three-month periods ended March 31, 1998 and
1997. Operating results for the three-month period ended March 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. The information set forth below should be read in
conjunction with the "Excel Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Consolidated Financial Statements of
Excel" included elsewhere herein. Per share data set forth below does not
reflect the Excel Stock Dividend which will be paid prior to the Effective
Time.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---------- -------- ---------- -------- --------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue................. $ 37,212 $ 20,204 $ 105,458 $ 63,135 $ 59,370 $ 42,259 $ 23,082
Expenses................ 20,425 9,894 54,681 37,562 44,861 28,355 20,250
Other gain (loss)....... (428) -- (1,815) (1,777) 3,683 (108) 399
---------- -------- ---------- -------- --------- -------- --------
Net income.............. $ 16,359 $ 10,310 $ 48,962 $ 23,796 $ 18,192 $ 13,796 $ 3,231
========== ======== ========== ======== ========= ======== ========
Net income per common
share:
Basic.................. $ 0.52 $ 0.48 $ 2.06 $ 1.66 $ 1.51 $ 1.27 $ 0.55
Diluted................ $ 0.49 $ 0.46 $ 1.97 $ 1.62 $ 1.51 $ 1.27 $ 0.55
Weighted average number
of common shares
outstanding:
Basic.................. 21,787 18,300 19,521 14,312 12,031 10,877 5,873
Diluted................ 23,966 18,736 20,708 14,531 12,038 10,881 5,877
Balance Sheet Data (at
period end):
Net real estate......... $ 881,650 $459,691 $ 891,582 $457,502 $ 372,016 $349,255 $273,362
Total assets............ $1,043,863 $590,859 $1,076,197 $558,628 $ 428,307 $375,100 $290,226
Debt.................... $ 362,738 $156,028 $ 514,408 $238,748 $ 210,797 $201,172 $120,062
Stockholders' equity.... $ 619,822 $428,162 $ 502,516 $312,654 $ 208,678 $163,898 $161,962
Other Data:
Distributions per common
share.................. $ 0.50 $ 0.46 $ 1.92 $ 1.81 $ 1.32(a) $ 1.71 $ 1.42
Funds from
operations(b).......... $ 17,846 $ 12,507 $ 62,596 $ 33,367 $ 26,536 $ 21,964 $ 8,891
Number of properties
owned at the end of the
period................. 139 114 148 112 112 110 98
</TABLE>
- --------
(a) In April 1995, Excel adopted a policy of declaring distributions to
stockholders of record on the first day of the succeeding quarter, instead
of the last day of the current quarter. The payment date of 15 days
following each quarter remained unchanged. In 1996, a distribution of
$0.445 per share was declared on January 1 and paid on January 15. Had
Excel not changed its distribution declaration date, the distributions
would have been $1.77 in 1995.
(b) Defined as net income plus depreciation of real estate and amortization
less gains from sales of securities and real estate properties less
preferred stock dividend requirements. FFO is presented because industry
analysts and Excel consider FFO to be an appropriate supplemental measure
of performance of REITs. FFO is not a substitute for cash flow generated
from operating activities or net income, as determined in accordance with
generally accepted accounting principles, or as a measure of profitability
or liquidity.
75
<PAGE>
EXCEL MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
NATURE OF BUSINESS
Excel is a self-administered, self-managed equity REIT which owns and
manages commercial retail income-producing properties primarily leased on a
long-term basis. The terms of such leases typically provide that the tenant is
responsible for all costs and expenses associated with the ongoing maintenance
of the property, including but not limited to property taxes, insurance and
common area maintenance. The majority of the single tenant property leases
also require that tenants pay for roof and structure repairs and maintenance.
The properties are generally either (i) neighborhood or community shopping
centers, anchored by a major retail discount department store and a major
grocery chain store or (ii) single tenant properties leased to a major retail
tenant.
Excel has operated in a manner to qualify as a REIT under Sections 856
through 860 of the Code. The Combined Company intends to continue to operate
in a manner as to qualify as a REIT after the Merger. As a REIT, Excel is not
subject to federal income tax with respect to that portion of its income which
meets certain criteria and is distributed annually to its stockholders.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the notes thereto included elsewhere in this Joint
Proxy Statement/Prospectus.
Comparison of the three-month period ended March 31, 1998 to the three-month
period ended March 31, 1997.
Rental revenue and expense reimbursements increased $17.2 million, or 117%
to $31.9 million in the three months ended March 31, 1998 from $14.7 million
in the three months ended March 31, 1997. The increase is primarily due to
Excel's 30 properties acquired in 1997 that accounted for approximately $13.5
million in rental revenue and expense reimbursements. The 1998 operating
results also reflect the consolidation of the operating partnership, Excel
Realty Partners, L.P. ("ERP"). Had ERP been consolidated in the three months
ended March 31, 1997, rental revenues and expense reimbursements would have
increased by $2.8 million. Additionally, two shopping centers acquired in 1998
accounted for $0.8 million. The remaining increase relates to a net increase
in rents from its existing properties net of five single tenant properties
that were sold in 1997 and 1998.
Interest income increased $1.7 million, or 49% to $5.2 million in 1998 from
$3.5 million in 1997. This increase is primarily related to additional notes
receivable issued during the period. Excel's outstanding notes receivable were
$136.7 million at March 31, 1998 compared to $89.3 million at March 31, 1997,
an increase of $47.4 million or 53%. This increase includes a net increase in
loans of $20.2 million made to EDV to facilitate the development of various
development projects. Also, $32.4 million of loans at March 31, 1998 were made
to Legacy relating to the spin-off of certain assets and other advances.
Other income in the three months ended 1998 was $0.1 million that was
primarily related to a foreign currency exchange gain on a note receivable in
Canadian dollars. In 1998, Excel received development fees from EDV in the
amount of $2.9 million. This was offset by the equity loss from EDV of $3.3
million and included in other property expenses. In the three-month period
ended March 31, 1997 other income of $2.0 million related primarily to $1.9
million of development fees that were received from EDV. This was offset by a
$0.1 million foreign currency exchange loss.
Interest expense increased $3.5 million or 81% to $7.8 million in 1998 from
$4.3 million in 1997. The increase primarily relates to additional debt
related to property acquisitions, the consolidation of ERP and the issuance of
$75.0 million senior notes in October 1997. The outstanding mortgages payable,
capital leases, senior notes and notes payable were $362.7 million at March
31, 1998 compared to $156.0 million at March 31, 1997.
Depreciation and amortization expenses increased $2.0 million or 97% in 1998
when compared to the three-month period ended March 31, 1997. This primarily
related to the acquisition of buildings which increased from $312.8 million at
March 31, 1997 to $601.5 million at March 31, 1998.
76
<PAGE>
Property taxes, repairs and maintenance, and other property expenses totaled
$6.7 million in 1998 compared to $2.4 million in 1996. This increase primarily
relates to property acquisitions made in 1997 and 1998, in addition to the
consolidation of ERP. The increase in expenses was offset partially by an
increase in expense reimbursements of $3.6 million.
General and administrative expenses increased by $0.7 million in 1998 from
1997 which was a decrease as a percentage of total revenues from 5.2% to 4.6%.
This is partially attributable to the consolidation of ERP whose total
revenues were consolidated with Excel accounts in 1998 and economies of scale
achieved from the growth of Excel from property acquisitions.
Net income increased $6.1 million, or 59% to $16.4 million in the three
months ended March 31, 1998 from $10.3 million for the three-month period
ended March 31, 1997. Distributions per share increased to $0.50 for the three
months ended March 31, 1998 from $0.46 for the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations has been the principal source of capital to fund
Excel's ongoing operations. Excel's issuance of common stock, preferred stock
and debt securities, use of Excel's credit facility and long-term mortgage
financing have been the principal sources of capital required to fund its
growth.
In order to continue to expand and develop its portfolio of properties and
other investments, Excel intends to finance future acquisitions and growth
through the most advantageous sources of capital available to Excel at the
time, which may include the sale of common stock, preferred stock or debt
securities through public offerings or private placements, the incurrence of
additional indebtedness through secured or unsecured borrowings and the
reinvestment of proceeds from the disposition of assets. In 1997, Excel
received investment grade credit ratings of Baa3 and BBB- from Moody's and
Standard and Poor's, respectively, on unsecured senior debt securities issued
from Excel's $500 million shelf registration. Excel's financing strategy is to
maintain a strong and flexible financial position by (i) maintaining a prudent
level of leverage, (ii) maintaining a large pool of unencumbered properties,
(iii) managing its variable rate exposure, (iv) amortizing existing property
specific non-recourse mortgages over the term of the anchor leases for such
mortgaged properties, and (v) maintaining a conservative distribution payout
ratio.
Excel may seek variable rate financing from time to time if such financing
appears advantageous in light of then-prevailing market conditions. In such
case, Excel will consider hedging against interest rate risk through interest
rate protection agreements, interest rate swaps or other means.
In April 1997, Excel filed with the Commission a $500 million shelf
registration statement. This registration statement was filed for the purpose
of issuing debt securities, preferred stock, depositary shares, common stock
or warrants. Currently, approximately $197.5 million is available to Excel on
this registration statement.
In January 1998, Excel issued 6,300,000 depositary shares each representing
one-tenth of a share of Series B Preferred Stock. The offering price was
$25.00 per depositary share with an annual dividend equal to $2.15625 per
depositary share, payable quarterly. Net proceeds from the offering totaled
approximately $152.5 million.
Excel also has outstanding 2,124,980 shares of Series A Preferred Stock. The
Series A Preferred Stock has an annual distribution of $2.125 per share
payable quarterly. The shares of Series A Preferred Stock are convertible by
the holder at any time into shares of Excel Common Stock at a conversion price
of $24.13 per share. On or after February 5, 2002, the Series A Preferred
Stock is redeemable by Excel at $25.00 per share in either shares of Excel
Common Stock or cash at Excel's election. The Series A Preferred Stock ranks
senior to Excel Common Stock and is on a parity with the Series B Preferred
Stock with respect to the payment of dividends and amounts payable upon
liquidation, dissolution or winding up of Excel. In March 1998, 2,473,620
shares of Series A Preferred Stock were converted into Excel Common Stock.
There were 2,126,380 shares of Series A Preferred Stock outstanding at March
31, 1998.
77
<PAGE>
In October 1997, Excel issued $75.0 million of 6.875% Senior Notes due 2004
(the "Excel Senior Notes"). The effective interest rate on the Excel Senior
Notes is 6.982% (6.875% coupon with proceeds before underwriting discount of
$74.6 million). Interest on the Excel Senior Notes is payable semi-annually in
arrears on April 15 and October 15 of each year.
Excel has an unsecured revolving credit facility for up to $250.0 million
from a group of banks (the "Excel Credit Facility") which carries an interest
rate of LIBOR plus 1.20%. The actual amount available to Excel is dependent on
covenants such as the value of unencumbered assets and certain ratios. The
Excel Credit Facility expires March 2000. The outstanding balance at March 31,
1998 was $22.0 million.
In 1995, EDV was organized to finance, acquire, develop, hold and sell real
estate in the short-term for capital gains and/or receive fee income. Excel
owns 100% of the outstanding preferred shares of EDV. The preferred shares of
EDV are entitled to receive dividends equal to 95% of net income from cash
flows, if any. Cash requirements to facilitate EDV transactions have primarily
been obtained through borrowings from Excel and are expected to continue in
the future. Interest and principal payments are repaid to Excel as excess cash
is available which is primarily expected to occur when development projects
are completed and sold. Excel has guaranteed $45 million of a $100 million
construction loan related to a retail development project in Orlando, Florida.
The project is expected to be completed in August 1998.
In September 1997, Excel established $25.7 million in credit facilities to
certain developers. The total outstanding amounts on the credit facilities of
$16.9 million at March 31, 1998 carry interest at 11% to 12%, are
collateralized by real estate, and are payable on the earlier of the sale of
certain real estate or seven years. Excel has also guaranteed $5.0 million
related to a line of credit agreement between a bank and a third party
developer. Excel is entitled to 50% of the profits generated by certain
projects related to this agreement.
In March 1998, Excel completed a spin-off of Legacy. Legacy was organized to
create and realize value by identifying and making opportunistic real estate
investments which are not restricted by REIT tax laws or influenced by Excel's
objectives of increasing cash flows and maintaining certain leverage ratios.
Prior to the spin-off, EDV transferred four notes receivable, a land parcel, a
leasehold interest in a parcel of land, an office building, a single tenant
building, and certain other assets to Excel for a total consideration of
approximately $38.1 million for which Excel reduced the note receivable from
EDV. Excel contributed to Legacy the above assets from EDV, together with ten
single tenant properties owned by Excel with a book value of approximately
$45.7 million, certain other net assets of approximately $1.2 million, and a
property held with a book value of approximately $14.5 million, in exchange
for 23,412,580 shares of common stock of Legacy, assumption of debt by Legacy
on the ten single tenant properties of approximately $33.9 million, and
issuance of a note payable from Legacy to Excel in the amount of approximately
$26.4 million. The note payable was repaid by Legacy in April 1998.
The spin-off of Legacy took place through a dividend distribution to holders
of Excel Common Stock of all Legacy shares of common stock (23,412,580 shares)
held by Excel. The distribution consisted of one share of Legacy common stock
for each share of Excel Common Stock held on the record date of March 2, 1998.
No gain was recognized by Excel for book purposes on the distribution of
approximately $39.3 million. For tax purposes, Excel recognized a gain of
approximately $16.7 million as the distribution was a taxable event and the
assets and liabilities were transferred at fair market value. The fair market
value of the distribution was approximately $56.0 million or $2.39 per share.
Upon completion of the spin-off, Legacy ceased to be a wholly-owned subsidiary
of Excel and began operating as an independent public company.
Excel has elected to be taxed as a REIT for federal income tax purposes and
must distribute at least 95% of its taxable income to its stockholders in
order to avoid income taxes. Although Excel receives most of its rental
payments on a monthly basis, it intends to make quarterly distribution
payments. Amounts accumulated for distributions will be invested by Excel in
short-term marketable instruments including deposits at commercial banks,
money market accounts, certificates of deposit, U.S. government securities or
other liquid investments (including GNMA, FNMA, and FHLMC mortgage-backed
securities) as the Excel Board deems appropriate.
78
<PAGE>
Excel calculates FFO as net income before gain or loss on real estate sales
(net of gain or loss on sales of undepreciated property), plus depreciation on
real estate, amortization, amortized leasing commission costs, loan costs
written off, and other non-recurring items. FFO does not represent cash flows
from operations as defined by generally accepted accounting principles, and
may not be comparable to other similarly titled measures of other REITs. Excel
believes, however, that to facilitate a clear understanding of its operating
results, FFO should be examined in conjunction with its net income as
reductions for certain items are not meaningful in evaluating income-producing
real estate, which historically has not depreciated. The following information
is included to show the items included in Excel's FFO for the three-month
periods ended March 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Net income.............................................. $16,359 $10,310
Depreciation:
Buildings............................................. 3,916 1,981
Tenant improvements................................... 150 88
From equity investments............................... 48 3
Amortization (1):
Organization costs.................................... 4 1
Leasing commissions................................... 61 49
Minority interest (2)................................... 404 --
Preferred dividends (3)................................. (3,051) --
Loan costs written off.................................. -- 75
(Gain) loss on sale of buildings:
Excel Realty Trust, Inc............................... 24 --
From equity investments............................... (69) --
------- -------
Funds from operations................................... $17,846 $12,507
======= =======
Other Information:
Leasing commissions paid.............................. $ 204 $ 40
Tenant improvements paid.............................. 171 248
Building improvements paid (Capitalized parking lots,
roofs, etc.)......................................... 217 115
</TABLE>
- --------
(1) Only amortization of organizational costs are shown as amortization
expense in the Consolidated Statements of Income. Loan cost amortization
and loan costs written-off are classified as interest expense and leasing
commission amortization is classified as part of other operating expenses
in the Consolidated Statements of Income.
(2) These amounts relate to third party ERP units and other common stock
equivalents.
(3) These amounts relate to the Series B Preferred Stock which are not
convertible into Excel Common Stock.
ECONOMIC CONDITIONS
The majority of Excel's leases contain provisions deemed to mitigate the
adverse impact of inflation. Such provisions include clauses enabling Excel to
receive percentage rents which generally increase as prices rise, and/or
escalation clauses which are typically related to increases in the consumer
price index or similar inflation indices. In addition, Excel believes that
many of its existing lease rates are below current market levels for
comparable space and that upon renewal or re-rental such rates may be
increased to current market rates. This belief is based upon an analysis of
relevant market conditions, including a comparison of comparable market rental
rates, and upon the fact that many of such leases have been in place for a
number of years and may not contain escalation clauses sufficient to match the
increase in market rental rates over such time. Most of Excel's leases require
the tenant to pay its share of operating expenses, including common area
maintenance, real estate taxes and insurance, thereby reducing Excel's
exposure to increases in costs and operating expenses resulting from
inflation. In addition, Excel periodically evaluates its exposure to interest
rate fluctuations, and may enter into interest rate protection agreements
which mitigate, but do not eliminate, the effect of changes in interest rates
on its floating rate loans.
79
<PAGE>
Many regions of the United States, including regions in which Excel owns
property, may experience economic recessions. Such recessions, or other
adverse changes in general or local economic conditions, could result in the
inability of some existing tenants of Excel to meet their lease obligations
and could otherwise adversely affect Excel's ability to attract or retain
tenants. Excel's shopping centers are typically anchored by discount
department stores, supermarkets and drug stores which usually offer day-to-day
necessities rather than high priced luxury items. These types of tenants, in
the experience of Excel, generally continue to maintain their volume of sales
despite a slowdown in economic conditions.
80
<PAGE>
UNAUDITED PRO FORMA OPERATING AND FINANCIAL INFORMATION
The following tables set forth summary consolidated pro forma operating and
financial information of the Combined Company for the nine months ended April
30, 1998 and the year ended July 31, 1997 as if the Merger and each respective
company's property acquisitions during its current fiscal year had occurred on
April 30, 1998 for balance sheet data and August 1, 1996 for income statement
data. Information with respect to Excel is as of March 31, 1998 for balance
sheet data and for the year ended June 30, 1997 and the nine months ended
March 31, 1998 for income statement data. The pro forma data included herein
may not be indicative of the actual results or financial position had the
Merger and property acquisitions occurred on the dates indicated.
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS--UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
EXCEL
NEW PLAN HISTORICAL PRO FORMA
HISTORICAL MAR. 31, COMBINED PRO FORMA
APRIL 30, 1998 1998 ADJUSTMENTS TOTALS
-------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Real estate, net........ $1,280,192 $ 881,650 $ 302,014 (2B) $2,463,856
Cash.................... 33,936 4,327 (12,200)(2C) 26,063
Accounts receivable,
net.................... 13,789 3.589 -- 17,378
Notes receivable--
affiliates............. -- 106,910 -- 106,910
Notes receivable--other. 12,719 29,794 -- 42,513
Other assets............ 14,539 17,593 11,189 (2D) 43,321
---------- ----------- --------- ----------
Total assets........ $1,355,175 $ 1,043,863 $ 301,003 $2,700,041
========== =========== ========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Mortgages and other
notes payable........ $ 555,431 $ 335,888 $ 9,362 (2E) $ 900,681
Capital leases........ -- 26,850 -- 26,850
Accounts payable,
accrued expenses and
other liabilities.... 40,068 19,873 -- 59,941
---------- ----------- --------- ----------
Total liabilities... 595,499 382,611 9,362 987,472
---------- ----------- --------- ----------
Minority interest in
partnership............ -- 41,430 -- 41,430
---------- ----------- --------- ----------
Stockholders' Equity:
Preferred stock....... 72,775 28 (72,774)(2F) 29
Beneficial interests.. 754,747 -- (754,747)(2F) --
Common stock.......... -- 234 644 (2F) 878
Additional paid-in
capital.............. -- 661,014 1,077,064 (2F) 1,738,078
Accumulated
distributions in
excess of net income. (66,533) (41,454) 41,454 (2F) (66,533)
Loans receivable--
purchase of shares... (2,344) -- -- (2,344)
Unrealized gain on
securities........... 1,031 -- -- 1,031
---------- ----------- --------- ----------
Total stockholders'
equity............. 759,676 619,822 291,641 1,671,139
---------- ----------- --------- ----------
Total liabilities
and stockholders'
equity............. $1,355,175 $ 1,043,863 $ 301,003 $2,700,041
========== =========== ========= ==========
</TABLE>
The accompanying notes and management's assumptions are an integral part of
this statement.
81
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
FOR THE YEAR ENDED JULY 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NEW PLAN EXCEL
NEW PLAN PROPERTY EXCEL PROPERTY
HISTORICAL ACQUISITIONS HISTORICAL ACQUISITIONS EXCEL COMBINED
YEAR ENDED AUG. 1, 1996 NEW PLAN YEAR ENDED JULY 1, 1996 LEGACY EXCEL MERGER PRO PRO
JULY 31, TO APRIL 30, PRO JUNE 30, TO APRIL 30, SPIN- PRO FORMA FORMA
1997 1998 FORMA 1997 1998 OFF FORMA ADJUSTMENTS RESULTS
---------- ------------ -------- ---------- ------------ ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental............ $202,093 $42,319 $244,412 $59,897 $63,546 $(4,937) $118,506 $ 401 (3B) $363,319
Interest and
other............ 4,728 -- 4,728 16,869 251 (1,458) 15,662 -- 20,390
-------- ------- -------- ------- ------- ------- -------- ------- --------
Total revenue... 206,821 42,319 249,140 76,766 63,797 (6,395) 134,168 401 383,709
-------- ------- -------- ------- ------- ------- -------- ------- --------
Expenses:
Property
expenses......... 74,316 13,331 87,647 9,028 14,503 -- 23,531 (213)(3C) 110,965
Interest.......... 28,256 19,005(3I) 47,261 19,675 10,296 (2,896) 27,075 (3,437)(3D) 70,899
Depreciation and
amortization..... 25,006 5,512(3I) 30,518 8,587 6,945 (870) 14,662 9,164 (3E) 54,344
General and
administrative... 2,203 -- 2,203 3,675 1,484 (799) 4,360 310 (3F) 6,873
-------- ------- -------- ------- ------- ------- -------- ------- --------
Total expenses.. 129,781 37,848 167,629 40,965 33,228 (4,565) 69,628 5,824 243,081
-------- ------- -------- ------- ------- ------- -------- ------- --------
Income before
real estate
sales, minority
interest and
other............ 77,040 4,471 81,511 35,801 30,569 (1,830) 64,540 (5,423) 140,628
Minority interest.. -- -- -- (70) -- -- (70) -- (70)
Gain on sales of
securities and
other............. 7 -- 7 -- -- -- -- -- 7
Gain (loss) on sale
of real estate.... (10) -- (10) (386) -- -- (386) -- (396)
-------- ------- -------- ------- ------- ------- -------- ------- --------
Net income...... $ 77,037 $ 4,471 $ 81,508 $35,345 $30,569 $(1,830) $ 64,084 $(5,423) $140,169
======== ======= ======== ======= ======= ======= ======== ======= ========
Net income
applicable to
common shares
Basic............. $ 76,576 $ 81,047 $31,505 $ 45,180 (3J) $120,804
Diluted........... $ 76,576 $ 81,047 $31,030 $ 45,577 (3J) $121,201
Basic net income
per common share.. $ 1.31 $ 1.39 $ 1.87 $ 1.93 $ 1.40
======== ======== ======= ======== ========
Diluted net income
per common share.. $ 1.30 $ 1.38 $ 1.79 $ 1.79 $ 1.36
======== ======== ======= ======== ========
Historical basic
weighted average
number of common
shares
outstanding....... 58,461 16,814
Historical diluted
weighted average
number of common
shares
outstanding....... 58,735 17,343
Pro forma basic
weighted average
number of common
shares
outstanding....... 58,461 6,600(3G) 23,414 86,558
Pro forma diluted
weighted average
number of common
shares
outstanding....... 58,735 8,106(3G) 25,449 89,274
</TABLE>
The accompanying notes and management's assumptions are an integral part of
this statement.
82
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME--UNAUDITED
FOR THE NINE MONTHS ENDED APRIL 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NEW PLAN
HISTORICAL NEW PLAN EXCEL EXCEL
NINE PROPERTY HISTORICAL PROPERTY
MONTHS ACQUISITIONS NINE ACQUISITIONS EXCEL COMBINED
ENDED AUG. 1, 1997 NEW PLAN MONTHS JULY 1, 1997 LEGACY EXCEL MERGER PRO PRO
APRIL 30, TO APRIL 30, PRO ENDED MAR. TO MAR. 31, SPIN- PRO FORMA FORMA
1998 1998 FORMA 31, 1998 1998 OFF FORMA ADJUSTMENTS RESULTS
---------- ------------ -------- ---------- ------------ ------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rentals........... $181,816 $7,503 $189,319 $81,453 $16,137 $(3,703) $ 93,887 $ 182 (3G) $283,388
Interest and
other............ 3,017 (266)(3I) 2,751 17,552 35 (2,101) 15,486 -- 18,237
-------- ------ -------- ------- ------- ------- -------- ------- --------
Total revenue... 184,833 7,237 192,070 99,005 16,172 (5,804) 109,373 182 301,625
-------- ------ -------- ------- ------- ------- -------- ------- --------
Expenses:
Property
expenses......... 65,699 2,572 68,271 15,325 3,868 -- 19,193 (181)(3C) 87,283
Interest.......... 26,967 3,153 (3I) 30,120 21,980 1,182 (2,016) 21,146 (1,823)(3D) 49,443
Depreciation and
amortization..... 23,054 982 (3I) 24,036 11,013 1,768 (652) 12,129 5,864 (3E) 42,029
General and
administrative... 2,093 -- 2,093 4,401 377 (1,154) 3,624 233 (3F) 5,950
-------- ------ -------- ------- ------- ------- -------- ------- --------
Total expenses.. 117,813 6,707 124,520 52,719 7,195 (3,822) 56,092 4,093 184,705
-------- ------ -------- ------- ------- ------- -------- ------- --------
Income before
real estate
sales, minority
interest and
other............ 67,020 530 67,550 46,286 8,977 (1,982) 53,281 (3,911) 116,920
Minority interest.. -- -- -- (1,151) -- -- (1,151) -- (1,151)
Gain on sales of
securities and
other............. 8 -- 8 (1,522) -- -- (1,522) -- (1,514)
Gain (loss) on sale
of real estate.... (67) -- (67) 207 -- -- 207 -- 140
-------- ------ -------- ------- ------- ------- -------- ------- --------
Net income...... $ 66,961 $ 530 $ 67,491 $43,820 $ 8,977 $(1,982) $ 50,815 $(3,911) $114,395
======== ====== ======== ======= ======= ======= ======== ======= ========
Net income
applicable to
common shares
Basic............. $ 62,573 $ 63,103 $33,623 $ 37,238 (3J) $ 96,430
Diluted........... $ 62,573 $ 63,103 $34,774 $ 38,389 (3J) $ 97,581
Basic net income
per common share.. $ 1.06 $ 1.07 $ 1.60 $ 1.59 $ 1.10
======== ======== ======= ======== ========
Diluted net income
per common share.. $ 1.05 $ 1.06 $ 1.51 $ 1.51 $ 1.08
======== ======== ======= ======== ========
Historical basic
weighted average
number of common
shares
outstanding....... 59,248 21,068
Historical diluted
weighted average
number of common
shares
outstanding....... 59,691 23,103
Pro forma basic
weighted average
number of common
shares
outstanding....... 59,248 2,346(3G) 23,414 87,345
Pro forma diluted
weighted average
number of common
shares
outstanding....... 59,691 2,346(3G) 25,449 90,230
</TABLE>
The accompanying notes and management's assumptions are an integral part of
this statement.
83
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL INFORMATION--UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. SUMMARY OF ACCOUNTING TREATMENT:
The exchange of New Plan Shares of Beneficial Interest for Excel Common
Stock in connection with the Merger is being accounted for as a reverse merger
for financial reporting purposes as if New Plan was acquiring Excel. As such,
the assets and liabilities of Excel have been adjusted to fair value in
connection with the application of purchase accounting.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(A) Certain reclassifications have been made to the historical balance
sheets of New Plan and Excel in order to conform to the desired pro forma
combined condensed balance sheet presentation.
(B) Represents adjustments to record the Merger in accordance with the
purchase method of accounting based upon an assumed purchase price of the
Excel stock of $918,163. The purchase price was calculated assuming a market
value of New Plan Shares of Beneficial Interest of $24.625 per share (which
was the closing price of New Plan Shares of Beneficial Interest on July 2,
1998) times the outstanding shares of Excel Common Stock of 28,096,465 after
the 20% stock dividend to the current holders of Excel Common Stock. In
addition, the Excel Preferred A Stock of 2,126,380 shares has been valued at
$30.125 per share and the Excel Preferred B Stock of 630,000 shares has been
valued at $24.6875 per 1/10 of a share, which were the closing prices of the
Preferred A and B Stock, respectively, on July 2, 1998. The total purchase
price is as follows:
<TABLE>
<CAPTION>
SHARES
SECURITY OUTSTANDING VALUE PER SHARE TOTAL CONSIDERATION
- -------- ----------- --------------- -------------------
<S> <C> <C> <C>
Common stock................... 28,096,465 $24.625 $691,875
Series A preferred stock....... 2,126,380 30.125 64,057
Series B preferred stock 630,000
to depositary shares.......... 6,300,000 24.6875 155,531
--------
Total consideration........ 911,463
Merger and the Other Transac-
tion costs (see below)........ 6,700
--------
Total purchase price....... $918,163
========
</TABLE>
Estimated fees and expenses related to the Merger are as follows:
<TABLE>
<S> <C>
Advisory fees..................................................... $ 7,200
Accounting and legal.............................................. 2,000
Other costs....................................................... 3,000
-------
Total......................................................... 12,200
Less Excel expenses............................................... 5,500
-------
New Plan transaction costs........................................ $ 6,700
=======
</TABLE>
84
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION--UNAUDITED (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The adjustment to reflect investment in real estate:
<TABLE>
<S> <C> <C>
Purchase price (see above)................................. $918,163
Less historical book value of Excel equity................. (619,822)
Transaction costs to be paid by Excel and expensed thereby
reducing the historical book value of Excel............... 5,500
Adjustments to reflect certain assets and liabilities of
Excel at fair value:
Other assets (see Note (D)).............................. $(11,189)
Mortgages and other notes payable (see Note (E))......... 9,362
--------
(1,827)
--------
Adjustment required to reflect investment in real estate,
net....................................................... $302,014
========
(C) To reflect the decrease in cash due to the estimated
Merger costs.............................................. $ 12,200
========
(D) Adjustments to other assets:
To eliminate Excel's asset related to the straight-lining
of rent related to leases............................... $ (1,815)
To eliminate Excel's asset of deferred financing costs... (3,085)
To eliminate Excel's asset of deferred leasing costs..... (917)
To eliminate Excel's assets of organization costs and
goodwill................................................ (40)
To adjust Excel's historical cost in ERT Development
Corporation to estimated fair market value of $17,427... 17,046
--------
$ 11,189
========
(E) To record a premium required to adjust mortgages and
other notes payable to fair value using estimated market
rates ranging from 6.75% to 7.5% on an instrument by
instrument basis.......................................... $ 9,362
========
</TABLE>
(F) To adjust stockholders' equity to reflect the issuance of Excel's common
stock to owners of New Plan's shares of beneficial interest as follows:
<TABLE>
<CAPTION>
CUMULATIVE
ADDITIONAL DISTRIBUTIONS
PREFERRED BENEFICIAL COMMON PAID-IN IN EXCESS OF
STOCK INTERESTS STOCK CAPITAL NET INCOME
--------- ---------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Exchange of New Plan
Shares of Beneficial
Interest for Excel
Common Stock........... $(754,747) $ 597 $ 754,150
Exchange of New Plan
Preferred Stock for
Excel Preferred Stock.. $ (72,774) 72,774
Excel's historical
Stockholders' equity... (28) (234) (661,014) $ 41,454
Value of Excel
acquisition............ 28 281 911,154 --
--------- --------- ----- ---------- --------
$(72,774) $(754,747) $ 644 $1,077,064 $ 41,454
========= ========= ===== ========== ========
</TABLE>
The historical cost of the other assets, including all accounts and notes
receivable, and liabilities of Excel are estimated to be their fair market
value.
85
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION--UNAUDITED (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ADJUSTMENTS TO PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(A) Certain reclassifications have been made to the historical statements of
income of New Plan and Excel in order to conform to the desired pro forma
combined condensed statements of income presentation. The Consolidated
Condensed Statements of Income include pro forma adjustments for real estate
acquisitions that both companies have made within the past twenty one months.
The cash used to acquire real estate by New Plan has been assumed to come from
available cash in savings and from new debt issuances. The cash used to
acquire real estate by Excel has been assumed to come from approximately $407
million in equity offerings and the issuance of $24 million in debt.
The following adjustments have been made to convert the operations of Excel,
which has reported operations on a calendar year basis, to a nine-month period
ended March 31, 1998 (this approximates the nine months ended April 30
reported by New Plan).
<TABLE>
<CAPTION>
ADD: LESS:
THREE MONTHS SIX MONTHS NINE MONTHS
YEAR ENDED ENDED ENDED ENDED
DEC. 31, 1997 MAR. 31, 1998 JUNE 30, 1997 MAR. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue........ $ 83,112 $31,870 $33,529 $81,453
Interest and other.... 22,346 5,342 10,136 17,552
-------- ------- ------- -------
Total revenue....... 105,458 37,212 43,665 99,005
-------- ------- ------- -------
Expenses:
Property expenses..... 14,023 6,749 5,447 15,325
Interest.............. 23,991 7,824 9,835 21,980
Depreciation and
amortization......... 11,621 4,150 4,758 11,013
General and
administrative....... 5,046 1,702 2,347 4,401
-------- ------- ------- -------
Total expenses...... 54,681 20,425 22,387 52,719
-------- ------- ------- -------
Income before real
estate sales,
minority interest and
other................ 50,777 16,787 21,278 46,286
Minority interest....... (816) (405) (70) (1,151)
Real estate gains on
sale/impairments....... 523 (23) 293 207
Other................... (1,522) -- -- (1,522)
-------- ------- ------- -------
Net income.......... $ 48,962 $16,359 $21,501 $43,820
======== ======= ======= =======
Basic net income per $2.06 $0.52 $0.95 $1.60
share.................. ===== ===== ===== =====
Diluted net income per $1.97 $0.49 $0.93 $1.51
share.................. ===== ===== ===== =====
</TABLE>
86
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION--UNAUDITED (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following adjustments have been made to convert the operations of Excel,
which has reported operations on a calendar year basis, to a year ended June
30, 1997 (this approximates the July 31 year end of New Plan).
<TABLE>
<CAPTION>
ADD: LESS:
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED YEAR ENDED
DEC. 31, 1996 JUNE 30, 1997 JUNE 30, 1996 JUNE 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Rental revenue........ $52,481 $33,529 $26,113 $ 59,897
Interest and other.... 10,654 10,136 3,921 16,869
------- ------- ------- --------
Total revenue....... 63,135 43,665 30,034 76,766
------- ------- ------- --------
Expenses:
Property expenses..... 7,778 5,447 4,197 9,028
Interest.............. 19,450 9,835 9,610 19,675
Depreciation and
amortization......... 7,487 4,758 3,658 8,587
General and
administrative....... 2,847 2,347 1,519 3,675
------- ------- ------- --------
Total expenses...... 37,562 22,387 18,984 40,965
------- ------- ------- --------
Income before real
estate sales and
minority interest.... 25,573 21,278 11,050 35,801
Minority interest....... -- (70) -- (70)
Real estate gains on
sale/impairments....... (1,777) 293 (1,098) (386)
------- ------- ------- --------
Net income.......... $23,796 $21,501 $ 9,952 $ 35,345
======= ======= ======= ========
Basic net income per $1.66 $0.95 $0.75 $1.87
share.................. ===== ===== ===== =====
Diluted net income per $1.62 $0.93 $0.75 $1.79
share.................. ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 JULY 31, 1997
-------------- -------------
<S> <C> <C>
(B) To recognize revenue from straight-lining
rent related to Excel's leases which will be
reset in connection with the Merger............ $ 182 $ 401
(C) To reflect the decrease in amortization of
Excel's deferred leasing costs................. (181) (213)
(D) To reflect the following adjustments to
interest expense:
(1) To recognize the elimination of
amortization of deferred loan costs.......... (529) (1,048)
(2) To reflect loan costs written off.......... -- (664)
(3) To reflect the amortization of the premium
required to adjust Excel's mortgages and
other notes payable to fair value............ (1,294) (1,725)
------ ------
Total adjustment............................. (1,823) (3,437)
====== ======
</TABLE>
87
<PAGE>
NEW PLAN EXCEL REALTY TRUST, INC.
NOTES AND MANAGEMENT'S ASSUMPTIONS TO PRO FORMA
CONSOLIDATED CONDENSED FINANCIAL INFORMATION--UNAUDITED (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
APRIL 30, 1998 JULY 31, 1997
-------------- -------------
<S> <C> <C>
(E) To reflect the increase in depreciation as a
result of recording Excel's real estate assets
at fair value versus historical cost, utilizing
an estimated useful life of 40 years and
allocating the cost between land and buildings
at 20% and 80%, respectively.
Pro forma depreciation....................... $ 17,755 $23,673
Excel's historical depreciation.............. (10,775) (8,434)
Pro forma depreciation on property
acquisitions................................ (1,768) (6,945)
Pro forma depreciation from Legacy spin-off.. 652 870
-------- -------
Total adjustment............................ $ 5,864 $ 9,164
======== =======
(F) To reflect the increase in general and
administrative costs due mainly to increased
salary costs under new contractual
arrangements................................... 233 310
(G) To increase the weighted average shares
outstanding for Excel for the issuance of
common stock and common stock equivalents for
the purchase of real estate by Excel. These
shares have been accounted for on a pro forma
basis as if they had been issued on July 1,
1996 and as such have been shown on a pro forma
basis to be outstanding during the entire
period presented.
Basic........................................ 2,346 6,600
Diluted...................................... 2,346 8,106
(H) The pro forma weighted average number of
common shares outstanding for the periods are
computed based on the historical weighted
average shares outstanding of New Plan and 1.2
times the pro forma weighted average shares
outstanding of Excel after giving effect to the
issuance of common stock and common stock
equivalents for the purchase of real estate as
noted in item (G) above.
(I) Includes pro forma effects of the
acquisition of real estate properties by New
Plan.
(J) Reflects the decrease in net income
applicable to common shares due to the
assumed issuance of Excel preferred
securities on July 1, 1996.
</TABLE>
88
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization of New Plan at April 30,
1998 (i) on an historical basis, and (ii) as adjusted to give effect to the
Merger and the revaluation of Excel assets and liabilities under the purchase
method of accounting. This information should be read in conjunction with the
financial statements and notes thereto and the pro forma financial information
incorporated by reference herein and included elsewhere herein.
<TABLE>
<CAPTION>
AS OF APRIL 30, 1998
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgages and other notes payable.................... $ 555,431 $ 900,681
Capital leases....................................... -- 26,850
---------- ----------
Total debt......................................... 555,431 927,531
---------- ----------
Stockholders' equity:
8 1/2% Series A Cumulative Convertible Preferred
Stock............................................... -- 21
8 5/8% Series B Cumulative Redeemable Preferred
Stock............................................... -- 7
7.8% Series D Cumulative Voting Step-Up Premium Rate
Preferred Stock..................................... -- 1
7.8% Series A Cumulative Step-Up Premium Rate
Preferred Stock..................................... 72,775 --
Common stock......................................... -- 878
Shares of beneficial interest........................ 754,747 --
Additional paid-in capital........................... -- 1,738,078
Loans receivable..................................... (2,344) (2,344)
Unrealized gains on securities....................... 1,031 1,031
Accumulated distributions in excess of net income.... (66,533) (66,533)
---------- ----------
Total stockholders' equity......................... 759,676 1,671,139
---------- ----------
Total capitalization............................. $1,315,107 $2,598,670
========== ==========
</TABLE>
89
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES RELATED TO THE COMBINED COMPANY
THE FOLLOWING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. EACH NEW
PLAN SHAREHOLDER IS URGED TO CONSULT HIS OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC TAX CONSEQUENCES TO HIM OF ACQUIRING, HOLDING, EXCHANGING OR
OTHERWISE DISPOSING OF COMBINED COMPANY STOCK, AND OF THE COMBINED COMPANY'S
ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING ANY STATE,
LOCAL AND NON-U.S. TAX CONSEQUENCES.
See "The Merger--Federal Income Tax Consequences of the Merger" for a
discussion of the federal income tax consequences of the Merger and the
exchange of securities pursuant thereto.
In this "Federal Income Tax Consequences Related to the Combined Company"
section, the term "Combined Company" means that Maryland corporation presently
known as Excel Realty Trust, Inc., which, after the Merger as described
herein, will be known as New Plan Excel Realty Trust, Inc. and means such
corporation whether before, on or after the Merger. After the Merger, New Plan
will be a wholly owned subsidiary of the Combined Company and will be a
disregarded entity for federal income tax purposes. For such purposes, New
Plan will be treated as a not-separately-incorporated division of the Combined
Company. This discussion should be construed accordingly.
General. The Combined Company elected REIT status commencing with its
taxable year ending December 31, 1987. The Combined Company believes that it
was organized in conformity with the requirements for qualification and
taxation as a REIT under the Code, and that its method of operation has
enabled and will enable the Combined Company to continue to meet the
requirements for qualification and taxation as a REIT under the Code. The
Combined Company further believes that, subsequent to the Merger, the Combined
Company's proposed method of operation described in this Joint Proxy
Statement/Prospectus and as represented by the Combined Company will enable it
to meet the requirements for qualification and taxation as a REIT.
The Combined Company's qualification as a REIT depends on the Combined
Company having met and the Combined Company continuing to meet, through actual
operating results, distribution levels, stockholder recordkeeping requirements
and diversity of share ownership, the various qualification tests imposed
under the Code that are discussed below. Accordingly, no assurance can be
given that the actual results of the Combined Company's operations for any
particular taxable year have satisfied such requirements or that the actual
results of the Combined Company's operations for any particular taxable year
will satisfy such requirements.
TAXATION OF THE COMBINED COMPANY AS A REIT
General. If the Combined Company qualifies for taxation as a REIT, it
generally will not be subject to federal corporate income taxes on its net
income that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (at the corporate and
stockholder levels) that generally results from investment in a regular
corporation. However, the Combined Company will be subject to federal income
tax as follows: First, the Combined Company will be taxed at regular corporate
rates on any undistributed REIT taxable income (as defined in the Code),
including undistributed net capital gains. However, if the Combined Company
elects to retain and pay tax on its net capital gains, its stockholders will
include such gains in income and will receive a refund or credit, as the case
may be, for their proportionate share of such tax. Second, under certain
circumstances, the Combined Company may be subject to the "alternative minimum
tax" on its items of tax preference. Third, if the Combined Company has (i)
net income from the sale or other disposition of "foreclosure property" which
is held primarily for sale to customers in the ordinary course of business or
(ii) other non-qualifying income from foreclosure property, it will be subject
to tax at the highest corporate rate on such income. Fourth, if the Combined
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than foreclosure
property), such income will be subject to a 100% tax. Fifth, if the Combined
90
<PAGE>
Company should fail to satisfy the 75% gross income test or the 95% gross
income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Combined Company fails
the 75% or 95% test, multiplied by (b) a fraction intended to reflect the
Combined Company's profitability. Sixth, if the Combined Company should fail
to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income (as defined in the Code) for such year, (ii) 95% of its
REIT capital gain net income (as defined in the Code) for such year, and (iii)
any undistributed taxable income from prior periods, the Combined Company
would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, if during the 10-
year period beginning on the first day of the first taxable year for which the
Combined Company qualified as a REIT (the "Recognition Period"), the Combined
Company recognizes gain on the disposition of any asset held by the Combined
Company as of the beginning of such Recognition Period, then, to the extent of
the excess of (a) the fair market value of such asset as of the beginning of
such Recognition Period over (b) the Combined Company's adjusted basis in such
asset as of the beginning of such Recognition Period (the "Built-in Gain"),
such gain will be subject to tax at the highest regular corporate rate
pursuant to Treasury regulations that have not yet been promulgated. Eighth,
if the Combined Company acquires any asset from a corporation (i.e., generally
a corporation subject to full corporate-level tax) in certain transactions in
which the basis of the asset in the hands of the Combined Company is
determined by reference to the basis of the asset (or any other property) in
the hands of the corporation, and the Combined Company recognizes gain on the
disposition of such asset during the 10-year period beginning on the date on
which such asset was acquired by the Combined Company, then, to the extent of
the Built-in Gain, such gain will be subject to tax at the highest regular
corporate rate pursuant to Treasury regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-in Gain assume that the Combined Company will make an election pursuant
to IRS Notice 88-19 and that the availability or nature of such election is
not materially modified as proposed in President Clinton's 1999 Federal Budget
Proposal, released on February 2, 1998. As a safety measure, the Combined
Company intends to make a protective election under Notice 88-19 with respect
to the Merger, although the Combined Company believes that such election will
not be necessary.
REIT QUALIFICATION REQUIREMENTS
General. The Code defines a REIT as a corporation, trust or association (1)
which is managed by one or more trustees or directors, (2) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest, (3) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code, (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code, (5) the beneficial ownership of which is held by 100
or more persons, (6) during the last half of each taxable year, not more than
50% in value of the outstanding stock of which is owned, actually or
constructively, by five or fewer individuals (as defined in the Code to
include certain entities) and (7) which meets certain other tests, described
below, regarding the nature of its income and assets. The Code provides that
conditions (1) to (4), inclusive, must be met during the entire taxable year
and that condition (5) must be met during at least 335 days of a taxable year
of 12 months, or during a proportionate part of a taxable year of less than 12
months. For purposes of conditions (5) and (6), pension funds and certain
other tax-exempt entities are treated as individuals, subject to a "look-
through" exception in the case of condition (6).
The Combined Company believes that it has previously issued sufficient
shares to allow it to satisfy conditions (5) and (6). In addition, the
Combined Company Charter and Articles Supplementary provide for restrictions
regarding ownership and transfer of the Combined Company Common Stock and the
Combined Company Preferred Stock, which restrictions are intended to assist
the Combined Company in continuing to satisfy the share ownership requirements
described in (5) and (6) above. Such ownership and transfer restrictions are
described in "Description of Excel and Combined Company Securities--
Restrictions on Ownership of Capital Stock." There can be no assurance,
however, that such transfer restrictions will in all cases prevent a violation
of the share ownership provisions described in (5) and (6) above.
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<PAGE>
In addition, except for certain "grandfathered" REITs, such as New Plan, a
corporation may not elect to be taxed as a REIT unless its taxable year is the
calendar year. The Combined Company has and will have a calendar taxable year.
Subsidiaries and Partnerships. The Combined Company owns and operates a
number of properties through wholly-owned subsidiaries (the "QRSs"). The
Combined Company has owned 100% of the stock of each of the QRSs at all times
that each of the QRSs has been in existence. As a result, the QRSs will be
treated as "qualified REIT subsidiaries" under the Code. In addition, as of
the Effective Time, New Plan will become a wholly-owned subsidiary of the
Combined Company and will therefore become a "qualified REIT subsidiary." Code
Section 856(i) provides that a corporation which is a qualified REIT
subsidiary shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a qualified REIT
subsidiary shall be treated as assets, liabilities and such items (as the case
may be) of the REIT. Thus, in applying the requirements described herein, the
QRSs will be ignored, and all assets, liabilities and items of income,
deduction, and credit of such QRSs will be treated as assets, liabilities and
items of the Combined Company. The Combined Company has not, however, sought
or received a ruling from the IRS that the QRSs are qualified REIT
subsidiaries.
The Combined Company also owns and operates a number of properties through
partnerships. In the case of a REIT that is a partner in a partnership,
Treasury Regulations provide that the REIT, based on its capital interest in a
partnership, will be deemed to own its proportionate share of the assets of
the partnership and will be deemed to be entitled to the income of the
partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership will retain the same character in
the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and the asset tests. Thus, the Combined
Company's proportionate share of the assets, liabilities and items of income
of the partnerships in which the Combined Company is a partner will be treated
as assets, liabilities and items of income of the Combined Company for
purposes of applying the requirements described herein. Certain special tax
risks which may arise as a result of the Combined Company investing in certain
properties through partnerships are described below under the heading "--Other
Tax Matters." The Combined Company has direct control of the partnerships in
which it is a partner and believes that it has operated and that it and the
Combined Company intend to continue to operate such partnerships consistent
with the requirements for qualification as a REIT.
Income Tests. In order to maintain qualification as a REIT, the Combined
Company annually must satisfy two gross income requirements. First, at least
75% of the Combined Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest), or income from certain types of temporary investments. Second, at
least 95% of the Combined Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived from such real
property investments, dividends, interest and gain from the sale or
disposition of stock or securities (or from any combination of the foregoing).
Rents received by the Combined Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described
above, only if several conditions are met. First, the amount of rent must not
be based in whole or in part on the income or profits of any person. However,
an amount received or accrued generally will not be excluded from the term
"rents from real property" solely by reason of being based on a fixed
percentage or percentages of receipts or sales. Second, the Code provides that
if the REIT, or an actual or constructive owner of 10% or more of the REIT,
actually or constructively owns 10% or more of a tenant of the REIT (or a
tenant of any partnership in which the REIT is a partner) (a "Related Party
Tenant"), the rent received by the REIT (either directly or through any such
partnership) from such tenant will not qualify as "rents from real property"
in satisfying the gross income tests of the Code. Third, if rent attributable
to personal property leased in connection with a lease of real property is
greater than 15% of the total rent received under the lease, then the portion
of rent attributable to such personal property will not qualify as "rents from
real property." Finally, for rents received to qualify as "rents from real
property," the REIT generally must not
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<PAGE>
operate or manage the property or furnish or render services to the tenants of
such property (subject to a 1% de minimis exception) other than through an
independent contractor from whom the REIT derives no revenue. However, the
REIT may directly perform certain services that are "usually or customarily
rendered" in connection with the rental of space for occupancy only and are
not otherwise considered "rendered to the occupant" of the property. The
Combined Company does not and the Combined Company will not (i) charge rent
for any property that is based in whole or in part on the income or profits of
any person (except by reason of being based on a fixed percentage of receipts
or sales, as described above), (ii) rent any property to a Related Party
Tenant (unless the Board of Directors of the Combined Company determines, in
its discretion, that the rent received from such Related Party Tenant is not
material and will not jeopardize the Combined Company's status as a REIT),
(iii) derive rental income attributable to personal property (other than
personal property leased in connection with the lease of real property, the
amount of which is less than 15% of the total rent received under the lease),
or (iv) except for certain development, property management, administrative
and miscellaneous services, perform services which are not usually or
customarily rendered in connection with the rental of space for occupancy only
or which are considered to be rendered to the occupant of the property, other
than through an independent contractor from whom the Combined Company derives
no revenue.
Income derived from the development, property management, administrative and
miscellaneous services described in the preceding paragraph qualifies under
neither the 95% or 75% gross income tests. In addition, EDV receives fees in
exchange for the performance of certain development activities. To the extent
that the Combined Company Board believes that there would be adverse tax
consequences through direct accrual of such fees to the Combined Company, such
activities will be performed by EDV and such fees will not accrue to the
Combined Company, but the Combined Company will derive dividends from EDV,
which qualify under the 95% gross income test, but not the 75% gross income
test. The Combined Company believes that the aggregate amount of any
nonqualifying income in any taxable year has not exceeded and will not exceed
the limit on nonqualifying income under the gross income tests.
If the Combined Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if the Combined Company's
failure to meet such test was due to reasonable cause and not due to willful
neglect, the Combined Company attaches a schedule of the sources of its income
to its federal income tax return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances the Combined Company would be
entitled to the benefit of these relief provisions. As discussed under "--
Taxation of the Combined Company as a REIT" above, even if these relief
provisions apply, a tax would be imposed with respect to the excess
nonqualifying income.
Sales or Dispositions of Assets. As a REIT, the Combined Company is subject
to a tax of 100% on its gain (i.e., the excess, if any, of the amount realized
over the Combined Company's adjusted basis in the property) from each sale of
property (excluding certain property obtained through foreclosure) in which it
is a dealer. In calculating its gain subject to the 100% tax, the Combined
Company is not allowed to offset gains on sales of property with losses on
other sales of property in which it is a dealer.
Under the Code, the Combined Company would be deemed to be a dealer in any
property that the Combined Company holds primarily for sale to customers in
the ordinary course of its business. Such determination is a factual inquiry,
and absolute certainty of the Combined Company's status generally cannot be
provided. However, the Combined Company will not be treated as a dealer in
real property for the 100% tax if (i) it has held the property for at least
four years for the production of rental income, (ii) capitalized expenditures
on the property in the four years preceding sale are less than 30% of the net
selling price of the property, and (iii) the Combined Company either (a) has
seven or fewer sales of property (excluding certain property obtained through
foreclosure) for the year of sale or (b) the aggregate tax basis of property
sold during the year of sale is 10% or less of the aggregate tax basis of all
assets of the Combined Company as of the beginning of the taxable year and
substantially all of the marketing and development expenditures with respect
to the property sold are made through an independent contractor from whom the
Combined Company derives no income. The sale of more
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<PAGE>
than one property to one buyer as part of one transaction constitutes one
sale. However, the failure of the Combined Company to meet these "safe harbor"
requirements does not necessarily mean that it is a dealer in real property.
Based on these rules, if the Combined Company sells a property that it has
held for more than four years and otherwise satisfies the "safe harbor"
described in the preceding paragraph, such sale will not result in the
imposition of the 100% tax on the gain. Because any dealer gain that is not
covered by the safe harbor is subject to the 100% tax, any sale not covered by
the safe harbor creates a risk that the REIT will be considered to be a dealer
in real property. Although any risk from a single isolated sale may be small,
the more regular, continuous, and frequent the Combined Company's sales of
assets are, the more likely the Combined Company will be treated as a dealer
with respect to sales or dispositions of real property. Moreover, except for
certain sales of property obtained through foreclosure, all sales, including
sales of property held less than four years, count toward the seven sales/10%
tax basis safe harbor for purposes of determining whether the Combined Company
qualifies for the safe harbor on any sales of property held for four years or
more. Furthermore, once the Combined Company has exceeded the seven sales/10%
tax basis safe harbor, gain from all sales and not just the gain from sales in
excess of such safe harbor are potentially subject to the 100% tax.
The Combined Company may be able to avoid triggering gain for purposes of
the 100% tax on real property it has held less than four years if it exchanges
such property for other property in a transaction that qualifies as a like-
kind exchange under the Code, because the like-kind exchange provisions result
in the deferral of gain. The like-kind exchange provisions of the Code,
however, are not available to the Combined Company on any property that it
holds primarily for sale rather than for investment or the production of
income. An exchange of property for tax purposes that does not qualify for
like-kind exchange treatment or some other nonrecognition provision is treated
the same as a sale for cash. The Combined Company may dispose of certain
properties that it has held less than four years in transactions intended to
qualify as like-kind exchanges. However, the failure of the transaction to
qualify as a like-kind exchange could subject the Combined Company to the 100%
tax on its gains as described above.
Asset Tests. The Combined Company, at the close of each quarter of its
taxable year, must also satisfy three tests relating to the nature of its
assets. First, at least 75% of the value of the Combined Company's total
assets must be represented by real estate assets (including (i) assets held by
the Combined Company's QRSs and the Combined Company's allocable share of real
estate assets held by partnerships in which the Combined Company owns an
interest and (ii) stock or debt instruments held for not more than one year
purchased with the proceeds of a stock offering or long-term (at least five
years) debt offering of the Combined Company), cash, cash items and government
securities. Second, not more than 25% of the Combined Company's total assets
may be represented by securities other than those in the 75% asset class.
Third, of the investments included in the 25% asset class, the value of any
one issuer's securities owned by the Combined Company may not exceed 5% of the
value of the Combined Company's total assets and the Combined Company may not
own more than 10% of any one issuer's outstanding voting securities (other
than a qualified REIT subsidiary).
The Combined Company currently holds 100% of the stock of each of the QRSs.
As set forth above, the asset tests provide that a REIT may not own securities
of any one issuer which constitute more than 10% of such issuer's voting
securities or more than 5% the value of the REIT's total assets. However,
because the QRSs are "qualified REIT subsidiaries," as defined in the Code,
such subsidiaries will not be treated as separate corporations for federal
income tax purposes. Because the QRSs will be treated as "qualified REIT
subsidiaries," the Combined Company's ownership of the stock of the QRSs will
not cause the Combined Company to fail the asset tests.
The Combined Company presently owns 100% of the nonvoting preferred stock of
EDV, which interest entitles the Combined Company to a percentage of all
dividends and liquidating distributions of EDV. Such shares of nonvoting
preferred stock will not constitute voting securities for purposes of the
asset tests. Furthermore, the Combined Company has not owned any of the voting
securities of EDV and will not own more than 10% of the voting securities of
such corporation. In addition, the Combined Company believes that the value of
its securities of EDV have not exceeded 5% of the total value of the Combined
Company's assets, and will not exceed such amount in the future. No
independent appraisals have been obtained to support this conclusion.
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EDV is not a "qualified REIT subsidiary." President Clinton's 1999 Federal
Budget Proposal, announced on February 2, 1998, includes a proposal to amend
the REIT asset tests to prohibit a REIT from owning more than 10% of the value
of the outstanding stock of any corporation that is not a qualified REIT
subsidiary (a "non-qualified REIT subsidiary"). Existing non-qualified REIT
subsidiaries would be exempt from this provision, and therefore subject only
to the 5% asset test and 10% voting securities test of current law, except
that such exemption would terminate if the subsidiary engaged in a new trade
or business or acquired substantial new assets after the date of the first
committee action on such legislation. If this proposal were enacted, the
Combined Company's ability to engage in certain activities through a non-
qualified REIT subsidiary, such as EDV, would be limited or prohibited. No
prediction can be made as to whether the above-mentioned provision will be
enacted and if enacted, whether the final legislation will be in a form
substantially similar to that in the proposal.
After meeting the asset tests at the close of any quarter, the Combined
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset
values. If the failure to satisfy the asset tests results from an acquisition
of securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close
of that quarter. The Combined Company intends to maintain adequate records of
the value of its assets to ensure compliance with the asset tests and to take
such other actions within 30 days after the close of any quarter as may be
required to cure any noncompliance. If the Combined Company fails to cure
noncompliance with the asset tests within such time period, the Combined
Company would cease to qualify as a REIT.
Annual Distribution Requirements. In order to qualify as a REIT, the
Combined Company is required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to (A) the sum of
(i) 95% of the Combined Company's "REIT taxable income" (computed without
regard to the dividends paid deduction and the Combined Company's net capital
gain) and (ii) 95% of the net income (after tax), if any, from foreclosure
property, minus (B) the sum of certain items of non-cash income. In addition,
if the Combined Company disposes of any asset during its Recognition Period,
the Combined Company will be required, pursuant to Treasury Regulations which
have not yet been promulgated, to distribute at least 95% of the Built-in Gain
(after tax), if any, recognized on the disposition of such asset. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before the Combined Company timely files
its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. To the extent that the Combined
Company does not distribute all of its net capital gain or distributes at
least 95%, but less than 100%, of its real estate investment trust taxable
income, as adjusted, it will be subject to tax thereon at regular ordinary and
capital gain corporate tax rates. Furthermore, if the Combined Company should
fail to distribute during each calendar year (or, in the case of distributions
with dividend declaration and record dates falling in the last three months of
the calendar year, by the end of the following January) at least the sum of
(i) 85% of its real estate investment trust ordinary income for such year,
(ii) 95% of its real estate investment trust capital gain net income for such
year, and (iii) any undistributed taxable income from prior periods, the
Combined Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. The Combined
Company intends to make timely distributions sufficient to satisfy this annual
distribution requirement.
It is possible that the Combined Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution
requirement due to timing differences between (i) the actual receipt of income
and actual payment of deductible expenses and (ii) the inclusion of such
income and deduction of such expenses in arriving at taxable income of the
Combined Company. In the event that such timing differences occur, in order to
meet the 95% distribution requirement, the Combined Company may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to
pay dividends in the form of taxable stock dividends.
Under certain circumstances, the Combined Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the
Combined Company's deduction for dividends paid for the earlier year. Thus,
the Combined Company may be able to avoid being taxed on amounts distributed
as deficiency dividends; however, the Combined Company will be required to pay
interest based upon the amount of any deduction taken for deficiency
dividends.
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Failure to Qualify. If the Combined Company fails to qualify for taxation as
a REIT in any taxable year, and the relief provisions do not apply, the
Combined Company will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Such a failure
to qualify for taxation as a REIT could have an adverse effect on the market
value and marketability of the Combined Company stock. Distributions to
stockholders in any year in which the Combined Company fails to qualify will
not be deductible by the Combined Company nor will they be required to be
made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to stockholders will be taxable as ordinary income
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, the Combined Company will also be disqualified
from taxation as a REIT for the four taxable years following the year during
which qualification was lost. It is not possible to state whether in all
circumstances the Combined Company would be entitled to such statutory relief.
In addition, President Clinton's 1999 Federal Budget Proposal contains a
provision which, if enacted in its present form, would result in the immediate
taxation of all gain inherent in a C corporation's assets upon an election by
the corporation to become a REIT in taxable years beginning after January 1,
1999, and thus could effectively preclude the Combined Company from re-
electing to be taxed as a REIT following a loss of REIT status.
OTHER TAX MATTERS
The Combined Company will own interests in several partnerships following
the Merger, and may own interests in additional partnerships in the future.
The ownership of an interest in a partnership involves special tax risks,
including the possible challenge by the IRS of (i) allocations of income and
expense items, which could affect the computation of taxable income of the
Combined Company, and (ii) the status of a partnership as a partnership (as
opposed to an association taxable as a corporation) for federal income tax
purposes. This partnership status risk should be diminished by Treasury
Regulations that were issued on December 17, 1996, and which are effective
January 1, 1997. With respect to the Combined Company's existing partnership
investments, these regulations provide that (1) previously claimed partnership
status, if supported by a reasonable basis for classification, will generally
be respected for all periods prior to January 1, 1997; and (2) previously
claimed partnership status will generally be retained after January 1, 1997,
unless an entity elects to change its status by filing a formal election. The
Combined Company believes that it has a reasonable basis for the
classification of the partnerships in which it owns interests as partnerships
for federal income tax purposes and has neither filed nor caused to be filed,
nor will it file (or cause to be filed), an election to be treated otherwise.
If a partnership elected to be treated as, or was otherwise deemed to be, an
association taxable as a corporation for federal income tax purposes, it would
be treated as a taxable entity. In such a situation, if the Combined Company
owned more than 10% of the outstanding voting securities of such partnership,
if the value of such securities exceeded 5% of the value of the Combined
Company's assets, the Combined Company would fail to satisfy the asset tests
described above, and would therefore fail to qualify as a REIT. Further,
distributions from such partnership to the Combined Company would be treated
as dividends that are not taken into account in satisfying the 75% gross
income test described above, which would make it more difficult for the
Combined Company to satisfy that test. Moreover, the interest in any such
partnership held by the Combined Company would not qualify as a "real estate
asset," which would make it more difficult for the Combined Company to meet
the 75% asset test described above. In addition, the Combined Company would
not be able to deduct its share of any losses generated by such a partnership
in computing its taxable income, which might adversely affect the Combined
Company's ability to comply with the REIT distribution requirements.
The Combined Company believes that the partnerships in which it owns
interests have been and will continue to be treated as partnerships (rather
than as associations taxable as corporations) for federal income tax purposes.
The Combined Company's position in this respect is not binding on the IRS and
no assurance can be given that the IRS will not successfully challenge the
status of any partnership as a partnership for federal income tax purposes.
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A portion of the cash to be used by the Combined Company to fund
distributions to its stockholders comes from EDV through dividends on
nonvoting preferred stock held by the Combined Company. EDV does not qualify
as a REIT and pays federal, state and local income taxes on its taxable income
at normal corporate rates. The federal, state and local income taxes that EDV
is required to pay reduces the cash available for distribution by the Combined
Company to its stockholders.
As described above, the value of EDV's securities held by the Combined
Company cannot exceed 5% of the value of the Combined Company's total assets
at the end of any calendar quarter in which the Combined Company acquires such
securities or increases its interest in such securities. See "--REIT
Qualification Requirements--Asset Tests" above. This limitation may restrict
the ability of EDV to increase the size of its business unless the value of
the assets of the Combined Company is increasing at a commensurate rate.
State and Local Taxes. The Combined Company may be subject to state or local
taxes in other jurisdictions such as those in which the Combined Company may
be deemed to be engaged in activities or own property or other interests. Such
tax treatment of the Combined Company in states having taxing jurisdiction
over it may differ from the federal income tax treatment described in this
summary. Consequently, prospective investors should consult their own tax
advisors regarding the effect of state and local tax laws on an investment in
the Combined Company.
TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY
As used herein, the term "U.S. Stockholder" means a holder of Combined
Company Common Stock or Combined Company Preferred Stock who is (for United
States federal income tax purposes) (i) a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized
in or under the laws of the United States, or of any political subdivision
thereof, (iii) an estate, the income of which is subject to United States
federal income taxation regardless of its source or (iv) a trust, if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. A holder that is
not a U.S. Stockholder as defined above will be considered a "Non-U.S.
Stockholder."
General. As long as the Combined Company qualifies as a REIT, distributions
made to the Combined Company's stockholders with respect to their shares out
of current or accumulated earnings and profits (and not designated as capital
gain dividends) will be taken into account by them as ordinary income. Such
distribution will not be eligible for the dividends received deduction for
stockholders that are corporations. For purposes of determining whether
distributions on the stock are out of current or accumulated earnings and
profits, the earnings and profits of the Combined Company will be allocated
first to the holders of Combined Company Preferred Stock and second to the
holders of Combined Company Common Stock. Dividends that are properly
designated by the Combined Company as capital gain dividends will be taxable
as capital gains (at a rate of either 20%, 25% or 28%, depending upon the
period of time that the Combined Company held the assets to which such gains
are attributable) without regard to the period for which the stockholder has
held its securities. However, corporate stockholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income. To the extent
that the Combined Company makes distributions (not designated as capital gains
dividends) in excess of current and accumulated earnings and profits, such
distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's securities by the
amount of such distribution (but not below zero), with distributions in excess
of the stockholder's tax basis taxable as capital gains (if the stock is held
as a capital asset). In addition, any dividend declared by the Combined
Company in October, November or December of any year and payable to a
stockholder of record on a specific date in any such month will be treated as
both paid by the Combined Company and received by the stockholder on December
31 of such year, provided that the dividend is actually paid by the Combined
Company during January of the following calendar year. Stockholders may not
include in their individual income tax returns any net operating losses or
capital losses of the Combined Company.
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The Combined Company may elect to retain and pay income tax on its net long-
term capital gain. If the Combined Company makes this election, its
stockholders will be required to include in their income as long-term capital
gain their proportionate share of such amount so designated by the Combined
Company. A stockholder will be treated as having paid his or her share of the
tax paid by the Combined Company in respect of such amount so designated by
the Combined Company, for which such stockholder will be entitled to a credit
or refund. In addition, each stockholder's adjusted basis in the Combined
Company stock will be increased by the excess of the amount so includible in
income over the tax deemed paid on such amount. The Combined Company must pay
tax on its designated long-term capital gain within 30 days of the close of
any taxable year in which it designates long-term capital gain pursuant to
this rule, and it must mail a written notice of its designation to its
stockholders within 60 days of the close of the taxable year.
Distributions made by the Combined Company and gain arising from the sale or
exchange by a stockholder of the Combined Company stock will not be treated as
passive activity income, and, as a result, stockholders will not be able to
apply any "passive losses" against such income or gain. Distributions made by
the Combined Company (to the extent that they do not constitute a return of
capital) generally will be treated as investment income for purposes of
computing the investment income limitation. Gain arising from the sale or
other disposition of the Combined Company stock (and distributions treated as
such), however, will not be treated as investment income unless a stockholder
so elects, in which case such capital gains will be taxed at ordinary income
rates.
Upon any sale or other disposition of the Combined Company stock, a
stockholder will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition and
(ii) the holder's adjusted basis in such shares of the Combined Company stock
for tax purposes. Net capital gain of a non-corporate shareholder will
generally be taxed at a 28% rate or a 20% rate if such shares have been held
for more than one year or eighteen months, respectively. In general, any loss
recognized by a stockholder upon the sale or other disposition of shares of
the Combined Company stock that have been held for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of capital gain dividends received by such stockholders
from the Combined Company which were required to be treated as long-term
capital gains.
Conversion of Series C Preferred Stock into Combined Company Common Stock.
As a general rule, no gain or loss will be recognized by a stockholder upon
the conversion of Series C Preferred Stock (as defined herein) into shares of
Combined Company Common Stock. Income will generally be recognized, however,
to the extent Combined Company Common Stock is received in payment of
dividends in arrears. In addition, gain or loss may be recognized to the
extent that a stockholder receives cash in lieu of fractional shares of
Combined Company Common Stock. Such gain or loss will be capital gain or loss
if the stock was held as a capital asset, measured by the difference between
the cash received for the fractional share interest and the stockholder's
basis in the fractional share interest.
Generally, a stockholder's basis in the Combined Company Common Stock
received upon conversion of the Series C Preferred Stock, other than shares of
Combined Company Common Stock taxed as dividends upon receipt, will equal the
adjusted tax basis of the converted Series C Preferred Stock (exclusive of any
basis allocable to a fractional share interest) and the holding period of such
Combined Company Common Stock will include the holding period of the converted
Series C Preferred Stock. As a general rule, a stockholder's basis in shares
of Combined Company Common Stock taxed as dividends upon receipt will equal
the fair market value thereof and the holding period for such Combined Company
Common Stock will begin on the day following the conversion.
Adjustment of Conversion Price. Section 305 of the Code treats certain
actual or constructive distributions of stock with respect to stock or
convertible securities, such as Series C Preferred Stock, as a distribution
taxable as a dividend to the extent of the issuing corporation's current or
accumulated earnings and profits (as determined for federal income tax
purposes). Treasury Regulations treat holders of convertible preferred stock
as having received such a constructive distribution when the conversion price
of such preferred stock is adjusted to reflect
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certain taxable distributions with respect to the stock into which such
preferred stock is convertible. Thus, under certain circumstances, an
adjustment to the conversion price of the Series C Preferred Stock may give
rise to a deemed taxable stock dividend to the stockholders thereof, whether
or not such stockholders exercise their conversion privilege. In addition, the
failure to fully adjust the conversion price of the Series C Preferred Stock
to reflect distributions of stock dividends with respect to Combined Company
Common Stock (or rights to acquire such stock) may give rise to a deemed
taxable stock dividend to the holders of the Combined Company Common Stock.
Taxation of Tax-Exempt Stockholders. Most tax-exempt employees' pension
trusts are not subject to federal income tax except to the extent of their
receipt of "unrelated business taxable income" as defined in Section 512(a) of
the Code ("UBTI"). Distributions by the Combined Company to a holder that is a
tax-exempt entity will not constitute UBTI, provided that the tax-exempt
entity has not financed the acquisition of its securities with "acquisition
indebtedness" within the meaning of the Code and the securities are not
otherwise used in an unrelated trade or business of the tax-exempt entity. In
addition, for taxable years beginning on or after January 1, 1994, certain
pension trusts that own more than 10% of a "pension-held REIT" may be required
to report a portion of the distribution that they receive from such a REIT as
UBTI. The Combined Company has not been and does not expect to be treated as a
pension-held REIT for purposes of this rule.
Taxation of Foreign Stockholders. The following is a discussion of certain
anticipated U.S. federal income tax consequences of the ownership and
disposition of the Combined Company stock applicable to Non-U.S. Stockholders
of such securities:
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Stockholders payable out of the Combined Company's earnings and profits which
are not attributable to capital gains of the Combined Company and which are
not effectively connected with a U.S. trade or business of the Non-U.S.
Stockholder will generally be subject to U.S. withholding tax at the rate of
30% (unless reduced by an applicable treaty). In general, Non-U.S.
Stockholders will not be considered engaged in a U.S. trade or business solely
as a result of their ownership of the Combined Company stock. In cases where
the dividend income from a Non-U.S. Stockholder's investment in securities is
(or is treated as) effectively connected with the Non-U.S. Stockholder's
conduct of a U.S. trade or business, the Non-U.S. Stockholder generally will
be subject to U.S. tax at graduated rates, in the same manner as U.S.
Stockholders are taxed with respect to such dividends (and may also be subject
to the 30% branch profits tax in the case of a Non-U.S. Stockholder that is a
foreign corporation).
2. Non-Dividend Distributions. Distributions by the Combined Company which
are not dividends out of the earnings and profits of the Combined Company will
not be subject to U.S. income or withholding tax to the extent such
distributions do not exceed the adjusted basis of a Non-U.S. Stockholder's
Combined Company stock. The excess over the adjusted basis will give rise to
gain from the sale of such Non-U.S. Stockholder's stock, which will be subject
to the tax treatment described below. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of the
Combined Company's current and accumulated earnings and profits, the entire
distribution will be subject to withholding at the rate applicable to
dividends. However, the Non-U.S. Stockholder may seek a refund of such amounts
from the IRS if it is subsequently determined that such distribution was, in
fact, in excess of current and accumulated earnings and profits of the
Combined Company.
3. Dividends Attributable to Gain from Dispositions of U.S. Real Property
Interests. Under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"), a distribution made by the Combined Company to a Non-U.S.
Stockholder, to the extent attributable to gains from dispositions of United
States real property interests ("USRPIs"), such as the properties beneficially
owned by the Combined Company, will be considered effectively connected with a
U.S. trade or business of the Non-U.S. Stockholder and subject to U.S. income
tax at the rate applicable to U.S. individuals or corporations, without regard
to whether such distribution is designated as a capital gain dividend. In
addition, the Combined Company will be required to withhold tax equal to 35%
of any distribution to a Non-U.S. Stockholder that could be designated as
capital gain dividends. Distributions subject to FIRPTA may also be subject to
a 30% branch profits tax in the hands of a foreign corporate stockholder that
is not entitled to treaty exemption.
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4. Dispositions of Combined Company Stock. Unless Combined Company stock
constitutes a USRPI, a sale of such stock by a Non-U.S. Stockholder generally
will not be subject to U.S. taxation under FIRPTA. The Combined Company stock
will not constitute a USRPI if the Combined Company is a "domestically
controlled REIT." A domestically controlled REIT is a REIT in which, at all
times during a specified testing period, less than 50% in value of its stock
is held directly or indirectly by Non-U.S. Stockholders. The Combined Company
believes that it has been and anticipates that it will continue to be a
domestically controlled REIT, and therefore that the sale of Combined Company
stock will not be subject to taxation under FIRPTA. Because the Combined
Company stock will be publicly traded, however, no assurance can be given that
the Combined Company will continue to be a domestically controlled REIT. If
the Combined Company were not to qualify as a domestically controlled REIT, a
Non-U.S. Stockholder's sale of Combined Company stock generally would still
not be subject to tax under FIRPTA provided that the selling Non-U.S.
Stockholder held 5% or less of that class of the Combined Company's
outstanding stock at all times during a specified testing period. If gain on
the sale of stock were subject to taxation under FIRPTA, the Non-U.S.
Stockholder would be subject to the same treatment as a U.S. Stockholder with
respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of stock could be required to withhold 10% of the purchase
price and remit such amount to the IRS. The 10% withholding tax will not apply
if the shares of Combined Company stock are "regularly traded" on an
established securities market. Capital gains not subject to FIRPTA will
nonetheless be taxable in the United States to a Non-U.S. Stockholder in two
cases: (i) if the Non-U.S. Stockholder's investment in stock is effectively
connected with a U.S. trade or business conducted by such Non-U.S.
Stockholder, the Non-U.S. Stockholder will be subject to the same treatment as
a U.S. Stockholder with respect to such gain, or (ii) if the Non-U.S.
Stockholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has a "tax home" in
the United States, the nonresident alien individual will be subject to a 30%
tax on the individual's capital gain.
Backup Withholding. The Combined Company reports to its stockholders and the
IRS the amount of dividends paid during each calendar year, and the amount of
tax withheld, if any. Under the backup withholding rules, a stockholder may be
subject to backup withholding at the rate of 31% with respect to dividends
paid unless such stockholder (a) is a corporation or comes within one of the
exempt categories and, when required, demonstrates this fact, or (b) provides
a taxpayer identification number, certifies as to no loss of exemption from
backup withholding, and otherwise complies with applicable requirements of the
backup withholding rules. A stockholder that does not provide the Combined
Company with its correct taxpayer identification number may also be subject to
penalties imposed by the IRS. Backup withholding is not an additional tax. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, the Combined Company may be required to
withhold a portion of capital gain distributions to any stockholders who fail
to certify their non-foreign status to the Combined Company.
Backup withholding tax and information reporting will generally not apply to
distributions paid to Non-U.S. Stockholders outside the United States or,
subject to certain exemptions, to a payment of the proceeds of a sale of
Combined Company stock by or through a foreign office of a foreign broker.
Payment to or through a United States office of a broker of the proceeds of a
sale is subject to both backup withholding and information reporting unless
the Non-U.S. Stockholder certifies its foreign status. On October 6, 1997, the
Treasury Department issued new regulations (the "New Regulations") that make
certain modifications to the backup withholding rules applicable to Non-U.S.
Stockholders. The New Regulations attempt to unify certification requirements
and modify reliance standards. The New Regulations will generally be effective
for payments made after December 31, 1999, subject to certain transition
rules. Prospective investors are urged to consult their own tax advisors
regarding the New Regulations.
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DESCRIPTION OF EXCEL AND COMBINED COMPANY SECURITIES
The following description sets forth certain general terms and provisions of
the capital stock of Excel. The statements below describing the capital stock
are in all respects subject to and qualified in their entirety by reference to
the applicable provisions of the Excel Charter (the "Combined Company Charter"
after the Merger), the Excel Bylaws (the "Combined Company Bylaws" after the
Merger) and the MGCL. In this "Description of Excel and Combined Company
Securities" section, the term "Combined Company" means that Maryland
corporation presently known as Excel Realty Trust, Inc., which, after the
Merger as described in this Joint Proxy Statement/Prospectus, will be known as
New Plan Excel Realty Trust, Inc. and means such corporation whether before,
at or after the Merger, as the context so requires.
GENERAL
Assuming the effectiveness of the Charter Amendments, the Combined Company
Charter will provide that the Combined Company may issue up to 275,000,000
shares of capital stock, consisting of 250,000,000 shares of Combined Company
Common Stock and 25,000,000 shares of preferred stock, par value $0.01 per
share ("Combined Company Preferred Stock"), of which such preferred stock,
2,126,380 shares were reclassified as Series A Preferred Stock and 600,000
shares were reclassified as Series B Preferred Stock as of April 30, 1998 and
100,000 shares have since been reclassified as Series C Junior Participating
Preferred Stock, par value $0.01 per share ("Series C Preferred Stock"). Prior
to the consummation of the Merger, the Excel Board will reclassify 150,000
shares of Excel Preferred Stock as Series D Preferred Stock, to be issued and
delivered to the depositary therefor in connection with the issuance of Series
D Depositary Shares to the holders of the New Plan Preferred Shares in
connection with the Merger. The aggregate par value of all authorized shares
of the Combined Company stock having par value will be $2,750,000.
At the Effective Time, and assuming conversion of the outstanding New Plan
Common Shares and the New Plan Preferred Shares as provided in the Merger
Agreement, and further assuming no additional issuances or redemptions of the
Excel Common Stock or Excel Preferred Stock between the date hereof and the
Effective Time (except in connection with the Merger and in connection with
the Excel Stock Dividend) or conversion of the Series A Preferred Stock into
Excel Common Stock, 88,002,580 shares of the Combined Company Common Stock and
2,904,980 shares of the Combined Company Preferred Stock will be issued and
outstanding, and approximately an additional 2,643,008 shares of the Combined
Company Common Stock will be subject to issuance upon conversion from time to
time of Series A Preferred Stock. The Combined Company Preferred Stock
outstanding will consist of 2,124,980 shares of Series A Preferred Stock,
630,000 shares of Series B Preferred Stock and assuming the issuance thereof
at the Effective Time, 150,000 shares of Series D Preferred Stock. In
addition, 100,000 shares of Series C Preferred Stock will remain subject to
issuance pursuant to the preferred share purchase rights plan, assuming that
no event occurs thereunder between the date hereof and the Effective Time
which would result in the issuance of such shares. Under Maryland law,
stockholders generally are not liable for the corporation's debts or
obligations.
The Combined Company Charter provides and will provide following the
Effective Time that the preferred stock may be issued, from time to time, in
one or more series or classes as authorized by the board and provides that,
prior to the issuance of shares of each series or class, the board shall
designate that series or class to distinguish it from all other series and
classes of stock of the Combined Company, and shall specify the number of
shares to be included in the series or class and shall set the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
and conditions of redemption applicable to such series or class.
COMMON STOCK
All shares of the Combined Company Common Stock issuable in connection with
the Merger will, upon consummation of the Merger at the Effective Time, be
duly authorized, fully paid and non-assessable. Subject to the preferential
rights of any other shares of capital stock, holders of the Combined Company
Common Stock
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will be entitled to receive dividends when, as and if authorized and declared
by the Combined Company Board, out of funds legally available therefor.
Payment and declaration of dividends on the Combined Company Common Stock and
purchases of shares thereof by the Combined Company may be subject to certain
restrictions if the Combined Company fails to pay dividends on outstanding
shares of Combined Company Preferred Stock. Upon the distribution of assets
upon any liquidation, dissolution or winding up of the Combined Company,
holders of Combined Company Common Stock will be entitled to share equally and
ratably in any assets available for distribution to them, after payment or
provision for payment of all known debts and liabilities of the Combined
Company and any preferential amounts owing with respect to any outstanding
Combined Company Preferred Stock. Subject to certain provisions of Maryland
law, the Combined Company Charter and the Combined Company Bylaws, each
outstanding share of Combined Company Common Stock entitles the holder to one
vote on all matters submitted to a vote of stockholders, including the
election of directors, and, except as otherwise required by law or except as
provided with respect to any other class or series of stock (such as the
Series D Preferred Stock which will vote with the Combined Company Common
Stock), the holders of such shares will possess the exclusive voting power.
Holders of Combined Company Common Stock will not have cumulative voting
rights in the election of directors, which means that holders of a majority of
all of the shares of or voting with the Combined Company Common Stock for the
election of directors will be able to elect all of the directors to be elected
by such holders if they choose to do so and, accordingly, the holders of the
remaining Combined Company Common Stock will be unable to elect any directors.
Holders of shares of Combined Company Common Stock will not have preemptive
rights, which means they have no right to acquire any additional shares of
Combined Company Common Stock that may be issued by the Combined Company at a
subsequent date. Holders of Combined Company Common Stock also will have no
conversion, sinking fund, redemption, preference or exchange rights. Subject
to the provisions of the Combined Company Charter regarding the restrictions
on transfer and limitations on ownership of the Combined Company Common Stock
or Combined Company Preferred Stock, shares of the Combined Company Common
Stock will have equal dividend, liquidation and other rights.
The Combined Company Charter provides and will provide following the
Effective Time that the Combined Company Preferred Stock may be issued in one
or more series or classes as authorized by the Excel Board or the Combined
Company Board, as the case may be, and that, prior to the issuance of shares
of each series or class, the board shall designate that series or class to
distinguish it from all other series and classes of stock of the Combined
Company, and shall specify the number of shares to be included in the series
or class and shall set the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption applicable
to such series or class. Thus, the Combined Company Board could authorize the
issuance of shares of Combined Company Preferred Stock with terms and
conditions which could have the effect of delaying, deferring or preventing a
transaction or a change in control of the Combined Company that might involve
a premium price for holders of Combined Company Common Stock or otherwise be
in their best interest.
SERIES D DEPOSITARY SHARES
General
The Series D Depositary Shares that will be issuable in the Merger to the
holders of New Plan Depositary Shares are, except as described below,
substantially similar in their terms to the New Plan Depositary Shares. Shares
of Series D Preferred Stock represented by Series D Depositary Shares will be
deposited at the Effective Time with BankBoston, N.A. (the "Depositary"), and
the Depositary will, pursuant to the terms of a Deposit Agreement between the
Combined Company and the Depositary (the "Deposit Agreement"), which will be
substantially similar to the current Deposit Agreement between New Plan and
BankBoston, N.A., act as depositary and transfer agent for the Series D
Preferred Stock and the receipts evidencing the Series D Depositary Shares.
Subject to the terms of the Deposit Agreement, each owner of a Series D
Depositary Share will be entitled, in proportion to the one-tenth fractional
interest of a share of Series D Preferred Stock represented by the Series D
Depositary Share, to all the rights and preferences of the Series D Preferred
Stock represented by such Series D Depositary Share (including dividend,
voting, redemption and liquidation rights).
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The Series D Depositary Shares will be evidenced by depositary receipts
issued pursuant to the Deposit Agreement. Copies of the Deposit Agreement may
be obtained prior or subsequent to the Effective Time from the Combined
Company upon request, and the statements made hereunder relating to the
Deposit Agreement and the depositary receipts to be issued thereunder, or
summaries of certain provisions thereof, do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all of the
provisions of the Deposit Agreement and the form of depositary receipts.
Dividends and Other Distributions
Whenever the Depositary receives any cash dividend or other cash
distribution on the deposited shares of Series D Preferred Stock, the
Depositary will distribute to the holders of record of receipts evidencing the
Series D Depositary Shares (the "Holders") on the record date fixed by the
Combined Company Board such sums as are, as nearly as practicable, in
proportion to the respective numbers of Series D Depositary Shares held by
such Holders. Any amount made available for distribution or distributed in
respect of Series D Depositary Shares subject to withholding taxes shall be
reduced accordingly.
The dividend rate on the Series D Depositary Shares will be $3.90 per annum
per Series D Depositary Share through September 15, 2012 and thereafter, $4.90
per annum per Series D Depositary Share. Whenever the Depositary receives a
distribution other than cash on the deposited shares of Series D Preferred
Stock, the Depositary will distribute to the Holders, subject to certain
obligations of the Holders to file proofs, certificates and other information
and to pay certain charges and expenses to the Depositary, such amounts of the
securities or property received by it as are, as nearly as practicable, in
proportion to the respective numbers of Series D Depositary Shares evidenced
by the receipts held by such Holders, in any manner that the Depositary and
the Combined Company may deem equitable and practicable for accomplishing such
distribution. In the event that the Depositary determines that it is not
feasible to make such distribution, the Depositary may, following consultation
and with the approval of the Combined Company, adopt such method as it deems
equitable and practicable for accomplishing such distribution, including the
sale of such securities or other property upon such terms as it may deem
proper, followed by the distribution of the net proceeds of such sale to the
Holders.
Redemption
Except in certain circumstances related to the Combined Company's ability to
maintain its qualification as a REIT under the Code, as provided for in the
Combined Company Charter, the Series D Depositary Shares will not be
redeemable prior to June 15, 2007. On and after June 15, 2007, the Combined
Company may, at its option upon not less than thirty nor more than sixty days'
written notice, redeem shares of Series D Preferred Stock held by the
Depositary, in whole or in part or from time to time, for cash at a redemption
price of $500.00 per share of Series D Preferred Stock plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption,
whereupon the Depositary will redeem as of the same redemption date the number
of Series D Depositary Shares representing shares of the Series D Preferred
Stock so redeemed for cash at a redemption price of $50.00 per Series D
Depositary Share plus an amount equal to any accrued and unpaid dividends
thereon to the date fixed for redemption, provided that the Combined Company
shall pay in full to the Depositary the redemption price of the Series D
Preferred Stock to be redeemed. If fewer than all the Series D Depositary
Shares are to be redeemed, those Series D Depositary Shares to be redeemed
will be selected pro rata (as nearly as practicable, without creating
fractional Series D Depositary Shares) or by any other equitable method
determined by the Combined Company.
From and after the date fixed for redemption, all dividends in respect of
the shares of Series D Preferred Stock so called for redemption will cease to
accrue, the Series D Depositary Shares so called for redemption will no longer
be deemed to be outstanding and all rights of the Holders thereof will cease,
except the right to receive any monies payable upon such redemption and any
money or other property to which the Holders were entitled upon redemption and
surrender thereof to the Depositary.
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Voting Rights
Upon receipt of notice of any meeting at which the Holders of the deposited
shares of Series D Preferred Stock are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the Holders at the
close of business on a specified record date fixed by the Combined Company
Board. Each such Holder as of such record date (which will be the same date as
the record date for the Series D Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights pertaining to the
amount of Series D Preferred Stock represented by the Series D Depositary
Shares held by such Holder. The Depositary will vote or cause to be voted the
amount of Series D Preferred Stock represented by such Series D Depositary
Shares in accordance with such instructions, and the Combined Company will
agree to take reasonable action which may be deemed necessary by the
Depositary in order to enable the Depositary to do so. Each share of Series D
Preferred Stock is entitled to ten votes per share when voting together with
the Combined Company Common Stock and 20 votes per share when voting together
with only the holders of Parity Stock (as defined below), such as the Series A
Preferred Stock and the Series B Preferred Stock, and, accordingly, each
Series D Depositary Share is entitled to one vote per depositary share when
voting together with the Combined Company Common Stock and two votes per
depositary share when voting with only the holders of Parity Stock (one vote
for each $25.00 equivalence in liquidation preference). The Depositary will
abstain from voting the amount of Series D Preferred Stock represented by such
Series D Depositary Shares, to the extent it has not received specific
instructions from any Holder. The Depositary shall not be responsible for any
failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from negligence or willful misconduct of the Depositary.
For a discussion of the matters on which the Holders shall have the right to
direct or cause the Depositary to vote, see "--Series D Preferred Stock--
Voting Rights" below.
Surrender of Receipts and Withdrawal of Deposited Series D Preferred Stock
Any Holder may withdraw any or all of the deposited shares of Series D
Preferred Stock represented by Series D Depositary Shares and all money and
other property, if any, represented by such Series D Depositary Shares by
surrendering such Holder's receipt or receipts at the corporate office of the
Depositary, provided that such Series D Preferred Stock has not been
previously redeemed or called for redemption and further provided that the
receipts held by such Holder and the Series D Depositary Shares represented
thereby would not, if held by the Holder, be held in violation of the
Ownership Limit (as defined herein). After such surrender, without
unreasonable delay, the Depositary will deliver to such Holder the number of
whole or fractional shares of Series D Preferred Stock and all such money and
other property, if any, represented by the Series D Depositary Shares
evidenced by the receipt or receipts surrendered for withdrawal. Delivery of
Series D Preferred Stock and such money and other property being withdrawn may
be made by delivery of such certificates, documents of title and other
instruments as the Depositary may deem appropriate, which, if required by the
Depositary, shall be properly endorsed and accompanied by proper instruments
of transfer.
Restrictions on Ownership
In order to maintain its qualification as a REIT, the Combined Company
Charter imposes limitations on the number of shares of capital stock and other
securities evidencing ownership in the Combined Company, including the Series
D Depositary Shares, that may be owned by any single person or affiliated
group. For information regarding such restrictions on ownership of the Series
D Depositary Shares, see "--Restrictions on Ownership of Capital Stock" below.
SERIES D PREFERRED STOCK
General
Upon consummation of the Merger, the issued and outstanding shares of Series
D Preferred Stock issued in connection with the Merger will be duly
authorized, fully paid and nonassessable. The shares of Series D Preferred
Stock will be represented by Series D Depositary Shares, each of which
represents a one-tenth fractional interest in the share of Series D Preferred
Stock. The summary of the terms applicable to the Series D Preferred Stock set
forth below is qualified in its entirety by the Articles of Supplementary to
be filed with the SDAT to establish the terms of the Series D Preferred Stock,
a copy of which is attached hereto as Annex IV.
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Rank
The Series D Preferred Stock represented by the Series D Depositary Shares
will, with respect to the payment of distributions and amounts upon
liquidation, dissolution or winding-up of the Combined Company, rank (i)
senior to all classes or series of the Combined Company Common Stock and to
all stock ranking junior (either as to distributions or rights upon
liquidation, dissolution or winding up) to the Series D Preferred Stock,
including the Series C Preferred Stock, if and when issued ("Junior Stock"),
(ii) on a parity with any other class of the Combined Company Preferred Stock
ranking on a parity with the Series D Preferred Stock as to distributions or
rights upon any liquidation, dissolution or winding up of the affairs of the
Combined Company ("Parity Stock"), including the Outstanding Preferred Stock
(defined below), and (iii) junior to any equity securities to be issued by the
Combined Company, the terms of which may specifically provide that such equity
securities rank senior to the Series D Preferred Stock with respect to
distributions or rights or rights upon liquidation, dissolution or winding-up
of the Combined Company.
While any shares of Series D Preferred Stock are outstanding, the Combined
Company may not authorize, create or increase the authorized amount of any
class or series of stock that ranks prior or senior to the Series D Preferred
Stock with respect to distributions or the distribution of assets upon
liquidation, dissolution or winding-up or reclassifying any authorized shares
of capital stock of the Combined Company into such shares or create, authorize
or issue any obligations or securities convertible into or evidencing the
right to purchase any such shares without the consent of the holders of two-
thirds of the outstanding shares of Series D Preferred Stock voting separately
as a class.
Distributions
Holders of then outstanding Series D Preferred Stock will be entitled to
receive, when, as and if declared by the Combined Company Board, out of funds
of the Combined Company legally available for payment thereof, cumulative
distributions at the rate of $39.00 per annum per share of Series D Preferred
Stock (equivalent to $3.90 per annum per Series D Depositary Share) through
September 15, 2012, and thereafter at the rate of $49.00 per annum per share
of Series D Preferred Stock (equivalent to $4.90 per annum per Series D
Depositary Share) payable in equal amounts of $0.975 per Series D Depositary
Share and $9.75 per share of Series D Preferred Stock, quarterly in cash
through September 15, 2012, and thereafter, in equal amounts of $1.225 per
Series D Depositary Share and $12.25 per share of Series D Preferred Stock,
quarterly in cash to stockholders of record at close of business on such date
as shall be fixed by the Combined Company Board, which generally shall not be
less than ten nor more than 30 days preceding the 15th day (or the next
succeeding business day if not a business day) of January, April, July and
October in each year, on which dates such quarterly distributions shall
accrue. Distributions on the Series D Preferred Stock for the quarter in which
the Merger occurs will include the period from the last quarterly distribution
on the New Plan Preferred Shares prior to the Effective Time through the
Effective Time so that distributions will effectively "carry-over" from the
New Plan Preferred Shares and, following the Effective Time, further interim
distributions for less than a full calendar quarter will be made with respect
to the Series D Preferred Stock and the Series D Depositary Shares in order to
transition the payment dates for distributions with respect to the New Plan
Preferred Shares (currently the 15th day of each March, June, September and
December) to the payment dates for distributions with respect to the other
series of Excel's Outstanding Preferred Stock (the 15th day of each of
January, April, July and October) without causing any delay in the payment of
distributions to holders of New Plan Preferred Shares as a result of the
Merger. Distributions on each share of Series D Preferred Stock will accrue
and be cumulative from and including the date of original issue thereof,
whether or not the Combined Company has earnings or whether authorized or
there shall be funds legally available for the payment of such distributions.
Distributions paid on shares of Series D Preferred Stock in an amount less
than the total amount of such distributions at the time accrued and payable on
such shares shall be allocated pro rata on a per share basis among all such
shares then outstanding. Accrued but unpaid distributions on shares of Series
D Preferred Stock will not bear interest and the holders thereof will not be
entitled to any distributions in excess of full cumulative distributions, as
described above. Any distribution payment on shares of Series D Preferred
Stock shall first be credited against the earliest accrued but unpaid
distribution due with respect to such shares which remains payable.
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The amount of any distributions accrued on any shares of Series D Preferred
Stock at any quarterly distribution payment date shall be the amount of any
unpaid distributions accumulated thereon, to and including such date, whether
or not earned or declared, and the amount of distributions accrued on any
shares of Series D Preferred Stock at any date other than a quarterly
distribution date shall be equal to the sum of the amount of any unpaid
distributions accumulated thereon, to and including the last preceding
quarterly distribution date, whether or not earned or declared, plus an amount
calculated on the basis of the applicable annual distribution rate for the
period after such last preceding quarterly distribution date to and including
the date as of which the calculation is made, based on a 360-day year of
twelve 30-day months.
Redemption
Except in certain circumstances relating to the Combined Company's
maintenance of its ability to qualify as a REIT under the Code as provided in
the Combined Company Charter and as described generally under the heading "--
Restrictions on Ownership of Capital Stock" below, the Series D Preferred
Stock will not be redeemable prior to June 15, 2007. On and after June 15,
2007, the Combined Company may, at its option upon not less than 30 nor more
than 60 days' written notice, redeem, in whole or in part, the Series D
Preferred Stock (and the Depositary will redeem the number of Series D
Depositary Shares representing the shares of Series D Preferred Stock so
redeemed upon not less than 30 nor more than 60 days' written notice to the
holders thereof), at any time or from time to time, for cash at a redemption
price of $500.00 per share (equivalent to $50.00 per Series D Depositary
Share), plus all accrued and unpaid distributions thereon to the date fixed
for redemption. The redemption price of the Series D Preferred Stock (other
than any portion thereof consisting of accrued and unpaid distributions) may
only be paid from funds legally available for the payment of the redemption
price and shall be paid only from the sale proceeds of other capital stock of
the Combined Company. For purposes of the preceding sentence, "capital stock"
means any equity securities (including common stock and preferred stock),
depositary shares, interests, participations or other ownership interests
(however designated) and any rights (other than debt securities convertible
into or exchangeable for equity securities) or options to purchase any of the
foregoing. Notice of any redemption will be given in the manner described in
the Series D Preferred Stock Articles Supplementary.
If proper notice of redemption of any Series D Preferred Stock has been
given and if, prior to the date fixed for redemption, funds necessary for such
redemption have been irrevocably set aside for payment, in trust for the
benefit of the holders of Series D Preferred Stock so called for redemption,
so as to be and to continue to be available therefor, then from and after the
date fixed for redemption distributions will cease to accrue on such Series D
Preferred Stock, such Series D Preferred Stock shall no longer be deemed
outstanding and all rights of the holders of the Series D Preferred Stock will
cease, except the right to receive the redemption price plus any accrued and
unpaid distributions payable upon such redemption.
Unless full accumulated distributions on all shares of Series D Preferred
Stock shall have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for all
past distribution periods and the then current distribution period, no shares
of Series D Preferred Stock shall be redeemed (unless all outstanding shares
of Series D Preferred Stock are simultaneously redeemed) or purchased or
otherwise acquired directly or indirectly (except by conversion into or
exchange for Junior Stock), provided, however, that the foregoing shall not
prevent the redemption of shares of Series D Preferred Stock pursuant to
circumstances relating to the Combined Company's maintenance of its ability to
qualify as a REIT or the purchase or acquisition of shares of Series D
Preferred Stock pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Series D Preferred Stock.
If the date fixed by the Combined Company Board for redemption of the Series
D Preferred Stock follows a record date fixed by the Combined Company Board
for the payment of any distribution but before the corresponding distribution
date, the distribution payable on such distribution date shall be paid to the
holder in whose name the Series D Preferred Stock to be redeemed is registered
at the close of business on the record date established for the distribution,
notwithstanding the redemption of such shares between such record date and the
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corresponding distribution date or default by the Combined Company and the
payment of the distribution due. In case of redemption of less than all of the
shares of Series D Preferred Stock then outstanding, the Series D Preferred
Stock to be redeemed shall be selected pro rata from the holders of record of
such shares in proportion to the number of shares of Series D Preferred Stock
held by such holders (with adjustments to avoid redemption of fractional
shares) or by any other equitable method determined by the Combined Company.
All shares of Series D Preferred Stock issued and reacquired in any manner
shall be restored to the status of authorized but unissued shares of the
Combined Company Preferred Stock without further designation as to series or
class. The Combined Company may also retire any unissued shares of Series D
Preferred Stock and such shares shall then be restored to the status of
authorized but unissued shares of the Combined Company Preferred Stock,
without further designation as to series or class.
Liquidation Preference
Upon any liquidation, dissolution or winding up of the Combined Company,
whether voluntary or involuntary, the holders of shares of Series D Preferred
Stock then outstanding will be entitled to receive and be paid out of the
assets of the Combined Company legally available for distribution to its
stockholders, before any payment or distribution shall be made on any Junior
Stock, the amount of $500.00 per share of Series D Preferred Stock, plus
accrued and unpaid distributions thereon to the date of liquidation,
dissolution or winding up, and no more.
Neither the sale or other disposition of all or substantially all of the
property or business of the Combined Company, the merger or consolidation of
the Combined Company into or with any other entity, nor the dissolution,
liquidation, winding-up or reorganization of the Combined Company immediately
followed by organization of another entity to which the assets in such
dissolution, liquidation or winding-up are distributed, shall be deemed to be
a dissolution, liquidation or winding-up, voluntary or involuntary, described
herein, provided that, in each case, effective provision is made in the
charter of the resulting and surviving entity or otherwise for the
recognition, preservation and protection of the rights of the holders of the
Series D Preferred Stock.
If, upon any voluntary or involuntary dissolution, liquidation or winding-up
of the Combined Company, the amounts payable with respect to the preference
value of the Series D Preferred Stock and any Parity Stock are not paid in
full, the holders of shares of Series D Preferred Stock and of such other
shares will share ratably in any such distribution of assets of proportion to
the full respective preference amounts to which they are entitled.
Under the MGCL, a distribution (whether by dividend, redemption or other
acquisition of shares) to holders of shares of stock of a Maryland corporation
may not be made unless, after giving effect to the distribution, the
corporation's total assets are greater than its total liabilities and, unless
the charter of the Maryland corporation permits otherwise, the amount that
would be needed to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights upon dissolution are superior to the
stockholders receiving a distribution. The provisions of the Combined Company
Charter establishing the terms of the Series D Preferred Stock will provide
that, in determining whether a dividend or other distribution may be paid upon
shares of Junior Stock, no effect need be given to the amounts that would be
needed to satisfy the preferential rights on dissolution of holders of
outstanding Series D Preferred Stock.
Voting Rights
Holders of the Series D Preferred Stock will have voting rights set forth in
the Articles Supplementary classifying the Series D Preferred Stock and as
described generally below. In any matter in which the Series D Preferred Stock
is entitled to vote, including any action by written consent, each share of
Series D Preferred Stock shall be entitled to ten votes, except in the case of
the voting of the Series D Preferred Stock with any Parity Stock, in which
case, the Series D Preferred Stock shall have one vote for each $25.00 in
liquidation
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preference and fractional votes shall be ignored, or 20 votes per share of
Series D Preferred Stock. Each vote may be directed separately by the holder
thereof, or by any proxy or proxies of such holder. With respect to each share
of Series D Preferred Stock, the holder thereof may designate up to ten (or 20
in the case of any vote with shares of Parity Stock), with each proxy having
the right to direct the whole number of votes totaling ten (or 20, as the case
may be) votes per share of Series D Preferred Stock.
The holders of the Series D Preferred Stock shall have the right to vote
with the Combined Company Common Stock on all matters on which the holders of
Combined Company Common Stock are entitled to vote, as though part of the same
class as holders of the Combined Company Common Stock. Accordingly, the
holders of the Series D Preferred Stock shall receive all notices of meetings
of the holders of the Combined Company Common Stock, and all other notices and
correspondence to the holders of the Combined Company Common Stock provided by
the Combined Company, and shall be entitled to take such actions, and shall
have such rights as are otherwise available to the holders of the Combined
Company Common Stock.
Whenever distributions on any shares of Series D Preferred Stock shall be in
arrears for six or more quarterly periods, the holders of the Series D
Preferred Stock, voting separately as a class with all other series of the
Combined Company Preferred Stock upon which like voting rights in respect of
dividends in arrears have been conferred and are exercisable, will be entitled
to vote for the election of two additional directors of the Combined Company
at a special meeting called by the Secretary of the Combined Company upon the
written request of any holder of record of any series or class of the Combined
Company Preferred Stock so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of
the stockholders, in which case at the next annual meeting of stockholders),
and at each subsequent annual meeting until all distributions accumulated on
such shares of Series D Preferred Stock for the past distribution periods and
the then current distribution period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment. In such
case, the entire Combined Company Board will be increased by two directors. If
and when all accumulated distributions on the Series D Preferred Stock have
been declared and paid or set aside for payment in full, the holders of the
Series D Preferred Stock shall be divested of the special voting rights in
respect of additional directors as described in this paragraph and the term of
office of each director elected by the holders of the Series D Preferred Stock
and all other series of the Combined Company Preferred Stock upon which like
voting rights have been conferred pursuant to such special voting rights shall
forthwith terminate and the number of directors constituting the entire
Combined Company Board shall be reduced accordingly. Except as described in
the immediately preceding sentence, any director so elected may be removed
only by the vote of the holders of record of a majority of the outstanding
shares of the Series D Preferred Stock and all other series or classes of the
Combined Company Preferred Stock upon which like voting rights have been
conferred, voting together as a separate class, at a meeting called for such
purpose. So long as any shares of Series D Preferred Stock are outstanding,
the number of directors constituting the entire Combined Company Board shall
at all times be such that the exercise by the holders of the Series D
Preferred Stock, and the holders of the Combined Company Preferred Stock upon
which like voting rights have been conferred, of the right to elect directors
under the circumstances provided above, will not contravene any provision of
the Combined Company Charter or Combined Company Bylaws restricting the number
of directors which may constitute the entire Combined Company Board. Any
vacancy in the office of a director so elected may be filled by a vote of the
board of directors, upon the nomination of the then remaining director elected
by the holders of a majority of the outstanding shares of Series D Preferred
Stock and all other series or classes of the Combined Company Preferred Stock
upon which like voting rights have been conferred, or the successor of such
director.
So long as any shares of Series D Preferred Stock remain outstanding, the
Combined Company will not, without the affirmative vote or consent of the
holders of at least two-thirds of the shares of Series D Preferred Stock
outstanding at any given time, given in person or by proxy, either in writing
or in a meeting, with such shares voting separately as a single class,
authorize or create or increase the authorized or issued amount of any class
or series of shares of capital stock of the Combined Company ranking prior or
senior to the Series D Preferred Stock with respect to the payment of
distributions or the distribution of assets upon liquidation, dissolution or
winding-up, or reclassify any authorized shares of capital stock of the
Combined Company into
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such shares, or create, authorize or issue any obligation or securities
convertible into or evidencing the right to purchase any such shares, or
amend, alter or repeal the provisions of the Combined Company Charter, whether
by merger, consolidation or otherwise, so as to materially and adversely
affect any right, preferences, privileges or voting power of the Series D
Preferred Stock or the holders thereof, provided, however, that with respect
to the occurrence of any of such described events, so long as the shares of
Series D Preferred Stock remain outstanding with the terms thereof materially
unchanged, taking into account that, upon the occurrence of such event, the
Combined Company may not be the surviving entity, the occurrence of any such
event shall not be deemed to materially and adversely effect any such right,
preference, privilege or voting powers of holders of the Series D Preferred
Stock, and provided further that any increase in the amount of authorized
Combined Company Preferred Stock or the creation or issuance of any other
shares of Series D Preferred Stock, or any increase in the amount of
authorized Series D Preferred Stock or any other the Combined Company
Preferred Stock, in each case ranking on a parity with or junior to the Series
D Preferred Stock with respect to payment of distributions or the distribution
of assets upon liquidation, dissolution or winding-up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
The foregoing voting provisions will not apply if at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Series D Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
Restrictions on Ownership
In order to maintain its qualification as a REIT, the Combined Company
Charter imposes limitations on the number of shares of capital stock and other
securities evidencing ownership in the Combined Company, including the Series
D Preferred Stock, that may be owned by any single person or affiliated group.
For information regarding such restrictions on ownership of the Series D
Preferred Stock, see "--Restrictions on Ownership of Capital Stock" below.
OUTSTANDING PREFERRED STOCK
General
The issued and outstanding shares of Series A Preferred Stock and Series B
Preferred Stock (the "Outstanding Preferred Stock") are all duly authorized,
fully paid and non-assessable. The Series B Preferred Stock is represented by
receipts evidencing depositary shares, each of which represents a one-tenth
fractional interest in a share of Series B Preferred Stock (the "Series B
Depositary Shares"). The terms of the Outstanding Preferred Stock will not be
altered or amended by the Merger and references below to the "Combined
Company" will mean both Excel and the Combined Company, in each case whether
before, at or after the Merger.
Rank
The Series A Preferred Stock and the Series B Preferred Stock rank, with
respect to payment of distributions and amounts upon liquidation, dissolution
or winding-up of the Combined Company (i) senior to all classes or series of
Combined Company Common Stock, and to all other Junior Stock, including the
Series C Preferred Stock; (ii) on a parity with each other and with additional
classes or series of Parity Stock including, when issued, the Series D
Preferred Stock, and (iii) junior to any equity securities to be issued by the
Combined Company, the terms of which may specifically provide that such equity
securities rank senior to the Outstanding Preferred Stock with respect to
distribution rights or rights upon liquidation, dissolution or winding-up of
the Combined Company.
While any shares of Outstanding Preferred Stock are outstanding, unless
provision is first made for redemption of such shares, the Combined Company
may not authorize, create or increase the authorized amount of any class or
series of stock that ranks prior or senior to the Outstanding Preferred Stock
with respect to the payment of distributions or amounts upon liquidation,
dissolution or winding-up without the consent of at least
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two-thirds of the holders of the Outstanding Preferred Stock and all other
shares entitled to vote thereon (including the Series D Preferred Stock, once
issued), voting as a single class. However, the Combined Company may create
additional series or classes of stock, increase the authorized number of
shares of the Combined Company Preferred Stock or issue series of Junior Stock
or Parity Stock.
Dividends
Holders of the Series A Preferred Stock are entitled to receive, when, as
and if declared by the Combined Company Board, out of funds of the Combined
Company legally available for payment thereof, cumulative cash dividends
payable in an amount per share equal to the greater of (i) $2.1250 per annum
or (ii) the cash dividends determined on the applicable Dividend Date (as
defined below) on the shares of Combined Company Common Stock (or portion
thereof) into which a share of Series A Preferred Stock is then convertible.
Holders of the Series B Preferred Stock are entitled to receive, when, as and
if authorized and declared by the Combined Company Board, out of funds legally
available for the payment thereof for dividends, cumulative cash dividends
payable at the rate of 8 5/8% per annum of the liquidation preference per
share of Series B Preferred Stock, or $21.5625 per annum per share of Series B
Preferred Stock, and equivalent to $2.15625 per annum per Series B Depositary
Share. Dividends on the Outstanding Preferred Stock are payable quarterly in
arrears on the fifteenth day (or the next succeeding business day) of January,
April, July and October, and in the case of any accumulated or accrued but
unpaid dividends, at such additional times and for such interim periods, if
any, as may be determined by the Combined Company Board. The amount of such
dividends payable per share of such Outstanding Preferred Stock for each such
quarterly dividend payment date shall be computed by dividing the annual
dividend by four. Each such dividend is payable to holders of record as they
appear on the stock records of the Combined Company at the close of business
on the applicable record date therefor, which, in the case of the Series A
Preferred Stock shall be a date not more than sixty days, and in the case of
the Series B Preferred Stock, not more than thirty nor less than ten days,
preceding the dividend payment date, as fixed by the Combined Company Board.
Dividends accrue from the date of original issuance of the applicable share of
Outstanding Preferred Stock and are cumulative from such date, whether or not
the Combined Company has earnings, and whether or not during any dividend
period or periods such dividends are authorized or declared or there are funds
of the Combined Company legally available for the payment of such dividends.
Accumulated dividends do not bear interest and any dividends payable for a
period of less than a full dividend period will be computed pro-rata on the
basis of twelve 30-day months and a 360-day year.
Except for pro-rata dividends with respect to Outstanding Preferred Stock
and any shares of Parity Stock, no dividends on any Outstanding Preferred
Stock or Junior Stock will be authorized, paid or set aside for payment (other
than a dividend payable in Junior Stock) for any period unless full cumulative
dividends have been declared and paid or contemporaneously declared and a fund
sufficient for payment set aside for such Outstanding Preferred Stock for all
prior and contemporaneous dividend periods.
Redemption
Except as otherwise provided under the Excel Charter (the Combined Company
Charter subsequent to the Effective Time) to protect the Combined Company's
status as a REIT, the Outstanding Preferred Stock is not redeemable by the
Combined Company prior to February 5, 2002 in the case of the Series A
Preferred Stock, and January 13, 2003 in the case of the Series B Preferred
Stock. On and after February 5, 2002, the Series A Preferred Stock will be
redeemable at the option of the Combined Company, in whole or in part, either
(i) for such number of authorized or previously unissued shares of the
Combined Company Common Stock equal to the product of $25.00 and the number of
shares of Series A Preferred Stock to be redeemed (without regard to
accumulated, accrued and unpaid dividends, if any, to the date for redemption,
which are to be paid in cash, whether or not earned or declared) divided by
the Conversion Price (as defined below under "--Conversion Rights") as of the
opening of business on the date set for such redemption (equivalent to a
conversion rate of 1.24378 of a share of the Combined Company Common Stock for
each share of Series A Preferred Stock after payment of the Excel Stock
Dividend), subject to adjustment in certain circumstances, or (ii) for cash at
a
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redemption price of $25.00 per share, plus any accumulated accrued and unpaid
dividend, whether or not earned or declared. On and after January 13, 2003,
the shares of Series B Preferred Stock will be redeemable at the option of the
Combined Company, in whole or in part, at any time and from time to time, for
cash at a redemption price of $250.00 per share (equivalent to $25.00 per
Series B Depositary Share), plus all accrued and unpaid dividends thereon to
the date fixed for redemption, without interest, to the extent the Combined
Company has funds legally available therefor.
The redemption price of Series B Preferred Stock (other than the portion
thereof consisting of accrued and unpaid dividends) is payable solely out of
the sale proceeds of other equity securities of the Combined Company and any
rights (other than debt securities convertible and/or exchangeable for such
equity securities) or options to purchase any of the foregoing. On the date
fixed for redemption, the Combined Company must pay in cash on each share of
Outstanding Preferred Stock to be redeemed, any accumulated, accrued and
unpaid dividends, if any, whether or not earned or declared, and the terms
applicable to the Series A Preferred Stock provide that, in the event that
full cumulative dividends on the Series A Preferred Stock and any Parity Stock
(which would include the Series B Preferred Stock) have not been paid or
declared and set apart for payment, the Series A Preferred Stock may not be
redeemed in part, and the Combined Company may not purchase or acquire shares
of Series A Preferred Stock otherwise than pursuant to a purchase or exchange
Offer made on the same terms to all holders of Series A Preferred Stock,
except in order to insure that the Combined Company remains qualified as a
REIT for federal income tax purposes.
Any shares of Outstanding Preferred Stock that have been redeemed will,
after such redemption, have the status of authorized but unissued Combined
Company Preferred Stock, without further designation as to series or class,
until such shares are once more designated as part of a particular series or
class by the Combined Company Board.
Voting Rights
Holders of Outstanding Preferred Stock have no voting rights except as
described below.
Whenever dividends on Outstanding Preferred Stock are in arrears for six or
more quarterly periods (whether or not consecutive), holders of such
Outstanding Preferred Stock will be entitled to vote with the holders of all
Parity Stock having equivalent voting rights, such Outstanding Preferred Stock
and Parity Stock voting together as a single class, for the election of two
additional directors of the Combined Company. Such election shall be held at
the next annual meeting or special meeting held in place thereof or special
meeting of holders of such stock as entitled to vote thereon as may, or at the
request of any holder of such stock will, be called by the Secretary of the
Combined Company and at each subsequent annual meeting at which their
successors are to be elected until all arrearages and the distribution for the
then current dividend period shall have been paid or a sum sufficient for the
full payment thereof shall have been set aside. Vacancies for directors
elected by holders of Outstanding Preferred Stock and Parity Stock will be
filled by the remaining directors upon the nomination of the then remaining
director elected by such holders or the successor of such remaining director.
In addition to the foregoing voting rights, for so long as any shares of
Outstanding Preferred Stock remain outstanding, any authorization or creation
of, or increase in the authorized amount of, any shares of any class or any
security convertible into shares of any class of the Combined Company, ranking
prior or senior to the Outstanding Preferred Stock with regard to the payment
of distributions or amounts upon liquidation, dissolution or winding up of the
Combined Company, or any amendment, alteration or repeal of any of the
provisions of the Combined Company Charter, including any applicable Articles
Supplementary that materially adversely affects the voting powers, rights or
preferences of the holders of the Outstanding Preferred Stock or any Parity
Stock, must be approved by holders of at least two-thirds of such affected
Outstanding Preferred Stock, voting together as a single class, provided that
any amendment authorizing or creating, or increasing the authorized amount of,
any Junior Stock or any shares of Parity Stock shall not be deemed to
materially adversely affect the voting powers, rights or preferences of the
holders of Outstanding Preferred Stock. In addition, the holders of the
Outstanding Preferred Stock shall not otherwise have any relative,
participating, optional or other special voting
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rights and powers nor shall their consent be required for the taking of any
corporate action, including, but not limited to, any merger or consolidation
involving the Combined Company, or a sale of all or substantially all of the
assets of the Combined Company, in the case of the Series A Preferred Stock,
irrespective of the affect thereof on the rights, preferences or voting powers
of the holders of the Series A Preferred Stock and, in the case of the Series
B Preferred Stock, generally so long as the relative rights and preferences of
the holders of the Series B Preferred Stock prior to the occurrence of such
event will generally not be affected thereby, but without regard to whether
the Combined Company is the survivor.
As to any matter on which the Outstanding Preferred Stock may vote,
including any action by written consent, each share of Series A Preferred
Stock shall have one vote per share, and each share of Series B Preferred
Stock shall have ten votes per share, such that each Series B Depositary Share
shall have an equivalent of one vote per depositary share. With respect to
each share of Series B Preferred Stock, the holder thereof may designate up to
ten proxies, with each such proxy having the right to vote a whole number of
votes (totaling ten votes per share of such Series B Preferred Stock).
Conversion Rights
Except as otherwise described below in respect of the Series A Preferred
Stock, the Outstanding Preferred Stock is not convertible into or exchangeable
for any property or security of the Combined Company.
Shares of Series A Preferred Stock, however, are convertible in whole or in
part, at any time, at the option of the holder thereof, into authorized and
previously unissued shares of Combined Company Common Stock at a conversion
price of $20.09 per share (after payment of the Excel Stock Dividend) of
Combined Company Common Stock (equivalent to a conversion rate of 1.24378 of a
share of Combined Company Common Stock, after payment of the Excel Stock
Dividend, for each share of Series A Preferred Stock), subject to adjustment
as described below (the "Conversion Price"). The right to convert shares of
Series A Preferred Stock called for redemption will terminate at the close of
business on the date fixed by the board of directors for redemption of such
shares.
The Conversion Price is subject to adjustment upon certain events, including
(i) dividends (and other distributions) payable in the Combined Company Common
Stock or any class of capital stock of the Combined Company (but excluding
issuances of the Combined Company Common Stock pursuant to the Combined
Company's dividend reinvestment plan), (ii) the issuance to all holders of the
Combined Company Common Stock of certain rights or warrants entitling them to
subscribe for or purchase the Combined Company Common Stock at a price per
share less than the fair market value per share of the Combined Company Common
Stock (but excluding issuances of the Combined Company Common Stock pursuant
to the New Plan Excel DRIP), (iii) subdivisions, combinations and
reclassifications of the Combined Company Common Stock, and (iv) distributions
to all holders of the Combined Company Common Stock of evidences of
indebtedness of the Combined Company or of assets (including securities and
cash, but excluding those dividends, rights, warrants and distributions
referred to in clause (i), (ii) or (iii) above and excluding cash dividends or
distributions out of current or accumulated FFO to the extent the same result
in a payment of an equal cash dividend to the holders of shares of Series A
Preferred Stock). In addition to the foregoing adjustments, the Combined
Company will be permitted to make such reductions in the Conversion Price as
it considers to be advisable in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights will not be taxable
to the holders of the Combined Company Common Stock or, if that is not
possible, to diminish any income taxes that are otherwise payable because of
such event.
In case the Combined Company shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share exchange, tender
offer for all or substantially all of the shares of Common Stock or sale of
all or substantially all of the Combined Company's assets), in each case as a
result of which shares of the Combined Company Common Stock will be converted
into the right to receive stock, securities or other property (including cash
or any combination thereof), each share of Series A Preferred Stock, if
convertible after the consummation of the transaction, will thereafter be
convertible into the kind and amount of shares of stock,
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securities and other property receivable (including cash or any combination
thereof) upon the consummation of such transaction by a holder of that number
of shares or fraction thereof of the Combined Company Common Stock into which
one share of Series A Preferred Stock was convertible immediately prior to
such transaction (assuming such holder of the Combined Company Common Stock
failed to exercise any rights of appraisal and received per share the kind and
amount of stock, securities and other property (including cash or any
combination thereof) received per share by a plurality of nonelecting shares).
The Combined Company may not become a party to any such transaction unless the
terms thereof are consistent with the foregoing.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding-up of the Combined Company, the holders of Outstanding Preferred Stock
will be entitled to receive out of the assets of the Combined Company
available for distribution to stockholders remaining after payment or
provision for payment of all debts and other liabilities of the Combined
Company other than the Combined Company's obligations with respect to any
outstanding Junior Stock, a liquidation preference of $25.00 per share in the
case of Series A Preferred Stock, and a liquidation preference of $250.00 per
share in the case of Series B Preferred Stock (equivalent to a liquidation
preference of $25.00 per Series B Depositary Share), plus, in each case, an
amount equal to any accrued and unpaid distributions on the date of payment.
If upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Combined Company, the assets of the Combined Company shall be insufficient
to make such full payments to holders of shares of Outstanding Preferred Stock
and any Parity Stock, then such assets will be distributed pro rata among such
holders. After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of Outstanding Preferred Stock will not
be entitled to any further participation in any distribution of assets by the
Combined Company. Neither a consolidation or merger of the Combined Company
with or into another corporation nor or a sale or transfer of substantially
all of the Combined Company's assets or a statutory share exchange will be
considered a liquidation, dissolution or winding-up of the Combined Company.
Under the MGCL, a distribution (whether by dividend, redemption or other
acquisition of shares) to holders of shares of stock of a Maryland corporation
may not be made unless, after giving effect to the distribution, the
corporation's total assets are greater than its total liabilities and, unless
the charter of the Maryland corporation permits otherwise, the amount that
would be needed to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights upon dissolution are superior to the
stockholders receiving the distribution. The provisions of the Combined
Company Charter establishing the terms of the Outstanding Preferred Stock
provide that, in determining whether a dividend or other distribution may be
paid on shares of Junior Stock of the Combined Company, no effect need to be
given to the amounts that would be needed to satisfy the preferential rights
on dissolution of holders of such Outstanding Preferred Stock.
PREFERRED SHARE PURCHASE RIGHTS
The terms of the Rights (as defined below) will not be altered or amended by
the Merger and references below to the "Combined Company" will mean both Excel
and the Combined Company, in each case whether before, at or after the Merger.
On May 13, 1998 the Excel Board declared a dividend of one preferred share
purchase right (a "Right") for each share of Excel Common Stock outstanding at
the close of business on May 26, 1998 (the "Record Date").
As long as the Rights are attached to the Combined Company Common Stock, the
Combined Company will issue one Right (subject to adjustment) with each new
share of common stock issued (including the shares of Combined Company Common
Stock issued in connection with the Merger) so that all such shares will have
attached Rights. When exercisable, each Right will entitle the registered
holder to purchase from Excel one one-thousandth of a share of Series C
Preferred Stock at a price of $100.00 per one one-thousandth of a share,
subject to adjustment (the "Series C Purchase Price"). The description and
terms of the Rights are set forth in the Rights Agreement.
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Until the earlier to occur of (i) ten days following a public announcement
that a person or group of affiliated or associated persons has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of Combined
Company Common Stock (an "Acquiring Person") or (ii) ten business days (or
such later date as may be determined by action of the board of directors prior
to such time as any person or group of affiliated persons becomes an Acquiring
Person) following the commencement or announcement of an intention to make a
tender offer or exchange offer the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the Combined
Company Common Stock (the earlier of (i) and (ii) being called the "Rights
Plan Distribution Date"), the Rights will be represented, with respect to any
certificate for Combined Company Common Stock outstanding as of the Record
Date, by such certificate together with a copy of a summary description of the
Rights available from the Combined Company.
The Rights Agreement provides that until the Rights Plan Distribution Date
(or earlier redemption, exchange, termination, or expiration of the Rights),
the Rights will be transferred with and only with the Combined Company Common
Stock. Until the Rights Plan Distribution Date (or earlier redemption or
expiration of the Rights), new Combined Company Common Stock certificates for
Combined Company Common Stock issued after the close of business on the Record
Date upon transfer or new issuance of the Combined Company Common Stock
(including certificates for Combined Company Common Stock issued in the
Merger) will contain a notation incorporating the Rights Agreement by
reference. Until the Rights Plan Distribution Date (or earlier redemption,
exchange, termination or expiration of the Rights), the surrender for transfer
of any certificates for Combined Company Common Stock, with or without such
notation or a copy of the summary description of the Rights, will also
constitute the transfer of the Rights associated with the Combined Company
Common Stock represented by such certificate. As soon as practicable following
the Rights Plan Distribution Date, separate certificates evidencing the Rights
("Right Certificates") will be mailed to holders of record of the Combined
Company Common Stock as of the close of business on the Rights Plan
Distribution Date and such separate Right Certificates alone will represent
the Rights.
The Rights are not exercisable until the Rights Plan Distribution Date. The
Rights will expire on May 26, 2008 subject to Combined Company's right to
extend such date (the "Final Expiration Date"), unless earlier redeemed or
exchanged by Combined Company or terminated.
Shares of Series C Preferred Stock purchasable upon exercise of the Rights
will be entitled, when, as and if declared, to a minimum preferential
quarterly dividend payment of $1.00 per share but will be entitled to an
aggregate dividend of 1,000 times the dividend, if any, declared per share of
Combined Company Common Stock. In the event of liquidation, dissolution or
winding up of Excel, the holders of the Series C Preferred Stock will be
entitled to a minimum liquidation payment of $1,000 per share (plus any
accrued but unpaid dividends), preferential to the Combined Company Common
Stock, but junior to the Series D Preferred Stock, the Outstanding Preferred
Stock or any Parity Stock, but will be entitled to an aggregate payment of
1,000 times the payment made per share of Series C Preferred Stock. Each share
of Series C Preferred Stock will have 1,000 votes and will vote together with
the Combined Company Common Stock. Finally, in the event of any merger,
consolidation or other transaction in which shares of Combined Company Common
Stock are exchanged, each share of Series C Preferred Stock will be entitled
to receive 1,000 times the amount received per share of Combined Company
Common Stock. Shares of Series C Preferred Stock are generally not redeemable.
These rights are protected by customary antidilution provisions. Because of
the nature of the dividend, liquidation and voting rights, the value of one
one-thousandth of a share of Series C Preferred Stock purchasable upon
exercise of each Right should approximate the value of one share of Combined
Company Common Stock.
The Series C Purchase Price payable, and the number of shares of Series C
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of the Series C Preferred Stock, (ii) upon the grant to
holders of the Series C Preferred Stock of certain rights, options or warrants
to subscribe for or purchase Series C Preferred Stock or convertible
securities at less than the current market price of the Series C Preferred
Stock or (iii) upon the distribution to holders of the Series C Preferred
Stock of evidences of indebtedness, cash, securities or assets (excluding
regular periodic cash dividends at a rate
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not in excess of 125% of the rate of the last regular periodic cash dividend
theretofore paid or, in case regular periodic cash dividends have not
theretofore been paid, at a rate not in excess of 50% of the average net
income per share of the Combined Company for the four quarters ended
immediately prior to the payment of such dividend, or dividends payable in
Series C Preferred Stock (which dividends will be subject to the adjustment
described in clause (i) above)) or of convertible securities, subscription
rights or warrants (other than those referred to above).
In the event that a person becomes an acquiring person or if the Combined
Company were the surviving corporation in a merger with an acquiring Person or
any affiliate or associate of an acquiring person and the common stock was not
changed or exchanged, each holder of a Right, other than Rights that are or
were acquired or beneficially owned by the acquiring person (which Rights will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Combined Company Common Stock having a market value
of two times the then current Series C Purchase Price under the Right. In the
event that, after a person has become an acquiring person, the Combined
Company were acquired in a merger or other business combination transaction or
more than 50% of its assets or earning power were sold, proper provision shall
be made so that each holder of a Right shall thereafter have the right to
receive, upon the exercise thereof at the then current Series C Purchase Price
under the Right, that number of shares of common stock of the acquiring
company which at the time of such transaction would have a market value of two
times the then current Series C Purchase Price under the Right.
At any time after a person becomes an acquiring person and prior to the
earlier of one of the events described in the last sentence of the previous
paragraph or the acquisition by such acquiring person of 50% or more of the
outstanding Combined Company Common Stock, the board of directors may cause
the Combined Company to exchange the Rights (other than Rights owned by an
acquiring person which will have become void), in whole or in part, for that
number of shares of Combined Company Common Stock having an aggregate value
equal to the spread (the excess of the value of the adjustment shares issuable
upon the exercise of a Right over the Series C Purchase Price) per Right
(subject to adjustment).
No adjustment in the Series C Purchase Price will be required until
cumulative adjustments require an adjustment of at least 1% in such Series C
Purchase Price. No fractional Series C Preferred Stock or Combined Company
Common Stock will be issued (other than fractions of Series C Preferred Stock,
which are integral multiples of one one-thousandth of a share of Series C
Preferred Stock, which may, at the election of the Combined Company, be
evidenced by depositary receipts), and in lieu thereof, a payment in cash will
be made based on the market price of the Series C Preferred Stock or the
Combined Company Common Stock on the last trading date prior to the date of
exercise.
The Rights may be redeemed in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price") by the board of directors at any time prior to
the time that an Acquiring Person has become such. The redemption of the
Rights may be made effective at such time, on such basis and with such
conditions as the board of directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the
Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Combined Company beyond those as an existing
stockholder, including, without limitation, the right to vote or to receive
dividends.
Any of the provisions of the Rights Agreement may be amended by the Combined
Company Board for so long as the Rights are then redeemable, and after the
Rights are no longer redeemable, the company may amend or supplement the
Rights Agreement in any manner that does not adversely affect the interests of
the holders of the Rights.
A copy of the Rights Agreement is available free of charge from the Combined
Company, both prior and subsequent to the Effective Time. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
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RESTRICTIONS ON OWNERSHIP OF CAPITAL STOCK
For the Combined Company to qualify as a REIT under the Code, its shares of
stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months (other than the first year for which an
election to be a REIT has been made) or during a proportionate part of a
shorter taxable year. Also, not more than 50% of the value of the outstanding
shares of stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities such as
qualified pension plans) during the last half of a taxable year (other than
the first year for which an election to be a REIT has been made). See "Federal
Income Tax Consequences Related to the Combined Company" for additional
discussion of the REIT qualification requirements.
The Combined Company Charter, subject to certain exceptions, contains
certain restrictions on the number of shares of stock of the Combined Company
that a person may own. The Combined Company Charter prohibits any person from
acquiring or holding, directly or indirectly, shares of the Combined Company
stock in excess of 9.8 % (by value or by number of shares, whichever is more
restrictive, except only by value in the case of any Outstanding Preferred
Stock) of the outstanding shares of each class or series of stock of the
Combined Company (except in the case of the Series A Preferred Stock and the
Series D Preferred Stock, where the prohibition relates to the stated
percentage of all outstanding Equity Stock (as defined herein) of the Combined
Company) (the "Ownership Limit"). The number and value of shares of the
outstanding Combined Company Common Stock and Combined Company Preferred Stock
(collectively, the "Equity Stock") shall be determined in good faith, which
determination shall be conclusive for all purposes hereof.
The Combined Company Board, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to the
board of directors and upon at least 15 days' written notice from a transferee
prior to the proposed transfer, that if consummated, would result in the
intended transferee beneficially owning shares in excess of the Ownership
Limit, and upon such other conditions as the board of directors may direct,
may exempt a person from the Ownership Limit (an "Excepted Holder"). In order
to be considered by the board as an Excepted Holder, a person also must not
own, directly or indirectly, an interest in a tenant of the company (or a
tenant of any entity owned or controlled by the company) that would cause the
company to own, directly or indirectly, more than a 9.9% interest in such a
tenant. The person seeking an exemption must represent to the satisfaction of
the board that it will not violate the aforementioned restriction. The person
also must agree that any violation or attempted violation of the foregoing
restriction will result in the automatic transfer of the shares of stock
causing such violation to the Trust (as defined below).
The Combined Company Charter further prohibits (a) any person from
beneficially or constructively owning shares of stock of the Combined Company
that would result in the Combined Company being "closely held" under Section
856(h) of the Code or otherwise cause the Combined Company to fail to qualify
as a REIT and (b) any person from transferring shares of stock of the Combined
Company if such transfer would result in shares of stock of the Combined
Company being owned by fewer than 100 persons. Any person who acquires or
attempts or intends to acquire beneficial or constructive ownership of shares
of stock of the Combined Company that will or may violate any of the foregoing
restrictions on transferability and ownership, or any person who would have
owned shares of the stock of the Combined Company that resulted in a transfer
of shares to the Trust, is required to give notice immediately to the Combined
Company and provide the Combined Company with such other information as the
Combined Company may request in order to determine the effect of such transfer
on the Combined Company's status as a REIT. The foregoing restrictions on
transferability and ownership will not apply if the board of directors
determines that it is no longer in the best interests of the Combined Company
to attempt to qualify, or to continue to qualify, as a REIT.
If any transfer of shares of stock of the Combined Company occurs which, if
effective, would result in any person beneficially or constructively owning
shares of stock of the Combined Company in excess or in violation of the above
transfer or ownership limitations (a "Purported Transferee"), then that number
of shares of stock of the Combined Company the beneficial or constructive
ownership of which otherwise would cause such person to violate such
limitations (rounded to the nearest whole share) shall be automatically
transferred to a trust (the
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"Trust") for the exclusive benefit of one or more charitable beneficiaries
(the "Charitable Beneficiary"), and the Purported Transferee shall not acquire
any rights in such shares. Such automatic transfer shall be deemed to be
effective as of the close of business on the Business Day (as defined in the
Combined Company Charter) prior to the date of such violative transfer. Shares
of stock held in the Trust shall be issued and outstanding shares of stock of
the Combined Company. The Purported Transferee shall not benefit economically
from ownership of any shares of stock held in the Trust, shall have no rights
to dividends and shall not possess any rights to vote or other rights
attributable to the shares of stock held in the Trust. The trustee of the
Trust (the "Trustee") shall have all voting rights and rights to dividends or
other distributions with respect to shares of stock held in the Trust, which
rights shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or other distribution prior to the discovery by the
Combined Company that shares of stock have been transferred to the Trustee
shall be paid by the recipient of such dividend or distribution to the Trustee
upon demand, and any dividend or other distribution authorized but unpaid
shall be paid when due to the Trustee. Any dividend or distribution so paid to
the Trustee shall be held in trust for the Charitable Beneficiary. The
Purported Transferee shall have no voting rights with respect to shares of
stock held in the Trust and, subject to Maryland law, effective as of the date
that such shares of stock have been transferred to the Trust, the Trustee
shall have the authority (at the Trustee's sole discretion) (i) to rescind as
void any vote cast by a Purported Transferee prior to the discovery by the
Combined Company that such shares have been transferred to the Trust and (ii)
to recast such vote in accordance with the desires of the Trustee acting for
the benefit of the Charitable Beneficiary. However, if the Combined Company
has already taken irreversible corporate action, then the Trustee shall not
have the authority to rescind and recast such vote.
The Trustee may transfer the shares of stock held in the Trust to a person,
designated by the Trustee, whose ownership of the shares will not violate the
Ownership Limitation or other limitations set forth in the Combined Company
Charter. Upon such sale, the interest of the Charitable Beneficiary in the
shares sold shall terminate and the Trustee shall distribute the net proceeds
of the sale to the Purported Transferee and to the Charitable Beneficiary as
follows. The Purported Transferee shall receive the lesser of (i) the price
paid by the Purported Transferee for the shares or, if the Purported
Transferee did not give value for the shares in connection with the event
causing the shares to be held in the Trust (e.g., a gift, devise or other such
transaction), the Market Price (as defined in the Combined Company Charter) of
such shares on the day of the event causing the shares to be held in the Trust
and (ii) the price per share received by the Trustee from the sale or other
disposition of the shares held in the Trust. Any net sale proceeds in excess
of the amount payable to the Purported Transferee shall be paid immediately to
the Charitable Beneficiary. If, prior to the discovery by the company that
shares of stock have been transferred to the Trust, such shares are sold by a
Purported Transferee, then (i) such shares shall be deemed to have been sold
on behalf of the Trust and (ii) to the extent that the Purported Transferee
received an amount for such shares that exceeds the amount that such Purported
Transferee was entitled to receive pursuant to the aforementioned requirement,
such excess shall be paid to the Trustee upon demand.
In addition, shares of stock held in the Trust shall be deemed to have been
offered for sale to the Combined Company, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market Price
on the date the Combined Company, or its designee, accepts such offer. The
Combined Company shall have the right to accept such offer for a period of 90
days after the later of (i) the date of the purported transfer resulting in a
transfer to the Trust and (ii) the date that the board of directors determines
in good faith that such transfer occurred. Upon such a sale to the Combined
Company, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Purported Transferee.
All certificates representing shares of the Combined Company Common Stock
and the Combined Company Preferred Stock will bear a legend referring to the
restrictions described above.
Every owner of more than 5% (or such lower percentage as required by the
Code or the regulations promulgated thereunder) of the number or value of
outstanding shares of Equity Stock of the Combined Company, shall, within 30
days after January 1 of each year, give written notice to the Combined Company
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stating the name and address of such owner, the number of shares of each class
and series of stock of the Combined Company which the owner constructively or
beneficially owns and a description of the manner in which such shares are
held. Each such owner shall provide to the Combined Company such additional
information as the Combined Company may request in order to determine the
effect, if any, of such beneficial ownership on the Combined Company's status
as a REIT and to ensure compliance with the Ownership Limit. In addition, each
stockholder shall upon demand be required to provide to the Combined Company
such information as the Combined Company may reasonably request in order to
determine the Combined Company's status as a REIT and to comply with the
requirements of any taxing authority or governmental authority or to determine
such compliance.
These ownership limits could delay, defer or prevent a transaction or a
change in control of the Combined Company that might involve a premium price
for the Equity Stock or otherwise be in the best interest of the stockholders.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Combined Company Common Stock and
Combined Company Preferred Stock is BankBoston, N.A.
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COMPARISON OF SHAREHOLDER AND STOCKHOLDER RIGHTS
Excel is incorporated and governed by the laws of the State of Maryland in
accordance with the MGCL. New Plan is a common law business trust organized in
accordance with the laws of the Commonwealth of Massachusetts. The rights of
Excel stockholders are governed by the MGCL, the Excel Charter and the Excel
Bylaws. The rights of New Plan's shareholders are governed by the New Plan
Declaration of Trust under Massachusetts law.
At the Effective Time, the shareholders of New Plan and holders of New Plan
Depositary Shares will become stockholders of the Combined Company (or holders
of the Series D Depositary Shares) and, therefore, will become subject to the
MGCL, the Combined Company Charter and the Combined Company Bylaws, each as
amended and in effect on the date thereof. A number of the differences between
Massachusetts law and the MGCL and between the organizational documents of New
Plan and Excel (and, accordingly, the Combined Company) are summarized below.
The New Plan Declaration of Trust refers to "shareholders" and the MGCL refers
to "stockholders." The use of either term herein refers to the holders of
shares of beneficial interest of New Plan or holders of capital stock of the
Combined Company, as the case may be.
The following summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the MGCL, the Combined Company
Charter, the Combined Company Bylaws and the New Plan Declaration of Trust.
Shareholders of New Plan and stockholders of Excel each are advised to review
the Combined Company Charter and the Combined Company Bylaws and the New Plan
Declaration of Trust, which are either attached hereto or are available as
described under "Available Information." All references below to the Combined
Company Charter and the Combined Company Bylaws assume that the Charter
Amendments have been approved by the requisite vote of the Excel stockholders
and have become effective, and that the Combined Company Bylaws have also
become effective. All references to the New Plan Declaration of Trust assume
that the New Plan Trust Amendments have been approved by the requisite vote of
the New Plan shareholders and have become effective.
AUTHORIZED AND ISSUED SHARES
Under the New Plan Declaration of Trust, the interests of the shareholders
of New Plan are divided into two classes of shares: shares of beneficial
interest and preferred shares. Neither class of shares entitles the holders to
any preemptive or appraisal rights of any kind. The number of shares of
beneficial interest issuable by New Plan is unlimited and without par value
and do not entitle the holder thereof to preference, conversion, exchange or
redemption rights of any kind.
The New Plan Declaration of Trust authorizes 1,000,000 preferred shares,
with a par value of $1.00 per share. The New Plan Board is authorized to issue
the preferred shares in series and, by resolution, to establish the number of
preferred shares to be included in each series and to fix the designation and
relative rights, preferences and limitations of the shares of each series,
including, but not limited to, the determination of the following: any
dividend and distribution rights; any terms on which shares may be redeemed;
any voting rights; any rights in the event of dissolution, liquidation or
winding up of New Plan; any conversion rights; and any other rights,
preferences and limitations; provided, however, that no preferred shares shall
be issued with preemptive rights or with the right to elect one or more
separate members of the New Plan Board. As of the New Plan Record Date, there
were 59,874,174 New Plan Common Shares and 150,000 New Plan Preferred Shares
issued and outstanding.
The Combined Company Charter authorizes 275,000,000 shares, of which
250,000,000 are shares of common stock, par value $.01 per share, and
25,000,000 are shares of preferred stock, par value $.01 per share. The
aggregate par value of all authorized shares of stock having par value is
$2,750,000. Under Maryland law, stockholders are generally not responsible for
a corporation's debts or obligations.
The rights and obligations of holders of capital stock of Excel and the
Combined Company are described under "Description of Excel and Combined
Company Securities."
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NEW PLAN PREFERRED SHARES/SERIES D PREFERRED STOCK
The terms of the Series D Preferred Stock to be issued by the Combined
Company and which will be represented by the Series D Depositary Shares to be
issued in connection with the Merger are substantially similar to the New Plan
Preferred Shares presently outstanding, with the exception of the following:
(i) the Series D Preferred Stock is entitled to vote together with the shares
of Combined Company Common Stock on all matters to be submitted to the holders
of the Combined Company Common Stock for a vote; (ii) the terms of the Series
D Preferred Stock entitle the holders thereof, together with other shares of
Parity Stock of the Combined Company, to elect two directors to the Combined
Company Board following such time as dividend payments on the Series D
Preferred Stock are in arrears for more than six quarters; and (iii) dividends
accrue and are payable under the terms of the New Plan Preferred Shares as of
the 15th day of March, June, September and December of each year, and
dividends will accrue under the terms of the Series D Preferred Stock as of
the first and are payable as of the 15th day of January, April, July and
October of each year. In addition, the terms of the Series D Preferred Stock
to be issued by the Combined Company will provide for the payment of a special
distribution following the Merger for the period from the last quarterly
distribution on the New Plan Preferred Shares through the Effective Time so
that distributions effectively "carry over" from the New Plan Preferred
Shares. Also following the Merger, further interim distributions for less than
a full calendar quarter will be made with respect to the Series D Preferred
Stock and the Series D Depositary Shares in order to transition the payment
dates for distributions with respect to the New Plan Preferred Shares
(currently the 15th day of each March, June, September and December) to the
payment dates for distributions with respect to the other series of Excel's
Outstanding Preferred Stock (the 15th day of each January, April, July and
October) without causing any delay in the payment of distributions to holders
of New Plan Preferred Shares as a result of the Merger. For a more complete
description of the Series D Preferred Stock of the Combined Company, see
"Excel and Combined Company Securities--Series D Preferred Stock" and Annex IV
attached hereto.
SHAREHOLDER RIGHTS PLANS
The New Plan Board recently adopted a Shareholders' Rights Plan for New Plan
(the "New Plan Rights Plan") and, in connection therewith, declared a
distribution to shareholders of record of New Plan at the close of business on
April 24, 1998 of one share purchase right (as herein defined, a "New Plan
Right") on each outstanding New Plan Common Share. The description and terms
of the New Plan Rights are set forth in a Rights Agreement between New Plan
and BankBoston, N.A., as Rights Agent. Similarly, the Excel Board recently
adopted a Preferred Share Purchase Rights Plan for Excel (the "Rights Plan")
and, in connection therewith, distributed to the holders of Excel Common Stock
of record at the close of business on May 26, 1998 one preferred share
purchase right (as herein defined, a "Right") for each outstanding share of
Excel Common Stock. For a summary description of the Rights Plan, which will
become applicable to the Combined Company following the Effective Time, see
"Description of Excel and Combined Company Securities--Preferred Share
Purchase Rights."
The Rights Plan and the New Plan Rights Plan are substantially similar in
their intent to increase the ability of the board of directors and the board
of trustees, as the case may be, in effectively representing the interests of
the stockholders or shareholders in the event of an unsolicited attempt to
acquire control of the respective companies. In addition, the New Plan Rights
Plan and the Rights Plan are substantially similar in the overall design of
the respective plans, in that both involve the distribution of rights to the
respective stockholders and shareholders which entitle the holders (other than
any person or group acquiring beneficial ownership of a certain percentage of
each entity whose Rights or New Plan Rights, as the case may be, will become
void) to acquire at a stated exercise price a number of shares having a market
value at that time equal to twice the exercise or purchase price provided for
under the terms of the respective rights; and in the event that the entity is
acquired in a merger or other business combination transaction which has not
been approved by the board of directors or the board of trustees, to purchase,
at the exercise or purchase price established in the right, a number of common
shares of the acquiring company having a market value at that time of twice
the exercise or purchase price established in the respective rights. A
principal difference in the plans is that the New Plan Rights are triggered if
a person acquires beneficial ownership of 15% or more of the outstanding
voting shares of New Plan whereas the similar threshold in the Rights Plan is
10%.
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Although substantially similar in many respects, the Rights Plan and the New
Plan Rights Plan differ in some respects as to their respective mechanics, in
that the New Plan Rights Plan provides that the New Plan Rights, once becoming
exercisable, are exercisable for New Plan Common Shares at an exercise price
of $90.00 per share, and the Rights Plan provides that the Rights, once
becoming exercisable, are initially exercisable for 1/1000th of a share of
Series C Preferred Stock at a purchase price of $100 each, and later, once a
"Trigger Event" (as defined in the Rights Agreement) has occurred, exercisable
for shares of the Combined Company Common Stock.
SHAREHOLDER AND STOCKHOLDER MEETINGS
Pursuant to the New Plan Declaration of Trust, New Plan shall hold an annual
meeting on a day, at a time and at a place set by the New Plan Board, after
delivery to the shareholders of the annual report and within six months after
the end of each fiscal year. Special meetings may be called at any time by the
Chairman of the New Plan Board, the President or a majority of the New Plan
Board, and may be called by any member of the New Plan Board upon the written
request of shareholders holding, in the aggregate, not less than 30% of the
outstanding shares having the right to vote thereat. Notice of the meetings
must be mailed to each shareholder at least ten days and not more than 60 days
before the meeting.
Pursuant to the Combined Company Bylaws, an annual meeting of the
stockholders shall be held on a date and at the time set by the Combined
Company Board in the month of May each year. The Combined Company Bylaws
provide that special meetings may be called only by the Chairman of the
Combined Company Board, by action of the Combined Company Board, or by holders
of shares entitled to cast not less than 50% of all of the votes entitled to
be cast at such meeting. The MGCL provides that a special meeting of the
stockholders of a Maryland corporation may also be called by the President of
the corporation, or by any other person specified in the charter or bylaws.
Notice of each meeting must be given to each stockholder entitled to vote at
such meeting, by mail, by presenting it in person, or by leaving it at such
stockholder's residence or usual place of business, at least ten, but no more
than 90 days before each meeting. For nominations of directors and proposals
of business to be considered by the stockholders at any annual or special
meeting, such nominations and proposals must be brought forth for
consideration pursuant to the procedures set forth under the bylaws. To comply
with these procedures, a stockholder's nomination or proposal shall be
delivered to the secretary of the corporation at the principal executive
offices of the corporation not less than 60 nor more than 90 days in advance
of the anniversary of the date of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so delivered
no earlier than the 90th day prior to such annual meeting and not later than
the close of business on the later of the 60th day prior to such annual
meeting or the 10th day following the day on which public announcement of the
date of such meeting is first made.
The New Plan Declaration of Trust contains no similar provisions
establishing procedures for nomination of members of the New Plan Board by
shareholders.
RECORD DATE FOR MEETINGS
Pursuant to the New Plan Declaration of Trust, for the purpose of
determining the shareholders who, having the right to vote upon a matter, are
entitled to vote or act upon such matter at any meeting or any adjournment
thereof, or who, having the right to participate in a dividend or
distribution, are entitled to participate in such dividend or distribution, or
for purpose of any other action, the New Plan Board from time to time may
close the transfer books for such period, not exceeding 30 days, as the New
Plan Board determines; or without closing the transfer books the New Plan
Board may fix a date not more than 60 days prior to the date of any meeting of
shareholders or dividend payment or other action as a record date for the
determination of such shareholders entitled to vote at any such meeting or any
adjournment thereof or to receive such other action, and any such
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shareholder who was a shareholder at the time so fixed shall be entitled to
vote at such meeting or any adjournment thereof or to receive such dividend,
even though he has since that date disposed of his shares, and no shareholder
becoming such after that date shall be so entitled to vote at such meeting or
any adjournment thereof or to receive such dividends or to be treated as a
shareholder of record for purposes of such other action.
Pursuant to the Combined Company Bylaws, the Combined Company Board may set,
in advance, a record date for the purpose of determining stockholders entitled
to notice of or to vote at any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any other
rights, or in order to make a determination of stockholders for any other
purpose. Such date, in any case, shall not be prior to the close of business
on the day the record date is fixed and shall be not more than 90 days and, in
the case of a meeting of stockholders, not less than ten days, before the date
on which the meeting or particular action requiring such determination of
stockholders is to be held or taken.
In lieu of fixing a record date, the Combined Company Board may provide that
the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting, and (b) the record date for the determination of stockholders
entitled to receive payment of a dividend or an allotment of any other rights
shall be the close of business on the day on which the resolution of the
directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has
been made through the closing of the transfer books and the stated period of
closing has expired. Pursuant to the MGCL, a meeting of the stockholders
convened on the date for which it was called may be adjourned from time to
time without further notice to a date not more than 120 days after the
original record date.
BOARD OF TRUSTEES/DIRECTORS
The New Plan Declaration of Trust provides that the number of members of the
New Plan Board shall not be less than five nor more than fifteen and such
number shall be determined from time to time by a majority of the New Plan
Board then acting, with the New Plan Board divided into three classes and the
number of members of the New Plan Board in each class as near equal as
practicable. The New Plan Board shall have the authority to appoint an
Investment Committee, consisting of three or more members, to whom the
approval of investments may be delegated. Not more than 49% of the members of
the New Plan Board, or the members of the New Plan Board constituting the
Investment Committee, may be "affiliated trustees," as defined by the New Plan
Declaration of Trust.
Any member of the New Plan Board may be removed for cause, by the holders of
at least 66 2/3% of the total shares then outstanding having the right to vote
for the election of members of the New Plan Board or by the written consent of
all of the members of the New Plan Board other than the member whose removal
is then being considered.
A vacancy may be filled by vote of the holders of at least a majority of the
shares entitled to vote for the election of members of the New Plan Board,
acting at any meeting of the shareholders duly called for that purpose, or a
majority of the New Plan Board continuing in office, acting by written
instrument or instruments.
Meetings of the New Plan Board may be held from time to time, upon the call
of the Chairman of the Board, the President or the Secretary of New Plan or
any two members of the New Plan Board.
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The Combined Company Charter provides for 15 initial directors, which number
may be increased or decreased, but shall not be less than three nor greater
than 21. There is no prohibition against affiliated directors in the Combined
Company Charter. The Combined Company Bylaws permit the Combined Company Board
to appoint from its members an Investment Committee, consisting of four
directors, and other committees composed of two or more directors. However,
pursuant to the Combined Company Bylaws, the Combined Company shall not have
an Executive Committee.
Subject to the rights of holders of one or more classes or series of
preferred stock to elect or remove one or more directors, any director (or the
entire board of directors) may be removed only with cause, upon the
affirmative vote of a majority of all the votes entitled to be cast for the
election of directors. A special meeting of the stockholders may be called,
pursuant to the Combined Company Bylaws, for the purpose of removing a
director.
Any vacancy on the Combined Company Board for any cause other than an
increase in the number of directors may be filled by a majority of the
remaining members of the Combined Company Board. Any vacancy created by an
increase in the number of directors may be filled by directors constituting a
majority of the Combined Company Board. The stockholders may elect a successor
to fill a vacancy which results from the removal of a director (other than the
removal of a director elected separately by any class or series).
An annual meeting of the Combined Company Board shall be held immediately
after and at the same place as the annual meeting of the stockholders. Special
meetings of the Combined Company Board may be called only at the request of
the Chairman of the Combined Company Board, the Chief Executive Officer or the
President of the Combined Company, or members constituting a majority of the
members of the Combined Company Board then in office.
The New Plan Board and the Combined Company Board are each divided into
three classes, holding staggered terms of office. The members of the New Plan
Board or members of the Combined Company Board of the class whose term expires
at each annual meeting of the shareholders or stockholders, as the case may
be, will be elected to hold office for a term expiring at the third succeeding
annual meeting.
POWERS OF THE BOARD OF TRUSTEES/DIRECTORS
The New Plan Declaration of Trust grants to the New Plan Board general
authority over the business and assets of New Plan, as well as certain
enumerated rights and powers, subject to certain specified limitations.
The Combined Company Charter grants the Combined Company Board general
authority, pursuant to all powers conferred under the general laws of the
State of Maryland.
RESTRICTIONS ON ACTIVITIES
The New Plan Declaration of Trust specifically enumerates certain
investments and activities which may not be undertaken by the New Plan Board.
Under the New Plan Declaration of Trust, the New Plan Board shall not:
(A) invest more than 10% of the New Plan assets in unimproved real
property, or mortgages of unimproved real property, except real property in
the process of development or which will be developed within a reasonable
period of time, as determined by the New Plan Board; (B) engage in any
trading activities with respect to New Plan's properties; (C) except as to
preferred shares or under any New Plan DRIP, issue redeemable equity
securities or equity securities of more than one class (which shall not,
however, prohibit the issuance of convertible obligations, warrants, rights
and options); (D) invest more than 10% of the New Plan assets in junior
mortgage loans excluding wrap-around loans; (E) issue debt securities to
the public unless the historical cash flow of New Plan, excluding
extraordinary items, is sufficient to cover the interest on debt
securities; (F) invest in commodities; (G) invest in contracts between
third parties
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for the sale of real estate for the purpose of reselling such contracts to
others; (H) engage in underwriting or the agency distribution of securities
issued by others; (I) invest in securities of any company which to the
actual knowledge of the New Plan Board holds investment securities or
engages in activities prohibited by the preceding clauses (A) through (H);
or (J) permit the amount of outstanding indebtedness of New Plan for money
borrowed from or guaranteed to others (including non-recourse indebtedness)
to exceed 500% of the net assets of New Plan.
The Combined Company Charter does not contain similar restrictions on the
Combined Company Board with respect to investments or activities on behalf of
the Combined Company.
INDEMNIFICATION
The New Plan Declaration of Trust and the Combined Company Charter each
contain similar provisions concerning the indemnification of trustees,
directors and officers. However, the New Plan Declaration of Trust extends
such indemnification to employees, agents and shareholders while the Combined
Company Bylaws provide that the Combined Company may extend such
indemnification to employees and agents of the Combined Company with the
approval of the Combined Company Board. Under Maryland law, stockholders
generally are not responsible for a corporation's debts or obligations.
STANDARD OF CONDUCT
Subject only to the express limitations contained in the New Plan
Declaration of Trust (see "--Restrictions on Activities" above and "--
Interested Party Transactions" below), the New Plan Declaration of Trust
grants broad powers to the members of the New Plan Board exercisable, in their
sole judgment and discretion, without regard to whether such exercise would be
permissible or appropriate for trustees subject to the "prudent man rule" or
other statutes or legal principles limiting or restricting in any manner the
investments or trust funds.
The MGCL requires any director of a Maryland corporation, such as the
Combined Company, to perform his duties as a director in good faith, in a
manner he reasonably believes to be in the best interest of the corporation
and with the care that an ordinarily prudent person in a like position would
use under similar circumstances.
LIMITATION OF LIABILITY
Under the common law of Massachusetts, which does not treat a trust as a
separate business entity, liabilities of a business trust are technically the
liabilities of the trustees individually, to the extent not negated by
contract. However, the New Plan Declaration of Trust provides that no member
of the New Plan Board, officer, employee or agent of New Plan shall have any
personal liability save that arising from said person's own bad faith, willful
misconduct, gross negligence or reckless disregard of his duties or failure to
act in good faith in the reasonable belief that his action was in the best
interests of New Plan. The New Plan Declaration of Trust further provides that
no member of the New Plan Board shall be personally liable to New Plan or its
shareholders for monetary damages for breach of fiduciary duty as a member of
the New Plan Board notwithstanding any provision of law imposing such
liability, except for liability (i) for any breach of the member's duty of
loyalty to New Plan or its shareholders, (ii) acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 61 or 62 of the Massachusetts Business Corporation Law or
(iv) for any fiduciary duty from which the member of the New Plan Board
received an improper personal benefit.
The MGCL permits a corporation to include in its charter, and the Combined
Company has included, a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action.
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INTERESTED PARTY TRANSACTIONS
The New Plan Declaration of Trust provides that the members of the New Plan
Board may not knowingly, directly or indirectly, lend any of the property of
New Plan to, purchase or otherwise acquire any property whatsoever (other than
securities of New Plan) from, or sell or otherwise transfer any property
whatsoever (other than securities of New Plan) to, any person who is (i) a
trustee, officer or employee of New Plan or is otherwise an affiliate of any
trustee, officer, or employee of New Plan or (ii), if there is an adviser
(which there has not been for several years), the adviser or any affiliate of
the adviser or affiliate of any affiliate of the adviser, nor shall any such
person receive any commission or other remuneration, directly or indirectly,
in connection with the loan, purchase, sale or transfer of assets of New Plan,
except transactions that are approved by a majority of disinterested members
of the New Plan Board and in all material respects on such terms as are fair
and reasonable to New Plan at the time of the transaction.
Under the MGCL, any contract or transaction between a corporation and any
director or entity in which the director has a material financial interest
will be voidable unless (i) it is approved, after disclosure of the interest,
by the affirmative vote of a majority of disinterested directors or by the
affirmative vote of a majority of the votes cast by disinterested shareholders
or (ii) it is fair and reasonable to the corporation. Without limiting any
other procedures available by law or otherwise to the Combined Company, the
Combined Company Charter permits, with the approval of a majority of
disinterested directors, the Combined Company Board to authorize the execution
and performance by the Combined Company of any agreement with a person,
corporation, association, company, trust partnership or other organization,
although one or more of the directors or officers may be a party or an
officer, director, stockholder, or member of such party, whereby, subject to
the supervision and control of the Combined Company Board, such other party
renders or makes available to the Combined Company managerial, investment,
advisory, and/or related services, office space and other services and
facilities, including management or supervision of the Combined Company's
investments.
AMENDMENTS
The New Plan Declaration of Trust may be amended or terminated, with certain
exceptions, by the majority vote of the New Plan Board and the affirmative
written vote or written consent of the holders of not less than 66 2/3% of the
shares then outstanding having the right to vote thereon, except that the New
Plan Board may, from time to time, with a two-thirds vote of the New Plan
Board, amend or alter the provisions of the New Plan Declaration of Trust,
without the vote or assent of the shareholders, to the extent deemed necessary
by the New Plan Board in good faith to meet the requirements for qualification
as a REIT.
The Combined Company Charter may be amended upon the affirmative vote of a
majority of all stockholders entitled to vote thereon after due authorization,
approval or advice of the Combined Company Board.
RESTRICTION ON TRANSFER, ACQUISITION AND REDEMPTION OF SHARES
In order that New Plan may qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding shares may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year. In order to
prevent a violation of this rule and to preserve the status of New Plan as a
REIT, the New Plan Declaration of Trust does not permit, except as to certain
"Excepted Persons" referred to therein, any issuance or transfer of shares, or
securities convertible into shares, that would create a direct or indirect
owner of more than 7.5% of the lesser of the number or the value of the total
shares outstanding. The New Plan Declaration of Trust also prohibits ownership
by any person, except as to Excepted Persons, if two-thirds of the members of
the New Plan Board, at any time and in good faith, shall be of the opinion
that the direct or indirect ownership of shares by persons has become
concentrated or that there is a substantial possibility it may become
concentrated, to an extent which would prevent New Plan from continuing to
qualify as a REIT. Pursuant to the applicable provisions of the New Plan
Declaration of Trust, any such transfer shall be deemed void ab initio,
subject to stop order, redeemed by New Plan or deemed a transfer to New Plan.
These provisions would be modified by the New Plan Trust Amendments to reflect
the fact that after the effectiveness of the Merger, New Plan will no longer
be qualified as a REIT.
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The Combined Company Charter contains provisions, designed to insure that
the Combined Company remains qualified as a REIT, that limit any holder from
owning or being deemed to own by virtue of the attribution provisions of the
Code, in excess of 9.8% (defined herein as the Ownership Limit) (by value or
by number of shares, whichever is more restrictive, except only by value in
the case of the Series A Preferred Stock and the Series B Preferred Stock) of
each class or series of outstanding Equity Stock of the Combined Company
(except in the case of the Series A Preferred Stock and the Series D Preferred
Stock, where the prohibition relates to the stated percentage of all
outstanding Equity Stock of the Combined Company). In addition, the Combined
Company Charter restricts transfers which would result in the equity stock of
the Combined Company being owned by fewer than 100 persons or which would
otherwise result in the Combined Company being "closely held" within the
meaning of Section 856(h) of the Code, or otherwise result in the Combined
Company failing to qualify as a REIT. The Combined Company Board may waive the
Ownership Limit if evidence satisfactory to the Combined Company Board, in the
form of an opinion of tax counsel, a ruling from the IRS, or other evidence
satisfactory to the Combined Company Board, is presented and the Combined
Company Board determines on the basis thereof that, notwithstanding such
exemption, the status of Combined Company as a REIT will not be jeopardized.
Any transfer of equity stock or any security convertible into equity stock
that would create direct or indirect ownership of equity stock in excess of
the Ownership Limit or that would result in the disqualification of the
Combined Company as a REIT, including any transfer that results in the
Combined Company being "closely held" or owned by fewer than 100 persons,
shall be void ab initio or transferred to a trust for the benefit of one or
more charitable beneficiaries, pursuant to the applicable provisions of the
Combined Company Charter. The Combined Company Charter provides that the
Ownership Limit shall apply to the Equity Stock of the Combined Company, and,
except in respect of the Series A Preferred Stock and the Series D Preferred
Stock, that the Ownership Limit will apply separately and independently to
each individual class or series of common stock and to each individual class
or series of preferred stock outstanding from time to time. Accordingly, the
Combined Company Charter provides that the Ownership Limit applies separately
to the common stock and, except as noted above, the preferred stock on a class
by class, and series by series, basis, and will apply separately to any
successive series or classes of common stock or preferred stock which may be
issued from time to time.
The restrictions and limitations on ownership and transfer of the equity
stock of the Combined Company will not preclude the settlement of transactions
on the NYSE or any other stock exchange in which the shares are listed from
time to time. The foregoing restrictions and limitations on ownership and
transfer of the equity stock of the Combined Company also will not apply if
the Combined Company Board determines that it is no longer in the best
interests of the Combined Company to continue to qualify as a REIT.
To assist the Combined Company Board in monitoring the ownership of the
equity stock of the Combined Company for purposes of continuing to insure the
status of the Combined Company's status as a REIT, and in order to fulfill the
requirements of the Code, any owner of greater than 5% of the number or value
of outstanding Equity Stock of the Combined Company shall provide to the
Combined Company within 30 days of January 1 of each year, the name and
address of such owner, the number and description of how shares are held and
such other information as the Combined Company shall request. The New Plan
Declaration of Trust similarly requires all shareholders of New Plan to notify
New Plan of such shareholder's ownership, directly or indirectly, of 500,000
or more shares, within ten days of becoming aware of such ownership.
SHAREHOLDER VOTING
The New Plan Declaration of Trust specifically enumerates those matters
which may be voted upon by shareholders. These include the election and
removal for cause of members of the New Plan Board, amendments to the New Plan
Declaration of Trust, the sale, conveyance, assignment, exchange, transfer or
other disposition of 50% or more of New Plan's property, reorganization of New
Plan, approval of certain transactions between New Plan and related persons or
an adviser to New Plan, certain determinations as to derivative or class
action litigation on behalf of New Plan or its shareholders, and any merger of
New Plan. Under the New Plan
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Declaration of Trust, the holders of preferred shares shall further have the
right to vote only on those matters specified in the resolution authorizing
the issuance of such shares except that no preferred shares may be issued with
the right to elect one or more separate members of the New Plan Board.
Whenever any action is to be taken by the shareholders, it shall be authorized
by a majority of the votes entitled to be cast, at a meeting of shareholders
at which a quorum is present, except that the amendment of the New Plan
Declaration of Trust and the termination, reorganization or merger of New Plan
require the affirmative vote of 66 2/3% of the votes entitled to be cast.
Pursuant to the Combined Company Bylaws, a plurality of all the votes cast
at a meeting of the stockholders duly called and at which a quorum is present
shall be sufficient to elect a director to the Combined Company Board. A
majority of the votes cast at a meeting of stockholders duly called and at
which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the Combined Company Charter. Pursuant
to the Combined Company Charter, notwithstanding any provision of law
permitting or requiring any action to be taken or authorized by the
affirmative vote of the holders of a greater number of votes, the affirmative
vote of a majority of all votes entitled to be cast on any matter or act
requiring approval of the stockholders of the Combined Company, including, but
not limited to any amendment of the Combined Company Charter, consolidation,
merger, share exchange, transfer of assets or dissolution, shall be
sufficient, valid and effective after due authorization, approval or advice by
the Combined Company Board, to approve and authorize such matter or act. In
addition, the Series D Preferred Stock provides for, and therefore the holders
of the Series D Depositary Shares will be entitled to exercise, the right to
vote with the Combined Company Common Stock on matters presented to the
holders of such shares for a vote.
INFORMAL ACTIONS
The New Plan Declaration of Trust and Combined Company Bylaws each provide
for any action which may be taken at a meeting of the shareholders, the New
Plan Board or the Combined Company Board, to be taken by informal written
action of the shareholders, members of the New Plan Board or members of the
Combined Company Board entitled to vote thereon. The written consent of the
New Plan shareholders must be signed by the holders of a majority of all
outstanding shares having the right to vote thereon, or such larger proportion
thereof as would be required for a vote of shareholders at a meeting. The
written consent of the New Plan Board must be signed by a majority of its
members (or a majority of a particular group whose vote is required). In the
case of the Combined Company, such actions of the stockholders or the Combined
Company Board must be unanimous, that is, the writing must be executed by
every Combined Company stockholder or member of the Combined Company Board
entitled to vote on the matter.
DIVIDENDS AND OTHER DISTRIBUTIONS
The New Plan Declaration of Trust provides that the New Plan Board may
declare and pay dividends to the shareholders having the right to participate
in any dividend or distribution, in proportion to their respective ownership
of shares, out of the earnings, profits or surplus, capital or assets of New
Plan or any other source. For so long as qualification as a REIT is the policy
of New Plan, the New Plan Declaration of Trust instructs the New Plan Board to
endeavor to declare and pay such dividends as shall be necessary for New Plan
to qualify as a REIT under the provisions of the Code. The New Plan
Declaration of Trust provides that the New Plan Board may retain from the net
profits such amount as it may deem necessary to pay the debts or expenses of
New Plan or to meet obligations of New Plan, or as it may deem desirable to
use in the conduct of the affairs or to retain for future requirements or
extensions of the business of New Plan.
Pursuant to the Combined Company Bylaws, dividends upon the stock of the
Combined Company may be declared by the Combined Company Board, subject to the
provisions of law and the Combined Company Charter. The MGCL provides that no
dividend or other distribution may be paid to stockholders of a Maryland
corporation unless, after payment of the distribution, the corporation is able
to pay its debts as they become due in the usual course of business and the
corporation's total assets would be at least equal the sum of its liabilities
and unless the charter permits otherwise, the amount that would be needed to
satisfy the preferential rights on
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dissolution of stockholders whose preferential rights on dissolution are
superior to stockholders receiving the distribution. The provisions of the
Combined Company Charter establishing the terms of the outstanding shares of
preferred stock of the Combined Company, comprised of Series A Preferred Stock
and Series B Preferred Stock, provide and the terms of the Series D Preferred
Stock will provide, that, in determining whether a dividend or other
distribution may be paid on shares of stock of the Combined Company, no effect
need be given to the amounts that would be needed to satisfy the preferential
rights on dissolution of holders of such outstanding preferred stock; the New
Plan Declaration of Trust contains no provision comparable to the MGCL or to
the Combined Company Charter or the Series D Preferred Stock Articles
Supplementary.
LIMITATIONS ON DISSENTERS' APPRAISAL RIGHTS
So long as the shares of stock are listed on a national stock exchange (as
are the NYSE-listed shares of the Combined Company Common Stock) or are
designated as a national market security on an interdealer quotation system by
the National Association of Securities Dealers, Inc., holders of such shares
who dissent from certain corporate transactions have no right under the MGCL
to an appraisal and payment of the fair value of their shares, except to the
limited extent set forth under "Comparison of Shareholder and Stockholder
Rights--Control Share Acquisitions." Absent such exception, as a general
matter the MGCL provides that a dissenting stockholder of a Maryland
corporation has the right to demand and receive the fair value of such
holder's stock, subject to complying with specified procedures, if the
corporation consolidates or merges with, or exchanges its shares for shares of
another corporation, or sells substantially all of its assets, or amends its
charter in a way which alters the contract rights expressly set forth in the
charter of any outstanding stock and substantially adversely affects the
stockholders' rights (if the charter does not reserve the right to make such
an amendment, which the Combined Company Charter does).
The comparable Massachusetts statute relating to appraisal rights of
dissenters applies principally to dissenting stockholders of a Massachusetts
business corporation with only limited application to dissenting shareholders
of a common law business trust such as New Plan, which application does not
include approval or implementation of the New Plan Trust Amendments or the
Merger. The New Plan Declaration of Trust specifically negates appraisal
rights of New Plan shareholders.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation
who, at any time within the two-year period prior to the date in question, was
the beneficial owner of ten percent or more of the voting power of the then-
outstanding voting stock of the corporation (an "Interested Stockholder") or
an affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by
holders of outstanding shares of voting stock of the corporation and (b) two-
thirds of the votes entitled to be cast by holders of voting stock of the
corporation other than shares held by the Interested Stockholder with whom (or
with whose affiliate) the business combination is to be effected, unless,
among other conditions, the corporation's common stockholders receive a
minimum price (as defined in the MGCL) for their shares and the consideration
is received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply,
however, to business combinations that are approved or exempted by the board
of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder.
The Excel Board has adopted a resolution providing that Excel, and the
Combined Company subsequent to the Effective Time, to the extent permitted by
applicable law, elects not to be governed by the provisions of the MGCL
relative to "business combinations," but no assurances can be given that such
resolution will not be modified, amended or revoked in the future or that the
provisions of the MGCL relative to business combinations will not be
reinstated or again become applicable to the Combined Company.
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The comparable Massachusetts statute relating to business combinations is
not applicable to common law business trusts (except for a business trust that
is a gas or electric operating or holding company), and accordingly New Plan
is not subject to any statutory provision in Massachusetts of the type
commonly referred to as a business combination statute.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror, by officers or by
directors who are employees of the corporation. "Control Shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority or more of all voting power.
Control shares do not include shares the acquiring person is then entitled to
vote as a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitations, the corporation may
redeem any or all of the control shares (except those for which voting rights
have previously been approved) for fair value determined, without regard to
the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquiror or of any meeting of
stockholders at which the voting rights of such shares are considered and not
approved. If voting rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of the shares
entitled to vote, all other stockholders may exercise appraisal rights. The
fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquiror in the
control share acquisition.
The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.
The Combined Company Bylaws contain a provision exempting from the control
share acquisition statute any and all acquisitions by any holder of the
Combined Company's stock. There can be no assurance that such provision will
not be amended or eliminated at any time in the future.
The comparable Massachusetts statute relating to control share acquisitions
is not applicable to common law business trusts (except for a business trust
that is a gas or electric operating or holding company), and accordingly New
Plan is not subject to any statutory provision in Massachusetts of the type
commonly referred to as a control share acquisition statute.
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NEW PLAN TRUST AMENDMENTS
The New Plan Board has adopted amendments to the New Plan Declaration of
Trust which are designed to enable New Plan to effect the Merger. The
following is a summary of the proposed New Plan Trust Amendments. The full
text of the New Plan Trust Amendments is set forth in Annex II.
General. Section 13.3 of the existing New Plan Declaration of Trust
currently authorizes the New Plan Board, after receiving the affirmative vote
of at least 66 2/3% of all outstanding New Plan Common Shares entitled to
vote, to merge New Plan into, consolidate New Plan with, or sell, convey or
transfer all of New Plan's assets to a successor organization in exchange for
shares or securities of such successor organization and the assumption by such
successor of the liabilities of New Plan, and thereupon terminate New Plan and
distribute the shares or securities of the successor organization among the
New Plan shareholders in redemption of their shares according to their
respective rights. The New Plan Trust Amendments add a new Section 13.4 to the
New Plan Declaration of Trust that provides that in lieu of a reorganization
or business combination followed by the termination of New Plan and the
distribution of the securities of the successor organization among the New
Plan shareholders in redemption of their New Plan shares (as provided in
Section 13.3), the New Plan Board may cause New Plan to merge with another
entity in a reorganization or business combination transaction ("Alternative
Business Combination Transaction") pursuant to which (a) New Plan shares are
exchanged for such securities of a person of which such other entity is a
subsidiary or for such other consideration as are provided for in the
agreement among New Plan, such other entity and such person, and (b) New Plan
is not terminated but remains in existence as a subsidiary of such person.
The Merger. The New Plan Trust Amendments identify the Merger as an
Alternative Business Combination Transaction authorized by the new Section
13.4 and specifically provide that the New Plan Board may implement the Merger
provided for in the Merger Agreement as approved by the affirmative vote of at
least 66 2/3% of all outstanding New Plan Common Shares at the New Plan
Special Meeting. The Trust Amendments also provide for the conversion of the
New Plan Common Shares as provided in the Merger Agreement. The New Plan Board
is given full power and authority, and is directed, to take or authorize such
actions as it determines to be appropriate or convenient to carry out and to
implement the Merger Agreement and to effect the Merger.
Alternative Business Combination Transactions. In the event that the Merger
should not be effected for any reason and the New Plan Board recommends an
Alternative Business Combination Transaction with some other person, the
authority of the New Plan Board to implement such other Alternative Business
Combination Transaction is subject to the prior approval of 66 2/3% or more of
all outstanding New Plan Common Shares having the right to vote thereon at a
meeting of shareholders the notice for which includes a description of the
principal terms of such other Alternative Business Combination Transaction.
Finally, the New Plan Trust Amendments specifically authorize the
consummation of the Merger (or any other Alternative Business Combination
Transaction) approved by the New Plan Common Shares as provided in Section
13.4, notwithstanding other potentially inconsistent provisions of the
existing New Plan Declaration of Trust such as those relating to shareholder
ownership limitations or REIT status.
Approval of the New Plan Trust Amendments. Approval of the New Plan Trust
Amendments will require the affirmative vote of at least 66 2/3% of all
outstanding New Plan Common Shares entitled to vote thereon.
THE NEW PLAN BOARD HAS UNANIMOUSLY DETERMINED THAT THE NEW PLAN TRUST
AMENDMENTS ARE IN THE BEST INTERESTS OF THE SHAREHOLDERS OF NEW PLAN. THE NEW
PLAN BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF NEW PLAN VOTE "FOR"
THE NEW PLAN TRUST AMENDMENTS.
BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE
NEW PLAN SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN
SHAREHOLDERS TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL
RESULT IN THE MERGER NOT OCCURRING.
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EXCEL CHARTER AMENDMENTS
GENERAL
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to amend certain provisions of the Excel Charter, which upon
the effectiveness of such amendments will become the Combined Company Charter.
This will be accomplished by filing Articles of Amendment with the SDAT (the
"Articles of Amendment") amending and restating in its entirety the Articles
of Amendment and Restatement filed with the SDAT on May 23, 1995, whereupon
the then current provisions of the Excel Charter will include the Articles of
Amendment, together with the Articles Supplementary filed with the SDAT with
respect to each of the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock and the Series D Preferred Stock.
As required by the MGCL and the Excel Charter, the affirmative vote of the
holders of a majority of the issued and outstanding shares of Excel Common
Stock is required to approve the Charter Amendments. The following description
is qualified in its entirety by the proposed Articles of Amendment a copy of
which is attached hereto as Annex III.
The Charter Amendments affect the following significant portions of the
Excel Charter, which will become the Combined Company Charter following such
changes:
.To change the name of Excel to New Plan Excel Realty Trust, Inc.
. To change the authorized capital stock of Excel to 250,000,000 shares of
Excel Common Stock and 25,000,000 shares of Excel Preferred Stock.
.To increase the maximum number of Excel directors to 21.
.To change the requirements for removal of an Excel director.
. To add the restriction that no amendment to the Excel Charter or Excel
Bylaws can adversely affect the indemnification rights of the directors
and officers entitled to such rights.
. To clarify and modify the restrictions on limitation and ownership of
the capital stock of the Combined Company in order to maintain its
status as a REIT.
In addition, various other amendments to the Excel Charter are to be effected
by the Charter Amendments. Accordingly, careful review of the proposed
Articles of Amendment attached hereto as Annex III is encouraged.
THE EXCEL BOARD HAS UNANIMOUSLY DECLARED ADVISABLE THE CHARTER AMENDMENTS
AND DETERMINED THAT THEY ARE IN THE BEST INTERESTS OF EXCEL AND ITS
STOCKHOLDERS. THE EXCEL BOARD UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF THE
EXCEL COMMON STOCK VOTE "FOR" THE CHARTER AMENDMENTS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
NAME CHANGE
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to change its name to New Plan Excel Realty Trust, Inc. This
change is contained in Article II of the proposed Articles of Amendment.
The name of Excel is proposed to be changed to reflect the consummation of
the Merger and the fact that the combined businesses of New Plan and Excel
prior to the Effective Time will become the business of the Combined Company
after the Effective Time.
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CHANGE IN AUTHORIZED CAPITAL
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to change its authorized capital structure. This change is
contained in Article V of the Articles of Amendment.
The proposed change in authorized capital stock is as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES CURRENT PROPOSED
---------------- ----------- -----------
<S> <C> <C>
Common Stock...................................... 100,000,000 250,000,000
Preferred Stock................................... 10,000,000 25,000,000
----------- -----------
Total Authorized.............................. 110,000,000 275,000,000
</TABLE>
The Excel Board believes that it is desirable to have an increased number of
authorized shares of capital stock so that there will be sufficient shares
available for purposes that the Combined Company Board may hereafter determine
to be in the best interests of the Combined Company and its stockholders. Such
purposes could include the offer of shares for cash, the declaration of stock
splits and stock dividends, mergers and acquisitions and other general
corporate purposes. In many situations, prompt action may be required which
would not permit seeking stockholder approval to authorize additional shares
for specific transactions on a timely basis. While the Excel Board does not
have a present plan to issue additional shares of Excel Common Stock or Excel
Preferred Stock (other than in connection with the Merger), it believes that
the Combined Company Board should have the flexibility to act promptly in the
best interests of the Combined Company and its stockholders. The terms of a
future issuance of shares of capital stock will be dependent largely on market
and financial conditions and other factors existing at the time of issuance.
The availability for issuance of additional shares of the Combined Company
Common Stock or the Combined Company Preferred Stock could enable the Combined
Company Board to render more difficult or discourage an attempt to obtain
control of the Combined Company. However, Excel is not aware of any pending or
threatened efforts to obtain such control.
INCREASE IN NUMBER OF EXCEL DIRECTORS
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to increase the maximum number of directors to 21. This
change is contained in Article VI of the Articles of Amendment.
Currently, Excel has six directors serving on the Excel Board; however,
after the Effective Time the Combined Company Board will consist of 15
directors, the maximum currently allowed by the Excel Bylaws. The Excel
Charter currently provides that the number of directors must be set in
accordance with the Excel Bylaws. The Excel Bylaws currently provide that the
number of directors can never be more than 15 or less than the minimum
required under the MCGL. In connection with the Merger, the Excel Bylaws are
being amended to increase the maximum number of directors to 21. See "--
Restated Bylaws" below. The increase in the maximum number of directors is
necessary in part to comply with the default director provisions under the
rights afforded to the holders of the Excel Preferred Stock and will also give
the Combined Company Board the needed flexibility to add qualified directors
as it deems necessary or appropriate in the future. In addition, certain
aspects of the Excel Charter relating to the classification of directors will
be amended to clarify, among other things, that each of the three classes of
directors of the Combined Company Board will be as equal in number as is
practicable, and to designate the three classes as Class I, Class II and Class
III.
REMOVAL REQUIREMENTS OF DIRECTORS
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to amend the requirements concerning removal of directors.
This change is contained in Article VI of the Articles of Amendment.
The Excel Charter currently provides that a director may be removed by a
vote of two-thirds of all votes entitled to vote for the election of directors
with or without cause at a special meeting of stockholders. The Combined
Company Charter proposes to allow removal of a director only for cause,
subject to the rights of holders of preferred stock to elect or remove one or
more directors.
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The proposed restriction on the removal of directors could render more
difficult or discourage an attempt to obtain control of the Combined Company.
However, Excel is currently not aware of any pending or threatened efforts to
obtain such control.
RESTRICTION ON AMENDMENT OF CHARTER OR BYLAWS
As a condition precedent to New Plan's obligation to consummate the Merger,
Excel is required to amend the Excel Charter to provide certain restrictions
concerning amendments to the Excel Charter or Excel Bylaws affecting the
indemnification rights of directors or officers. This change is contained in
Article VIII of the Articles of Amendment.
Currently, the Excel Charter does not provide any restrictions concerning
amendments to the Excel Charter or Excel Bylaws which could affect the
indemnification rights of directors and officers. The Combined Company Charter
will provide that no amendment to the Combined Company Charter or the Combined
Company Bylaws may adversely affect the rights of any person entitled to
indemnification or advancement of expenses under the Combined Company Charter
or the Combined Company Bylaws for any act which occurred prior to such
amendment. The Excel Board believes that it is desirable to add this
restriction on amendment because it offers certain protections needed to
retain qualified directors and officers. This provision of the Combined
Company Charter will provide the directors and officers of the Combined
Company with rights of indemnification and advancement of expenses to the
fullest extent permitted by Maryland law.
MODIFICATIONS TO RESTRICTIONS AND LIMITATIONS ON OWNERSHIP
In addition to modifications to the Excel Charter required as a condition to
New Plan's obligation to consummate the Merger, the Charter Amendments provide
for several additional modifications, including modifications to the
provisions of Article VII of the current Excel Charter designed to preserve
the status of Excel as a REIT. These modifications provide that a
determination of whether a stockholder has exceeded the Ownership Limit will
be made on the basis of the value or the number of shares of Combined Company
Common Stock held by the stockholders, whichever is more restrictive, as
opposed to only by value as provided in the current Excel Charter; and further
provide that such determination will be made on a class-by-class and series-
by-series basis (except as respects the Series A Preferred Stock and Series D
Preferred Stock, to which the Ownership Limit applies on the basis of the
stated percentage of all outstanding Equity Stock) as opposed to all Equity
Stock considered as a whole. The Excel Board has determined that these
modifications, although imposing increased restrictions on ownership of the
Equity Stock of the Combined Company, are in the best interest of the
stockholders and will assist in assuring that the Combined Company's status as
a REIT is not jeopardized as a result of its violating the diversity of share
ownership requirements applicable to REITs.
THE EXCEL BOARD CONSIDERS THE APPROVAL OF THE CHARTER AMENDMENTS TO BE IN
THE BEST INTERESTS OF EXCEL AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS A
VOTE FOR THE CHARTER AMENDMENTS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
RESTATED BYLAWS
Pursuant to the Merger Agreement, Excel will, prior to the Effective Time,
adopt the Combined Company Bylaws, which will amend various provisions of the
Excel Bylaws. The Excel Board unanimously authorized, adopted and approved the
Combined Company Bylaws, subject to consummation of the Merger. In the event
of approval of the Share Issuance, the Charter Amendments and the Election of
Directors by the requisite vote of
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holders of Excel Common Stock, and the New Plan Trust Amendments and the
Merger by the requisite vote of holders of New Plan Common Shares, the
Combined Company Bylaws will, without the taking of any stockholder action,
become the bylaws of the Combined Company upon effectiveness of the Merger.
The Combined Company Bylaws, if made effective upon consummation of the
Merger, will alter certain aspects of the governance of the Combined Company.
Set forth below is a description of the material changes which are proposed to
be made to the Excel Bylaws.
With respect to matters affecting stockholders of Excel, currently the Excel
Bylaws authorize stockholders representing not less than 10% of the
outstanding Excel Common Stock to call special meetings of the stockholders.
The Combined Company Bylaws would authorize stockholders representing not less
than 50% of the outstanding Combined Company Common Stock to call special
meetings of the stockholders.
With respect to Excel's directors, the Excel Bylaws currently provide that
the maximum number of Excel directors cannot be more than 15. The Combined
Company Bylaws provide that the maximum number of directors will be increased
to 21 (including two directorships which will be reserved to the extent
necessary to comply with any default director provisions under the rights
afforded to the holders of preferred stock). The minimum number of directors
pursuant to the Combined Company Bylaws shall remain the same as currently
provided in the Excel Bylaws, which is the minimum number required by the
MGCL.
The Excel Bylaws currently provide that a director may be removed for cause
or without cause. The Combined Company Bylaws reflect the proposed amendment
to the Excel Charter which only allows for removal of directors for cause.
Currently, the Excel Bylaws authorize the Excel Board to appoint an
Executive Committee, an Audit Committee and other committees as it deems
necessary. The Combined Company Bylaws, if made effective upon consummation of
the Merger, will provide the Combined Company Board with the authority to
create an Investment Committee and certain other committees as it deems
necessary with the exception of an Executive Committee, which is expressly
prohibited under the Combined Company Bylaws. The Investment Committee will be
comprised of four directors. Subject to the requirements of Maryland law, the
Investment Committee will have the power and authority, with the consent of at
least three members thereof, to approve on behalf of the Combined Company any
acquisition or disposition with a purchase price (taking into account purchase
money financing and assumption of existing mortgage indebtedness) of less than
5% of the total assets (before accumulated depreciation and amortization) of
the Combined Company on a consolidated basis, determined in accordance with
generally accepted accounting principles, at the time such transaction is
entered into. The Investment Committee also has authority to approve any such
transaction in an amount in excess of 5%, but less than 10%, of total assets
(before accumulated depreciation and amortization) of the Combined Company,
determined in accordance with generally accepted accounting principles, by the
consent of all four members of the Investment Committee and two additional
members of the Combined Company Board. The Investment Committee is not
authorized to approve any refinancing, unsecured financing or new financing,
other than purchase money financing or debt assumed as described above. Under
the Combined Company Bylaws, the Combined Company Board may also delegate to
the Investment Committee the authority to approve the use of so-called Down
REIT units in connection with such a transaction and authorize and reserve for
issuance shares of the Combined Company Common Stock upon conversion of such
Down REIT units.
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ELECTION OF DIRECTORS
At the Excel Special Meeting, holders of Excel Common Stock will be asked to
elect ten directors to the Combined Company Board. As a condition precedent to
the Merger, New Plan and Excel are required to cause the Combined Company
Board to consist of 15 directors (Excel's six current directors and New Plan's
nine current trustees). Five of Excel's six current directors will continue to
serve on the Combined Company Board in their current classes. One of Excel's
current directors, Gary B. Sabin, will be elected into a new class.
Accordingly, at the Excel Special Meeting the holders of Excel Common Stock
will be asked to elect Mr. Sabin into a new class and elect the nine nominees
designated by New Plan onto the Combined Company Board.
Pursuant to the Combined Company Charter, the Combined Company Board will be
divided into three classes designated Class I, Class II and Class III. The
terms of the directorship of the Class I directors will expire at the annual
meeting of the Combined Company in 1999. The terms of the directorship of the
Class II directors will expire at the annual meeting of the Combined Company
in 2000. The terms of the directorship of the Class III directors will expire
at the annual meeting of the Combined Company in 2001. For additional
information regarding the management of the Combined Company at the Effective
Time, see "Combined Company Operations and Management."
NEW PLAN DIRECTORS
The following nine members of the current New Plan Board are nominees to
become directors of the Combined Company. As a condition precedent to the
Merger, each of the following nominees (or any substitute for any such nominee
as may be designated by New Plan) is required to be elected to serve as a
director of the Combined Company for a term expiring in accordance with their
respective classes as set forth below:
<TABLE>
<CAPTION>
NAME PRINCIPAL TITLE OR OCCUPATION CLASS
- ---- ------------------------------------------------------------ -----
<S> <C> <C>
William Newman.......... Chairman of the Board and Chief Executive Officer, New Plan. III
Arnold Laubich.......... President and Chief Operating Officer, New Plan. III
James M. Steuterman..... Executive Vice President, New Plan. II
Dean Bernstein.......... Vice President--Administration and Finance, New Plan. I
Raymond A. Bottorf...... Managing Director, ABN-AMRO Chicago Corp. I
Norman Gold............. Partner, Altheimer & Gray. III
Melvin Newman........... Private Investor. II
John Wetzler............ President, Nautica Retail USA, Inc. II
Gregory White........... Managing Director, Schroder Mortgage Associates. I
</TABLE>
For additional information regarding the New Plan nominees for directors,
see "--Nominees for Election" below.
Although neither New Plan nor Excel anticipates that the nominees designated
by New Plan will be unavailable for election, in the event of such occurrence
the proxies will be voted for such substitute, if any, as New Plan may
designate.
EXCEL DIRECTORS
Five current directors of Excel will continue to serve on the Combined
Company Board in their current classes. Current Excel directors Boyd A.
Lindquist and Robert E. Parsons, Jr. will continue to serve on the Combined
Company Board as Class I directors. Current Excel director Bruce A. Staller
will continue to serve on the Combined Company Board as a Class II director.
Current Excel directors Richard B. Muir and John H. Wilmot will continue to
serve on the Combined Company Board as Class III directors. For additional
information regarding these directors, see "Management of Excel--Directors and
Executive Officers."
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Gary B. Sabin, currently a director of Excel elected to serve a term
expiring at the annual meeting of Excel in 1999, is a nominee to be elected to
serve as a director of the Combined Company for a term expiring at the
Combined Company annual meeting in 2000. As a condition precedent to
consummate the Merger, Mr. Sabin (or any substitute as may be designated by
Excel) is required to be elected to serve as a Class II director of the
Combined Company.
<TABLE>
<CAPTION>
NAME PRINCIPAL TITLE OR OCCUPATION CLASS
- ---- -------------------------------------------------------------------- -----
<S> <C> <C>
Gary B. Sabin........... Chairman of the Board, President and Chief Executive Officer, Excel. II
</TABLE>
For additional information regarding the Excel nominee for director, see "--
Nominees for Election" below.
Although neither New Plan nor Excel anticipates that the nominee designated
by Excel will be unavailable for election, in the event of such occurrence the
proxies will be voted for such substitute, if any, as Excel may designate.
NOMINEES FOR ELECTION
William Newman, age 72, has been Chairman of the New Plan Board since 1972.
He served as President and Chief Executive Officer of New Plan's predecessor
corporation, New Plan Realty Corporation, from the corporation's organization
in 1961 through its reorganization into New Plan in 1972, and acted in such
capacities for New Plan until 1988. In 1988, William Newman relinquished the
title of President to Arnold Laubich, but retained the office and
responsibilities of Chief Executive Officer. William Newman is a Certified
Public Accountant, and has been actively involved in real estate for over 50
years. He also is a past Chairman of the National Association of Real Estate
Investment Trusts.
Arnold Laubich, age 68, has been a member of the New Plan Board since 1988.
He has also been President and Chief Operating Officer of New Plan since 1988.
From 1961 to 1972, he served as Executive Vice President of New Plan's
predecessor corporation. From 1972 until 1988, Arnold Laubich was President of
Dover Management Corporation, which managed New Plan's properties.
Gary B. Sabin, age 44, has served as Chairman of the Excel Board, President
and Chief Executive Officer of Excel since January 1989. Gary Sabin has served
as Chief Executive Officer of various companies since his founding of Excel's
predecessor company and its affiliates starting in 1977. He has been active in
diverse aspects of the financial services industry, including the evaluation
and negotiation of real estate acquisitions, management, financing and
disposition.
John Wetzler, age 52, has been a member of the New Plan Board since 1994.
John Wetzler has been President of Nautica Retail U.S.A., Inc., a subsidiary
of Nautica Enterprises, Inc., the international men's apparel maker and
marketer, since July 1994. From December 1988 to June 1994 he was the
Executive Vice President of Nautica Retail U.S.A., Inc.
Melvin Newman, age 56, has been a member of the New Plan Board since 1983.
From 1972 to 1982, he was Vice President and General Counsel of New Plan.
Melvin Newman is a private investor.
Raymond H. Bottorf, age 56, has been a member of the New Plan Board since
1991. Mr. Bottorf has been the Managing Director of the New York office of the
Global Property Team of ABN-AMRO Chicago Corp., an investment bank, since
October 1997. From May 1990 to October 1997 he was the President and sole
director of U.S. Alpha, Inc., New York, New York, a wholly-owned subsidiary of
Stichting Pensioenfonds (formerly Algemeen Burgerlijk Pensioenfonds).
Gregory White, age 42, has been a member of the New Plan Board since 1994.
Gregory White is a founding partner and Managing Director of Schroder Mortgage
Associates in New York, New York, and has been associated with Schroder
Mortgage Associates since 1992. From 1988 to 1992, he was a Managing Director
of the Salomon Brothers Inc. real estate finance department.
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Norman Gold, age 68, has been a member of the New Plan Board since its
organization in 1972. He has been active in the practice of law for 44 years
and a partner of the law firm of Altheimer & Gray for over 35 years. He is
also a trustee of Banyan Strategic Realty Trust, which is not in any way
related to or competitive with either New Plan or Excel.
James M. Steuterman, age 42, has been a member of the New Plan Board since
1990. He has served as Executive Vice President of New Plan since October
1994. James Steuterman has been associated with New Plan since 1984 as a
property acquisition specialist, becoming Director of Acquisitions in 1986, a
Vice President in 1988 and a Senior Vice President in 1989.
Dean Bernstein, age 40, has been a member of the New Plan Board since 1992.
He has served as Vice President--Administration and Finance of New Plan since
October 1994. He became an Assistant Vice President of New Plan in 1991 and
Vice President--Acquisitions in September 1993. From 1988 to 1991, Dean
Bernstein was a Vice President in the Real Estate Group at Chemical Bank. Dean
Bernstein is the son-in-law of William Newman.
VOTE REQUIRED
Assuming the presence of a quorum, a plurality of the votes cast at the
Excel Special Meeting in favor of the election of a director is sufficient to
elect such director. Any proxy submitted and directing that the shares
represented thereby be voted FOR the Election of Directors will result in the
proxy holder voting such shares at the Excel Special Meeting in favor of the
election of each director recommended for election by the Excel Board. Any
Excel stockholder present in person at the Excel Special Meeting will have the
option to vote for or abstain from voting for each individual nominee for
election to the Combined Company Board. Abstentions and broker non-votes will
have no effect on the election of directors.
THE EXCEL BOARD CONSIDERS THE APPROVAL OF THE ELECTION OF DIRECTORS TO BE IN
THE BEST INTERESTS OF EXCEL AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT THE HOLDERS OF THE EXCEL COMMON STOCK VOTE "FOR" THE ELECTION OF
DIRECTORS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE
ISSUANCE, THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN
THE MERGER NOT OCCURRING.
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BUSINESS OF NEW PLAN
This section discusses and describes New Plan's business on an historical
basis only without regard to the effects of the Merger. Upon consummation of
the Merger, the Combined Company Board and the management of the Combined
Company will adopt and establish strategies, policies and investment direction
for the Combined Company, which may differ from those adopted and established
by New Plan prior to the Merger as described below. See "Combined Company
Operations and Management."
GENERAL
New Plan, a self-administered and self-managed equity REIT was organized on
July 31, 1972 as a business trust under the laws of the Commonwealth of
Massachusetts. New Plan is the successor to New Plan Realty Corporation, which
was incorporated under the laws of the State of Delaware on December 4, 1961.
New Plan is in the business of managing, operating, leasing, acquiring,
developing and investing in shopping centers, factory outlet centers and
apartment communities.
As of April 30, 1998, New Plan owned fee or leasehold interests in 132
shopping centers containing an aggregate of approximately 18.9 million square
feet of GLA, six factory outlet centers containing an aggregate of
approximately 1.8 million square feet of GLA and 52 apartment communities
containing approximately 12,400 units, located in 23 states, primarily in the
eastern half of the United States. The average occupancy rates at April 30,
1998 for the shopping centers, factory outlet centers and apartment
communities were approximately 91%, 92% and 92%, respectively.
New Plan is self-administered and self-managed and does not engage or pay a
REIT advisor because New Plan personnel manage and maintain all of New Plan's
properties.
New Plan maintains its executive offices at 1120 Avenue of the Americas, New
York, New York 10036, and its telephone number is (212) 869-3000.
ACQUISITION, FINANCING AND OPERATING STRATEGIES
New Plan's primary investment strategy is to identify and purchase well-
located income-producing shopping centers and apartment communities at a
discount to replacement cost. New Plan also purchases or develops selected
factory outlet centers. New Plan seeks to achieve income growth and enhance
the cash flow potential of its properties through a program of expansion,
renovation, leasing, re-leasing and improving the tenant mix. New Plan
minimizes development risks by generally purchasing existing income-producing
properties. New Plan regularly reviews its portfolio and from time to time
considers the sale of certain of its properties.
New Plan generally has acquired properties for cash. It is management's
belief that its ability to purchase available properties for cash enhances its
negotiating position in obtaining attractive purchase prices. In a few
instances properties have been acquired subject to existing mortgages. Long-
term debt of New Plan at April 30, 1998, consisted of $92.7 million of
mortgages having a weighted average interest rate of 7.84% and unsecured notes
aggregating $462.7 million having a weighted average interest rate of 6.86%.
In July 1997 New Plan issued 150,000 New Plan Preferred Shares. In connection
with the issuance of New Plan Preferred Shares, 1,500,000 New Plan Depositary
Shares, each representing a one-tenth fractional interest in a New Plan
Preferred Share, were sold to the public.
New Plan's short-term debt consists of normal trade payables and the current
portion of mortgages payable. As of April 30, 1998 there was no balance
outstanding under New Plan's $50 million unsecured line of credit with the
Bank of New York, Bank Hapalim and Fleet National Bank.
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Virtually all operating and administrative functions, such as leasing, data
processing, finance, accounting, construction and legal, are centrally managed
at New Plan's headquarters. In addition, New Plan maintains regional offices
located near its various properties. On-site functions such as security,
maintenance, landscaping and other similar activities are either performed by
New Plan or subcontracted. The cost of these functions are passed through to
tenants to the extent permitted by the respective leases.
DEVELOPMENTS DURING THE 1998 FISCAL YEAR THROUGH APRIL 30, 1998
In the nine months ended April 30, 1998, New Plan acquired 10 shopping
centers containing an aggregate of approximately 1.3 million square feet of
GLA and 14 apartment communities containing 1,276 units. The newly acquired
properties are located in Florida, Georgia, Indiana, Michigan, New Jersey, New
York, North Carolina, Ohio and Virginia. The aggregate purchase price for all
of the properties, including assumed mortgages, was approximately $117
million.
Gross revenues, net income and FFO of New Plan for the nine-month period
ended April 30, 1998 were the largest for any comparable period in New Plan's
history. FFO applicable to shares of beneficial interest, defined as net
income plus depreciation and amortization of real estate, less gains from
asset sales, less preferred stock dividend requirements, was approximately
$85.7 million ($1.44 per share diluted).
COMPETITION
The success of New Plan depends, among other factors, upon the trends of the
economy, including interest rates, construction costs, income tax laws,
increases or decreases in operating expenses, governmental regulations and
legislation, including environmental requirements, real estate fluctuations,
retailing trends, population trends, zoning laws, the financial condition and
stability of tenants, the availability of financing and capital on
satisfactory terms and the ability of New Plan to compete with others for
tenants and keep its properties leased at profitable levels. New Plan competes
for properties with an indeterminate number of investors, including domestic
and foreign corporations and financial institutions, other REITS, life
insurance companies, pension funds and trust funds.
Adverse changes in general or local economic conditions could result in the
inability of some existing tenants of New Plan to meet their lease obligations
and could otherwise adversely affect New Plan's ability to attract or retain
tenants. Management believes, however, that New Plan's financial strength and
operating practices, particularly its ability to implement renovation,
expansion and leasing programs will enable it to maintain and increase rental
income from its properties.
EMPLOYEES
As of April 30, 1998 New Plan employed 600 individuals, including executive,
administrative and field personnel. New Plan considers its relations with its
personnel to be good.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
New Plan presently meets the qualification requirements of a REIT under
Sections 856-58 of the Code. If, as New Plan contemplates, such qualification
continues, the Combined Company will continue as a qualified REIT under the
Code after the Merger and will not be taxed on its REIT taxable income, at
least 95% of which will be distributed to stockholders.
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BUSINESS OF EXCEL
This section discusses and describes Excel's business on an historical basis
only without regard to the effects of the Merger. Upon consummation of the
Merger, the Combined Company Board and the management of the Combined Company
will adopt and establish strategies, policies and investment direction for the
Combined Company, which may differ from those adopted and established by Excel
prior to the Merger as described below. See "Combined Company Operations and
Management."
GENERAL
Excel is a self-administered, self-managed REIT which acquires, owns and
manages neighborhood and community shopping centers and other retail and
commercial properties which are primarily leased on a long-term basis to major
retail companies throughout the United States. As of March 31, 1998, Excel
owned or managed 82 shopping centers (the "Shopping Centers"), 53 single
tenant properties (the "Single Tenant Properties"), four commercial properties
and office buildings (the "Commercial Properties") and one additional property
which is currently being constructed. The Shopping Centers consist of
neighborhood and community shopping centers which typically range from 100,000
to 200,000 square feet in size. The Single Tenant Properties typically are
either anchor stores within shopping centers not owned by Excel or free
standing properties located in commercial areas, with triple net leases which
require the lessee to be responsible for substantially all of the costs and
expenses associated with the ongoing maintenance of the property, including
but not limited to property taxes, insurance and common area maintenance. The
Commercial Properties consist of office buildings and commercial properties
which Excel typically purchases at an attractive price to take advantage of a
distressed situation or underutilized space. The Shopping Centers, Single
Tenant Properties and Commercial Properties accounted for approximately 89%,
10% and 1%, respectively, of the annualized base rental income ("ABR") of
Excel at March 31, 1998. As of March 31, 1998, Excel's 139 operating
properties were located in 27 states, contained approximately 13.9 million
square feet of GLA and were approximately 96% leased.
Excel emphasizes investments in retail properties where a substantial
portion of such properties' GLA is subject to long-term net leases to national
or regional retail tenants. Excel seeks to lease to national or regional
retail tenants that market basic goods and services to consumers and enjoy a
leading position in their respective industries.
Excel's principal executive officers have worked together in acquiring and
managing retail and commercial real estate for over 15 years and have
administered the investments and affairs of Excel since 1989. As of March 31,
1998, management of Excel owned approximately 9.3% of the Excel Common Stock
(including shares representing approximately 4.0% of the Excel Common Stock
which may be acquired upon the exercise of stock options exercisable within 60
days).
Excel was incorporated under the laws of California in 1985 and
reincorporated as a Maryland corporation in July 1993. Excel's executive
offices are located at 16955 Via Del Campo, Suite 100, San Diego, California
92127, and Excel's telephone number is (619) 485-9400.
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RECENT DEVELOPMENT
Since March 31, 1998 Excel has purchased 12 Shopping Centers located in
Alabama, Florida, Illinois, Kentucky, Louisiana, Michigan, Nevada, New York,
Ohio, and Tennessee. These centers were purchased for an aggregate purchase
price of approximately $144.7 million and have added approximately 2.1 million
square feet of GLA and $14.9 million in ABR. The properties were subject to
secured debt of approximately $42.0 million. The 12 properties acquired
include:
<TABLE>
<CAPTION>
PERCENT
TOTAL GLA LEASED
PROPERTY NAME LOCATION (SQ. FT.) AT PURCHASE
- ------------- --------------- --------- -----------
<S> <C> <C> <C>
Galleria Commons.......................... Henderson, NV 254,285 100%
Saddletree Village Shopping Center ....... Columbia, TN 45,800 94
River Run Centre.......................... Coshocton, OH 82,957 100
Mist Lake Plan............................ Lexington, KY 217,292 100
Lagniappe Village......................... New Iberia, LA 220,225 99
Grants Mill............................... Irondale, AL 226,837 95
Genessee Valley........................... Genesseo, KY 204,609 98
23rd Street Plaza......................... Panama City, FL 99,756 100
Payton Park............................... Sylacauga, AL 231,820 100
King City Square.......................... Mt. Vernon, IL 94,428 100
Roundtree Place........................... Ypsilanti, MI 195,413 98
Hornell Plaza............................. Hornell, NY 253,813 98
---------
2,127,235
=========
</TABLE>
In addition, since March 31, 1998 Excel has sold two Single Tenant
Properties comprising approximately 68,281 square feet of GLA for a total
sales price of approximately $3.5 million.
GROWTH STRATEGY
Excel's primary objective is to acquire, own and manage a portfolio of
commercial retail properties that will provide cash for quarterly
distributions to stockholders while protecting investor capital and providing
potential for capital appreciation. Excel seeks to achieve this objective by
(i) aggressively managing its 139 existing operating properties, (ii)
continuing to acquire well-located neighborhood and community shopping centers
with tenants that have a national or regional presence and an established
credit quality, (iii) disposing of mature properties to continually update its
core property portfolio, and (iv) continuing to maintain a strong and flexible
financial position to facilitate growth.
Since Excel's public offering in August 1993, Excel has successfully
acquired 87 properties for an aggregate purchase price of approximately $741.6
million (representing approximately 11.5 million square feet of GLA) and
disposed of 28 properties for an aggregate sales price of approximately $50.7
million (representing approximately 1.0 million square feet of GLA), excluding
those properties transferred to Legacy in connection with the spin-off.
Aggressive Management
Excel aggressively manages its properties, with an emphasis on maintaining
high occupancy rates and a strong base of nationally recognized anchor
tenants. In addition, Excel emphasizes monitoring of the physical condition of
the properties and the financial condition of the tenants. Excel follows a
schedule of regular physical maintenance with a view towards tenant expansion,
renovations and refurbishing to preserve and increase the value of its
properties. Renovations include upgrading of existing facades, updating
signage, resurfacing parking lots and improving parking lot and exterior
building lighting.
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In addition to the 38 employees at Excel's San Diego, California
headquarters, Excel employs approximately 113 property management personnel at
its eleven field offices in Phoenix, Arizona; Huntington Beach, California;
Sacramento, California; Clearwater, Florida; Orlando, Florida (two offices);
Atlanta, Georgia; Lexington, Kentucky; Raleigh, North Carolina; Chattanooga,
Tennessee; and Salt Lake City, Utah. Each of Excel's field offices is
responsible for the leasing, property management and maintenance of Excel's
properties in its region. Excel also employs a team of eight people at its
Salt Lake City, Utah office whose efforts are dedicated solely to acquisitions
and dispositions of Excel's properties.
Over time, Excel will seek to increase cash flow and portfolio value
primarily through contractual rent increases during the terms of its leases,
reletting of existing space at higher rents, expansion of existing properties
and the minimization of overhead and operating costs.
Acquisition of Properties
Excel intends to continue its portfolio focus on retail properties with
predictable cash flow and growth potential. Excel seeks to expand its
portfolio by acquiring well-located neighborhood and community shopping
centers and other retail properties with tenants that have a national or
regional presence and an established credit quality and that Excel believes
will have the ability to make timely lease payments over the term of the
lease. When acquiring properties, however, primary emphasis is placed on the
quality of the location and comparable market rents as opposed to a particular
tenant. Excel intends to continue to concentrate its property acquisitions in
the southwestern and southeastern United States, where a majority of its
current properties are located. Management believes that such emphasis will
allow Excel to utilize its current property management and maintenance
personnel in these areas. Excel may, however, acquire properties in other
areas of the United States. Additionally, Excel intends to continue to
evaluate its property type mix and may purchase from time to time other
properties that Excel believes will meet its objectives.
Acquisitions through Partnerships. Excel may from time to time enter into
joint venture partnership arrangements with certain institutions for the
purchase and management of properties. Excel may also from time to time
acquire properties from unaffiliated property owners by forming partnerships
and exchanging limited partnership units in such partnerships for the property
owners' equity in the acquired properties. Such partnership units are
generally exchangeable for shares of Common Stock under certain circumstances.
Excel believes that this acquisition method may permit Excel to acquire
properties at attractive prices from property owners wishing to enter into tax
deferred transactions. In 1994, Excel acquired six properties through a single
partnership using the foregoing structure. In 1995, Excel formed a second
partnership, ERP, to facilitate additional potential acquisitions.
142
<PAGE>
Joint Venture Development. Excel may from time to time finance properties
under development with joint venture partners. Under this financing method,
Excel either purchases the undeveloped property and leases such property back
to the developer or makes a subordinated loan to the developer, and upon
completion, Excel has the option to purchase the development. Excel believes
that these methods of financing give Excel opportunities to purchase developed
properties at capitalization rates slightly above those which might otherwise
be available after completion of development.
A summary of acquisition and consolidation activity from Excel's public
offering in August 1993 through March 31, 1998 is set forth below (some of the
following properties were transferred to Legacy in the spin-off):
<TABLE>
<CAPTION>
PERCENT
ACQUISITION EXCEL'S TOTAL GLA LEASED AS OF
DATE PROPERTY NAME LOCATION INTEREST (SQ. FT.) 03/31/98
----------- ------------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
1st Qtr. 1998 Rose Pavillion Shopping Ctr. Pleasanton, CA 100% 292,902 97%
1st Qtr. 1998 Vail Ranch Temecula, CA 100 107,700 100
4th Qtr. 1997 Westminster City Center Westminster, CO 100 339,600 100
4th Qtr. 1997 Merchant's Central Winchester, TN 100 208,123 98
4th Qtr. 1997 Clearwater Mall Clearwater, FL 100 685,141 94
4th Qtr. 1997 San Dimas Plaza San Dimas, CA 100 119,157 98
4th Qtr. 1997 Market Street Square Elizabethtown, PA 100 169,481 100
4th Qtr. 1997 Island Plaza James Island, SC 100 167,101 95
4th Qtr. 1997 Bardin Pl. Ctr. Arlington, TX 100 399,892 99
4th Qtr. 1997 Miami Gardens Miami, FL 100 244,719 100
4th Qtr. 1997 Freedom Square Naples, FL 100 212,183 88
3rd Qtr. 1997 Metro 580 Shopping Ctr. Pleasanton, CA 100 174,586 100
3rd Qtr. 1997 Firstar Bank Building Burnsville, MN 100 17,275 100
3rd Qtr. 1997 Apison Crossing Ooltewah, TN 100 79,048 96
3rd Qtr. 1997 Johnstown Galleria Richland Township, PA 100 61,698 100
3rd Qtr. 1997 Megafoods Shopping Center Mesa, AZ 100 84,160 98
3rd Qtr. 1997 Glendale Galleria Glendale, AZ 100 119,461 98
2nd Qtr. 1997 Bakersfield Plaza Bakersfield, CA (1)(2) 213,372 98
2nd Qtr. 1997 Cudahy Plaza Cudahy, CA (1)(2) 138,670 100
2nd Qtr. 1997 Bristol Plaza Santa Ana, CA (1)(2) 112,379 100
2nd Qtr. 1997 Briggsmore Plaza Modesto, CA (2) 96,800 100
2nd Qtr. 1997 Montebello Plaza Montebello, CA (2) 284,718 95
2nd Qtr. 1997 Paradise Plaza Paradise, CA (2) 198,562 97
2nd Qtr. 1997 Kietzke Center Reno, NV (2) 165,350 98
2nd Qtr. 1997 Riverview Plaza Gadsden, AL (3) 147,615 100
2nd Qtr. 1997 Northside Plaza Dalton, GA (3) 67,831 92
2nd Qtr. 1997 Wisteria Village Snellville, GA (3) 164,646 100
2nd Qtr. 1997 Green River Campbellsville, KY (3) 190,316 100
2nd Qtr. 1997 Stratford Commons Winston-Salem, NC (3) 72,308 95
2nd Qtr. 1997 Remount Village N. Charleston, SC (3) 60,238 94
2nd Qtr. 1997 St. Elmo Central Chattanooga, TN (3) 74,978 100
2nd Qtr. 1997 Habersham Hills Cornelia, GA (3) 161,278 100
2nd Qtr. 1997 Kimball Crossing Kimball, TN (3) 139,455 98
2nd Qtr. 1997 Red Food Center Shelbyville, TN (3) 52,335 97
2nd Qtr. 1997 Commerce Central Tullahoma, TN (3) 182,401 100
2nd Qtr. 1997 Unity Professional Bldg. Fridley, MN (3) 62,556 99
2nd Qtr. 1997 Kmart Brooksville, FL 100 94,841 97
2nd Qtr. 1997 Coachella Plaza Coachella, CA 100 11,182 100
2nd Qtr. 1997 Carmen Plaza Camarillo, CA 100 128,904 66
2nd Qtr. 1997 Broadway Faire Shopping Ctr. Fresno, CA 100 60,383 100
2nd Qtr. 1997 Arbor Faire Shopping Ctr. Fresno, CA 100 199,986 99
2nd Qtr. 1997 Thomasville Crossing Thomasville, NC 100 78,505 100
1st Qtr. 1997 Market Central Dalton, GA 100 34,000 86
1st Qtr. 1997 Winn-Dixie Chattanooga, TN 100 43,848 100
4th Qtr. 1996 Northmall Centre Tucson, AZ 100 157,057 75
4th Qtr. 1996 Valley Fair Mall W. Valley City, UT 100 608,000 89
3rd Qtr. 1996 Chili's Tucson, AZ 100 5,997 100
</TABLE>
143
<PAGE>
<TABLE>
<CAPTION>
PERCENT
ACQUISITION EXCEL'S TOTAL GLA LEASED AS OF
DATE PROPERTY NAME LOCATION INTEREST (SQ. FT.) 03/31/98
----------- ------------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C>
3rd Qtr. 1996 Ruby Tuesday Tucson, AZ 100 5,665 100
3rd Qtr. 1996 University Commons Statesboro, GA 100 59,814 98
1st Qtr. 1996 Crossroads Statesville, NC 100 246,791 99
1st Qtr. 1996 Granville Corners Oxford, NC 100 136,549 98
1st Qtr. 1996 The Shops of Riverdale Riverdale, GA 100 34,255 77
1st Qtr. 1996 Roanoke Landing Williamston, NC 100 156,561 100
4th Qtr. 1995 Farrar Place Manchester, TN 100 39,220 100
4th Qtr. 1995 Hazel Path Shopping Ctr Hendersonville, TN 100 68,345 91
4th Qtr. 1995 Palmetto Crossing Hilton Head, SC 100 40,920 82
3rd Qtr. 1995 Anson Station Wadesboro, NC 100 130,800 99
3rd Qtr. 1995 Kinston Pointe Kinston, NC 100 170,166 96
2nd Qtr. 1995 Foothills Market Jonesville, NC 100 44,350 100
2nd Qtr. 1995 Piney Grove Plaza Kernersville, NC 100 49,709 86
2nd Qtr. 1995 Roxboro Square Roxboro, NC 100 98,980 97
2nd Qtr. 1995 Siler Crossing Siler City, NC 100 132,639 99
2nd Qtr. 1995 Village Marketplace Asheboro, NC 100 87,800 100
4th Qtr. 1994 Chapel Square Kannapolis, NC 100 45,450 100
3rd Qtr. 1994 Q-Club Scottsdale, AZ 100 44,374 100
2nd Qtr. 1994 Q-Club Phoenix, AZ 100 44,374 100
2nd Qtr. 1994 Lexington Road Plaza Versailles, KY 100 182,732 98
2nd Qtr. 1994 Sun Valley Plaza Mesa, AZ 100 80,678 94
2nd Qtr. 1994 Lake Wales Center Lake Wales, FL 100 102,161 100
1st Qtr. 1994 Valley View Plaza Marion, IN 100(4) 30,000 88
1st Qtr. 1994 Stanly County Plaza Albemarle, NC 100(4) 63,637 95
1st Qtr. 1994 London Marketplace London, KY 100 169,032 100
1st Qtr. 1994 Circle Center Hilton Head, SC 100 65,313 81
1st Qtr. 1994 Lakewood Village Celina, OH 100(4) 113,897 100
1st Qtr. 1994 Woodland Plaza Warsaw, IN 100(4) 31,000 80
1st Qtr. 1994 Wabash Valley Plaza Terre Haute, IN 100(4) 79,135 77
1st Qtr. 1994 Brooksville, Square Brooksville, FL 100(4) 96,562 96
1st Qtr. 1994 Lowes Home Centers, Inc. Middletown, OH 100(5) 126,400 100
1st Qtr. 1994 Lucky Phoenix, AZ 100 28,217 100
1st Qtr. 1994 Kmart Atlantic, IA 100 40,318 100
1st Qtr. 1994 Excel Building San Diego, CA 100 19,942 100
1st Qtr. 1994 Kash n Karry Homosassa Springs, FL 100 29,600 100
4th Qtr. 1993 Covington Gallery Covington, GA 100 172,482 95
4th Qtr. 1993 Ashland Square Ashland, OH 100 162,749 100
3rd Qtr. 1993 Galleria Scottsdale, AZ 100 670,000 0
3rd Qtr. 1993 Irving West Irving, TX 100 70,056 96
----------
Total 11,461,411
==========
</TABLE>
- --------
(1) These properties are master-leased by ERP. At the termination of each
lease and under certain circumstances, ERP has an option to purchase each
property at a fixed price.
(2) These properties were acquired by ERP following Excel's consolidation of
ERP. Excel is the sole general partner of ERP and, as of March 31, 1998,
owned a 47% interest in these properties.
(3) These properties were acquired by ERP prior to Excel's consolidation of
ERP and have been added to Excel's portfolio as a result of such
consolidation. Excel is the sole general partner of ERP and, as of March
31, 1998, owned a 47% interest in these properties.
(4) Excel owns a 99.82% interest in these properties, as the sole general
partner of the partnership holding the properties, E.H. Properties, L.P.
The limited partner has an option to convert its equity interest of 0.18%
into Excel Common Stock of Excel at $22.25 per share. Upon such
conversion, the partnership will be dissolved.
(5) Excel has transferred these properties to Legacy in connection with the
spin-off.
Disposition of Properties
Excel continually analyzes each asset in its portfolio and identifies those
properties which can be sold or exchanged (to the extent consistent with REIT
qualification requirements) for optimal sales prices (or exchange values)
given prevailing market conditions and the particular characteristics of each
property. Through this strategy, Excel seeks to continually update its core
property portfolio by disposing of properties which have
144
<PAGE>
limited appreciation potential and redeploy capital into newer properties or
properties where its aggressive management techniques may maximize property
values. Excel engages from time to time in like-kind property exchanges (i.e.,
Code Section 1031 exchanges) which allow Excel to dispose of properties and
redeploy proceeds in a tax efficient manner. Since Excel's public offering in
August 1993, Excel has disposed of or exchanged 28 properties for an aggregate
sales price (or exchange value) of approximately $50.7 million, excluding
those properties transferred to Legacy in connection with the spin-off.
Excel holds its properties for investment and the production of rental
income, and not for sale to customers or other buyers in the ordinary course
of Excel's business. If Excel were treated as holding properties for sale to
customers in the ordinary course of its business, it would be subject to tax
equal to 100% of its gain from each property sold or exchanged (with no offset
allowed for properties sold at a loss). In addition, if the gain recognized in
any taxable year before 1998 from certain asset dispositions exceeded
specified limits, such gain could cause the disqualification of Excel as a
REIT. See "Federal Income Tax Consequences--Taxation of Excel as a REIT."
A summary of disposition activity from Excel's public offering in August
1993 through March 31, 1998 is set forth below:
<TABLE>
<CAPTION>
DISPOSITION TOTAL GLA
DATE PROPERTY NAME LOCATION (SQ. FT.)
----------- ---------------------------- -------- ---------
<S> <C> <C> <C>
1st Qtr. 1998 Wal-Mart (1) Brighton, CO 94,220
1st Qtr. 1998 Wal-Mart (1) Orland Hills, IL 114,513
1st Qtr. 1998 Wal-Mart (1) Decatur, IN 72,200
1st Qtr. 1998 Lowes (1) Terre Haute, IN 104,259
1st Qtr. 1998 Wal-Mart (1) Wabash, IN 93,465
1st Qtr. 1998 Wal-Mart (1) Big Rapids, MI 91,440
1st Qtr. 1998 Lowes (1) Middletown, OH 126,400
1st Qtr. 1998 Wal-Mart (1) Wyomissing, PA 115,092
1st Qtr. 1998 Wal-Mart (1) Temple, TX 110,580
1st Qtr. 1998 Wal-Mart (1) Berlin, WI 59,097
1st Qtr. 1998 Dayton Hudson Maplewood, MN 2,888
4th Qtr. 1997 Eagle Food Center New Lenox, IL 39,410
4th Qtr. 1997 Kmart Springfield, MO 106,747
4th Qtr. 1997 Kmart Waverly, OH 40,318
3rd Qtr. 1998 Rite-Aid/Payless Durango, CO 50,000
2nd Qtr. 1997 ABCO Tucson, AZ 29,700
4th Qtr. 1996 Ben Franklin (2) Tucson, AZ 25,818
4th Qtr. 1996 Mountain Jacks Mentor, OH 6,040
3rd Qtr. 1996 Q-Club Pad Phoenix, AZ 24,000 (3)
3rd Qtr. 1996 Kmart (2) Fargo, ND 55,552
1st Qtr. 1996 Kindercare Ventura, CA 7,472
4th Qtr. 1995 Kmart (2) Goose Creek, SC 72,897
4th Qtr. 1995 Talley Plaza Phoenix, AZ 225,870
4th Qtr. 1995 Osco Drug (2) Phoenix, AZ 25,625
4th Qtr. 1995 Kmart (2) Casa Grande, AZ 50,000
3rd Qtr. 1995 Payless ShoeSource Veradale, WA 3,010
2nd Qtr. 1995 Safeway Colorado Springs, CO 44,240
2nd Qtr. 1995 Safeway Houston, TX 50,848
2nd Qtr. 1995 Safeway Chehalis, WA 24,960
1st Qtr. 1995 Osco Drug (2) Mesa, AZ 24,789
1st Qtr. 1995 Chester's Roseville, MN 5,000
4th Qtr. 1994 Lucky (2) Champaign, IL 29,427
2nd Qtr. 1994 Miami Wings Miami, FL 2,768
2nd Qtr. 1994 Otero Savings Pueblo, CO 4,000
1st Qtr. 1994 Safeway (2) Odessa, TX 44,382
1st Qtr. 1994 Diversified Hospitality Grp. League City, TX 1,675
4th Qtr. 1993 Green Mill St. Paul, MN 14,240
4th Qtr. 1993 Fuddruckers Tucson, AZ 7,500
---------
Total 2,000,442
=========
</TABLE>
- --------
(1)Excel transferred these properties to Legacy on March 31, 1998.
(2)Excel received a lease termination fee from this tenant in addition to
sales proceeds.
(3)Represents total square footage of land.
145
<PAGE>
FINANCING STRATEGY
Excel intends to finance future acquisitions with the most advantageous
sources of capital available to Excel at that time, which may include the sale
of common stock, preferred stock or debt securities through public offerings
or private placements, the incurrence of additional indebtedness through
secured or unsecured borrowings, and the reinvestment of proceeds from the
disposition of assets. Excel's financing strategy is to maintain a strong and
flexible financial position by (i) maintaining a prudent level of leverage,
(ii) maintaining a large pool of unencumbered properties, (iii) managing its
variable rate exposure, (iv) amortizing existing mortgages over the term of
the leases for such mortgaged properties, and (v) maintaining a low
distribution payout ratio (i.e., distributions paid in respect of a year as a
percentage of FFO for such year).
Excel may seek variable rate financing from time to time if such financing
appears advantageous in light of then-prevailing market conditions. In such
case, Excel will consider hedging against interest rate risk through interest
rate protection agreements, interest rate swaps or other means.
Excel has an unsecured, two-year revolving credit facility (the "Unsecured
Revolving Credit Facility") of up to $250.0 million from a group of seven
banks led by BankBoston, N.A. With Excel's unsecured real estate base at March
31, 1998, Excel had approximately $228 million available under the Unsecured
Revolving Credit Facility.
PROPERTY PORTFOLIO
As of March 31, 1998, Excel's properties consisted of 82 Shopping Centers,
53 Single Tenant Properties, four Commercial Properties and one additional
property which is currently being constructed. As set forth in the following
table, such properties were located in 27 states, contained approximately 13.9
million square feet of GLA and generated approximately $98 million in ABR as
of March 31, 1998:
<TABLE>
<CAPTION>
PERCENT OF
ANNUALIZED SCHEDULED
NUMBER OF PERCENT GROSS BASE RENT ANNUAL BASE
STATE PROPERTIES LEASED LEASABLE AREA INCOME RENTAL INCOME
- ----- ---------- ------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Alabama................. 4 100.0% 241,944 $ 1,368,474 1.4%
Arizona................. 12 92.1 1,107,740 8,437,019 8.6
Arkansas................ 2 100.0 105,459 528,883 0.5
California.............. 16 96.3 2,140,362 21,155,020 21.5
Colorado................ 2 100.0 346,491 4,293,592 4.4
Florida................. 9 95.5 1,895,280 11,686,674 11.9
Georgia................. 11 90.2 993,667 5,790,450 5.9
Illinois................ 7 100.0 243,204 1,513,389 1.5
Indiana................. 10 87.4 220,382 1,381,635 1.4
Iowa.................... 3 100.0 104,208 562,969 0.6
Kentucky................ 5 99.6 802,838 4,677,061 4.8
Louisiana............... 1 100.0 41,293 228,671 0.2
Michigan................ 2 100.0 16,174 220,085 0.2
Minnesota............... 3 98.2 85,024 1,109,812 1.1
Missouri................ 3 11.3 82,210 68,299 0.1
Nebraska................ 3 100.0 70,513 439,225 0.4
Nevada.................. 1 98.5 165,350 1,003,104 1.0
New Jersey.............. 1 100.0 55,552 271,780 0.3
North Carolina.......... 14 98.1 1,612,927 10,162,000 10.3
Ohio.................... 2 99.3 277,065 1,433,116 1.5
Oklahoma................ 1 100.0 45,510 280,344 0.3
Pennsylvania............ 4 100.0 296,645 2,404,723 2.4
South Carolina.......... 5 94.3 376,002 2,764,516 2.8
Tennessee............... 10 98.3 1,218,378 7,831,515 8.0
Texas................... 6 97.9 590,395 4,192,263 4.3
Utah.................... 1 88.9 588,296 3,294,545 3.4
Virginia................ 1 100.0 193,238 1,141,112 1.2
--- ----- ---------- ----------- -----
139(1) 95.6%(2) 13,916,147 $98,240,277(3) 100.0%
--- ----- ---------- ----------- -----
</TABLE>
- --------
(1) Excel had 139 operating properties and one property in the process of
construction as of March 31, 1998.
146
<PAGE>
(2) Percent of total square footage of GLA leased as of March 31, 1998.
(3) Includes income from space leased for which rent is being paid but which
is not presently occupied. See "Single Tenant Properties" table below.
The following table contains a summary of certain information regarding
Excel's properties as of March 31, 1998:
<TABLE>
<CAPTION>
ANNUALIZED BASE RENTAL
GROSS LEASABLE AREA INCOME
-------------------------------- -------------------------
PERCENT OF
PERCENT OF PERCENT COMPANY
PROPERTY TYPE SQ. FT. COMPANY TOTAL LEASED AMOUNT TOTAL
- ------------- ---------- ------------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Shopping Centers........ 12,210,777 87.7% 96.2% $87,456,759 89.0%
Single Tenant
Properties............. 1,592,217 11.4 90.7 9,374,567 9.6
Commercial Properties... 113,153 0.8 98.7 1,408,952 1.4
---------- ----- ---- ----------- -----
13,916,147 100.0% 95.6%(1) $98,240,277(2) 100.0%
</TABLE>
- --------
(1) Percent of total GLA leased as of March 31, 1998.
(2) Includes income from space leased for which rent is being paid but which
is not presently occupied. See "Single Tenant Properties" table below.
Shopping Centers. Excel's Shopping Centers consist of 82 neighborhood and
community centers that are leased primarily to major retail companies. The
Shopping Centers typically range from 100,000 to 200,000 square feet in size,
and as of March 31, 1998 contained approximately 12.2 million square feet of
GLA and accounted for approximately 89% of Excel's ABR. The table below sets
forth certain pertinent information regarding the Shopping Centers as of March
31, 1998.
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
------------------ PERCENT OF CENTER LEASE
BASE RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER RENTAL PER CENTER PRINCIPAL PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS INCOME SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- ---------- ------- ---------- ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
ALABAMA
Gadsden
Riverview Plaza (1) 147,615 14 $ 837,889 $5.68 100% Wal-Mart 79% 2010
ARIZONA
Glendale
Glendale Galleria 119,405 28 1,146,256 9.6 98 Megafoods 44 2009
Osco Drugs 18 2010
Mesa
Kmart Plaza 182,581 11 744,957 4.08 99 Kmart 65 1998
Mesa
SunValley Plaza 107,533 19 689,139 6.41 94 ABCO 33 2001
Mesa
Megafoods 84,160 14 709,940 8.44 98 Megafoods 62 2013
Phoenix
Metro Marketplace 251,156 36 2,112,424 8.41 87 Toys R Us 18 2014
Officemax 13 2001
Lamps Plus 13 2004
Sheplers 21 2002
Tucson
Northmall Centre 168,719 11 891,880 5.29 75 Stein Mart 20 2010
CompUSA 18 2013
Cost Plus, Inc. 11 2012
CALIFORNIA
Bakersfield
Bakersfield Plaza
(1)(2) 213,372 21 1,885,198 8.84 98 Von's 22 2014
Circuit City 16 2016
Long's Drug Store 14 2012
Burbank
Sony/Kinko 14,616 2 527,043 36.06 100 Sony 72 1999
Kinko 28 1998
</TABLE>
147
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
----------------- PERCENT OF CENTER LEASE
RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER BASE PER CENTER PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS RENTAL SQ. FT. LEASED PRINCIPAL TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- INCOME ------- ---------- ------------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Camarillo
Carmen Plaza 129,054 20 859,234 6.66 66 Sav-on Drug 14 2019
Michaels Crafts 14 2000
Coachella
Coachella Plaza 11,182 6 176,955 15.82 100 Payless ShoeSource 27 2002
Cudahy
Cudahy Plaza(1)(2) 138,670 12 578,778 4.17 100 Kmart 67 2013
Fresno
Broadway Faire 60,383 6 965,597 15.99 100 United Artists 66 2016
Blockbuster 22 2005
Fresno
Arbor Faire 199,986 14 1,920,369 9.6 99 Home Depot 51 2009
PetsMart 13 2008
Home Express 20 2009
Modesto
Briggsmore Plaza(1) 100,681 16 653,211 6.49 100 MacFrugals 21 2001
Family Bargain Ctr. 12 1999
Montebello
Montebello Plaza(1) 254,304 38 2,448,819 9.63 95 Albertsons 21 2001
Circuit City 20 2004
Office Depot 10 2001
Paradise
Paradise Plaza(1) 198,562 18 675,462 3.4 97 Kmart 41 2004
Albertson's 19 2009
Payless Drug 19 2009
Pleasanton
Metro 580 Shopping
Center 167,329 14 2,390,952 14.29 100 Linens N Things 25 2011
Borders 18 2011
Sears Homelife 20 2010
Pleasanton
Rose Pavilion Shopping
Center 292,902 52 4,207,063 14.36 97 Macy's Furniture 16 2009
Levitz 17 2008
Santa Ana
Bristol Plaza(1)(2) 112,379 17 1,082,122 9.63 100 Lucky 25 2002
Thrifty Drug 18 2001
Pic 'N Save 19 2006
San Dimas
San Dimas Plaza 119,157 39 1,693,456 14.21 98 T.J. Maxx 21 1998
Temecula
Vail Ranch Center 107,843 18 944,228 8.76 100 Albertson's 47 2022
Payless Drug 16 2017
COLORADO
Westminster
Westminster City Center 333,935 15 4,210,581 12.61 100 Circuit City 18 2017
Homeplace 16 2011
Babies R Us 13 2006
FLORIDA
Brooksville
Brooksville Square(3) 191,232 22 1,212,645 6.34 96 Kmart 50 2019
Publix 22 2007
</TABLE>
148
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
----------------- PERCENT OF CENTER LEASE
BASE RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER RENTAL PER CENTER PRINCIPAL PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS INCOME SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- --------- ------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Clearwater Montgomery
Clearwater Mall 801,059 78 4,183,048 5.22 94 Ward 16 2003
Gayfers 18 1999
Dillards 15 1999
Deland
Northgate S.C. 186,074 8 1,230,206 6.61 99 Kmart 60 2018
Publix 30 2013
Lakewales
Eastgate S.C. 102,161 2 595,543 5.83 100 Kmart 93 2019
Leesburg
Leesburg Square 91,846 14 574,425 6.25 93 Walgreen 14 2026
Publix 43 2006
Miami
Miami Gardens 244,719 11 2,210,682 9.03 100 Kmart 50 2020
Winn Dixie 27 2016
Naples
Freedom Square 211,839 6 1,353,432 6.39 88 Kmart 55 2019
Publix 26 2015
GEORGIA
Cornelia
Habersham Hills(1) 161,278 16 709,067 4.4 100 Wal-Mart 61 2009
Food Lion 16 2010
Covington
Covington Gallery 174,882 18 1,031,020 5.9 97 Kmart 49 2016
Ingles 25 2011
Dalton
Market Central 34,000 12 343,984 10.12 86 Cato 21 2000
Dalton
Northside Plaza(1) 67,831 15 393,481 5.8 92 Bi-Lo Food 48 2010
Perry
Perry Marketplace 179,973 18 1,186,849 6.59 100 Kmart 53 2017
Kroger 21 2012
Riverdale
Shops of Riverdale 34,255 7 276,908 8.08 77 Fashion Bug 27 2006
Famous Footwear 16 2005
Snellville
Wisteria Village(1) 164,646 18 1,075,610 6.53 100 Kmart 51 2010
Winn Dixie 27 2005
Statesboro
Publix
University Commons 59,814 8 521,353 8.72 98 80 2014
INDIANA
Marion
Valley View Plaza(3) 29,972 13 223,158 7.45 88 Hallmark 17 1999
Terre Haute
Wabash Valley Plaza(3) 79,135 7 379,866 4.8 77 Supervalue 58 2009
Warsaw
Woodland Plaza(3) 31,007 13 209,442 6.75 80 Shoe Show 15 2015
Rent-A-Center 10 1999
KENTUCKY
Campbellsville
Green River(1) 190,316 25 945,626 4.97 100 Wal-Mart 35 2009
Kroger 20 2008
JC Penney 12 2005
</TABLE>
149
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
----------------- PERCENT OF CENTER LEASE
BASE RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER RENTAL PER CENTER PRINCIPAL PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS INCOME SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- --------- ------- ---------- ----------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Elizabethtown
Kmart Plaza 130,466 8 778,773 5.97 100 Kmart 70 2017
Staples 22 2011
Glasgow
Highland Commons 130,466 7 727,327 5.57 100 Kmart 70 2017
Food Lion 22 2012
London
London Marketplace 169,032 7 1,040,164 6.15 100 Kmart 56 2018
Kroger 24 2014
Goody's 12 2003
Versailles
Lexington Road Plaza 182,558 10 1,185,171 6.49 98 Kmart 52 2018
Kroger 33 2014
NEVADA
Reno
Kietzke Center(1) 165,350 22 1,003,104 6.07 98 Mervyn's 41 2002
Ernst Home Center 30 2002
NORTH CAROLINA
Albemarle
Stanly County Plaza(3) 63,637 17 380,259 5.98 95 Ingles 50 2008
Asheboro
Village Marketplace 87,800 28 736,020 8.38 100 Harris-Teeter 34 2008
Old America Store 19 2000
Jonesville
Foothills Market 49,630 9 274,654 5.53 100 Food Lion 61 2008
Kannapolis
Chapel Square 45,450 7 364,442 8.02 100 Food Lion 64 2013
Kernersville
Piney Grove Plaza 49,709 6 296,238 5.96 86 Lowe's Food 64 2008
Kinston
Kinston Pointe 170,166 24 929,214 5.46 96 Wal-Mart 53 2011
Food Lion 15
Oxford
Granville Corners 136,549 26 853,586 6.25 98 Wal-Mart 52 2012
Byrd's Food 20 2011
Roxboro
Roxboro Square 98,980 15 561,670 5.67 97 Wal-Mart 70 2009
Siler City
Siler Crossing 132,639 16 763,174 5.75 99 Food Lion 19 2008
Belk-Yates 17 2008
Rose's Dept. 34 2008
Statesville
Crossroads Ctr. 340,189 30 1,832,342 5.39 99 Wal-Mart 57 2011
Bi-Lo 10 2011
Thomasville
Thomasville Crossing 78,509 14 645,360 8.22 100 Lowe's Food 50 2015
Eckerd Drug 12 2011
Wadesboro
Anson Station 130,800 18 721,313 5.51 99 Wal-Mart 40 2008
Food Lion 19 2008
BC Moore 14 2004
Williamston
Roanoke Landing 156,561 23 963,762 6.16 100 Wal-Mart 45 2011
Winn-Dixie 23 2011
Winston-Salem
Stratford Commons(1) 72,308 5 839,965 11.62 95 Office Max 32 2015
Michaels Stores 25 2006
Blockbuster Music 21 2005
</TABLE>
150
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
----------------- PERCENT OF CENTER LEASE
RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER BASE PER CENTER PRINCIPAL PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS RENTAL SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- INCOME ------- ---------- -------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OHIO
Ashland
Ashland Square 163,168 15 854,105 5.23 99 Wal-Mart 42 2010
JC Penneys 14 2008
Food Town 26 2010
Celina
Lakewood Village (3) 113,897 11 579,011 5.08 100 Wal-Mart 60 2010
PENNSYLVANIA
Elizabethtown
Market Street Square 169,481 9 1,343,261 7.93 100 Kmart 61 2022
Weis Market 27 2008
Richard Twnsp
Johnstown Galleria
Outparcel 61,968 3 584,782 9.44 100 Sun TV/Appl. 49 2008
Staples 38 2009
SOUTH CAROLINA
Hilton Head Island
Circle Center 65,613 12 636,249 9.7 81 Bi-Lo 56 2012
Hilton Head Island
Crossroads Palmetto 40,920 4 240,720 5.88 81 Food Lion 71 2010
James Island
Island Plaza 167,101 14 1,134,821 6.79 95 Food Lion 17 2013
Kmart 62 2018
N. Charleston
Remount Village(1) 60,238 6 529,438 8.79 94 Bi-Lo 64 2016
TENNESSEE
Chattanooga
St. Elmo Central(1) 74,978 9 649,528 8.66 100 Winn Dixie 60 2015
Ooltewah
Apison Crossing 79,048 13 695,749 8.8 96 Winn-Dixie 60 2016
Hendersonville
Hazel Path 68,345 18 446,288 6.53 91 Food Lion 42 2010
Kimball
Kimball Crossing(1) 280,476 21 1,722,659 6.14 98 Wal-Mart 65 2007
Bi-Lo 9 2007
Knoxville
Chapman-Ford
Crossing(4) 185,604 16 1,009,342 5.44 100 Wal-Mart 51 2010
Food Lion 16 2010
Goody's 14 2000
Manchester
Farrar Place Shopping
Center 43,220 5 355,479 8.22 100 Food Lion 67 2016
Rite Aid 16 1999
Shelbyville
Madison Street(1) 52,335 10 316,585 6.05 97 Bi-Lo/Red Food 48 2005
Eckerd Drug 17 2005
Tullahoma
Commerce Central(1) 182,401 14 1,216,646 6.67 100 Wal-Mart 80 2015
Winchester
Merchant's Central 208,123 18 1,181,827 5.68 98 Wal-Mart 70 2016
Peebles 10 2017
TEXAS
Arlington
Bardin Place Center 399,909 22 3,079,661 7.7 99 Kmart 27 2019
Venture Stores 24 2013
</TABLE>
151
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED PERCENT OF
------------------- PERCENT OF CENTER LEASE
RENT TOTAL LEASED BY EXPIRATION OF
TOTAL GLA NUMBER BASE RENTAL PER CENTER PRINCIPAL PRINCIPAL PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS INCOME SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- ---------- ---------- ----------- ------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Irving
Irving West 70,056 16 540,516 7.72 93 Winn Dixie 64 2007
UTAH
W. Valley City
Valley Fair Mall 588,296 82 3,294,545 5.6 89 JC Penney 24 2000
Mervyn's 15 2005
ZCMI 18 2009
VIRGINIA
Norton
VA-KY Regional S.C. 193,238 21 1,141,112 5.91 100 Wal-Mart 45 2009
Goody's 16 1999
Ingles 17 2009
---------- ----------- -----
TOTAL 12,210,777 $87,456,759 $7.16
========== =========== =====
</TABLE>
- --------
(1) These properties are held in ERP. Excel is the sole general partner of ERP
and, as of March 31, 1998 owned a 47% interest in these properties.
(2) These properties are master-leased by ERP. At the termination of each
lease and under certain circumstances, ERP has an option to purchase each
property at a fixed price.
(3) Excel owns a 99.82% interest in these properties, as the sole general
partner of the partnership holding the properties, E.H. Properties, L.P.
The limited partner has an option to convert its equity interest of 0.18%
into Excel Common Stock at $22.25 per share. Upon such conversion, the
partnership will be dissolved.
(4) Excel owns a 50.0% interest in this property.
Single Tenant Properties. Excel's Single Tenant Properties consist of 53
properties leased primarily to major retail companies. Excel's ABR derived
from Single Tenant Properties is attributable to properties located within
shopping centers not otherwise owned by Excel or from free standing properties
located in commercial areas. In general, the leases on the Single Tenant
Properties require the lessee to be responsible for substantially all of the
costs and expenses associated with the ongoing maintenance of the property,
including but not limited to property taxes, insurance and common area
maintenance. The Single Tenant Properties contained approximately 1.6 million
square feet of GLA and accounted for approximately 10% of Excel's ABR as of
March 31, 1998.
<TABLE>
<CAPTION>
ANNUALIZED
----------------
BASE RENT
TOTAL GLA RENTAL PER LEASE
LOCATION TENANT SUBTENANT (SQ. FT.) INCOME SQ. FT. EXPIRATION
-------- ------------ ------------- --------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
ALABAMA
Muscle Shoals......... Kroger(1)(2) Sak N Save 42,130 $252,780 $6.00 2007
Muscle Shoals......... Kroger(1)(2) Handy TV 10,069 60,414 6.00 2007
Scottsboro............ Kroger(1) Food World 42,130 217,391 5.16 2007
ARKANSAS
Pine Bluff............ Kmart(1) County Market 60,842 288,232 4.74 2006
Sherwood.............. Safeway(1) Kroger 44,617 240,651 5.39 2002
ARIZONA
Mesa.................. Lucky(1) ABCO 29,827 126,438 4.24 2002
Phoenix............... Lucky(1) ABCO 28,217 154,620 5.48 2001
Phoenix............... Q-Club 44,374 737,354 16.62 2019
Phoenix............... Q-Club 44,374 726,655 16.38 2019
Yuma.................. Rite Aid Payless Drugs 25,834 113,050 4.38 2001
</TABLE>
152
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED
---------------
RENT
TOTAL GLA BASE PER LEASE
LOCATION TENANT SUBTENANT (SQ. FT.) RENTAL SQ. FT. EXPIRATION
-------- --------------------------- ----------- --------- INCOME ------- ----------
<S> <C> <C> <C> <C> <C> <C>
COLORADO
Pueblo................ United Artists 12,556 83,011 6.61 2002
FLORIDA
Brandon............... Food Lion(1)(2) Gold's Gym 36,750 202,582 5.51 2002
Homosassa Springs..... Food Lion Gold's Gym 29,600 124,110 4.19 2002
GEORGIA
Albany................ Vacant(3) 72,900 -- -- --
East Albany........... Kroger(1) Harvey's 34,019 197,612 5.81 2007
Supermarket
East Albany........... Rite Aid 10,069 54,567 5.42 2007
IOWA
Atlantic.............. Kmart 40,318 160,000 3.97 2005
Coralville............ Eagle Food Center(1)(2)(4), 28,875 172,669 5.98 2006
GEICO
Dubuque............... Eagle Food Center(4) 35,015 230,300 6.58 2000
ILLINOIS
Decatur............... Eagle Food Center(2)(4) 29,000 181,996 6.28 2003
Moline................ Eagle Food Center 38,681 227,420 5.88 2001
Ottawa................ Kroger 44,088 278,866 6.33 2007
Peoria................ Eagle Food Center(4) 30,000 208,133 6.94 2003
Springfield........... Eagle Food Center(4) 30,000 180,090 6 2002
Sterling.............. Eagle Food Center(4) 40,265 229,748 5.71 2000
Waterloo.............. Kroger Schnuck 31,170 207,135 6.65 2007
Market(1)
INDIANA
Fort Wayne............ Kindercare 4,584 49,694 10.84 2000
Hobart................ Eagle Food Center(2) 29,300 190,792 6.51 2003
Indianapolis.......... Kindercare 4,268 49,694 11.64 2000
Indianapolis.......... Kindercare 4,452 49,694 11.16 2000
Indianapolis.......... Kindercare 4,212 49,694 11.8 2000
Indianapolis.......... Kindercare 4,452 21,600 4.85 2000
Michigan City......... Eagle Food Center 29,000 158,000 5.45 2003
LOUISIANA
West Monroe........... Safeway(1) Brookshire 41,293 228,671 5.54 2002
Grocery
MICHIGAN
Dearborne Hts......... Mountain Jacks 9,914 150,000 15.13 2006
Kalamazoo............. Kindercare 6,260 70,085 11.2 2005
MINNESOTA
Burnsville............ Firstar Bank Building 13,373 131,700 9.85 2007
MISSOURI
Fenton................ Kindercare 4,659 36,000 7.73 1997
High Ridge............ Kindercare 4,654 32,299 6.94 2000
St. Charles........... Vacant 72,897 -- -- --
NEBRASKA
Grand Island.......... Northern Automotive 5,671 73,693 12.99 2008
Hastings.............. Northern Automotive 4,000 52,758 13.19 2008
Omaha................. Kmart(1) Gold's Gym 60,842 312,775 5.14 2006
</TABLE>
153
<PAGE>
<TABLE>
<CAPTION>
ANNUALIZED
------------------
TOTAL RENT
GLA BASE PER LEASE
LOCATION TENANT SUBTENANT (SQ. FT.) RENTAL SQ. FT. EXPIRATION
-------- ----------------------- ----------------- --------- INCOME ------- ----------
<S> <C> <C> <C> <C> <C> <C>
NEW JERSEY
Somerville............ Kmart 55,552 271,780 4.89 2007
OKLAHOMA
Muskogee.............. Safeway-Assoc. 45,510 280,344 6.16 2002
Grocers(1) Homeland
PENNSYLVANIA
Clearfield............ Kroger(1) Clearfield Mrkt. 31,170 210,000 6.74 2007
Pittsburgh............ Kroger(1) Giant Eagle Pharm 34,026 266,680 7.84 2007
SOUTH CAROLINA
James Island.......... Kroger(1) Bi-Lo 42,130 223,289 5.3 2007
TENNESSEE
Chattanooga........... Winn-Dixie 43,848 237,413 5.41 2005
TEXAS
Desoto................ Kmart 72,897 299,910 4.11 2005
Houston............... Diversified Hospitality 1,675 42,887 25.6 2011
Grp.(2)
Houston............... Diversified Hospitality 1,675 -- -- --
Grp.(2)
Missouri City......... Kroger 44,183 229,289 5.19 2002
--------- ---------- -----
Total 1,592,217 $9,374,567 $5.88
========= ========== =====
</TABLE>
- --------
(1) Property is subleased. Nevertheless, the tenant under the lease remains
responsible for payment of all rents due under such lease.
(2) Property is currently unoccupied. Nevertheless, the tenant under the lease
remains responsible for payment of all rents due under such lease.
(3) Excel received a lease termination fee from the former tenant of this
property, which is treated as pre-paid rent and is being amortized using
the straight line method over the estimated time to re-lease or sell the
related property.
(4) Property was originally built by Lucky for its subsidiary Eagle Food
Centers, Inc. Lucky has subsequently sold such subsidiary but remains
obligated under this lease.
154
<PAGE>
Commercial Properties. Excel's Commercial Properties consist of three office
buildings and one commercial property, which contained approximately 113,000
square feet of GLA and accounted for approximately 1% of Excel's ABR as of
March 31, 1998. Although Excel's stated focus is on retail-oriented
properties, under certain circumstances Excel may acquire properties that are
not necessarily retail-oriented, but where management views an opportunity to
take advantage of a distressed situation or underutilized space and is able to
purchase the property at an attractive price.
<TABLE>
<CAPTION>
ANNUALIZED LEASE
------------------ PERCENT OF EXPIRATION
BASE RENT PERCENT OF PROPERTY OF
TOTAL GLA NUMBER RENTAL PER PROPERTY PRINCIPAL LEASED BY PRINCIPAL
LOCATION (SQ. FT.) OF TENANTS INCOME SQ. FT. LEASED TENANT(S) TENANT(S) TENANT(S)
- -------- --------- ---------- ---------- ------- ---------- ------------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ARIZONA
Scottsdale
Genzyme............... 21,560 1 $ 284,307 $13.19 100% Genzyme Corp. 100% 2005
CALIFORNIA
San Diego
Excel Building........ 19,942 7 146,533 7.35 100 Excel Realty Trust 48 N/A
MINNESOTA
Fridley
Unity Professional
Bldg. (1)............ 62,556 29 851,684 13.61 92 Unity Hospital 13 1999
Stillwater
Stillwater Government
Bldg................. 9,095 3 126,427 13.9 90 Washington County 76 2000
------- ---------- ------
Total................ 113,153 $1,408,952 $12.45
======= ========== ======
</TABLE>
- --------
(1) This property is held in ERP. Excel is the sole general partner of ERP
and, as of March 31, 1998, owned a 47% interest in this property.
PRINCIPAL LESSEES
Kmart is Excel's largest lessee in terms of ABR, representing approximately
11.2% of Excel's ABR (approximately 14.9% of GLA) at March 31, 1998. Kmart's
principal business is general merchandise retailing through a chain of
discount department stores. It is one of the world's largest retailers based
on sales volume. Kmart has experienced flat or declining earnings in recent
periods and has announced plans to eliminate a significant number of jobs and
close certain of its existing stores. Kmart's credit ratings as of March 1998
were Ba3 and B+ according to Moody's and Standard & Poor's, respectively.
Kmart has closed five stores that were leased from Excel. Excel received lease
termination fees with respect to all five of these properties, three of which
were subsequently sold. Excel is currently in the process of re-leasing or
selling the other two properties. Should Kmart in the future announce
additional store closures, Excel believes that Kmart would continue its lease
payments for the term of the leases unless lease termination fees were
negotiated, or that the properties could be re-leased at rental rates which
would not cause a material loss of revenue for Excel. However, Excel cannot
fully predict the effect on Excel of material deterioration in Kmart's
financial position.
Wal-Mart is Excel's second largest lessee in terms of ABR, representing
approximately 6.6% of Excel's ABR (approximately 11.1% of GLA) at March 31,
1998. Wal-Mart is the nation's largest retailer and operates approximately
2,000 discount department stores and over 400 warehouse clubs. Wal-Mart is
listed on the NYSE and, as of March 1998, had credit ratings of AA from
Standard & Poor's and Aa2 from Moody's.
Wal-Mart and Kmart are publicly-traded companies, and financial and other
information regarding these lessees is on file with the Commission.
Other significant lessees include three major operators of retail
supermarkets: The Kroger Co. ("Kroger"), Food Lion, Inc. ("Food Lion") and
Lucky Stores, Inc. ("Lucky"). Leases to Kroger (including SuperX Drugs
Corporation, on whose leases Kroger is a guarantor) involve 15 properties and
accounted for approximately 4.1%
155
<PAGE>
of Excel's GLA and 3.7% of its ABR at March 31, 1998. Kroger's primary focus
is combination food and drug stores (with over 1,300 supermarkets operating in
1998), and it also operates food wholesaling and specialty retailing
businesses at various locations. Kroger is listed on the NYSE, and its credit
ratings as of March 1998 were Baa3 and BBB- according to Moody's and Standard
& Poor's, respectively. Food Lion leases 14 properties from Excel, accounting
for approximately 2.9% of Excel's GLA and 2.5% of its ABR at March 31, 1998.
Food Lion is a major operator of retail supermarkets in the United States and
Canada, is listed on the NYSE and had credit ratings as of March 1998 of A3
and A- according to Moody's and Standard & Poor's, respectively. Lucky
(including Eagle Food Centers, Inc. on whose leases Lucky is a guarantor)
leases 12 properties, representing approximately 2.7% of Excel's GLA and 2.2%
of its ABR at March 31, 1998. Lucky, a national supermarket chain, is owned by
American Stores, Inc., a NYSE company which had credit ratings as of March
1998 of Baa2 and BBB+ from Moody's and Standard & Poor's, respectively.
Excel's lessees also include other companies with a national or regional
presence, such as Winn-Dixie Stores, Inc., Lowe's Home Centers, Inc., Sports &
Fitness Clubs of America, Inc., Bi-Lo, Inc. and Publix Super Markets, Inc. As
of March 31, 1998, over 50% of Excel's ABR was derived from major national or
regional lessees.
Certain information as of March 31, 1998 with respect to the ten largest
lessees of Excel is set forth in the following table:
<TABLE>
<CAPTION>
ANNUALIZED BASE RENTAL
GROSS LEASABLE AREA INCOME
-------------------- ----------------------
PERCENT OF PERCENT OF
NUMBER OF COMPANY COMPANY
LESSEE LEASES SQ. FT. TOTAL AMOUNT TOTAL
------ --------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Kmart............... 23 2,079,067 14.9% $10,981,423 11.2%
Wal-Mart............ 16 1,548,360 11.1 6,438,849 6.6
Kroger.............. 15 577,379 4.1 3,659,602 3.7
Food Lion........... 14 399,630 2.9 2,491,251 2.5
Winn Dixie.......... 7 326,651 2.3 2,384,392 2.4
Lucky............... 12 376,380 2.7 2,140,868 2.2
Publix.............. 5 374,405 2.7 1,781,047 1.8
Q-Club.............. 2 241,798 1.7 1,732,356 1.8
Circuit City........ 3 143,708 1.0 1,343,252 1.4
Cato................ 21 122,710 0.9 1,052,086 1.1
--- --------- ---- ----------- ----
Total............... 118 6,190,088 44.3% $34,005,126 34.7%
=== ========= ==== =========== ====
</TABLE>
Certain leases related to the lessees in the table above have either been
subleased or assigned to such party. Nevertheless, the original lessee under
the lease remains responsible for payment of all rents and other obligations
due under such lease. An assignment of the lease would not affect the terms of
the lease. Generally, all subtenants are currently required to pay the same
rent to the lessee as the lessee is required to pay to Excel. Subleased
properties generally have been subleased for a term that is approximately the
same as the remaining term of the lease. In the event that the subtenant
defaults under the sublease and vacates the property, or in the event that the
term of the sublease expires earlier than the term of the lease, the property
could remain unoccupied until a new subtenant is located. In any event, the
original lessee will remain responsible for payment of all rents and other
obligations due under the lease for the full remaining term of the lease.
ENVIRONMENTAL CONDITIONS
Under various federal, state and local laws, ordinances and regulations,
Excel may be considered an owner or operator of real property or may have
arranged for the disposal or treatment of hazardous or toxic substances and,
therefore, may become liable for the costs of removal or remediation of
certain hazardous substances released on or in its property or disposed of by
it, as well as certain other potential costs which could relate to hazardous
or toxic substances (including governmental fines and injuries to persons and
property). Such liability may be imposed whether or not Excel knew of, or was
responsible for, the presence of such hazardous or toxic substances. See "Risk
Factors--Environmental Risks."
156
<PAGE>
Except as discussed below, Excel is not aware of any significant
environmental condition at any of its properties. Soil and groundwater
contamination exists at Carmen Plaza in Camarillo, California, Cudahy Plaza in
Cudahy, California, and Bristol Plaza in Santa Ana, California. With regard to
Carmen Plaza, the primary contaminants of concern are perchloroethylene (PCE)
associated with operations of an on-site dry cleaner, methyl tertiary butyl
ether (MTBE) from an unknown source and petroleum hydrocarbons associated with
operations of an on-site auto repair facility. With regard to Cudahy Plaza,
the primary contaminants of concern are PCE associated with operations of a
former on-site dry cleaner and petroleum hydrocarbons associated with
operations of an existing on-site auto repair facility. With regard to Bristol
Plaza, the primary contaminants of concern are PCE and trichloroethylene (TCE)
associated with operations of an on-site dry cleaner and petroleum
hydrocarbons associated with operations of an on-site auto repair facility.
Environmental professionals retained by Excel estimate that the total,
cumulative cost of remediation for these three properties will be between
approximately $1.8 million and $5.5 million. In connection with each of these
properties, Excel has entered into a remediation and indemnity agreement,
which obligates the prior owner of the properties (including in some cases,
principals of the prior owner) to perform the remediation and to indemnify
Excel for any losses it may suffer because of the contamination or
remediation. Although there can be no assurance that the remediation estimates
of the environmental professionals are accurate or that the prior owners will
perform their obligations under the remediation and indemnity agreements,
Excel does not expect the environmental conditions at these properties to have
a material adverse effect on Excel. In addition, groundwater contamination
exists at Briggsmore Plaza in Modesto, California. The primary contaminant of
concern is gasoline associated with a former on-site service station. The
former tenant at the property is in the process of performing the necessary
remediation. Although there can be no assurance that such remediation will be
satisfactory, Excel does not expect the environmental condition of this
property to have a material adverse effect on Excel.
LEGAL PROCEEDINGS
Excel is not a party to any legal proceedings other than various claims and
lawsuits arising in the normal course of its business which, in the opinion of
Excel's management, are not individually or in the aggregate material to its
business.
EXCEL'S POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of certain investment, financing, conflicts of
interest and other policies of Excel. These policies have been determined by
the Excel Board and generally may be amended or revised from time to time by
the Excel Board without a vote of the stockholders.
Investment Policies
Investments in Real Estate. Excel's business objective is to achieve
predictable cash flow available for distribution and growth potential through
the management of its lease portfolio. Excel will seek to meet this objective
by investing in a diversified portfolio of properties which have a majority of
their GLA subject to long-term leases with national or regional tenants. Excel
will generally seek leases with its primary tenants which provide (i) that the
tenant is responsible for most or all operating and capital expenses, as well
as environmental and other contingent liabilities, (ii) primary lease terms of
five to 25 years, and (iii) contractual rent increases over the term of the
lease, and will seek to acquire properties subject to leases with the
foregoing characteristics.
Excel's policy is to acquire and hold assets primarily for generation of
current income and appreciation in long-term value. Excel generally intends to
hold its properties for investment, typically at least five to ten years or
longer, and does not intend to engage in the short-term trading of, or
speculation in, real estate. However, Excel may dispose of a property if it
deems such disposition to be in its best interests and may either reinvest the
proceeds of such disposition or distribute the proceeds to stockholders.
Excel intends to acquire additional properties if and when favorable terms
can be obtained. Excel intends to invest principally in retail properties
where approximately 70% of the net leasable area is occupied by national or
regional tenants that generally market basic goods and services.
157
<PAGE>
Excel will generally invest in existing properties, although it may also
invest in newly constructed properties or properties under development. Excel
will not make significant investments in undeveloped properties or raw land,
but under certain circumstances may expand the improvements on (or may permit
its tenants to expand the improvements on) Excel's properties.
Excel will not have any limit on the amount or percentage of its assets
invested in one property. Future investments are not limited to any geographic
area or type of property, although Excel presently intends to concentrate on
retail properties.
Excel may enter into joint ventures or partnerships for the purpose of
obtaining an equity interest in a particular facility or property in
accordance with Excel's investment policies. Such investments may permit Excel
to own interests in larger assets without unduly restricting diversification
and, therefore, add flexibility in structuring its portfolio. Excel will not
enter into a joint venture or partnership to make an investment that would not
otherwise meet its investment policies.
Investments in Real Estate Mortgages. While Excel will emphasize equity real
estate investment in properties subject to long-term leases, it may, in its
discretion, invest in mortgages and other interests related to real estate,
although it has not done so in the past. Excel does not presently intend to
invest more than ten percent of its total assets in mortgage loans, but may do
so subject to the investment restrictions applicable to REITs. The mortgages
in which Excel may invest may be either first mortgages or junior mortgages
and may or may not be insured by a governmental agency. See "Federal Income
Tax Consequences, Taxation of Excel as a REIT."
Securities of or Interests in Entities Primarily Engaged In Real Estate
Activities and Other Issuers. Subject to the percentage of ownership
limitations and gross income tests necessary for REIT qualification, Excel
also may invest in securities of entities engaged in real estate activities or
securities of other issuers, including for the purpose of exercising control
over such entities. See "Federal Income Tax Consequences Related to the
Combined Company--Taxation of Excel as a REIT." Excel may acquire all or
substantially all of the securities or assets of other REITs or similar
entities when such investments would be consistent with Excel's investment
policies. Excel does not intend that its investments in securities will
require it to register as an "investment company" under the Investment Company
Act of 1940, and Excel intends to divest securities if any such registration
would otherwise be required.
Interim Investments. Pending disbursement for investment as described
herein, Excel may invest funds in deposits at commercial banks, money market
accounts, certificates of deposit, U.S. government securities or other liquid
investments (including GNMA, FNMA, and FHLMC mortgage-backed securities) as
the Excel Board deems appropriate.
Financing Policies
Excel intends to maintain a ratio of debt to total market capitalization
(i.e., total debt of Excel as a percentage of the market value of outstanding
shares of its capital stock plus total debt) of 50% or less. The ratio of debt
to total market capitalization measures total outstanding indebtedness of
Excel divided by the total market capitalization (that is, total outstanding
debt plus the market value of all outstanding shares of capital stock). Excel
has established its debt policy relative to the total market capitalization of
Excel rather than to the book value of its assets, a ratio that is frequently
employed, because it believes that the book value of its assets (which to a
large extent is the depreciated value of real property, Excel's primary
tangible asset) does not accurately reflect its ability to borrow and to meet
debt service requirements. The market capitalization of Excel, however, is
more variable than book value, and does not necessarily reflect the fair
market value of the underlying assets of Excel at all times. Excel may from
time to time re-evaluate its borrowing policies in light of then current
economic conditions, relative costs of debt and equity capital, market value
of properties, growth and acquisition opportunities and other factors. There
is no limit on Excel's ratio of debt to total market capitalization, and
accordingly Excel may modify its borrowing policy and may increase or decrease
its ratio of debt to total market capitalization. To the extent that the Excel
Board determines to obtain additional capital, Excel may raise such capital
through additional equity offerings, debt financing or retention of cash flow
subject to provisions in the Code concerning transferability of undistributed
REIT income, or a combination of these methods.
158
<PAGE>
Excel intends to finance future acquisitions with the most advantageous
sources of capital available at the time, which may include undistributed
funds from operations or the reinvestment of the proceeds from the disposition
of assets. Excel may incur additional indebtedness to finance acquisitions
through secured or unsecured borrowings or through public offerings or private
placements of securities. Excel may acquire properties subject to seller
financing, existing loans secured by mortgages, deeds of trust or similar
liens. Excel may also obtain mortgage financing for properties it acquires and
refinance its existing properties.
To the extent the Excel Board determines to obtain debt financing in
addition to the mortgage loans, Excel may do so generally through mortgage
loans secured by liens on properties. These mortgage loans may be recourse or
non-recourse and may be cross-collateralized or contain cross-default
provisions. Excel does not have a policy limiting the number or amount of
mortgages that may be placed on any particular property, but mortgage
financing instruments usually limit additional liens on such properties.
Future credit facilities and lines of credit may be used for the purpose of
making acquisitions or capital improvements or to provide working capital.
Excel may incur indebtedness for purposes other than the acquisition of
properties when, in the opinion of the Excel Board, it would be advisable to
do so. For example, Excel may borrow to meet the REIT taxable income
distribution requirement under the Code if Excel has taxable income without
receipt of cash sufficient to meet these distribution requirements. For short-
term purposes, from time to time Excel may borrow under lines of credit or
arrange for other short-term borrowings from banks or other sources. Excel's
financing strategy may be reviewed from time to time and changed by the Excel
Board without a vote of the stockholders.
Conflicts of Interest Policies
Excel has adopted certain policies designed to reduce potential conflicts of
interest. In general, Excel will not engage in any transaction with any
director, officer or affiliate thereof involving the sale or disposition of an
equity interest in Excel property to such person, and most other transactions
between Excel and any director or officer, or affiliate thereof, must be
approved by a majority vote (or in certain cases by a unanimous vote) of the
disinterested directors as being fair, competitive, and commercially
reasonable and no less favorable to Excel than similar transactions between
unaffiliated parties under the same circumstances. Such restrictions do not
apply where such director, officer or affiliate has acquired the property for
the sole purpose of facilitating its acquisition by Excel, and the total
consideration paid by Excel does not exceed the cost of the property to such
person (where the cost is increased by the person's holding costs and
decreased by any income received by the person from the property) and no
special benefit results to such person.
Following the recent spin-off of Legacy, certain directors and executive
officers of Excel have served and will continue to serve as directors and
executive officers of Legacy. In this regard, Excel has adopted certain
policies and procedures to be followed by the Excel Board to address potential
conflicts. In addition, the certificate of incorporation of Legacy contains a
specific purpose clause which identifies at the outset which types of business
opportunities will be pursued by Legacy. This clause provides that Legacy's
purpose includes performing an intercompany agreement, which prohibits Legacy
from engaging in certain activities or making certain investments (including
investments in neighborhood and community shopping centers, power centers,
malls or other conventional retail properties) unless Excel was first offered
the opportunity and declined to pursue such activities or investments. In the
event the Combined Company purchases pursuant to the exercise of the option
described in "Combined Company Operations and Management--Legacy Arrangements"
the requisite amount of Legacy Shares, the intercompany agreement will be
amended to include acquisitions of apartments as an opportunity which must
first be offered to and declined by Excel.
Excel's officers are subject to certain conflict of interest restrictions
set forth in their employment contracts with Excel. Certain of Excel's
directors may engage in real estate transactions which may be of the type
conducted by Excel, but it is not anticipated that such transactions will have
a material effect upon Excel's operations.
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Policies with Respect to Other Activities
Subject to the restrictions set forth below, Excel has authority to issue
and/or offer shares of its capital stock in exchange for property and to
repurchase or otherwise acquire its capital stock and to make loans to other
persons, and may engage in such activities in the future. Excel has not
engaged in trading, underwriting or agency distribution or sale of securities
of other issuers and does not intend to do so. Excel has in the past
repurchased capital stock from time to time from stockholders pursuant to a
share repurchase plan (the "Repurchase Plan"), which allowed stockholders of
Excel to offer their shares (or a portion thereof) to Excel for repurchase at
a specified price. The Excel Board terminated the Repurchase Plan as of April
1993 and Excel has no present plans to repurchase any shares, although it may
do so in the future.
Excel has delivered annual reports to its stockholders in the past, and
intends to continue to do so. At all times, Excel intends to make investments
in such a manner as to qualify as a REIT, unless because of circumstances or
changes in the Code (or the Treasury Regulations), the Excel Board determines
that it is no longer in the best interest of Excel to qualify as a REIT.
Excel's policies with respect to all of the above activities may be reviewed
and modified from time to time by the Excel Board without a vote of the
stockholders.
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MANAGEMENT OF EXCEL
This section discusses and describes Excel's management on an historical
basis only without regard to the effects of the Merger. Upon consummation of
the Merger, the Combined Company management will consist of a combination of
existing Excel and New Plan management. See "Combined Company Operations and
Management."
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
directors and executive officers of Excel:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary B. Sabin........... 44 Chairman, President and Chief Executive Officer
Richard B. Muir......... 43 Director, Executive Vice President and Secretary
David A. Lund........... 46 Chief Financial Officer
Graham R. Bullick....... 48 Senior Vice President--Capital Markets
Ronald H. Sabin......... 47 Senior Vice President--Asset Management
S. Eric Ottesen......... 43 Senior Vice President, General Counsel and Assistant Secretary
Mark T. Burton.......... 38 Senior Vice President--Acquisitions
Boyd A. Lindquist....... 60 Director
Robert E. Parsons, Jr... 42 Director
Bruce A. Staller........ 56 Director
John H. Wilmot.......... 55 Director
</TABLE>
Gary B. Sabin. See "Election of Directors--Nominees for Election" for Mr.
Sabin's biography.
Richard B. Muir has served as director, Executive Vice President and
Secretary of Excel since January 1989. Mr. Muir has served as an officer and
director for various affiliates of Excel since 1978, primarily in
administrative and executive capacities, including asset acquisition,
financing and management.
David A. Lund has served as Chief Financial Officer of Excel since 1994 and
as a Vice President of Excel since 1988. Mr. Lund has served as an officer and
director of certain affiliates of Excel since 1983. Mr. Lund is a Certified
Public Accountant and, prior to 1983, was a partner in a public accounting
firm.
Graham R. Bullick, Ph.D. has served as Senior Vice President--Capital
Markets of Excel since January 1991. Previously, Dr. Bullick was associated
with Excel as a director from 1991 to 1992. From 1985 to 1991, Dr. Bullick
served as Vice President and Chief Operations Officer for an Arizona-based
real estate investment firm, where his responsibilities included acquisition
and financing of investment real estate projects.
Ronald H. Sabin has served as Senior Vice President--Asset Management of
Excel since January 1989. Ronald Sabin has served as an officer or otherwise
been employed by affiliates of Excel since 1979, primarily providing property
management services. Ronald Sabin has managed Excel's properties for 15 years.
He is a licensed real estate broker and a licensed property and casualty
insurance agent. Ronald Sabin is the brother of Gary Sabin.
S. Eric Ottesen has served as General Counsel of Excel since January 1995,
as Senior Vice President since October 1995 and as Assistant Secretary since
September 1996. Previously, Mr. Ottesen was a senior partner in a San Diego
law firm from 1987 to 1995.
Mark T. Burton has served as Senior Vice President--Acquisitions of Excel
since October 1995 and as a Vice President of Excel since January 1989. Mr.
Burton has been associated with Excel, its predecessor and its affiliates
since 1983, primarily in the evaluation and selection of property
acquisitions.
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<PAGE>
Boyd A. Lindquist has served as a director of Excel since February 1992. Mr.
Lindquist is presently President, Chief Executive Officer and a director of
Republic Bank. Prior to joining Republic Bank in July 1991, Mr. Lindquist
served since prior to 1987 as President and Chief Executive Officer of the
Bank of San Diego, where he was responsible for the management of the six-
branch bank. Mr. Lindquist has over 30 years' experience in managing financial
institutions.
Robert E. Parsons, Jr. has served as a director of Excel since January 1989.
Mr. Parsons is presently Executive Vice President and Chief Financial Officer
of Host Marriott Corporation, a company he joined in 1981. He also serves as a
director and an officer of several Host Marriott subsidiaries, and as a
director of Merrill Financial Corporation, a privately-held real estate
company.
Bruce A. Staller has served as a director of Excel since its inception.
Prior to establishing Bruce Atwater Staller, Registered Investment Advisor in
1995, Mr. Staller served as President and director of First Wilshire
Securities Management, Inc., a privately-held securities brokerage firm, from
1988 to 1995. Mr. Staller is also a founder and director of The Monrovia
Schools Foundation, Inc., a privately-held company which provides financial
support to the Monrovia Unified School District.
John H. Wilmot has served as a director of Excel since 1989. Mr. Wilmot,
individually and through his wholly-owned corporations, develops and manages
real property, primarily in the Phoenix/Scottsdale area, and has been active
in such business since prior to 1989.
CERTAIN COMMITTEES OF EXCEL BOARD; MEETINGS
The Excel Board held four meetings (excluding telephonic meetings) during
the year ended December 31, 1997. For that year, no director attended fewer
than 75% of the aggregate of the total number of meetings of the Excel Board
and of any meetings of committees upon which he served. The Excel Board has
established the following standing committees: Audit Committee, Executive
Committee and Executive Compensation and Stock Option Committee. There is no
standing Nominating Committee. The Excel Board has delegated certain functions
to the following committees of the Board:
Audit Committee. The Audit Committee consists of three directors who are not
employees of Excel ("non-employee directors"). Messrs. Lindquist and Parsons
are the current members of the Committee. The Audit Committee was established
to make recommendations concerning the management of independent public
accountants, review with the independent public accountants the plans and
results of the audit engagement, approve professional services provided by the
independent accountants, review the independence of the independent
accountants, consider the range of audit and non-audit fees, and review the
adequacy of Excel's internal accounting controls. The Audit Committee met
three times during 1997.
Executive Committee. The Executive Committee consists of three directors,
one of whom must be a non-employee director. Messrs. Gary Sabin, Muir and
Wilmot currently serve on the Executive Committee. Subject to Excel's conflict
of interest policies, the Executive Committee has been granted authority to
acquire and dispose of real property and to borrow or loan funds on behalf of
Excel; provided, however, that any such transaction involving amounts equal to
10% or more of Excel's gross assets require the approval of at least a
majority of the directors, subject to certain further restrictions set forth
in the Excel Bylaws. The Executive Committee also has the power to authorize
the execution of certain contracts and agreements, including those related to
the borrowing of money by Excel. The Executive Committee met five times during
1997, and held numerous meetings telephonically.
Executive Compensation and Stock Option Committee. The Executive
Compensation and Stock Option Committee (the "Compensation Committee")
consists of three directors, all of whom must be non-employee directors.
Messrs. Lindquist, Parsons and Staller currently serve on the Compensation
Committee. The Compensation Committee determines the compensation for Excel's
executive officers and administers the granting of stock options. The
Compensation Committee met two times during 1997.
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<PAGE>
COMPENSATION OF THE DIRECTORS OF EXCEL
Directors who are not otherwise paid employees or consultants of Excel
received during 1997 annual compensation of $14,000 plus a fee of $1,000 for
attendance, in person, at each meeting of the Excel Board, and the directors
received $500 per committee meeting for the Audit and Compensation Committees
and $750 per committee meeting for the Executive Committee, but not for
telephonic meetings. Each such non-employee director also is reimbursed for
expenses incurred in attending meetings (including committee meetings).
Officers of Excel who are directors are not paid director fees or committee
meeting fees.
Pursuant to the terms of Excel's Directors' 1994 Stock Option Plan (the
"Director Plan"), every duly elected and qualified director is entitled to, on
an annual basis, options to purchase shares of Excel Common Stock in
accordance with the following formula: 3,000 shares, plus 250 shares
multiplied by the number of years of continuous service beginning in 1997,
including any portion of any fiscal year of service as a full year.
COMPENSATION OF THE EXECUTIVE OFFICERS
The information set forth below is submitted with respect to each of Excel's
executive officers.
Summary Compensation Table
The following table shows, for the fiscal years ended December 31, 1997,
1996 and 1995, the compensation paid by Excel to its Chief Executive Officer
and each of the four most highly compensated executive officers other than the
Chief Executive Officer (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
NAME AND SECURITIES
PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) OPTIONS COMPENSATION(4)
--------- ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Sa- 1997 $282,562 $247,845 $5,690 265,750(5) $4,750
bin 1996 273,083 137,500 3,585 103,000(5) 4,750
President, 1995 251,000 126,000 3,975 37,000(5) 4,620
Chief Ex-
ecutive
Officer
and Chair-
man of Ex-
cel Board
Richard B.
Muir
Executive
Vice Pres- 1997 174,675 153,212 7,000 178,250(5) 4,750
ident and 1996 168,083 85,000 8,739 73,000(5) 4,750
Secretary 1995 146,417 73,500 7,196 28,250(5) 4,620
David A.
Lund
Chief Fi- 1997 138,713 76,477 6,000 44,000 4,750
nancial 1996 134,167 67,500 5,250 56,400 4,750
Officer 1995 125,000 62,500 -- 17,500 4,620
Graham R.
Bullick
Senior 1997 128,437 70,812 6,650 44,000 3,673
Vice Pres- 1996 123,750 62,500 8,894 47,000 4,188
ident 1995 110,000 55,000 9,194 17,500 3,575
Ronald H.
Sabin
Senior 1997 128,437 70,812 6,000 44,000 4,028
Vice Pres- 1996 122,554 62,500 6,250 47,000 4,468
ident 1995 110,000 55,000 6,000 17,500 4,620
</TABLE>
- --------
(1) Includes compensation that was accrued and deferred pursuant to Excel's
401(k) Plan.
(2) Bonuses were awarded pursuant to the Employment Agreements (as defined
below) which were entered into in April 1993 or, with respect to David A.
Lund, by grant of the Compensation Committee.
(3) Includes car allowance and miscellaneous incentive compensation.
(4) Comprised of 401(k) contributions by Excel.
(5) Includes stock options granted in capacity as a director of Excel.
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<PAGE>
Stock Option Grants Table
The following table provides information concerning the grant of stock
options to the Named Executive Officers as of the end of the last fiscal year.
Excel does not have any outstanding stock appreciation rights:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
--------------------- ----------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(2) FISCAL YEAR PRICE DATE 5% 10%
- ---- ---------- ------------ -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gary B. Sabin........... 262,500 38% $31.00 11-Dec-2007 $5,192,415 $13,039,522
3,250(3) 0 25.38 09-May-2007 77,871 165,344
Richard B. Muir......... 175,000 26 31.00 11-Dec-2007 3,461,610 8,693,015
3,250(3) 0 25.38 09-May-2007 77,871 165,344
David A. Lund........... 44,000 6 31.00 11-Dec-2007 870,348 2,185,672
Graham R. Bullick....... 44,000 6 31.00 11-Dec-2007 870,348 2,185,672
Ronald H. Sabin......... 44,000 6 31.00 11-Dec-2007 870,348 2,185,672
</TABLE>
- --------
(1) Based on a price of $31.00 per share at December 31, 1997. These amounts
represent assumed rates of appreciation in the price of Excel Common Stock
during the terms of the options in accordance with rates specified in
applicable federal securities regulations. Actual gains, if any, on stock
option exercises will depend on the future price of Excel Common Stock and
overall stock market conditions. There is no representation that the rates
of appreciation reflected in this table will be achieved.
(2) Except as otherwise indicated, these options were granted pursuant to the
Employment Agreements (or in the case of Mr. Lund, pursuant to a grant by
the Compensation Committee), and are immediately exercisable. The exercise
price of the options was equal to the market price on the date of grant.
(3) These options were granted to Messrs. Sabin and Muir in their capacities
as directors of Excel and became immediately exercisable as of the date of
grant. The exercise price of the options was equal to the market price on
the date of grant.
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of stock options during the last
fiscal year and unexercised options held as of the end of the fiscal year:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
NUMBER OF YEAR-END YEAR-END(2)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(1) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Gary B. Sabin........... 0 0 507,750/0 $2,773,656/0
Richard B. Muir......... 0 0 351,500/0 1,990,469/0
David A. Lund........... 0 0 147,900/0 1,119,125/0
Graham R. Bullick....... 10,000 $72,500 128,500/0 908,250/0
Ronald H. Sabin......... 0 0 158,500/0 1,265,750/0
</TABLE>
- --------
(1) Fair market value of underlying securities at exercise minus the exercise
price.
(2) Represents the difference between the closing price of Excel Common Stock
on December 31, 1997 and the exercise price of the options.
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<PAGE>
EMPLOYMENT AGREEMENTS
Gary Sabin has entered into a new employment agreement with the Combined
Company, which will become effective only upon the consummation of the Merger,
pursuant to which Gary Sabin will serve as President of the Combined Company.
For additional information regarding Gary Sabin's employment agreement as well
as the employment agreements to be entered into by certain other executive
officers of the Combined Company in connection with the Merger, see "The
Merger--Interests of Certain Persons in the Merger." Such employment
agreements will supersede the Employment Agreements described below upon
consummation of the Merger. No payments will be received by the officers of
Excel under such superseded Employment Agreements following the Merger.
Excel entered into separate employment agreements (the "Employment
Agreements") with Messrs. Gary Sabin, Muir, Ronald Sabin and Bullick effective
as of April 1, 1993. Each of the Employment Agreements is automatically
extended for an additional year at the end of each year of the agreement,
subject to the right of either Excel or said employees to terminate the
agreement voluntarily by giving at least three months' prior written notice.
Each of the Employment Agreements provides for an annual base salary as well
as an automobile allowance, an award of stock options and medical insurance
coverage. In addition, the Employment Agreements contain severance provisions
which provide that, under certain circumstances, the employees are entitled to
lump sum severance payments following the termination of their employment with
Excel. Such severance payments are as follows: Gary Sabin is entitled to an
amount equal to two and one-half (2 1/2) times, Mr. Muir is entitled to an
amount equal to two (2) times, and Messrs. Ronald Sabin and Bullick are each
entitled to an amount equal to one and one-half (1 1/2) times the highest
compensation paid to each of them under their respective Employment Agreements
for any year, or if greater, that which is payable to each of them for the
year in which their respective Employment Agreements are terminated. The
Employment Agreements provided for annualized base salaries in 1997 as
follows: Mr. Gary Sabin, $283,250; Mr. Muir, $175,100; Mr. Ronald Sabin,
$128,750; and Mr. Bullick, $128,750. Each of such employees is entitled to
annual bonus compensation and options to be determined by the Compensation
Committee. The award of any bonus or option compensation, however, is
dependent on the achievement of certain performance levels by Excel, including
per share growth in funds from operations and cash flow.
On June 12, 1997, the Excel Board resolved to amend the severance provisions
contained in the Employment Agreements to provide severance payments as
follows: Gary Sabin will be entitled to an amount equal to two and one-half (2
1/2) times, Mr. Muir will be entitled to an amount equal to two (2) times, and
Messrs. Ronald Sabin and Bullick will each be entitled to an amount equal to
one and one-half(1 1/2) times the highest compensation paid to each of them
under their respective Employment Agreement for any year, or if greater, that
which is payable to each of them for the year in which their respective
Employment Agreement is terminated.
COMPENSATION PLANS
401(k) Plan. Excel has established a tax-qualified employee savings and
retirement plan (the "401(k) Plan") covering all of Excel's eligible full-time
employees. Excel adopted the 401(k) Plan effective as of January 1, 1993.
Pursuant to the 401(k) Plan, participants may elect to contribute, through
salary reductions, up to 15% of their annual compensation. Excel provides an
additional 50% matching contribution equal to 3% of the first 6% of
compensation that is contributed by all participating employees. The 401(k)
Plan is designed to qualify under Section 401 of the Code so that
contributions by employees or by Excel to the 401(k) Plan, and income earned
on plan contributions, are not taxable to employees until withdrawn from the
401(k) Plan, and so that contributions by Excel, if any, will be deductible by
Excel when made.
Director Plan. The Director Plan was adopted by the Excel Board on April 19,
1994 and approved by Excel's stockholders on May 25, 1994. The Director Plan
is administered by the Compensation Committee and provides for the granting to
duly elected and qualified directors of Excel of stock options with respect to
an aggregate of 240,000 shares of Excel Common Stock. The Director Plan
expires on May 15, 2004, unless sooner terminated by the Excel Board. Pursuant
to the Director Plan, every participating director is entitled to, on an
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<PAGE>
annual basis, options to purchase shares of Excel Common Stock in accordance
with the following formula: 3,000 shares, plus 250 shares multiplied by the
number of years of continuous service beginning in 1997, including any portion
of any fiscal year of service as a full year. Options granted under the
Director Plan are exercisable on the date of grant, and the exercise price of
such options is equal to the fair market value of Excel Common Stock on the
date of grant. As of March 31, 1998, options to purchase an aggregate of
71,750 shares of Excel Common Stock had been granted under the Director Plan
at prices ranging from $18.25 to $25.38, of which 59,500 were still
unexercised. Directors of the Combined Company who were formerly trustees of
the New Plan Board will have New Plan service considered for purposes of stock
option eligibility under the Director Plan.
Employee Plan. In May 1993, the Excel Board approved the 1993 Stock Option
Plan of Excel Realty Trust, Inc. (the "Employee Plan"), authorizing the
granting of options to purchase up to 1,450,000 shares of Excel Common Stock.
As of March 31, 1998, options to purchase an aggregate of 1,449,150 shares of
Excel Common Stock had been granted under the Employee Plan at prices ranging
between $16.38 to $31.69, of which 1,272,750 were still unexercised. At the
Excel annual stockholders meeting on May 28, 1998, the stockholders of Excel
approved an amendment to the Employee Plan to increase the number of shares
available for issuance under the Employee Plan for each of the next five
fiscal years by 2.0% of the number of shares of Excel Common Stock issued and
outstanding as of the end of the immediately preceding fiscal year. The
Employee Plan is administered by the Compensation Committee and provides for
the granting to executive and other key employees of Excel of "incentive stock
options" (as defined in Section 422 of the Code) and non-qualified stock
options. Options may be granted under the Employee Plan for a period through
May 3, 2003, unless the Employee Plan is earlier terminated. The price of
shares of Excel Common Stock subject to each option will be set by the
Compensation Committee; provided, however, that the price per share of an
option shall not be less than 100% of the fair market value of the Excel
Common Stock on the date of the grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, the Compensation Committee was comprised of Messrs.
Lindquist, Parsons and Staller. No interlocking relationship exists between
any member of the Compensation Committee and any member of any other company's
board of directors or compensation committee.
COMPENSATION COMMITTEE REPORT
Set forth below in full is the Report of the Compensation Committee
regarding the compensation paid by Excel to its executive officers during
1997:
In 1997, the Compensation Committee retained the compensation consulting
firm FPL Advisory Group ("FPL") to review management compensation and make
recommendations on company compensation policy which would increase
stockholder value by aligning closely the financial interests of Excel's
management with that of its stockholders. Based on recommendations from FPL,
the Compensation Committee recommended and Excel adopted certain adjustments
in management compensation, all of which adjustments make management's
compensation comparable to executive officers of other public companies of
comparable size.
Stockholders are interested in how companies pay their executives, both in
terms of the plan designs that generate pay, and in the ultimate amount of
compensation. Following is a discussion of the thought process that has gone
into Excel's 1997 executive pay plans and amounts:
General. The Compensation Committee has implemented compensation policies
which seek to enhance the profitability of Excel, and thus stockholder values,
by aligning closely the financial interests of Excel's management with those
of its stockholders.
Executive pay continues to consist of three elements that are designed to
meet those policies:
. Base salary, based primarily on job content and peer group comparisons.
The Compensation Committee believes that base salaries at least at market
average are essential to retaining good performers.
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<PAGE>
. Bonuses, which are based primarily upon the achievement of certain
performance levels by Excel, including per share growth in funds from
operations.
. Stock options, which allow executives to benefit when Excel's stock price
increases. The Compensation Committee believes that its grant of stock
options, along with the award of bonuses based on company performance,
aligns executives' interests with stockholders.
Following is additional information regarding each of the above elements:
Base Salary. Excel entered into the Employment Agreements with Messrs. Gary
Sabin, Muir, Bullick and Ronald Sabin as of April 1, 1993. The salaries paid
to each of such executive officers in 1997, as set forth in the Summary
Compensation Table above, are comparable to salaries paid in 1997 to executive
officers at similarly-sized comparable companies.
Bonuses. The Employment Agreements generally allow for bonus awards,
dependent upon Excel's achievement of certain performance levels, including 1)
growth in funds from operations, 2) a comparison of peer group compensation
and 3) execution of Excel's strategic plan. Such bonus amounts, as indicated
in the Summary Compensation Table, were declared in December 1997 and paid in
January 1998, and were awarded with respect to service to Excel from January
1, 1997 through December 31, 1997. The bonus awards for 1997 were based in
part on Excel's performance in 1997. In 1997, Excel's funds from operations
increased 89.1% to $62.6 million ($2.54 per share) as compared to $33.1
million ($2.30 per share) in fiscal 1996. The funds from operations per share
increased 10.4%. Revenue and net income also increased in 1997 compared to
1996.
Stock Options. Options to purchase shares were issued during 1997 to the
Named Executive Officers as indicated in the Summary Compensation Table under
Excel's 1993 Stock Option Plan. The options were granted based upon the
Compensation Committee's determination that the performance of Excel during
1997, as discussed above, warranted such options. Stock value must increase
from the value at time of grant in order for option holders to realize any
benefit from these rewards. Thus, option holders benefit only if all
stockholders benefit. The annual return to stockholders has been 35.7%, 34.6%
and 32.9% for the years 1995 through 1997, respectively. Also, as to executive
options, FPL proposed, and the Compensation Committee adopted, dividend
equivalent compensation based on the incremental increase on the value of
Excel's dividend over time. This dividend equivalent compensation would
provide an award only on the incremental increase in the value of the dividend
rather than the full dividend. The Compensation Committee believes the
dividend equivalent approach enables Excel executives to receive compensation
that is closely linked to a total shareholder return philosophy. This applies
only to options granted during 1997 and thereafter, and only as to cash common
stock dividends in excess of $2.00 per share.
Chief Executive Officer Pay. Amounts earned during 1997 by the Chief
Executive Officer, Gary Sabin, are shown in the Summary Compensation Table.
Some additional notes regarding his pay follow:
. The base salary for Gary Sabin, as set forth in the Summary Compensation
Table, is believed by the Compensation Committee to be comparable to the
base salary of chief executive officers of other public companies of
comparable size.
. FPL recommended, and Gary Sabin was awarded, a cash bonus of $247,845 in
recognition of his outstanding performance in 1997. This is consistent
with, or even somewhat conservative compared to, other public companies
of similar size.
. During 1995, Gary Sabin received options to purchase 35,000 shares of
stock at $19.25 per share and to purchase 40,000 shares of stock at
$23.375 per share. The option for 35,000 shares was granted in May 1995
for services performed in 1994. The option for 40,000 shares was granted
in January 1996 for services performed in 1995. During 1995, Gary Sabin
also received options to purchase 2,000 shares of stock at $19.63 per
share in his capacity as a director of Excel. During 1996, Gary Sabin
received options to purchase 60,000 shares of stock at $23.375 per share.
In addition, Gary Sabin received options to purchase 3,000 shares of
stock at $18.25 per share in his capacity as a director of Excel. During
1997,
167
<PAGE>
Gary Sabin received options to purchase 262,500 shares of stock at $31.00
per share. In addition, Gary Sabin received options to purchase 3,250
shares of stock at $25.375 per share in his capacity as a director of
Excel. The exercise price of all such options is equal to the market price
at the date of grant. The Compensation Committee believes that this long-
term incentive opportunity is conservative when compared to other public
companies of comparable size.
Summary. Currently, Excel's executive compensation program continues to
reward the following elements of performance:
. Individual performance is rewarded through continued employment with
Excel and, to some extent, through the bonus plan.
. Achievement of internal company goals is rewarded through the bonus plan.
. Stock price performance is rewarded through increases in the value of
previously granted stock options.
The Compensation Committee believes that the current program has been
effective in rewarding executives appropriately for performance, retaining
good performers, and aligning executives' interests with those of
stockholders. While the Compensation Committee is pleased with the current
compensation system, it reserves the right to make changes to the program as
are necessary to continue to meet stated goals in future years.
Benefits also are offered to officers that are not based on performance.
Such benefits provide a safety net of protection in the event of illness,
disability, death, retirement, etc. Such a safety net is provided to most of
the employees of Excel.
PERFORMANCE GRAPH
The following performance graph compares the performance of Excel Common
Stock to the S&P 500 Index and to the published National Association of Real
Estate Investment Trust's All Equity Index (excluding Health Care REITs). The
graph assumes that the value of the investment in Excel Common Stock and each
index was 100 at December 31, 1992 and that all dividends were reinvested:
LOGO
168
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1995, a taxable affiliate company, EDV, was formed to assist in Excel's
acquisition of additional properties. Excel owns 100% of the outstanding
preferred shares of EDV. The preferred shares receive 95% of the dividends, if
any, from EDV. One hundred percent (100%) of the outstanding common shares of
EDV are owned by EIC. Gary B. Sabin, who is President, Chief Executive Officer
and Chairman of the Board of Excel, is President, Chief Executive Officer and
Chairman of the Board of EIC, and certain other officers of Excel serve as
officers and directors of EIC. At December 31, 1997, Excel had notes
receivable outstanding to EDV of $90.1 million to facilitate certain
transactions (which indebtedness was subsequently reduced by approximately
$38.1 million in connection with the spin-off described below).
On March 31, 1998, Excel consummated its previously-announced spin-off of
Legacy through the distribution, on a pro rata basis, to the holders of record
of Excel Common Stock on March 2, 1998 of all of the common stock of Legacy.
Legacy was organized to create and realize value by identifying and making
opportunistic real estate investments which are not restricted by REIT tax
laws or influenced by Excel's objectives of increasing cash flows and
maintaining certain leverage ratios. Prior to the spin-off, Excel transferred
to Legacy ten single tenant properties owned by Excel with a book value of
approximately $45.7 million, a property under development with a book value of
approximately $14.5 million and certain other net assets of approximately $1.2
million, in exchange for a sufficient number of shares of Legacy common stock
to effect the spin-off, a note payable from Legacy to Excel in the amount of
approximately $26.4 million, and the assumption by Legacy of indebtedness on
the properties in the amount of approximately $33.9 million. The note payable
to Excel was repaid by Legacy in April 1998. Prior to the spin-off, EDV
transferred to Legacy four notes receivable, a leasehold interest in a parcel
of land, an office building and a single tenant property, in exchange for the
cancellation by Excel of approximately $38.1 million of EDV's indebtedness to
Excel. Excel's executive officers will continue to manage Excel's operations
as well as supervise the management of Legacy.
Concurrently with the spin-off, certain officers of Legacy, including
Excel's executive officers, (i) purchased 9,195,224 shares of Legacy common
stock in a private placement at a price per share of $2.39 (the market value
of the Legacy common stock as of the spin-off based on the value of the assets
being transferred to Legacy), for an aggregate purchase price of approximately
$22.0 million, and (ii) were granted options to acquire 3,100,000 shares of
Legacy common stock under the 1998 Stock Option Plan of Legacy, 50% of which
have an exercise price of $5.00 per share and 50% of which have an exercise
price of $10.00 per share. Legacy agreed to loan to such officers, in
connection with their purchase of Legacy common stock, approximately 50% of
the purchase price therefor (an aggregate amount of approximately $10.9
million). Such loans bear interest at a rate of 7.0% per annum, mature in
March 2003 and are recourse obligations of such officers.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under Section 16(a) of the Exchange Act, directors, officers and beneficial
owners of ten percent or more of Excel Common Stock ("Reporting Persons") are
required to report to the Commission on a timely basis the initiation of their
status as a Reporting Person and any changes with respect to their beneficial
ownership of Excel Common Stock. Regulations promulgated by the Commission
require Excel to disclose in this Joint Proxy Statement/Prospectus any
reporting violations with respect to the 1997 fiscal year which came to
Excel's attention based on a review of the applicable filings required by the
Commission to report such status as an officer or director or such changes in
beneficial ownership as submitted to Excel. Based solely on its review of such
forms received by it, Excel believes that all filing requirements applicable
to its executive officers, directors and beneficial owners of more than ten
percent of Excel Common Stock were complied with during the fiscal year ended
December 31, 1997.
169
<PAGE>
PRINCIPAL STOCKHOLDERS OF EXCEL
As of the Excel Record Date, Excel had 23,440,338 shares of Excel Common
Stock outstanding and 1,414 stockholders of record. The following table sets
forth information regarding beneficial ownership of the shares of Excel Common
Stock as of such date by (i) each of Excel's executive officers and directors,
(ii) Excel's executive officers and directors as a group and (iii) all other
stockholders known by Excel to beneficially own more than five percent of
Excel Common Stock. For purposes of this Joint Proxy Statement/Prospectus,
beneficial ownership of securities is defined in accordance with the rules of
the Commission and means generally the power to vote or exercise investment
discretion with respect to securities, regardless of any economic interests
therein. Except as otherwise indicated, Excel believes that the beneficial
owners of the securities listed below have sole investment and voting power
with respect to such shares, subject to community property laws where
applicable. Unless otherwise indicated, the business address for each of the
individuals listed below is c/o Excel Realty Trust, Inc., 16955 Via Del Campo,
Suite 110, San Diego, California 92127.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENT
BENEFICIALLY BENEFICIALLY
NAME OWNED(1) OWNED(2)
---- ------------ ------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Gary B. Sabin(3)..................................... 1,334,225 5.57%
Chief Executive Officer, President, Chairman of the
Board
Richard B. Muir...................................... 437,804 1.84
Executive Vice President, Secretary, Director
Ronald H. Sabin...................................... 245,937 1.04
Senior Vice President
David A. Lund........................................ 170,181 *
Chief Financial Officer, Treasurer
Mark T. Burton....................................... 152,331 *
Senior Vice President/Acquisitions
Graham R. Bullick.................................... 135,636 *
Senior Vice President
S. Eric Ottesen...................................... 92,087 *
Senior Vice President, General Counsel, Assistant
Secretary
John H. Wilmot(4).................................... 110,336 *
Director
Bruce A. Staller(5).................................. 17,184 *
Director
Robert E. Parsons, Jr.(6)............................ 15,373 *
Director
Boyd A. Lindquist(7)................................. 13,268 *
Director
Executive Officers and Directors as a group (11 2,724,362 10.90%
persons)............................................
Fidelity Management & Research Company(8)............ 2,715,790 10.87%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of stock.
(1) Includes options to purchase shares, exercisable within 60 days of the
Excel Record Date, as follows: Mr. Gary Sabin, 511,000; Mr. Muir, 355,000;
Mr. Ronald Sabin, 158,500; Mr. Lund, 147,900; Mr. Burton, 133,500; Mr.
Bullick, 128,500; Mr. Ottesen, 91,000; Mr. Staller, 82,500; Mr. Parsons,
3,250; and Mr. Lindquist, 10,250.
170
<PAGE>
(2) Represents stock plus options divided by the total of the shares
outstanding and options of the individual officer or director.
(3) Includes shares held by EIC, of which Gary B. Sabin is the controlling
stockholder.
(4) Mr. Wilmot's business address is 4455 E. Camelback Rd., Phoenix, Arizona
85018.
(5) Mr. Staller's business address is 618 W. Hillcrest Blvd., Monrovia,
California 91016.
(6) Mr. Parson's business address is Host Marriott Corporation, 10400 Fernwood
Road, Washington, D.C. 20058.
(7) Mr. Lindquist's business address is 23133 Hawthorne Boulevard, Torrance,
California 90505.
(8) The information is presented as of December 31, 1997 and is based on a
Schedule 13G filed with the Commission. Fidelity is a group of funds of
which no single fund owns more than five percent of Excel Common Stock.
LEGAL MATTERS
Certain legal matters relating to the Merger will be passed on for New Plan
by Altheimer & Gray, Chicago, Illinois, and for Excel by Latham & Watkins, San
Diego, California. The validity of the Combined Company Shares offered hereby
will be passed on for Excel by Ballard Spahr Andrews & Ingersoll, LLP,
Baltimore, Maryland. Altheimer & Gray and Latham & Watkins will rely on
Ballard Spahr Andrews & Ingersoll, LLP, as to certain matters of Maryland law.
EXPERTS
The consolidated balance sheets of Excel as of December 31, 1997 and 1996
and the consolidated statements of income, changes in stockholders' equity and
cash flows of Excel for each of the three years in the period ended December
31, 1997, included in this prospectus, and the consolidated balance sheets of
New Plan as of July 31, 1997 and 1998 and the consolidated statements of
income, changes in shareholders' equity, and cash flows of New Plan for each
of the three years in the period ended July 31, 1997, incorporated by
reference in this prospectus, have been included or incorporated herein in
reliance on the reports of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER PROPOSALS
Any proposals by New Plan shareholders to be presented at New Plan's Annual
Meeting of Shareholders to be held in 1998 must have been received by New Plan
no later than June 30, 1998 in order to be included in New Plan's proxy
materials relating to the meeting. If the Merger is consummated, New Plan will
have only one shareholder (the Combined Company) and therefore will not
conduct a 1998 annual meeting. Any proposals by Excel stockholders to be
presented at Excel's Annual Meeting of Stockholders to be held in 1999 must be
received by Excel no later than December 25, 1998.
OTHER MATTERS
The New Plan Board does not intend to bring any matter before the New Plan
Special Meeting other than as specifically set forth in the Notice of Special
Meeting of Shareholders, nor does it know of any matter to be brought before
the New Plan Special Meeting by others. If, however, any other matters
properly come before the New Plan Special Meeting, it is the intention of the
proxyholders to vote such proxy in their discretion with respect to those
matters.
171
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF EXCEL
<TABLE>
<CAPTION>
PAGE
INTERIM FINANCIAL STATEMENTS ----
<S> <C>
Consolidated Balance Sheets
March 31, 1998 (Unaudited) and December 31, 1997.......................... F-2
Consolidated Statements of Income
Three Months Ended March 31, 1998 and 1997 (Unaudited).................... F-3
Consolidated Statements of Changes in Stockholders' Equity
Three Months Ended March 31, 1998 and 1997 (Unaudited).................... F-4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1998 and 1997 (Unaudited).................... F-5
Notes to Consolidated Financial Statements (Unaudited)..................... F-6
ANNUAL FINANCIAL STATEMENTS
Report of Independent Accountants.......................................... F-15
Consolidated Balance Sheets
December 31, 1997 and 1996................................................ F-16
Consolidated Statements of Income
Years Ended December 31, 1997, 1996 and 1995.............................. F-17
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1997, 1996 and 1995.............................. F-18
Consolidated Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995.............................. F-19
Notes to Consolidated Financial Statements................................. F-20
Schedule II--Valuation and Qualifying Accounts
Years Ended December 31, 1997, 1996 and 1995.............................. F-33
Schedule III--Real Estate and Accumulated Depreciation
December 31, 1997......................................................... F-34
</TABLE>
F-1
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER
1998 31, 1997
----------- -----------
(UNAUDITED)
ASSETS
------
<S> <C> <C>
Real estate:
Land.............................................. $ 313,731 $ 307,995
Buildings......................................... 601,521 617,523
Accumulated depreciation.......................... (33,602) (33,936)
----------- -----------
Net real estate................................. 881,650 891,582
Cash................................................ 4,327 18,426
Escrow and other cash deposits...................... 1,223 20,814
Accounts receivable, less allowance for bad debts of
$1,488 and $1,896 in 1998 and 1997, respectively... 3,589 4,577
Notes receivable--affiliates........................ 106,910 90,124
Notes receivable--other............................. 29,794 27,953
Interest receivable................................. 8,493 12,867
Loan acquisition costs.............................. 3,085 2,993
Other assets........................................ 4,792 6,861
----------- -----------
$ 1,043,863 $ 1,076,197
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Liabilities:
Mortgages payable................................. $ 238,502 $ 243,664
Capital leases.................................... 26,850 26,850
Senior notes payable.............................. 75,000 75,000
Notes payable..................................... 22,386 168,894
Accounts payable and accrued liabilities.......... 11,519 10,135
Deferred rental income............................ 3,637 2,662
Other liabilities................................. 4,717 4,490
----------- -----------
Total liabilities............................... 382,611 531,695
----------- -----------
Minority interest in partnership.................. 41,430 41,986
----------- -----------
Commitments and contingencies..................... -- --
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, 4,600,000 shares designated as 8 1/2%
Series A Cumulative Convertible Preferred,
2,126,380 and 4,600,000 shares outstanding in
1998 and 1997, respectively; Depository shares of
6,300,000 each representing 1/10 of a share of 8
5/8% Series B Cumulative Redeemable Preferred,
630,000 and 0 outstanding in 1998 and 1997,
respectively..................................... 28 46
Common stock, $.01 par value, 100,000,000 shares
authorized, 23,413,721 and 20,999,634 shares
issued and outstanding in 1998 and 1997,
respectively..................................... 234 210
Additional paid-in capital........................ 661,014 507,866
Accumulated distributions in excess of net income. (41,454) (5,606)
----------- -----------
Total stockholders' equity...................... 619,822 502,516
----------- -----------
$ 1,043,863 $ 1,076,197
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME--UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1998 1997
------- -------
<S> <C> <C>
Revenues:
Rental revenue.............................................. $26,625 $13,046
Expense reimbursements...................................... 5,245 1,598
Interest.................................................... 5,210 3,529
Other....................................................... 132 2,031
------- -------
Total revenue............................................. 37,212 20,204
------- -------
Operating expenses:
Interest.................................................... 7,824 4,321
Depreciation and amortization............................... 4,150 2,110
Property taxes.............................................. 2,993 863
Repairs and maintenance..................................... 1,853 744
Other property expenses..................................... 1,903 806
General and administrative.................................. 1,702 1,050
------- -------
Total operating expenses.................................. 20,425 9,894
------- -------
Income before real estate sales and minority interest....... 16,787 10,310
Minority interest............................................. (405) --
Loss on sale of real estate................................... (23) --
------- -------
Net income.................................................. $16,359 $10,310
======= =======
Basic net income per share.................................... $ 0.52 $ 0.48
======= =======
Diluted net income per share.................................. $ 0.49 $ 0.46
======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY--UNAUDITED
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS TOTAL
------------------ ----------------- PAID-IN IN EXCESS OF STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL NET INCOME EQUITY
---------- ------ ---------- ------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Three Months Ended March
31, 1998:
Balance at January 1,
1998................... 4,600,000 $ 46 20,999,634 $210 $507,866 $ (5,606) $502,516
Issuance of preferred
shares................. 630,000 6 -- -- 157,494 -- 157,500
Preferred stock
converted to common
stock.................. (2,473,620) (24) 2,373,006 24 -- -- --
Issuance of common
stock.................. -- -- 41,081 -- 893 -- 893
Selling expenses........ -- -- -- -- (5,239) -- (5,239)
Net income.............. -- -- -- -- -- 16,359 16,359
Distributions........... -- -- -- -- -- (52,207) (52,207)
---------- ---- ---------- ---- -------- -------- --------
Balance at March 31,
1998................... 2,756,380 $ 28 23,413,721 $234 $661,014 $(41,454) $619,822
========== ==== ========== ==== ======== ======== ========
Three Months Ended March
31, 1997:
Balance at January 1,
1997................... -- $-- 18,231,089 $182 $324,229 $(11,757) $312,654
Issuance of preferred
stock.................. 4,600,000 46 -- -- 114,954 -- 115,000
Issuance of common
stock.................. -- -- 99,558 1 2,174 -- 2,175
Selling expenses........ -- -- -- -- (3,591) -- (3,591)
Net income.............. -- -- -- -- -- 10,310 10,310
Distributions........... -- -- -- -- -- (8,386) (8,386)
---------- ---- ---------- ---- -------- -------- --------
Balance at March 31,
1997................... 4,600,000 $ 46 18,330,647 $183 $437,766 $ (9,833) $428,162
========== ==== ========== ==== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1997
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 16,359 $ 10,310
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation.......................................... 4,145 2,109
Equity in affiliates.................................. 3,253 (173)
Provision for bad debts............................... 469 298
Minority interest in income of partnership............ 405 --
Amortized loan costs and leasing commissions.......... 258 442
Loss on sale of real estate........................... 23 --
Changes in accounts receivable.......................... 519 (200)
Changes in other assets................................. 2,708 (3,443)
Changes in accounts payable............................. 1,603 (369)
Changes in other liabilities............................ 1,203 (74)
--------- --------
Net cash provided by operating activities........... 30,945 8,900
--------- --------
Cash flows from investing activities:
Real estate acquisitions and building improvements...... (54,708) (2,201)
Advances for notes receivable........................... (42,887) (17,896)
Principal payments on notes receivable.................. 11,338 11,029
Proceeds from real estate sales......................... 372 --
Other................................................... (36) (389)
--------- --------
Net cash used in investing activities............... (85,921) (9,457)
--------- --------
Cash flows from financing activities:
Issuance of preferred stock............................. 157,500 115,000
Principal payments of mortgages and notes payable....... (150,014) (98,719)
Proceeds from mortgages and notes payable............... 52,148 16,000
Distributions paid...................................... (12,945) (8,386)
Selling and offering costs.............................. (5,239) (3,591)
Issuance of common stock................................ 785 964
Minority interest distributions......................... (852) --
Loan costs paid......................................... (506) (181)
--------- --------
Net cash provided by financing activities........... 40,877 21,087
--------- --------
Net increase (decrease) in cash..................... (14,099) 20,530
Cash at January 1......................................... 18,426 5,038
--------- --------
Cash at March 31.......................................... $ 4,327 $ 25,568
========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The financial statements reflect all adjustments of a recurring nature which
are, in the opinion of management, necessary for a fair presentation of the
financial statements. No adjustments were necessary which were not of a normal
recurring nature. Certain reclassifications have been made to the consolidated
financial statements for the three months ended March 31, 1997 and at December
31, 1997 in order to conform with the current period presentation. These
financial statements should be read in conjunction with the consolidated
financial statements and accompanying footnotes included in the Company's
December 31, 1997 Annual Report on Form 10-K.
Organization
Excel Realty Trust, Inc. (the "Company") was formed in 1985 and subsequently
reincorporated as a Maryland corporation. The Company is in the business of
purchasing and operating commercial real estate. The Company is operated as a
self-administered, self-managed real estate investment trust (REIT).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all significantly owned
partnerships. All significant intercompany accounts and transactions have been
eliminated in consolidation.
On April 1, 1997, the Company began consolidating the accounts of Excel
Realty Partners, L.P., a Delaware limited partnership ("ERP"), when the
Company converted its loans into an equity investment in ERP. Prior to April
1, 1997, the Company accounted for ERP on the equity method of accounting. The
Company uses the equity method to account for its investment in ERT
Development Corporation ("EDV"), a Delaware corporation (Note 4).
Income Taxes
The Company has elected to be treated as a real estate investment trust
under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. Under these provisions, the Company and its subsidiaries will not be
subject to federal income tax if 95% of its real estate investment trust
taxable income (before dividends paid deduction) is distributed to
shareholders and certain gross income, asset diversification, share ownership
and disclosure requirements are met. Accordingly, no provision for federal
income taxes is included in the accompanying consolidated financial
statements.
Real Estate
Land, buildings and building improvements are recorded at cost. Depreciation
is computed using the straight-line method over estimated useful lives of 40
years for buildings and 2 to 40 years for building improvements. Expenditures
for maintenance and repairs are charged to expense as incurred and significant
renovations are capitalized.
The Company assesses whether there has been a permanent impairment in the
value of its real estate by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to pay rent under the terms of the lease. If a property is leased at
significantly lower rent, the Company may recognize a permanent impairment
loss if the income stream is not sufficient to recover its investment.
F-6
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
Deferred Leasing and Loan Acquisition Costs
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on the
straight-line method over the terms of the related leases or debt agreements.
Revenue Recognition
Base rental revenue is recognized on the straight-line basis, which averages
annual minimum rents over the terms of the leases. Certain of the leases
provide for additional rental revenue by way of percentage rents to be paid
based upon the level of sales achieved by the lessee. These percentage rents
are recorded on the accrual basis and are included on the Consolidated
Statements of Income in rental revenue. The leases also typically provide for
tenant reimbursement of common area maintenance and other operating expenses
which are included in the accompanying Consolidated Statements of Income as
expense reimbursements.
Net Income Per Common Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings Per Share effective December 31, 1997.
SFAS No. 128 requires the presentation of basic and diluted earnings per
share. Basic earnings per share is computed by dividing income available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share is computed giving
effect to all dilutive potential common shares that were outstanding during
the period. Dilutive potential common shares consist of the incremental common
shares issuable upon the conversion of convertible preferred stock (using the
"if converted" method), exercise of stock options and warrants and potential
conversion of ERP limited partner units. All prior period earnings per share
amounts have been restated to comply with SFAS No. 128 (Note 9).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
2. REAL ESTATE:
Acquisitions
In the three months ended March 31, 1998, the Company acquired two shopping
centers and a parcel of land, all located in California. The total cost of
these three properties was approximately $54,100,000.
In the three months ended March 31, 1997, the Company acquired a shopping
center in Georgia and a building leased to a single tenant, Winn Dixie,
located in Tennessee. The total cost of these two properties was approximately
$5,600,000. No mortgage debt was assumed in these transactions.
Sales
In 1998, the Company sold one single tenant property for $372,000 and
recognized a $23,000 loss on the sale. On March 31, 1998, ten single tenant
properties and one property held for sale owned by the Company were spun-off
to Excel Legacy Corporation ("Legacy") along with certain other assets (Note
4). There were no real estate sales in 1997.
F-7
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
Environmental Matters
Soil and groundwater contamination exists at Carmen Plaza in Camarillo,
California, Cudahy Plaza in Cudahy, California, and Bristol Plaza in Santa
Ana, California. Environmental professionals retained by the Company estimate
that the total, cumulative cost of remediation for these properties will be
approximately $1.8 million to $5.5 million. In connection with each of these
properties, the Company has entered into a remediation and indemnity
agreement, which obligates the prior owner of the properties (including in
some cases, principals of the prior owner) to perform the remediation and to
indemnify the Company for any losses it may suffer because of the
contamination or remediation. Although there can be no assurance that the
remediation estimates of the environmental professionals are accurate or that
the prior owners will perform their obligations under the remediation and
indemnity agreements, the Company does not expect the environmental conditions
at these properties to have a material adverse effect on the Company.
The Company has identified asbestos minerals relating to spray-applied
fireproofing materials in Clearwater Mall in Clearwater, Florida which was
acquired by the Company in December 1997. Environmental professionals retained
by the Company estimate that the total cumulative cost of remediation for this
property will be approximately $3.2 million. The estimated cost of this
remediation, which was capitalized as part of the acquisition price of this
property, is included in other liabilities in the Company's Consolidated
Balance Sheets.
3. NOTES RECEIVABLE:
The Company had the following notes receivable at March 31, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes from EDV, interest at 14% per annum,
collateralized by EDV assets. Due on demand........... $ 74,547 $ 90,124
Notes from Legacy, interest at 12% per annum, repaid in
April 1998 (Note 4)................................... 32,363 --
Notes from development companies, interest from 11%-12%
per annum. Maturity dates vary based upon the
completion of certain properties...................... 17,369 15,599
Note from a development company, interest at 25%
compounded monthly, payable in Canadian dollars. Due
May 2003.............................................. 11,322 11,235
Other.................................................. 1,103 1,119
-------- --------
Total notes receivable............................... $136,704 $118,077
======== ========
</TABLE>
Interest and principal payments from EDV are primarily received upon the
completion of development projects. Interest receivable from EDV was
$2,134,000 and $7,628,000 at March 31, 1998 and December 31, 1997,
respectively.
The Company has made loans totaling $16,050,000 Canadian dollars
($11,322,000 U.S. dollars at March 31, 1998) to a Canadian company which used
the proceeds to acquire a 50% joint venture interest in a mixed-use commercial
building known as "Atrium on Bay", and an adjacent land parcel in Toronto,
Canada. The loan is collateralized by the Canadian company's interest in the
building.
In 1997 the Company established $25,680,000 in credit facilities to certain
developers. The outstanding amounts on the credit facilities of $16,869,000
carry interest of 11% to 12%, are collateralized by real estate, and are
payable on the earlier of the sale of real estate or seven years.
F-8
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
4. INVESTMENTS:
Excel Realty Partners, L.P.
In 1995, ERP was formed to own and manage certain real estate properties.
The Company is the sole general partner of ERP. The general partner is
entitled to receive 99% of net income and gains before depreciation, if any,
after the limited partners receive their stipulated distributions. On April 1,
1997, loans and related interest payable in the amount of $23,427,000 from the
Company to ERP were converted into limited partnership interests in ERP. Upon
this transaction, the Company began consolidating the accounts of ERP which
were previously accounted for on the equity method. Properties have been
contributed to ERP in exchange for limited partnership units (which may be
redeemed at stipulated prices for cash or the issuance of Company common
shares, at the Company's option) and cash. At March 31, 1998, there were
2,828,790 limited partner units outstanding of which the Company owned
1,152,121 units. Quarterly distributions approximate $872,000 for limited
partner units held by third parties.
Pro Forma Financial Statements (In thousands, except per share amounts)
The following Company unaudited actual and pro forma condensed consolidated
income statements have been presented as if the Company had converted its
notes and related interest receivable from ERP on January 1, 1997. The
unaudited pro forma condensed consolidated income statements are not
necessarily indicative of what actual results of operations of the Company
would have been had the transaction actually occurred on January 1, 1997, nor
do they purport to represent the results of operations of the Company for
future periods.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1998 1997
-------- -------
(PRO
(ACTUAL) FORMA)
<S> <C> <C>
STATEMENTS OF INCOME
Rental revenues and reimbursements..................... $31,870 $17,446
</TABLE>
<TABLE>
<S> <C> <C>
Interest and other income............................. 5,342 4,605
Depreciation and amortization......................... (4,150) (2,446)
Property and other expenses........................... (8,451) (4,139)
Interest expense...................................... (7,824) (5,366)
Minority interest..................................... (405) (33)
Real estate sales..................................... (23) --
------- -------
Net income.......................................... $16,359 $10,067
======= =======
Basic net income per share............................ $ 0.52 $ 0.47
======= =======
Diluted net income per share.......................... $ 0.49 $ 0.45
======= =======
</TABLE>
F-9
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
ERT Development Corporation
In 1995, EDV was organized to acquire, develop, hold and sell real estate in
the short-term for capital gains and/or receive fee income. The Company owns
100% of the outstanding preferred shares of EDV. The preferred shares are
entitled to receive dividends equal to 95% of net income and are expected to
be paid from cash flows, if any. Cash requirements to facilitate EDV's
transactions have primarily been obtained through borrowings from the Company.
Summary unaudited financial information for EDV is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
--------- ------------
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEETS
Notes receivable from developers, interest at
10% to 20%..................................... $53,400 $ 79,400
Net real estate and other assets................ 24,900 25,500
------- --------
Total assets.................................. $78,300 $104,900
======= ========
Notes payable to Excel Realty Trust, Inc........ $74,500 $ 90,100
Other liabilities............................... 3,500 11,200
------- --------
Total liabilities............................. 78,000 101,300
Total stockholders' equity...................... 300 3,600
------- --------
Total liabilities and stockholders' equity.... $78,300 $104,900
======= ========
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1998 1997
--------- ------------
(IN THOUSANDS)
<S> <C> <C>
STATEMENTS OF INCOME
Total revenues.................................. $ 3,700 $ 3,500
Interest expense to Excel Realty Trust, Inc..... (3,200) (1,600)
Development and other fees paid to Excel Realty
Trust, Inc..................................... (2,900) (1,900)
Other expenses.................................. (900) (200)
------- --------
Net loss...................................... $(3,300) $ (200)
======= ========
</TABLE>
EDV's receivables include loans of approximately $23,150,000 made to a joint
venture partnership under a loan commitment related to a retail development
project in Florida. The joint venture has a construction loan which is
expected to total approximately $100,000,000 of which $45,000,000 is
guaranteed by the Company.
Excel Legacy Corporation
In March 1998, the Company spun off Legacy, a newly-formed corporation which
was a wholly-owned subsidiary of the Company (the "Spin-off"). Legacy was
organized to create and realize value by identifying and making opportunistic
real estate investments which are not restricted by REIT tax laws or
influenced by the Company's objectives of increasing cash flows and
maintaining certain leverage ratios. Prior to the Spin-off, EDV transferred
four notes receivable, a land parcel, a leasehold interest in a parcel of
land, an office building, a single tenant building, and certain other assets
to the Company for a total consideration of approximately $38,112,000 for
which the Company reduced the note receivable from EDV. The Company
contributed to Legacy, the above assets from EDV, together with ten single
tenant properties owned by the Company with a book value of approximately
$45,747,000, certain other net assets of approximately $1,158,000, and a
property
F-10
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
held for sale with a book value of $14,525,000, in exchange for 23,412,580
common shares of Legacy, assumption of debt by Legacy on the ten single tenant
properties of approximately $33,878,000, and issuance of a note payable from
Legacy to the Company in the amount of $26,402,000. This note was repaid in
April 1998.
The Spin-off took place through a dividend distribution to the Company's
common stockholders, of all Legacy common stock (23,412,580 shares) held by
the Company. The distribution consisted of one share of Legacy common stock
for each share of the Company's common stock held on the record date of March
2, 1998. No gain was recognized by the Company for book purposes on the
distribution of $39,262,000. For tax purposes, the Company recognized a gain
of $16,694,000 as the distribution was a taxable event and the assets and
liabilities were transferred at fair market value. The fair market value of
the distribution was approximately $55,956,000 or $2.39 per share. Upon
completion of the Spin-off, Legacy ceased to be a wholly-owned subsidiary of
the Company and began operating as an independent public company.
5. MORTGAGES PAYABLE:
The Company had the following mortgages payable at March 31, 1998 and
December 31, 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Mortgage notes at 3% to 10%, payable in installments
through 2021 (monthly payments at March 31, 1998 of
$2,081), collateralized by real estate and an
assignment of rents:
Insurance companies................................... $116,727 $125,377
Banks................................................. 107,647 77,467
Bonds................................................. 14,128 40,820
-------- --------
Total mortgages payable............................. $238,502 $243,664
======== ========
</TABLE>
The principal payments required to be made on mortgages payable over the
next five years are as follows (in thousands):
<TABLE>
<S> <C>
Year
1998, remaining nine months....... $ 12,263
1999.............................. 49,672
2000.............................. 21,570
2001.............................. 20,555
2002.............................. 5,131
Thereafter........................ 129,311
--------
$238,502
========
</TABLE>
Mortgages of $28,661,000 are fully amortizing with the final monthly
payments to be made between the years 2004 and 2018.
6. CAPITAL LEASES:
In 1997, the Company acquired a leasehold interest in three shopping centers
in California ("Master Leased Centers"). The term of the leases are thirty-
four years and the monthly lease payment is $201,000. In addition, the Company
has purchased the option to acquire fee title to the Master Leased Centers,
exercisable at various times during the terms of the respective leases. The
owner of one of the Master Leased Centers has the option to require the
Company to purchase the property after the occurrence of certain events. There
are no principal payments due on the leases until a Master Leased Center is
acquired.
F-11
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
7. NOTES PAYABLE:
The Company had the following notes payable at March 31, 1998 and December
31, 1997:
<TABLE>
<CAPTION>
1998 1997
------- --------
(IN THOUSANDS)
<S> <C> <C>
Unsecured credit agreement of $250,000, interest at
LIBOR +1.20% (6.9% at March 31, 1998).................. $22,000 $148,572
Unsecured loan payable to a financial institution,
interest at 8.75% (encumbered by Legacy--Note 4)....... -- 19,926
Other................................................... 386 396
------- --------
Total notes payable................................... $22,386 $168,894
======= ========
</TABLE>
The Company has a two-year revolving credit facility of up to $250,000,000
in unsecured advances from a group of banks. The facility expires March 31,
2000 and bears an interest rate based upon the credit rating of the Company.
Based upon the Company's current investment credit rating of Baa3 and BBB-
from Moody's Investor Service and Standard and Poor's Corporation,
respectively, on future senior debt securities issued from the Company's $500
million shelf registration. Accordingly, the interest rate on the credit
facility is 1.2% over LIBOR.
The Company has guaranteed $5,000,000 related to a line of credit agreement
between a bank and a third party developer. The Company is entitled to 50% of
profits generated by certain projects related to this agreement.
8. SENIOR NOTES PAYABLE:
In 1997, the Company issued $75,000,000 of 6.875% Senior Notes due 2004 (the
"Senior Notes"). The effective rate on the Senior Notes is 6.982% (6.875%
coupon with proceeds before the underwriting discount of $74,561,000).
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 each year.
9. CAPITAL STOCK:
Equity Offerings
In January 1998, the Company issued 6,300,000 depositary shares each
representing 1/10 share of 8 5/8% Series B Cumulative Redeemable Preferred
Stock (the "Preferred B Shares"). The offering price was $25.00 per depositary
share with an annual dividend equal to $2.15625, payable quarterly. Net
proceeds from the offering totaled $152,538,000 and were used primarily to
repay outstanding amounts on the Company's credit facility.
In February 1997, the Company issued 4,600,000 shares of 8 1/2% Series A
Cumulative Convertible Preferred Stock at $25.00 per share (the "Preferred A
Shares"). The Preferred A Shares are entitled to an annual distribution of
$2.125 per share and are convertible into common shares at a price of $26.06
per share. Net proceeds of approximately $111,550,000 were used to repay the
Company's notes payable, purchase properties and for general corporate
purposes. In March 1998, 2,473,620 Preferred A Shares were converted into
common shares. There are 2,126,380 Preferred A Shares outstanding at March 31,
1998.
Distributions
In January 1998 and 1997, distributions of $0.50 and $0.46 per share,
respectively, were paid to common stockholders. In January 1998, distributions
of $0.53 per share were paid on the Preferred A shares. In April 1998, $0.50
per share was paid to the common stockholders, $0.53 was paid to the Preferred
A shareholders, and $0.48 was paid to the Preferred B shareholders. For both
the three months ended March 31, 1998 and
F-12
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONTINUED)
1997, none of the distributions received by common shareholders were
considered to be a return of capital for tax purposes. In March 1998, the
Company distributed the shares of Legacy with a per share book value and tax
value of $1.68 and $2.39, respectively.
Earnings Per Share (EPS)
In accordance with the disclosure requirements of SFAS No. 128 (Note 1), a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (in thousands, except per share amounts).
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
BASIC EPS
NUMERATOR:
Net income............................................ $16,359 $10,310
Preferred dividends................................... (5,072) (1,466)
------- -------
$11,287 $ 8,844
======= =======
DENOMINATOR:
Weighted average of common shares outstanding......... 21,787 18,300
======= =======
EARNINGS PER SHARE...................................... $ 0.52 $ 0.48
======= =======
DILUTED EPS
NUMERATOR:
Net income............................................ $16,359 $10,310
Preferred dividends................................... (5,072) (1,466)
Adjustments for ERP third party units................. 405 (215)
------- -------
Net income available to common shares................. $11,692 $ 8,629
======= =======
DENOMINATOR:
Weighted average of common shares outstanding......... 21,787 18,300
Effect of diluted securities:
Common stock options and warrants................... 413 168
ERP third party units............................... 1,766 268
------- -------
23,966 18,736
======= =======
EARNINGS PER SHARE...................................... $ 0.49 $ 0.46
======= =======
</TABLE>
10. STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURE:
The amounts paid for interest during the three months ended March 31, 1998
and 1997 were approximately $6,376,000 and $3,964,000, respectively. State
income taxes of approximately $20,000 and $78,000 were paid in 1998 and 1997,
respectively.
For the three months ended March 31, 1998, the Company spun-off certain
assets to Legacy in the form of a dividend and note receivable as described in
Note 4. Additionally, when Legacy ceased to be a wholly-owned subsidiary of
the Company, deposits and other assets of $19,926,000 and notes payable of
$19,926,000 were no longer consolidated with the Company accounts. Also in
1998, 2,473,620 Preferred A Shares were converted into 2,373,006 of the
Company's common shares and $108,000 of ERP units were converted into the
Company's common shares.
In 1997, the Company acquired real estate of $2,055,000 without the use of
cash by retiring notes receivable. Also, limited partners of ERP converted
$1,196,000 of units into common shares of the Company.
F-13
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--UNAUDITED--(CONCLUDED)
11. MINIMUM FUTURE RENTALS:
The Company leases its shopping centers and single-tenant buildings to
tenants under noncancelable operating leases generally requiring the tenant to
pay a minimum rent adjusted by either (i) fixed increases, (ii) a percentage
of gross sales, or (iii) a CPI index. The leases generally either (i) require
the tenant to pay all expenses of operating the property such as insurance,
property taxes, and structural repairs and maintenance, or (ii) require the
tenant to reimburse the Company for the tenant's share of real estate taxes
and other common area maintenance expenses.
Minimum future rental revenue for the next five years for the commercial
real estate currently owned at March 31, 1998 and subject to noncancelable
operating leases is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998, remaining nine months..... $ 73,330
1999............................ 89,017
2000............................ 82,347
2001............................ 74,467
2002............................ 66,891
Thereafter...................... 565,270
</TABLE>
F-14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Excel Realty Trust, Inc.
We have audited the consolidated balance sheets of Excel Realty Trust, Inc.
and subsidiaries as of December 31, 1996 and 1997 and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1997, and the financial
statement schedules as listed in the index on page F-1 of this Registration
Statement. These financial statements and financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Excel Realty Trust, Inc. and subsidiaries as of December 31, 1997 and 1996
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedules referred to above, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information required to be included therein.
/s/ PricewaterhouseCoopers LLP
Coopers & Lybrand, L.L.P.
San Diego, California
March 13, 1998
F-15
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996
---------- --------
ASSETS
<S> <C> <C>
Real estate:
Land................................................... $ 307,995 $156,060
Buildings.............................................. 617,523 323,418
Accumulated depreciation............................... (33,936) (21,976)
---------- --------
Net real estate...................................... 891,582 457,502
Cash..................................................... 18,426 5,038
Escrow and other deposits................................ 20,814 625
Accounts receivable, less allowance for bad debts of
$1,896 and $1,608 in 1997 and 1996, respectively........ 4,577 2,917
Notes receivable--affiliates............................. 90,124 57,716
Notes receivable--other.................................. 27,953 26,026
Interest receivable...................................... 12,867 2,579
Loan acquisition costs................................... 2,993 1,775
Other assets............................................. 6,861 4,450
---------- --------
$1,076,197 $558,628
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable...................................... $ 243,664 $157,716
Senior notes payable................................... 75,000 --
Notes payable.......................................... 168,894 81,032
Capital leases......................................... 26,850 --
Accounts payable and accrued liabilities............... 10,135 4,738
Deferred rental income................................. 2,662 2,023
Other liabilities...................................... 4,490 465
---------- --------
Total liabilities.................................... 531,695 245,974
---------- --------
Minority interest in partnership......................... 41,986 --
---------- --------
Commitments and contingencies............................ -- --
Stockholders' equity:
8 1/2% Series A Cumulative Convertible Preferred Stock,
par value $0.01 per share, 10,000,000 shares
authorized, 4,600,000 and 0 shares issued and
outstanding in 1997 and 1996, respectively............ 46 --
Common Stock, par value $0.01 per share, 100,000,000
shares authorized, 20,999,634 and 18,231,089 shares
issued and outstanding in 1997 and 1996, respectively. 210 182
Additional paid-in capital............................. 507,866 324,229
Accumulated distributions in excess of net income...... (5,606) (11,757)
---------- --------
Total stockholders' equity........................... 502,516 312,654
---------- --------
$1,076,197 $558,628
========== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-16
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Revenues:
Rental revenue.................................... $ 72,941 $47,892 $51,453
Expense reimbursements............................ 10,171 4,589 3,776
Interest.......................................... 16,381 6,731 3,150
Other............................................. 5,965 3,923 991
-------- ------- -------
Total revenue................................... 105,458 63,135 59,370
-------- ------- -------
Expenses:
Interest.......................................... 23,991 19,450 22,458
Depreciation and amortization..................... 11,621 7,487 6,933
Property taxes.................................... 6,002 2,765 2,877
Repairs and maintenance........................... 4,388 1,865 1,861
Other property expenses........................... 3,633 2,797 3,230
Master lease...................................... -- 351 4,681
General and administrative........................ 5,046 2,847 2,821
-------- ------- -------
Total expenses.................................. 54,681 37,562 44,861
-------- ------- -------
Income before real estate impairment and sales,
minority interest and other items.................. 50,777 25,573 14,509
Gain (loss) on sale of real estate.................. 1,264 (933) 3,683
Impairment of real estate........................... (741) (844) --
Minority interest in income of partnership.......... (816) -- --
Other items......................................... (1,522) -- --
-------- ------- -------
Net income...................................... $ 48,962 $23,796 $18,192
======== ======= =======
Basic net income per share.......................... $ 2.06 $ 1.66 $ 1.51
======== ======= =======
Diluted net income per share........................ $ 1.97 $ 1.62 $ 1.51
======== ======= =======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-17
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DISTRIBUTIONS TOTAL
---------------- ----------------- PAID-IN IN EXCESS OF STOCKHOLDERS'
NUMBER AMOUNT NUMBER AMOUNT CAPITAL NET INCOME EQUITY
--------- ------ ---------- ------ ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... -- $-- 10,883,570 $109 $175,702 $(11,913) $ 163,898
Issuance of common
stock.................. -- -- 2,287,783 23 45,641 -- 45,664
Selling expenses........ -- -- -- -- (2,812) -- (2,812)
Net income.............. -- -- -- -- -- 18,192 18,192
Distributions........... -- -- -- -- -- (16,264) (16,264)
--------- ---- ---------- ---- -------- -------- ---------
Balance at December 31,
1995................... -- -- 13,171,353 132 218,531 (9,985) 208,678
Issuance of common
stock.................. -- -- 5,059,736 50 110,543 -- 110,593
Selling expenses........ -- -- -- -- (4,845) -- (4,845)
Net income.............. -- -- -- -- -- 23,796 23,796
Distributions........... -- -- -- -- -- (25,568) (25,568)
--------- ---- ---------- ---- -------- -------- ---------
Balance at December 31,
1996................... -- -- 18,231,089 182 324,229 (11,757) (312,654)
Issuance of preferred
stock.................. 4,600,000 46 -- -- 114,954 -- 115,000
Issuance of common
stock.................. -- -- 2,768,545 28 75,846 -- 75,874
Selling expenses........ -- -- -- -- (7,163) -- (7,163)
Net income.............. -- -- -- -- -- 48,962 48,962
Distributions........... -- -- -- -- -- (42,811) (42,811)
--------- ---- ---------- ---- -------- -------- ---------
Balance at December 31,
1997................... 4,600,000 $ 46 20,999,634 $210 $507,866 $ (5,606) $ 502,516
========= ==== ========== ==== ======== ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-18
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................... $ 48,962 $ 23,796 $ 18,192
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation............................... 11,609 7,482 6,929
Equity in earnings of affiliates........... (3,792) (1,254) (93)
(Gain) loss on sale of real estate......... (1,264) 933 (3,683)
Amortization of loan costs and leasing
commissions............................... 1,081 1,235 1,968
Provision for bad debts.................... 959 1,008 445
Loss on sale of interest rate lock......... 896 -- --
Minority interest in income of partnership. 816 -- --
Impairment of real estate.................. 741 844 --
Loan costs written off..................... 664 -- 4,453
Change in accounts receivable................ (2,253) (1,642) (1,157)
Change in other assets....................... (11,636) (2,612) (1,750)
Change in accounts payable and accrued
liabilities................................. 3,117 (1,084) 2,213
Change in other liabilities.................. 2,653 (626) 1,378
--------- -------- ---------
Net cash provided by operating
activities.............................. 52,553 28,080 28,895
--------- -------- ---------
Cash flows from investing activities:
Real estate acquisitions and building
improvements................................ (259,721) (39,731) (26,281)
Advances for notes receivable................ (82,022) (78,224) (36,881)
Principal payments on notes receivable....... 23,872 2,335 23,130
Proceeds from real estate sales.............. 11,214 4,741 29,397
Escrow and other deposits paid............... (23,637) (3,595) (17,146)
Escrow and other deposits collected.......... 3,432 17,876 4,751
Other........................................ 355 398 (5,395)
--------- -------- ---------
Net cash used in investing activities.... (326,507) (96,200) (28,425)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from mortgages and notes payable.... 363,607 71,256 105,253
Principal payments of mortgages and notes
payable..................................... (209,959) (84,032) (118,516)
Issuance of preferred stock.................. 115,000 -- --
Issuance of common stock..................... 74,641 105,911 44,451
Distributions paid........................... (42,811) (25,568) (20,949)
Selling and offering costs................... (7,163) (4,845) (2,812)
Minority interest distributions and
redemptions................................. (2,556) -- --
Loan costs paid.............................. (2,521) (129) (2,216)
Other........................................ (896) 753 --
--------- -------- ---------
Net cash provided by financing
activities.............................. 287,342 63,346 5,211
--------- -------- ---------
Net increase (decrease) in cash.......... 13,388 (4,774) 5,681
Cash at beginning of year...................... 5,038 9,812 4,131
--------- -------- ---------
Cash at end of year............................ $ 18,426 $ 5,038 $ 9,812
========= ======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-19
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Excel Realty Trust, Inc. (the "Company") was formed in 1985 and subsequently
reincorporated as a Maryland corporation. The Company is in the business of
purchasing and operating commercial real estate. The Company is operated as a
self-administered, self-managed real estate investment trust (REIT).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries and all significantly owned
partnerships. All significant intercompany accounts have been eliminated in
consolidation.
On April 1, 1997, the Company began consolidating the accounts of Excel
Realty Partners, L.P., a Delaware limited partnership ("ERP"), when the
Company converted its loans into an equity investment in ERP. Prior to April
1, 1997, the Company accounted for ERP on the equity method of accounting. The
Company uses the equity method to account for its investment in ERT
Development Corporation, a Delaware corporation ("EDV") (Note 4).
Income Taxes
The Company has elected to be treated as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. Under these provisions,
the Company and its subsidiaries will not be subject to federal income tax if
95% of its real estate investment trust taxable income (before dividends paid
deduction) is distributed to shareholders and certain gross income, asset
diversification, share ownership and disclosure requirements are met.
Accordingly, no provision for federal income taxes is included in the
accompanying consolidated financial statements.
Real Estate
Land, buildings and building improvements are recorded at cost. Depreciation
is computed using the straight-line method over estimated useful lives of 40
years for buildings and 2 to 40 years for building improvements. Expenditures
for maintenance and repairs are charged to expense as incurred and significant
renovations are capitalized.
The Company assesses whether there has been a permanent impairment in the
value of its real estate by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include a lessee's
ability to pay rent under the terms of the lease. If a property is leased at a
significantly lower rent, the Company may recognize a permanent impairment
loss if the income stream is not sufficient to recover its investment. Such
losses have been determined as the difference between the carrying value and
the fair value of the property and are included in the Consolidated Statements
of Income.
Deferred Leasing and Loan Acquisition Costs
Costs incurred in obtaining tenant leases and long-term financing are
amortized to other property expense and interest expense, respectively, on the
straight-line method over the terms of the related leases or debt agreements.
F-20
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Base rental revenue is recognized on the straight-line basis, which averages
minimum rents over the terms of the leases. Certain of the leases provide for
additional rental revenue by way of percentage rents to be paid based upon the
level of sales achieved by the lessee. These percentage rents are recorded on
the accrual basis and are included on the Consolidated Statements of Income in
rental revenue. The leases also typically provide for tenant reimbursement of
common area maintenance and other operating expenses which are included in the
accompanying Consolidated Statements of Income as expense reimbursements.
Net Income Per Common Share
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, Earnings Per Share effective December 31, 1997.
SFAS No. 128 requires the presentation of basic and diluted earnings per
share. Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS is computed giving effect to all dilutive potential
common shares that were outstanding during the period. Dilutive potential
common shares consist of the incremental common shares issuable upon the
conversion of convertible preferred stock (using the "if converted" method),
exercise of stock options and warrants and potential conversion of ERP limited
partner units for all periods. All prior period earnings per share amounts
have been restated to comply with SFAS No. 128 (Note 9).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
Reclassifications
Certain reclassifications have been made to the consolidated financial
statements for the years ended December 31, 1996 and 1995 in order to conform
with the current period's presentation.
2. REAL ESTATE:
Acquisitions
In 1997, the Company acquired 27 shopping centers located in California
(12), Florida (3), Arizona (2), Pennsylvania (2), Tennessee (2), Colorado,
Georgia, Nevada, North Carolina, South Carolina, and Texas. The Company also
purchased buildings leased to single tenants, Winn Dixie and Kmart, in
Tennessee and Florida, respectively, an out-parcel in Minnesota and the
remaining interest of a property owned in Tennessee. The total cost of these
properties was approximately $365,919,000. The Company assumed mortgage debt
of $34,042,000 and capital leases of $26,850,000 in the above transactions. In
January 1998, the Company acquired a shopping center located in California for
approximately $9,500,000 and two single tenant properties under construction
located in Colorado. The cost of these two properties after construction is
expected to total approximately $50,000,000. In March 1998, the Company
acquired a shopping center located in California for approximately
$41,000,000.
In 1996, the Company acquired three shopping centers in North Carolina, two
shopping centers in Georgia, one shopping center in Arizona and a shopping
center in Utah. The total cost of the properties was $93,190,000 of which the
Company assumed $43,332,000 in mortgage debt.
F-21
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Sales
In 1997, the Company sold five single tenant properties for proceeds of
$11,214,000. A net gain of $1,264,000 was recognized on the sales. The Company
sold four single-tenant properties in 1996. The net sales price of these
properties totaled $4,741,000 and the Company recognized a $933,000 net loss.
Impairment of Real Estate
In accordance with SFAS No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," the Company has written
down the value of dark single-tenant properties by $741,000 in 1997 and
$844,000 in 1996, to their estimated fair value based upon current market
data. Another property was written down in the second quarter of 1996 by
$1,246,000 but was reclassified as part of the net loss on sale of real estate
when it was sold in the third quarter of 1996.
Real Estate Held for Sale
At December 31, 1997, the Company has a property with a book value of
$14,702,000 held for sale/redevelopment in Arizona. Depreciation expense is no
longer being charged to the property and costs to hold the property until sale
are being capitalized. This property was transferred to Excel Legacy
Corporation ("Legacy") in March 1998 (Note 4).
Environmental Matters
Soil and groundwater contamination exists at Carmen Plaza in Camarillo,
California, Cudahy Plaza in Cudahy, California, and Bristol Plaza in Santa
Ana, California. Environmental professionals retained by the Company estimate
that the total, cumulative cost of remediation for these properties will be
approximately $1.8 million to $5.5 million. In connection with each of these
properties, the Company has entered into a remediation and indemnity
agreement, which obligates the prior owner of the properties (including in
some cases, principals of the prior owner) to perform the remediation and to
indemnify the Company for any losses it may suffer because of the
contamination or remediation. Although there can be no assurance that the
remediation estimates of the environmental professionals are accurate or that
the prior owners will perform their obligations under the remediation and
indemnity agreements, the Company does not expect the environmental conditions
at these properties to have a material adverse effect on the Company.
The Company has identified asbestos minerals relating to spray-applied
fireproofing materials in Clearwater Mall in Clearwater, Florida which was
acquired by the Company in December 1997. Environmental professionals retained
by the Company estimate that the total cumulative cost of remediation for this
property will be approximately $3.2 million. The estimated cost of this
remediation, which was capitalized as part of the acquisition price of this
property, is included in other liabilities in the Company's Consolidated
Balance Sheet at December 31, 1997.
Master Lease and Option Agreement
In 1995, the Company entered into master lease and option agreements with
respect to eleven shopping centers. Under the master leases, the Company
received all cash flow in excess of the master lease expense which included
lease payments to the lessor and interest payments from debt service. All of
the rental revenue and related operating expenses of these properties have
been included in the Company's Consolidated Statements of Income. In 1996 and
1995, the Company purchased ten of the properties under the option agreements
and terminated the master lease and purchase option on the one remaining
property. Upon purchase of these properties, the master leases were canceled.
F-22
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. NOTES RECEIVABLE:
The Company had the following notes receivable at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Notes from EDV, interest at 14% per annum,
collateralized by EDV assets. Due on demand............ $ 90,124 $39,786
Notes from ERP, interest at 12% per annum,
collateralized by real estate. Converted to equity in
April 1997............................................. -- 17,930
Notes from development companies, monthly interest from
10%-14% per annum. Maturity dates vary depending upon
the completion or sale of certain properties........... 15,599 15,763
Note from a development company, interest at 25%
compounded monthly, payable in Canadian dollars Due May
2003................................................... 11,235 9,504
Other................................................... 1,119 759
-------- -------
Total................................................. $118,077 $83,742
======== =======
</TABLE>
Interest and principal payments from EDV are primarily received upon the
completion of development projects. Interest receivable from EDV was
$7,628,000 and $879,000 at December 31, 1997 and 1996, respectively.
The Company has made loans totaling $16,050,000 Canadian dollars
($11,235,000 U.S. dollars at December 31, 1997) to a Canadian company which
used the proceeds to acquire a 50% joint venture interest in a mixed-use
commercial building known as "Atrium on Bay", and an adjacent land parcel in
Toronto, Canada. The loan is collateralized by the Canadian company's interest
in the building.
In 1997, the Company established $25,680,000 in credit facilities to certain
developers. The total outstanding amounts on the credit facilities of
$14,049,000 carry interest at 11% to 12%, are collateralized by real estate,
and are payable on the earlier of the sale of real estate or seven years. In
1997, the Company recognized $720,000 in loan fees related to the credit
facilities.
4. INVESTMENTS:
Excel Realty Partners, L.P.
In 1995, ERP was formed to own and manage certain real estate properties.
The Company is the sole general partner of ERP. The general partner is
entitled to receive 99% of all net income and gains before depreciation, if
any, after the limited partners receive their stipulated distributions. On
April 1, 1997, loans and related interest receivable in the amount of
$23,427,000 from the Company to ERP were converted into limited partnership
interests in ERP. Upon this transaction, the Company began consolidating the
accounts of ERP which were previously accounted for on the equity method.
Properties have been contributed to ERP in exchange for limited partnership
units (which may be redeemed at stipulated prices for cash or the issuance of
the Company common shares at the Company's option) and cash. At December 31,
1997, there were approximately 2,833,000 limited partner units outstanding of
which the Company owned approximately 1,152,000 units. Quarterly distributions
approximate $882,000 for limited partner units held by third parties.
Pro Forma Financial Statements (in Thousands, Except Per Share Amounts)
The following Company actual and unaudited pro forma condensed consolidated
balance sheets and income statements have been presented as if the Company had
converted its notes and related interest receivable from ERP on December 31,
1996 and January 1, 1995 respectively. The unaudited pro forma condensed
consolidated
F-23
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
financial statements are not necessarily indicative of what the actual
financial position would have been at December 31, 1996, or what actual
results of operations of the Company would have been had the transaction
actually occurred on January 1, 1996, nor do they purport to represent the
actual results of operations of the Company for future periods.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- -----------
(ACTUAL) (PRO FORMA)
<S> <C> <C>
Net real estate assets............................. $ 891,582 $ 537,485
Other assets....................................... 184,615 82,839
---------- ---------
$1,076,197 $ 620,324
========== =========
Mortgages payable and notes payable................ $ 514,408 $ 293,375
Other liabilities.................................. 17,287 8,396
---------- ---------
Total liabilities................................ 531,695 301,771
Minority interest.................................. 41,986 5,899
Stockholders' equity............................... 502,516 312,654
---------- ---------
$1,076,197 $ 620,324
========== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
STATEMENTS OF INCOME (PRO
FORMA)
Rental revenues and
reimbursements........... $ 85,914 $ 59,482 $ 55,935
Interest and other income. 21,391 8,242 3,928
Interest expense.......... (25,036) (22,256) (22,757)
Depreciation and
amortization............. (11,957) (8,358) (7,022)
Property and other
expenses................. (19,745) (11,906) (15,572)
Real estate sales and
impairment............... 523 (1,777) 3,683
Minority interest in
income of partnership.... (849) (164) (91)
Other items............... (1,522) -- --
-------- -------- --------
Net income.............. $ 48,719 $ 23,263 $ 18,104
======== ======== ========
Basic net income per
share.................... $ 2.05 $ 1.63 $ 1.50
======== ======== ========
Diluted net income per
share.................... $ 1.96 $ 1.58 $ 1.50
======== ======== ========
</TABLE>
F-24
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
ERT Development Corporation
In 1995, EDV was organized to finance, acquire, develop, hold and sell real
estate in the short-term for capital gains and/or receive fee income. The
Company owns 100% of the outstanding preferred shares of EDV. The preferred
shares receive 95% of the dividends, if any. Cash requirements to facilitate
EDV's transactions have primarily been obtained through borrowings from the
Company. Summary unaudited financial information for EDV is as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
-------- -------
<S> <C> <C>
BALANCE SHEETS
Notes receivable from developers, interest at 10% to
20%.................................................... $ 79,400 $39,000
Net real estate and other assets........................ 25,500 2,500
-------- -------
Total assets.......................................... $104,900 $41,500
======== =======
Notes payable to Excel Realty Trust, Inc................ $ 90,100 $39,800
Other liabilities....................................... 11,200 1,500
-------- -------
Total liabilities..................................... 101,300 41,300
Total stockholders' equity.............................. 3,600 200
-------- -------
Total liabilities and stockholders' equity............ $104,900 $41,500
======== =======
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTH PERIOD
ENDED DECEMBER 31, INCEPTION TO
-------------------- DECEMBER 31,
1997 1996 1995
--------- --------- ------------
<S> <C> <C> <C>
STATEMENTS OF INCOME
Total revenues........................ $ 16,200 $ 6,500 $ 2,900
Interest expense to Excel Realty
Trust, Inc........................... (9,200) (2,500) (1,700)
Development and other fees paid to
Excel Realty Trust, Inc.............. (2,000) (2,400) (300)
Other expenses........................ (1,600) (1,700) (600)
--------- --------- -------
Net income (loss)..................... $ 3,400 $ (100) $ 300
========= ========= =======
</TABLE>
EDV's receivables include loans of approximately $15,100,000 made to a joint
venture partnership under a loan commitment related to a retail development
project in Florida. In 1997, the joint venture obtained a construction loan
which is expected to total approximately $85,000,000 of which $30,000,000 is
guaranteed by the Company.
Excel Legacy Corporation
In December 1997, the Company filed a registration statement with the
Securities and Exchange Commission with respect to the Company's intention to
spin off Excel Legacy Corporation ("Legacy"), a newly-formed corporation which
is a wholly-owned subsidiary of the Company (the "Spin-off"). Legacy was
organized to create and realize value by identifying and making opportunistic
real estate investments which are not restricted by REIT tax laws or
influenced by the Company's objectives of increasing cash flows and
maintaining certain leverage ratios. Prior to the Spin-off, EDV will transfer
four notes receivable, a leasehold interest in a parcel of land, an office
building and a single tenant building to the Company for a total consideration
of $33,300,000. The Company will reduce the note receivable from EDV. The
Company will contribute the above assets from EDV together with ten single
tenant properties owned by the Company with a
F-25
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
December 31, 1997 book value of approximately $46,200,000 and a property held
for sale/redevelopment
(Note 2) to Legacy, in exchange for 23,160,757 common shares of Legacy,
assumption of debt by Legacy on the ten single tenant properties of
approximately $34,200,000, and issuance of a note payable from Legacy to the
Company in the amount of $20,600,000. The Spin-off is expected to take place
on or about March 31, 1998 through a dividend distribution to the Company's
common stockholders, of all Legacy common stock held by the Company. The
distribution will consist of one share of Legacy common stock for each share
of the Company's common stock held on the record date of March 2, 1998. Upon
completion of the Spin-off, Legacy will cease to be a wholly-owned subsidiary
of the Company and begin operating as an independent public company. The
Company's executive officers will continue to manage the Company's operations
as well as supervise the management of Legacy.
5. MORTGAGES PAYABLE:
The Company had the following mortgages payable at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Mortgage notes at 4.15% to 10%, payable in
installments through 2018 (monthly payments at
December 31, 1997 of $2,265), collateralized by real
estate and an assignment of rents:
Insurance companies................................ $125,377 $ 87,530
Banks.............................................. 77,467 41,656
Bonds.............................................. 40,820 28,530
-------- --------
Total mortgages payable.......................... $243,664 $157,716
======== ========
</TABLE>
The principal payments required to be made on mortgages payable are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998..................................... $ 15,292
1999..................................... 51,322
2000..................................... 23,514
2001..................................... 22,655
2002..................................... 7,405
Thereafter............................... 123,476
--------
$243,664
========
</TABLE>
Mortgages of $59,477,000 are fully amortizing with the final monthly
payments to be made between the years 2004 and 2018.
6. SENIOR NOTES PAYABLE:
In 1997, the Company issued $75,000,000 of 6.875% Senior Notes due 2004 (the
"Senior Notes"). The effective rate on the Senior Notes is 6.982% (6.875%
coupon with proceeds before the underwriting discount of $74,561,000).
Interest on the Notes is payable semi-annually in arrears on April 15 and
October 15 each year. Net proceeds were used to repay outstanding amounts on
the credit facility and for general corporate purposes.
F-26
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. NOTES PAYABLE:
The Company had the following notes payable at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Unsecured credit agreement of $150,000, interest at
LIBOR + 1.20% (7.20% at December 31, 1997)......... $148,572 $67,000
Unsecured loan payable to a financial institution,
interest at 8.75% (converted to LIBOR + 1.20% in
January 1998)...................................... 19,926 --
Term loan payable to a financial institution,
interest at LIBOR + 1.75%, repaid in 1997.......... -- 10,000
Line of credit payable to a financial institution,
repaid in 1997..................................... -- 3,923
Other............................................. 396 109
--------- --------
Total notes payable............................... $168,894 $81,032
========= ========
</TABLE>
The Company has a revolving credit facility of up to $150,000,000 in
unsecured advances from a group of seven banks. The facility expires December
1999 and bears an interest rate based upon the credit rating of the Company.
In August 1997, the Company received prospective investment credit ratings of
Baa3 and BBB- from Moody's Investor Service and Standard and Poor's
Corporation, respectively, on future senior debt securities issued from the
Company's $500 million shelf registration. Accordingly, the interest rate on
the credit facility is 1.2% over LIBOR.
In July 1997, the Company bought an interest rate lock related to a proposed
Senior Note Offering. The interest rate lock was sold when the Senior Note
Offering was postponed until October 1997 and a Common Stock Offering was
completed instead. The Company recognized a $896,000 loss on the sale which is
included in other items on the Consolidated Statements of Income.
8. CAPITAL LEASES:
In 1997, the Company acquired a leasehold interest in three shopping centers
in California ("Master Leased Centers"). The term of the leases are thirty-
four years and the monthly lease payment is $201,000. In addition, the Company
has purchased the option to acquire fee title to the Master Leased Centers,
exercisable at various times during the terms of the respective leases. The
owner of one of the Master Leased Centers has the option to require the
Company to purchase the property after the occurrence of certain events. There
are no principal payments due on the leases until a Master Leased Center is
acquired.
9. STOCKHOLDERS' EQUITY:
Equity Offerings
In January 1998, the Company issued 6,300,000 depositary shares each
representing 1/10 of a share of 8 5/8% Series B cumulative redeemable
preferred stock (the "Preferred B Shares"). The offering price was $25.00 per
depositary share with an annual dividend equal to $2.15625, payable quarterly.
Net proceeds from the offering totaled $152,538,000.
In July 1997, the Company issued 2,500,000 shares of common stock with a
market price of $28.00 per share for net proceeds of $26.6875 per share or
$66,719,000. In February 1997, the Company issued 4,600,000 shares of 8 1/2%
Series A Cumulative Convertible Preferred Stock at $25.00 per share (the
"Preferred A Shares") with net proceeds totaling approximately $111,400,000.
The Preferred A Shares are entitled to an annual distribution of $2.125 per
share and are convertible into common shares at a price of $26.06 per share.
On or after February 5, 2002, the Preferred A Shares are redeemable by the
Company at $25.00 per share in either shares of common stock or cash at the
Company's election. The Preferred A Shares rank senior to the
F-27
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company's common stock and are on a parity with the Preferred B Shares with
respect to the payment of dividends and amounts payable upon liquidation,
dissolution or winding down of the Company. In March 1998, 2,211,120 Preferred
A Shares were converted into 2,121,183 shares of the Company's common stock.
In June 1996, the Company issued 1,725,000 shares of common stock at $20.625
per share and in December 1996, the Company issued an additional 2,990,000
shares of common stock at $22.875 per share.
Proceeds from the above offerings were used to repay debt, acquire
properties, make loans to EDV and for general corporate purposes.
Distributions
In 1997, distributions of $0.46, $0.46, $0.50, $0.50 were declared to common
stockholders for each of the four quarters, respectively. In 1996,
distributions of $0.445, $0.445, $0.46 and $0.46 were declared for each of the
four quarters, respectively. In April 1995, the Company adopted a policy of
declaring distributions to stockholders of record on the first day of the
succeeding quarter, instead of the last day of the current quarter. The
payment date of 15 days following each quarter remained unchanged. As such, in
1995, distributions of $0.43 per share were declared on March 31 and paid on
April 15 and distributions of $0.445 per share were declared on July 1 and
October 1 and paid on July 15 and October 15, respectively. In 1997,
distributions of $0.32, $0.53, $0.53 ($2.125 per annum) were paid in April,
July, and October 1997, respectively, on the Preferred A Shares.
For the years ended December 31, 1997, 1996 and 1995, approximately 0%, 9%,
and 28%, respectively, of the distributions received by shareholders were
considered to be a return of capital for tax purposes.
Options And Warrants
The Company has adopted the 1993 Stock Option Plan (the "1993 Stock Plan")
for executive officers and other key employees of the Company and its
subsidiaries which was amended in 1996. In May 1994, the Company adopted the
Directors 1994 Stock Option Plan (the "1994 Stock Plan") for directors options
which was also amended in 1996.
Options may be granted under the 1993 Stock Plan for a period through 2003
and under the 1994 Stock Plan through the year 2004. Options under these plans
are exercisable for 10 years from the date of grant. The exercise price of
stock options may not be less than 100% of the fair market value of the stock
on the date of grant. The aggregate number of shares issuable upon exercise of
options under the 1993 Stock Plan may not exceed 1,450,000 shares and the
aggregate number of shares issuable upon exercise of options under the 1994
Stock Plan may not exceed 240,000 shares.
Stock option and warrant activity are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS/ EXERCISE PRICE
WARRANTS PER SHARE
--------- ----------------
<S> <C> <C>
Outstanding at January 1, 1995................ 602,587 $ 19.15
Granted--1995................................. 148,250 $ 19.23
Exercised or expired--1995.................... (106,453) $ 17.26
Granted--1996................................. 525,900 $ 21.96
Exercised--1996............................... (31,332) $ 18.05
Granted--1997................................. 700,250 $ 30.60
Exercised or forfeited--1997.................. (169,155) $ 19.81
---------
Outstanding December 31, 1997................. 1,670,047 $ 24.92
=========
</TABLE>
F-28
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The options and warrants expire at various dates through December 2007. Of
the options and warrants, 1,601,316 were issued to officers, directors or
affiliates of the Company. At December 31, 1997, options for 143,350 and
168,250 shares were available for granting under the 1993 Stock Plan and 1994
Stock Plan, respectively.
SFAS No. 123, Accounting for Stock-Based Compensation, requires either the
recording or disclosure of compensation cost for stock-based employee
compensation plans at fair value. The Company has adopted the disclosure-only
provisions of SFAS No. 123. Accordingly, no compensation costs have been
recognized by the Company.
Had compensation cost for the Company's two stock option plans been
recognized based on the fair value at the grant date for awards consistent
with the provisions of SFAS No. 123, the Company's net income in 1997 would
have been reduced by $1,618,000 from $48,962,000 ($2.06 per share basic, and
$1.97 per share--diluted) to $47,344,000 ($1.97 per share--basic, and $1.89
per share--diluted). In 1996 net income would have been reduced by $576,000,
from $23,796,000 ($1.66 per share--basic and $1.62 per share--diluted) to
$23,220,000 ($1.62 per share--basic and $1.58 per share--diluted) and in 1995,
net income would have been reduced by $340,000, from $18,192,000 ($1.51 per
share--basic and diluted) to $17,852,000 ($1.49 per share--basic and diluted).
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997: dividend yield of 7.85%; expected
volatility of 18.22%; risk-free interest rate of 5.73% to 6.49%; and expected
lives of 4 to 5 years.
Distribution Reinvestment Plan
The Company has adopted a distribution reinvestment plan (the "Plan").
Shares purchased under the Plan will be, at the Company's discretion, either
newly issued shares of the Company, shares purchased in the open market or a
combination of the foregoing. Distributions may be invested in newly issued
shares at a 5% discount from the average closing price for the five trading
days prior to the distribution pay date or in shares purchased in the open
market without brokerage commissions or service charges.
F-29
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Earnings Per Share (EPS)
In accordance with the disclosure requirements of SFAS No. 128 (Note 1), a
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (in thousands, except per share amounts).
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
BASIC EPS
NUMERATOR:
Net income.................................. $48,962 $23,796 $ 18,192
Preferred dividends......................... (8,798) -- --
------- ------- --------
$40,164 $23,796 $ 18,192
======= ======= ========
DENOMINATOR:
Weighted average of common shares
outstanding................................ 19,521 14,312 12,031
======= ======= ========
EARNINGS PER SHARE.......................... $ 2.06 $ 1.66 $ 1.51
======= ======= ========
DILUTED EPS
NUMERATOR:
Net income.................................. $48,962 $23,796 $ 18,192
Preferred dividends......................... (8,798) -- --
Adjustments for ERP third party units....... 601 (285) --
------- ------- --------
Net income available to common shares....... $40,765 $23,511 $ 18,192
======= ======= ========
DENOMINATOR:
Weighted average of common shares
outstanding................................ 19,521 14,312 12,031
Effect of diluted securities:
Common stock options and warrants........... 252 44 7
ERP third party units....................... 935 175 --
------- ------- --------
20,708 14,531 12,038
======= ======= ========
EARNINGS PER SHARE............................ $ 1.97 $ 1.62 $ 1.51
======= ======= ========
</TABLE>
10. FINANCIAL INSTRUMENTS AND CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of risk consist principally of cash, accounts receivable and
notes receivable. The following fair value disclosure was determined by the
Company, using available market information and discounted cash flow analyses
as of December 31, 1997 and 1996. However, considerable judgement is necessary
to interpret market data and to develop the related estimates of fair value.
Accordingly, the estimates presented are not necessarily indicative of the
amounts that the Company could realize upon disposition. The use of different
estimation methodologies may have a material effect on the estimated fair
value amounts. The Company believes that the carrying values reflected in the
Consolidated Balance Sheets at December 31, 1997 and 1996 approximates the
fair values for cash, accounts receivable and payable, notes receivable,
variable-rate debt, and senior notes payable, and that the market value of its
real estate held for sale exceeds the carrying value. The Company estimates
that the fair values of its fixed-rate mortgage debt at December 31, 1997 and
1996 is approximately $181,000,000 and $155,000,000, respectively compared to
carrying values of $170,000,000 and $153,000,000 on the Company's books.
At December 31, 1997 the Company's largest and second largest tenant's
scheduled annual base rents ("ABR") account for approximately 10% and 9% of
the Company's total revenues, respectively. The Company's next three largest
tenant's ABR account for approximately 8% in total of the Company's revenues.
At December 31, 1997, the Company owned 148 properties located in 28 states.
There were 14 properties in California, 14 properties in North Carolina, 13
properties in Indiana, 12 properties in Arizona and 11 properties in Georgia.
Approximately 44% of the Company's ABR are derived from these five states.
F-30
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. STATEMENT OF CASH FLOWS--SUPPLEMENTAL DISCLOSURE (IN THOUSANDS):
The amounts paid for interest during the years ended December 31, 1997, 1996
and 1995 were $21,334,000 $18,116,000 and $16,507,000, respectively.
In 1997, the Company acquired real estate and other assets of $116,232,000
without the use of cash by issuing $39,332,000 of ERP limited partner units,
assuming $43,385,000 of mortgages payable and $26,850,000 of capitalized
leases, retiring $3,104,000 of notes receivable and assuming $3,561,000 of
notes payable and other liabilities. On April 1, 1997, the Company began
consolidating the accounts of ERP when notes and related interest receivable
in the amount of $23,427,000 from the Company were converted into limited
partnership interests in ERP. Upon this transaction, ERP assets of $81,600,000
(including cash of $355,000) and liabilities of $52,263,000 (net of payables
to the Company) were consolidated with the Company's accounts. Also in 1997,
the Company redeemed $1,196,000 of ERP limited partnership units by issuing
common stock.
In 1996, the Company acquired real estate and interests in partnerships of
$45,073,000 without the use of cash. The Company assumed $43,389,000 of
mortgage debt, net of other assets and liabilities, and issued $1,684,000 of
common stock. The Company also exchanged $2,947,000 in common stock to repay
mortgage debt. In 1995, the Company acquired real estate of $23,997,000
without the use of cash be assuming $22,784,000 of mortgages payable, net of
other assets and liabilities, and issued $1,213,000 of common stock.
12. MINIMUM FUTURE RENTALS:
The Company leases its shopping centers and single-tenant buildings to
tenants under noncancelable operating leases generally requiring the tenant to
pay a minimum rent adjusted by either (i) fixed increases, (ii) a percentage
of gross sales, or (iii) a CPI index. The leases generally either (i) require
the tenant to pay all expenses of operating the property such as insurance,
property taxes and structural repairs and maintenance, or (ii) require the
tenant to reimburse the Company for the tenant's share of real estate taxes
and other common area maintenance expenses.
Minimum future rental revenue for the next five years for the commercial
real estate owned at
December 31, 1997 and subject to noncancelable operating leases is as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998...................................... $95,562
1999...................................... 88,134
2000...................................... 81,729
2001...................................... 74,458
2002...................................... 67,358
Thereafter................................ 588,208
</TABLE>
13. RETIREMENT PLAN:
The Company has a 401(k) retirement plan (the "401(k) Plan") covering most
of the officers and employees of the Company. The 401(k) Plan permits
participants to contribute, until termination of employment with the Company,
up to a maximum of 15% of their compensation to the 401(k) Plan. In addition,
contributions of participants are matched by the Company in an amount equal to
50% of the participant's contribution in Company stock (up to a maximum of 3%
of such person's compensation) plus an annual discretionary contribution, to
be determined by the Board of Directors, based upon the performance of the
Company. For the years ended December 31, 1997, 1996 and 1995, the Company
incurred costs of $109,000, $77,000 and $46,000, respectively, in connection
with the 401(k) Plan.
F-31
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. NEW PRONOUNCEMENTS:
In 1997, the Financial Accounting Standards Board issued SFAS No. 131,
Disclosures about Segments in an Enterprise and Related Information and SFAS
No. 130, Comprehensive Income, which become effective in 1998. The Company has
determined that the adoption of these SFASs will not have a material effect on
the consolidated financial statements.
15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for 1997 and 1996 is as follows (in
thousands except per share amounts):
<TABLE>
<CAPTION>
NET INCOME NET INCOME
TOTAL NET PER SHARE- PER SHARE
REVENUES INCOME BASIC DILUTED
-------- ------- ---------- ----------
<S> <C> <C> <C> <C>
1997:
First quarter.................... $20,204 $10,310 $0.48 $0.46
Second quarter................... 23,461 11,191 0.47 0.46
Third quarter.................... 27,360 12,646 0.50 0.48
Fourth quarter................... 34,433 14,815 0.59 0.56
1996:
First quarter.................... $14,707 $5,858 $0.44 $0.44
Second quarter................... 15,327 4,094 0.31 0.31
Third quarter.................... 15,906 6,899 0.46 0.45
Fourth quarter................... 17,195 6,945 0.43 0.41
</TABLE>
F-32
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------- ----------
ACCOUNTS
BALANCE AT CHARGED TO RECEIVABLE BALANCE AT
BEGINNING BAD DEBT WRITTEN END OF
DESCRIPTION OF YEAR EXPENSE OFF YEAR
- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for bad debts:
Year ended December 31, 1997...... $1,608 $ 959 $671 $1,896
====== ====== ==== ======
Year ended December 31, 1996...... $ 726 $1,008 $126 $1,608
====== ====== ==== ======
Year ended December 31, 1995...... $ 318 $ 445 $ 37 $ 726
====== ====== ==== ======
</TABLE>
F-33
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- ---------------------- ------------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ -------- ------------ -------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sony Building
Burbank, CA..... $ -- $ 2,610 $ 2,610 $ -- $ -- $ 2,610 $ 2,610 $ 5,220 $ 536
Genetrix
Building
Scottsdale, AZ.. -- 666 1,434 (14) -- 652 1,434 2,086 252
Shopping Center
Mesa, AZ........ -- 2,394 3,132 (14) 258 2,380 3,390 5,770 694
Office Building
Stillwater, MN.. 354 175 525 -- 37 175 562 737 95
Kinder Care
#1182
Kalamazoo, MI... -- 170 397 -- -- 170 397 567 68
Shopping Center
Phoenix, AZ..... -- 7,312 8,995 (56) 1,354 7,256 10,349 17,605 1,923
Shopping Center
Norton, VA...... -- 1,559 7,711 316 187 1,875 7,898 9,773 1,051
Shopping Center
Perry, GA....... 7,140 2,025 8,075 (9) 506 2,016 8,581 10,597 1,088
Shopping Center
Leesburg, FL.... -- 1,436 4,584 30 704 1,466 5,288 6,754 921
Shopping Center
Knoxville, TN... 6,092 1,995 6,547 -- 12 1,995 6,559 8,554 514
Wal-Mart
Building
Berlin, MI...... 1,624 680 1,586 -- -- 680 1,586 2,266 200
Wal-Mart
Building
Decateur, IN.... 2,416 1,011 2,359 -- -- 1,011 2,359 3,370 297
Wal-Mart
Building
Big Rapids, MI.. 2,340 1,052 2,455 (10) -- 1,042 2,455 3,497 309
Wal-Mart
Building
Wysomming, PA... 4,710 2,118 4,942 -- -- 2,118 4,942 7,060 623
Wal-Mart
Building
Brighton, CO.... 2,377 1,069 2,494 -- -- 1,069 2,494 3,563 314
Wal-Mart
Building
and Outparcels
Temple, TX...... 4,364 1,963 4,580 35 -- 1,998 4,580 6,578 577
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Sony Building
Burbank, CA..... 1988 1989-90 40 years
Genetrix
Building
Scottsdale, AZ.. 1971 1990 40 years
Shopping Center
Mesa, AZ........ 1970 1990 40 years
Office Building
Stillwater, MN.. 1985 1991 40 years
Kinder Care
#1182
Kalamazoo, MI... 1990 1991 40 years
Shopping Center
Phoenix, AZ..... 1988 1991-92 40 years
Shopping Center
Norton, VA...... 1989 1992 40 years
Shopping Center
Perry, GA....... 1992 1992 40 years
Shopping Center
Leesburg, FL.... 1986 1992 40 years
Shopping Center
Knoxville, TN... 1990 1992 40 years
Wal-Mart
Building
Berlin, MI...... 1992 1992 40 years
Wal-Mart
Building
Decateur, IN.... 1992 1992 40 years
Wal-Mart
Building
Big Rapids, MI.. 1992 1992 40 years
Wal-Mart
Building
Wysomming, PA... 1992 1992 40 years
Wal-Mart
Building
Brighton, CO.... 1992 1992 40 years
Wal-Mart
Building
and Outparcels
Temple, TX...... 1992 1992 40 years
</TABLE>
F-34
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST CAPITALIZED
(SOLD) SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- --------------------- ------------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ -------- ------------ -------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wal-Mart
Building
Wabash, IN...... $ 2,596 $ 1,167 $ 2,724 $ -- $ -- $ 1,167 $ 2,724 $ 3,891 $ 343
Mtn. Jacks
#210303
Dearborn
Heights, MI..... -- 378 1,134 73 135 451 1,269 1,720 148
Autoworks #125
Hastings, NE.... -- 105 332 24 45 129 377 506 44
Autoworks #138
Grand Island,
NE.............. -- 189 421 24 44 213 465 678 54
Kindercare #125
Indianapolis,
IN.............. -- 63 146 9 18 72 164 236 19
Kindercare #126
Indianapolis,
IN.............. -- 63 146 9 18 72 164 236 19
Kindercare #577
High Ridge, MO.. -- 60 238 13 26 73 264 337 31
Kindercare #162
Fenton, MO...... -- 59 235 13 25 72 260 332 31
Kindercare #128
Indianapolis,
IN.............. -- 90 211 14 25 104 236 340 28
Kindercare #134
Indianapolis,
IN.............. -- 90 211 14 25 104 236 340 28
Kindercare #132
Indianapolis,
IN.............. -- 63 146 9 18 72 164 236 19
DHG (Bellaire)
Houston, TX..... -- 74 110 -- -- 74 110 184 14
DHG (Beechnut)
Houston, TX..... -- 103 155 -- -- 103 155 258 20
Egghead Software
Maplewood, MN... -- 172 258 -- -- 172 258 430 33
United Artists
Pueblo, CO...... -- 247 576 37 70 284 646 930 75
Lowes Building
Terre Haute, IN. 3,754 1,325 3,446 530 -- 1,855 3,446 5,301 391
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ --------- -------------
<S> <C> <C> <C>
Wal-Mart
Building
Wabash, IN...... 1992 1992 40 years
Mtn. Jacks
#210303
Dearborn
Heights, MI..... 1980 1992 40 years
Autoworks #125
Hastings, NE.... 1988 1992 40 years
Autoworks #138
Grand Island,
NE.............. 1988 1992 40 years
Kindercare #125
Indianapolis,
IN.............. 1975 1992 40 years
Kindercare #126
Indianapolis,
IN.............. 1976 1992 40 years
Kindercare #577
High Ridge, MO.. 1980 1992 40 years
Kindercare #162
Fenton, MO...... 1977 1992 40 years
Kindercare #128
Indianapolis,
IN.............. 1976 1992 40 years
Kindercare #134
Indianapolis,
IN.............. 1976 1992 40 years
Kindercare #132
Indianapolis,
IN.............. 1976 1992 40 years
DHG (Bellaire)
Houston, TX..... 1985 1992 40 years
DHG (Beechnut)
Houston, TX..... 1985 1992 40 years
Egghead Software
Maplewood, MN... 1987 1992 40 years
United Artists
Pueblo, CO...... 1977 1992 40 years
Lowes Building
Terre Haute, IN. 1993 1992/1993 40 years
</TABLE>
F-35
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------ ------------------------ -------------------------------
BUILDINGS ACCUMULATED
AND BUILDINGS AND BUILDINGS AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ ----- ------------ --------- ------------- -------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Wal-Mart
Building
Orland Hills,
IL.............. 6,139 2,631 6,140 -- -- 2,631 6,140 8,771 735
Kmart Building
Albany, GA...... -- 1,033 1,918 (260) (482) 773 1,436 2,209 210
Kmart Building
DeSoto, TX...... -- 951 1,767 -- 152 951 1,919 2,870 252
Kmart Building
Omaha, NE....... -- 924 1,715 -- -- 924 1,715 2,639 188
Kmart Building
Pine Bluff, AR.. -- 892 1,656 -- -- 892 1,656 2,548 181
Kmart Building
Somerville, NJ.. -- 836 1,553 -- 4 836 1,557 2,393 170
Kmart Building
St. Charles, MD. -- 936 1,738 (296) (365) 640 1,373 2,013 270
Kash & Karry
Building
Brandon, FL..... -- 698 1,295 -- -- 698 1,295 1,993 142
Kroger Building
Clearfield, PA.. -- 731 1,357 -- -- 731 1,357 2,088 148
Kroger Building
East Albany, GA. -- 639 1,186 -- -- 639 1,186 1,825 130
Kroger Building
James Island,
SC.............. -- 722 1,340 -- -- 722 1,340 2,062 147
Kroger Building
Missouri City,
TX.............. -- 790 1,466 -- 41 790 1,507 2,297 161
Kroger Building
Muscle Shoals,
AL.............. -- 817 1,517 -- -- 817 1,517 2,334 166
Kroger Building
Ottawa, IL...... -- 902 1,674 -- -- 902 1,674 2,576 183
Kroger Building
Scottsboro, AL.. -- 703 1,305 -- -- 703 1,305 2,008 143
Payless Drug
Building
Yuma, AZ........ -- 389 723 -- -- 389 723 1,112 79
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Wal-Mart
Building
Orland Hills,
IL.............. 1992 1993 40 years
Kmart Building
Albany, GA...... 1981 1993 40 years
Kmart Building
DeSoto, TX...... 1980 1993 40 years
Kmart Building
Omaha, NE....... 1981 1993 40 years
Kmart Building
Pine Bluff, AR.. 1981 1993 40 years
Kmart Building
Somerville, NJ.. 1982 1993 40 years
Kmart Building
St. Charles, MD. 1981 1993 40 years
Kash & Karry
Building
Brandon, FL..... 1982 1993 40 years
Kroger Building
Clearfield, PA.. 1982 1993 40 years
Kroger Building
East Albany, GA. 1982 1993 40 years
Kroger Building
James Island,
SC.............. 1982 1993 40 years
Kroger Building
Missouri City,
TX.............. 1982 1993 40 years
Kroger Building
Muscle Shoals,
AL.............. 1982 1993 40 years
Kroger Building
Ottawa, IL...... 1982 1993 40 years
Kroger Building
Scottsboro, AL.. 1981 1993 40 years
Payless Drug
Building
Yuma, AZ........ 1980 1993 40 years
</TABLE>
F-36
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
----------------- ------------------------ --------------------------------
BUILDINGS ACCUMULATED
AND BUILDINGS AND BUILDINGS AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ ---- ------------ --------- ------------- ------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lucky Building
Phoenix, AZ..... -- 471 875 -- -- 471 875 1,346 87
Lucky Building
Coralville, IA.. -- 558 1,037 -- -- 558 1,037 1,595 113
Lucky Building
Decateur, IL.... -- 588 1,093 -- -- 588 1,093 1,681 119
Lucky Building
Dubuque, IA..... -- 744 1,383 -- -- 744 1,383 2,127 150
Lucky Building
Hobart, IA...... -- 617 1,145 -- -- 617 1,145 1,762 125
Lucky Building
Mesa, AZ........ -- 435 809 -- -- 435 809 1,244 88
Lucky Building
Michigan City,
IN.............. -- 511 948 -- -- 511 948 1,459 104
Lucky Building
Moline, IL...... -- 735 1,365 -- -- 735 1,365 2,100 149
Lucky Building
Peoria, IL...... -- 673 1,249 -- -- 673 1,249 1,922 137
Lucky Building
Pittsburgh, PA.. -- 862 1,601 -- -- 862 1,601 2,463 175
Lucky Building
Springfield, IL. -- 582 1,081 -- -- 582 1,081 1,663 118
Lucky Building
Sterling, IL.... -- 744 1,382 -- -- 744 1,382 2,126 151
Kroger Building
Waterloo, IL.... -- 670 1,243 -- -- 670 1,243 1,913 136
Safeway Building
Muskogee, OK.... -- 906 1,683 -- -- 906 1,683 2,589 184
Safeway Building
Sherwood, AR.... -- 778 1,445 -- -- 778 1,445 2,223 158
Safeway Building
West Monroe, LA. -- 739 1,373 -- -- 739 1,373 2,112 150
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Lucky Building
Phoenix, AZ..... 1981 1993 40 years
Lucky Building
Coralville, IA.. 1981 1993 40 years
Lucky Building
Decateur, IL.... 1983 1993 40 years
Lucky Building
Dubuque, IA..... 1980 1993 40 years
Lucky Building
Hobart, IA...... 1993 1993 40 years
Lucky Building
Mesa, AZ........ 1982 1993 40 years
Lucky Building
Michigan City,
IN.............. 1983 1993 40 years
Lucky Building
Moline, IL...... 1981 1993 40 years
Lucky Building
Peoria, IL...... 1983 1993 40 years
Lucky Building
Pittsburgh, PA.. 1982 1993 40 years
Lucky Building
Springfield, IL. 1982 1993 40 years
Lucky Building
Sterling, IL.... 1980 1993 40 years
Kroger Building
Waterloo, IL.... 1982 1993 40 years
Safeway Building
Muskogee, OK.... 1981 1993 40 years
Safeway Building
Sherwood, AR.... 1981 1993 40 years
Safeway Building
West Monroe, LA. 1981 1993 40 years
</TABLE>
F-37
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------ ------------------------- --------------------------------
BUILDINGS ACCUMULATED
AND BUILDINGS AND BUILDINGS AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ ----- ------------ --------- ------------- -------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rite Aid
Building
East Albany, GA. -- 176 328 -- -- 176 328 504 36
Super X Building
Muscle Shoals,
AL.............. -- 195 363 -- -- 195 363 558 40
Shopping Center
Elizabethtown,
KY.............. 4,996 1,888 4,981 -- 23 1,888 5,004 6,892 625
Shopping Center
Glasgow, KY..... 4,562 629 5,555 -- 24 629 5,579 6,208 685
Shopping Center
Deland, FL...... 8,284 3,469 8,125 64 224 3,533 8,349 11,882 946
Shopping Center
Irving, TX...... 3,000 1,655 3,074 -- 6 1,655 3,080 4,735 331
Shopping Center
Ashland, OH..... -- 2,689 4,994 35 182 2,724 5,176 7,900 606
Shopping Center
Covington, GA... -- 3,188 5,921 (10) 98 3,178 6,019 9,197 642
K-Mart Building
Atlantic, IA.... -- 564 1,048 -- -- 564 1,048 1,612 104
Kash N' Karry
Building
Homossassa
Springs, FL..... -- 378 702 -- -- 378 702 1,080 69
Shopping Center
Brooksville, FL. -- 1,779 3,305 124 400 1,903 3,705 5,608 392
Shopping Center
Celina, OH...... -- 1,552 2,882 155 292 1,707 3,174 4,881 302
Shopping Center
Albemarle, NC... 2,499 984 1,827 125 260 1,109 2,087 3,196 204
Shopping Center
Marion, IN...... -- 656 1,219 53 115 709 1,334 2,043 126
Shopping Center
Warsaw, IN...... -- 568 1,056 110 204 678 1,260 1,938 116
Shopping Center
Terre Haute, IN. 3,042 1,618 3,013 181 343 1,799 3,356 5,155 318
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Rite Aid
Building
East Albany, GA. 1982 1993 40 years
Super X Building
Muscle Shoals,
AL.............. 1982 1993 40 years
Shopping Center
Elizabethtown,
KY.............. 1992 1993 40 years
Shopping Center
Glasgow, KY..... 1992 1993 40 years
Shopping Center
Deland, FL...... 1993 1993 40 years
Shopping Center
Irving, TX...... 1987 1993 40 years
Shopping Center
Ashland, OH..... 1990 1993 40 years
Shopping Center
Covington, GA... 1991 1993 40 years
K-Mart Building
Atlantic, IA.... 1980 1994 40 years
Kash N' Karry
Building
Homossassa
Springs, FL..... 1982 1994 40 years
Shopping Center
Brooksville, FL. 1987 1994 40 years
Shopping Center
Celina, OH...... 1990 1994 40 years
Shopping Center
Albemarle, NC... 1988 1994 40 years
Shopping Center
Marion, IN...... 1989 1994 40 years
Shopping Center
Warsaw, IN...... 1989 1994 40 years
Shopping Center
Terre Haute, IN. 1989 1994 40 years
</TABLE>
F-38
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------ ------------------------ --------------------------------
BUILDINGS ACCUMULATED
AND BUILDINGS AND BUILDINGS AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ ----- ------------ --------- ------------- -------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Office Building
San Diego, CA... 1,834 753 1,762 -- 228 753 1,990 2,743 193
Shopping Center
Hilton Head, SC. 4,286 2,431 4,515 -- 14 2,431 4,529 6,960 436
Shopping Center
Lakes Wales, FL. -- 2,028 3,767 -- 17 2,028 3,784 5,812 343
Shopping Center
Versailles, KY.. 7,920 3,882 7,209 -- 171 3,882 7,380 11,262 713
Shopping Center
Mesa, AZ........ -- 1,300 2,415 -- 308 1,300 2,723 4,023 381
Shopping Center
London, KY...... 5,223 3,351 6,223 -- 18 3,351 6,241 9,592 581
Q Club Building
Scottsdale, AZ.. -- 1,822 3,385 8 14 1,830 3,399 5,229 287
Q Club Building
Phoenix, AZ..... -- 1,813 3,366 (145) (14) 1,668 3,352 5,020 304
Lowe's Building
Middletown, OH.. 4,027 2,187 4,061 -- -- 2,187 4,061 6,248 393
Shopping Center
Kannapolis, NC.. 2,147 1,035 1,924 69 133 1,104 2,057 3,161 156
Shopping Center
Asheboro, NC.... 3,156 2,109 3,917 182 345 2,291 4,262 6,553 281
Shopping Center
Kernersville,
NC.............. 2,552 1,096 2,036 178 15 1,274 2,051 3,325 130
Shopping Center
Roxboro, NC..... -- 1,842 3,421 -- 29 1,842 3,450 5,292 221
Shopping Center
Siler City, NC.. 5,282 2,330 4,328 -- 18 2,330 4,346 6,676 277
Shopping Center
Wadesboro, NC... -- 2,264 4,205 -- 13 2,264 4,218 6,482 250
Shopping Center
Jonesville, NC.. 1,856 824 1,531 -- 6 824 1,537 2,361 99
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Office Building
San Diego, CA... 1988 1994 40 years
Shopping Center
Hilton Head, SC. 1994 1994 40 years
Shopping Center
Lakes Wales, FL. 1994 1994 40 years
Shopping Center
Versailles, KY.. 1994 1994 40 years
Shopping Center
Mesa, AZ........ 1981 1994 40 years
Shopping Center
London, KY...... 1994 1994 40 years
Q Club Building
Scottsdale, AZ.. 1994 1994 40 years
Q Club Building
Phoenix, AZ..... 1994 1994 40 years
Lowe's Building
Middletown, OH.. 1993 1994 40 years
Shopping Center
Kannapolis, NC.. 1992 1994 40 years
Shopping Center
Asheboro, NC.... 1988 1995 40 years
Shopping Center
Kernersville,
NC.............. 1988 1995 40 years
Shopping Center
Roxboro, NC..... 1989 1995 40 years
Shopping Center
Siler City, NC.. 1988 1995 40 years
Shopping Center
Wadesboro, NC... 1988 1995 40 years
Shopping Center
Jonesville, NC.. 1988 1995 40 years
</TABLE>
F-39
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
------------------- ------------------- --------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION DATE OF
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B) CONSTRUCTION
----------- ------------ ------ ------------ ----- ------------ ------ ------------ ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
and Outparcels
Kinston, NC..... $ -- $2,871 $5,331 $ 320 $119 $3,191 $5,450 $8,641 $352 1991
Shopping Center
Hilton Head, SC. 2,448 1,157 2,149 (24) -- 1,133 2,149 3,282 119 1989
Shopping Center
Hendersonville,
TN.............. -- 1,325 2,461 -- 71 1,325 2,532 3,857 146 1989
Shopping Center
Manchester, TN.. -- 807 1,499 273 529 1,080 2,028 3,108 96 1990
Shopping Center
Williamsburg,
NC.............. 6,027 2,990 5,553 -- 39 2,990 5,592 8,582 282 1991
Shopping Center
Atlanta, GA..... -- 954 1,771 -- 11 954 1,782 2,736 84 1995
Shopping Center
Oxford, NC...... 5,727 2,863 5,318 -- 20 2,863 5,338 8,201 252 1991
Shopping Center
Statesville, NC. 9,625 5,821 10,810 1,325 945 7,146 11,755 18,901 532 1991
Shopping Center
Statesboro, GA.. 3,305 1,694 3,145 -- 6 1,694 3,151 4,845 115 1994
Shopping Center
West Valley, UT. 17,587 12,222 22,699 -- 242 12,222 22,941 35,163 593 1970
Shopping Center
and Outparcels
Tucson, AZ...... -- 5,996 9,324 (33) (39) 5,963 9,285 15,248 246 1995/96
Shopping Center
Gadsden, AL(4).. 5,629 2,519 4,682 -- -- 2,519 4,682 7,201 259 1995
Shopping Center
Bakersfield,
CA(4)........... -- 6,310 11,718 -- 15 6,310 11,733 18,043 156 1970
Shopping Center
Cudahy, CA(4)... -- 1,936 3,602 -- 9 1,936 3,611 5,547 50 1968
Shopping Center
Modesto, CA(4).. 1,479 1,998 3,721 -- 9 1,998 3,730 5,728 51 1974
Shopping Center
Montebello,
CA(4)........... 9,253 8,055 14,959 -- 40 8,055 14,999 23,054 200 1974
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE STATEMENTS IS
DESCRIPTION ACQUIRED COMPUTED(3)
----------- -------- -------------
<S> <C> <C>
Shopping Center
and Outparcels
Kinston, NC..... 1995 40 years
Shopping Center
Hilton Head, SC. 1995 40 years
Shopping Center
Hendersonville,
TN.............. 1995 40 years
Shopping Center
Manchester, TN.. 1995 40 years
Shopping Center
Williamsburg,
NC.............. 1996 40 years
Shopping Center
Atlanta, GA..... 1996 40 years
Shopping Center
Oxford, NC...... 1996 40 years
Shopping Center
Statesville, NC. 1996 40 years
Shopping Center
Statesboro, GA.. 1996 40 years
Shopping Center
West Valley, UT. 1996 40 years
Shopping Center
and Outparcels
Tucson, AZ...... 1996 40 years
Shopping Center
Gadsden, AL(4).. 1997 40 years
Shopping Center
Bakersfield,
CA(4)........... 1997 40 years
Shopping Center
Cudahy, CA(4)... 1997 40 years
Shopping Center
Modesto, CA(4).. 1997 40 years
Shopping Center
Montebello,
CA(4)........... 1997 40 years
</TABLE>
F-40
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
-------------------- ------------------ ----------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION DATE OF
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B) CONSTRUCTION
----------- ------------ ------- ------------ ----- ------------ ------- ------------ ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
Paradise, CA(4). $ 2,872 $ 1,717 $ 3,189 $ -- $ -- $ 1,717 $ 3,189 $ 4,906 $ 43 1979
Shopping Center
Santa Ana,
CA(4)........... -- 3,731 6,930 -- 19 3,731 6,949 10,680 96 1972
Shopping Center
San Dimas,
CA(4)........... 8,100 6,367 11,825 -- -- 6,367 11,825 18,192 62 1986-88
Shopping Center
Cornelia, GA(4). 4,094 2,183 4,054 -- 19 2,183 4,073 6,256 193 1990
Shopping Center
Dalton, GA(4)... 2,337 1,261 2,341 -- 16 1,261 2,357 3,618 137 1990
Shopping Center
Snellville,
GA(4)........... 2,801 3,124 5,802 -- 123 3,124 5,925 9,049 345 1985
Shopping Center
Campbellsville,
KY(4)........... 5,497 2,950 5,479 -- 45 2,950 5,524 8,474 247 1989
Office Building
Fridley, MN(4).. 5,800 2,171 4,031 -- 79 2,171 4,110 6,281 176 1991
Shopping Center
Winton-Salem,
NC(4)........... 6,131 2,848 5,289 -- 9 2,848 5,298 8,146 138 1995
Shopping Center
Reno, NV(4)..... -- 3,785 7,028 -- 8 3,785 7,036 10,821 93 1974
Shopping Center
N. Charleston,
SC(4)........... 3,905 1,826 3,390 -- -- 1,826 3,390 5,216 95 1996
Shopping Center
Chattanooga,
TN(4)........... 4,340 2,036 3,781 -- -- 2,036 3,781 5,817 130 1995
Shopping Center
Kimball, TN(4).. 10,379 2,494 3,940 -- 9,287 2,494 13,227 15,721 274 1987
Shopping Center
Shelbyville,
TN(4)........... -- 974 1,809 -- 26 974 1,835 2,809 104 1985
Shopping Center
Tullahoma,
TN(4)........... 9,116 4,051 7,524 -- -- 4,051 7,524 11,575 258 1995
Firstar Bank
Building
Burnsville, MN.. -- 441 818 -- -- 441 818 1,259 8 1975
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE STATEMENTS IS
DESCRIPTION ACQUIRED COMPUTED(3)
----------- -------- -------------
<S> <C> <C>
Shopping Center
Paradise, CA(4). 1997 40 years
Shopping Center
Santa Ana,
CA(4)........... 1997 40 years
Shopping Center
San Dimas,
CA(4)........... 1997 40 years
Shopping Center
Cornelia, GA(4). 1996 40 years
Shopping Center
Dalton, GA(4)... 1995 40 years
Shopping Center
Snellville,
GA(4)........... 1995 40 years
Shopping Center
Campbellsville,
KY(4)........... 1996 40 years
Office Building
Fridley, MN(4).. 1996 40 years
Shopping Center
Winton-Salem,
NC(4)........... 1996 40 years
Shopping Center
Reno, NV(4)..... 1997 40 years
Shopping Center
N. Charleston,
SC(4)........... 1997 40 years
Shopping Center
Chattanooga,
TN(4)........... 1996 40 years
Shopping Center
Kimball, TN(4).. 1995 40 years
Shopping Center
Shelbyville,
TN(4)........... 1995 40 years
Shopping Center
Tullahoma,
TN(4)........... 1996 40 years
Firstar Bank
Building
Burnsville, MN.. 1997 40 years
</TABLE>
F-41
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- ------------------- ------------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION DATE OF
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B) CONSTRUCTION
----------- ------------ -------- ------------ ------ ------------ -------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
Camarillo, CA... $ -- $ 2,538 $ 4,719 $ -- $ -- $ 2,538 $ 4,719 $ 7,257 $ 64 1971
Shopping Center
Coachella, CA... -- 515 956 -- -- 515 956 1,471 13 1991
Shopping Center
Fresno, CA...... -- 6,511 12,092 -- -- 6,511 12,092 18,603 214 1993
Shopping Center
Fresno, CA...... -- 3,207 5,956 -- -- 3,207 5,956 9,163 105 1995
Shopping Center
Pleasanton, CA.. -- 7,634 14,178 -- -- 7,634 14,178 21,812 103 1995-96
Shopping Center
Westminster, CO. -- 15,336 28,481 -- -- 15,336 28,481 43,817 30 1996
Shopping Center
Miami, FL....... -- 6,908 12,832 -- -- 6,908 12,832 19,740 67 1996
Shopping Center
Naples, FL...... -- 4,071 7,561 -- -- 4,071 7,561 11,632 39 1995
Shopping Center
Clearwater, FL.. -- 8,158 15,151 -- -- 8,158 15,151 23,309 16 1973
Shopping Center
Thomasville, NC. -- 2,004 3,732 -- -- 2,004 3,732 5,736 67 1996
Shopping Center
Richland
Township, PA.... 3,674 1,875 3,482 -- -- 1,875 3,482 5,357 40 1993
Shopping Center
Elizabethtown,
PA.............. -- 4,230 7,857 -- -- 4,230 7,857 12,087 41 1993-94
Shopping Center
James Island,
SC.............. -- 3,381 6,279 -- -- 3,381 6,279 9,660 33 1993-94
Shopping Center
Collegedale, TN. 4,966 2,266 4,208 -- -- 2,266 4,208 6,474 48 1997
K-Mart Building
Brooksville, FL. -- 1,795 3,334 -- -- 1,795 3,334 5,129 45 1987
Shopping Center
Winchester, TN.. -- 3,901 7,246 -- -- 3,901 7,246 11,147 7 1997
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE STATEMENTS IS
DESCRIPTION ACQUIRED COMPUTED(3)
----------- -------- -------------
<S> <C> <C>
Shopping Center
Camarillo, CA... 1997 40 years
Shopping Center
Coachella, CA... 1997 40 years
Shopping Center
Fresno, CA...... 1997 40 years
Shopping Center
Fresno, CA...... 1997 40 years
Shopping Center
Pleasanton, CA.. 1997 40 years
Shopping Center
Westminster, CO. 1997 40 years
Shopping Center
Miami, FL....... 1997 40 years
Shopping Center
Naples, FL...... 1997 40 years
Shopping Center
Clearwater, FL.. 1997 40 years
Shopping Center
Thomasville, NC. 1997 40 years
Shopping Center
Richland
Township, PA.... 1997 40 years
Shopping Center
Elizabethtown,
PA.............. 1997 40 years
Shopping Center
James Island,
SC.............. 1997 40 years
Shopping Center
Collegedale, TN. 1997 40 years
K-Mart Building
Brooksville, FL. 1997 40 years
Shopping Center
Winchester, TN.. 1997 40 years
</TABLE>
F-42
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET COST
CAPITALIZED (SOLD)
SUBSEQUENT TO GROSS AMOUNT AT WHICH
INITIAL COST ACQUISITION CARRIED AT CLOSE OF PERIOD
--------------------- --------------------- ------------------------------
BUILDINGS BUILDINGS BUILDINGS ACCUMULATED
AND AND AND TOTAL DEPRECIATION
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS (A) (B)
----------- ------------ -------- ------------ ------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Winn Dixie
Building
Chatannooga, TN. $ -- $ 739 $ 1,373 $ -- $ -- $ 739 $ 1,373 $ 2,112 $ 27
Shopping Center
Glendale, AZ.... -- 3,951 7,337 -- -- 3,951 7,337 11,288 69
Shopping Center
Mesa, AZ........ -- 2,445 4,542 -- -- 2,445 4,542 6,987 43
Shopping Center
Dalton, GA...... -- 1,232 2,288 -- -- 1,232 2,288 3,520 45
Shopping Center
Arlington, TX... -- 9,595 17,820 -- -- 9,595 17,820 27,415 93
Property Held
for
Sale/Redevelopment
Scottsdale, AZ.. -- 2,940 5,460 (2,940) 9,242 0 14,702 14,702 --
-------- -------- -------- ------- ------- -------- -------- -------- -------
$243,664 $307,454 $590,291 $ 541 $27,232 $307,995 $617,523 $925,518 $33,936
======== ======== ======== ======= ======= ======== ======== ======== =======
(1)
<CAPTION>
LIFE ON WHICH
DEPRECIATION
IN LATEST
INCOME
DATE OF DATE STATEMENTS IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED(3)
----------- ------------ -------- -------------
<S> <C> <C> <C>
Winn Dixie
Building
Chatannooga, TN. 1995 1997 40 years
Shopping Center
Glendale, AZ.... 1989-91 1997 40 years
Shopping Center
Mesa, AZ........ 1986-97 1997 40 years
Shopping Center
Dalton, GA...... 1994 1997 40 years
Shopping Center
Arlington, TX... 1992-93 1997 40 years
Property Held
for
Sale/Redevelopment
Scottsdale, AZ.. 1989 1993 (2)
</TABLE>
- ----
(1) Listing does not include debt related to capitalized leases on three ERP
properties totaling $26,850.
(2) At December 31, 1997, this property was held for sale / redevelopment.
Depreciation expense is not being charged to the property.
(3) Tenant improvements and other costs capitalized subsequent to acquisition
are depreciated over 2-40 years.
(4) These properties are owned by Excel Realty Partners, L.P. ("ERP") . The
Company began consolidating the accounts of ERP on April 1, 1997.
Acquisition dates are dates properties were contributed to ERP.
F-43
<PAGE>
EXCEL REALTY TRUST, INC. AND SUBSIDIARIES
SCHEDULE III--REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
[a] Reconciliation of total real estate carrying value for the past three years
is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year............... $479,478 $386,925 $359,459
Acquisitions............................... 365,919 93,190 47,583
Improvements and other additions........... 10,800 6,206 7,473
Consolidation of ERP at April 1, 1997...... 80,724 -- --
Cost of property sold...................... (10,662) (5,999) (27,590)
Impairment of real estate.................. (741) (844)
-------- -------- --------
Balance at end of year..................... $925,518 $479,478 $386,925
======== ======== ========
Total cost for federal income tax purposes
at the end of each year................... $879,950 $476,266 $386,062
======== ======== ========
[b] Reconciliation of accumulated depreciation for the past three years is as
follows:
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year............... $ 21,976 $ 14,909 $ 10,228
Depreciation expense....................... 11,389 7,354 6,845
Consolidation of ERP at April 1, 1997...... 1,283 -- --
Deletions--property sold................... (712) (287) (1,918)
Reclass to real estate held for sale....... -- -- (246)
-------- -------- --------
Balance at end of year..................... $ 33,936 $ 21,976 $ 14,909
======== ======== ========
</TABLE>
F-44
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ANNEX I
AGREEMENT AND PLAN OF MERGER
AMONG
EXCEL REALTY TRUST, INC.,
ERT MERGER SUB, INC.
AND
NEW PLAN REALTY TRUST
DATED MAY 14, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1. THE MERGER.............. I-1
1.1. The Merger.............. I-1
1.2. The Closing............. I-2
1.3. Effective Time.......... I-2
Revision of Form of
1.4. Transaction............. I-2
ORGANIZATION OF THE
ARTICLE 2. SURVIVING TRUST......... I-2
2.1. Declaration of Trust.... I-2
2.2. Trustees................ I-2
2.3. Officers................ I-2
ARTICLE 3. ORGANIZATION OF EXCEL... I-3
Articles of
3.1. Incorporation........... I-3
3.2. Bylaws.................. I-3
3.3. Directors............... I-3
3.4. Officers................ I-3
3.5. Excel Stock Dividend.... I-3
ARTICLE 4. EFFECT OF THE MERGER ON
THE CAPITAL STOCK OF THE
CONSTITUENT
PARTIES; EXCHANGE OF
CERTIFICATES............ I-3
4.1. Effect on Capital Stock. I-3
Exchange of
4.2. Certificates............ I-5
REPRESENTATIONS AND
ARTICLE 5. WARRANTIES OF NEW PLAN.. I-7
Existence; Good
Standing; Authority;
5.1. Compliance With Law..... I-7
Authorization, Validity,
and Effect of
5.2. Agreements.............. I-8
5.3. Capitalization.......... I-8
5.4. Subsidiaries............ I-9
5.5. Other Interests......... I-9
5.6. No Violation............ I-9
5.7. SEC Documents........... I-10
5.8. Litigation.............. I-10
Absence of Certain
5.9. Changes................. I-10
5.10. Taxes................... I-10
5.11. Books and Records....... I-12
5.12. Properties.............. I-12
5.13. Environmental Matters... I-13
5.14. Employee Benefit Plans.. I-13
5.15. Labor Matters........... I-14
5.16. No Brokers.............. I-14
Opinion of Financial
5.17. Advisor................. I-14
5.18. Excel Stock Ownership... I-14
Related Party
5.19. Transactions............ I-14
Contracts and
5.20. Commitments............. I-15
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.21. Leases....................................................... I-15
5.22. Investment Company Act of 1940............................... I-15
5.23. Certain Payments Resulting From Transactions................. I-15
5.24. State Takeover Statutes...................................... I-16
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF EXCEL...................... I-16
6.1. Existence; Good Standing; Authority; Compliance With Law..... I-16
6.2. Authorization, Validity and Effect of Agreements............. I-16
6.3. Capitalization............................................... I-17
6.4. Subsidiaries................................................. I-17
6.5. Other Interests.............................................. I-18
6.6. No Violation................................................. I-18
6.7. SEC Documents................................................ I-18
6.8. Litigation................................................... I-19
6.9. Absence of Certain Changes................................... I-19
6.10. Taxes........................................................ I-19
6.11. Books and Records............................................ I-20
6.12. Properties................................................... I-20
6.13. Environmental Matters........................................ I-21
6.14. Employee Benefit Plans....................................... I-22
6.15. Labor Matters................................................ I-22
6.16. No Brokers................................................... I-22
6.17. Opinion of Financial Advisor................................. I-22
6.18. New Plan Share Ownership..................................... I-23
6.19. Related Party Transactions................................... I-23
6.20. Contracts and Commitments.................................... I-23
6.21. Leases....................................................... I-23
6.22. Investment Company Act of 1940............................... I-23
6.23. Certain Payments Resulting From Transactions................. I-23
6.24. State Takeover Statutes...................................... I-24
6.25. Legacy Arrangements.......................................... I-24
ARTICLE 7. COVENANTS.................................................... I-24
7.1. No Solicitation by New Plan.................................. I-24
7.2. No Solicitation by Excel..................................... I-26
7.3. Conduct of Businesses........................................ I-27
7.4. Meetings of Stockholders..................................... I-31
7.5. Filings; Other Action........................................ I-32
7.6. Inspection of Records........................................ I-32
7.7. Publicity.................................................... I-32
7.8. Registration Statement....................................... I-33
7.9. Listing Application.......................................... I-33
7.10. Affiliates of New Plan....................................... I-33
7.11. Expenses..................................................... I-34
7.12. Indemnification.............................................. I-34
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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7.13. Employees.................................................. I-35
7.14. Reorganization............................................. I-36
7.15. Advice of Changes.......................................... I-36
7.16. REIT Status................................................ I-36
7.17. Governance................................................. I-36
7.18. Corporate Headquarters..................................... I-37
7.19. Amendments to Excel DRIP................................... I-37
7.20. Legacy Arrangements........................................ I-37
7.21. Consulting Agreement....................................... I-37
7.22. No Sale Agreements......................................... I-37
7.23. Dividends.................................................. I-37
7.24. Executive Employment Agreements............................ I-37
7.25. Certain Agreements......................................... I-38
ARTICLE 8. CONDITIONS................................................. I-38
8.1. Conditions to Each Party's Obligation to Effect the Merger. I-38
8.2. Conditions to Obligations of New Plan to Effect the Merger. I-38
8.3. Conditions to Obligation of Excel to Effect the Merger..... I-40
ARTICLE 9. TERMINATION................................................ I-40
9.1. Termination by Mutual Consent.............................. I-40
9.2. Termination by Either Excel or New Plan.................... I-41
9.3. Termination by New Plan.................................... I-41
9.4. Termination by Excel....................................... I-41
9.5. Certain Fees and Expenses Upon Effect of Termination and
Abandonment................................................ I-42
9.6. Investigation.............................................. I-44
ARTICLE 10. GENERAL PROVISIONS......................................... I-44
10.1. Nonsurvival of Representations, Warranties and Agreements.. I-44
10.2. Notices.................................................... I-44
10.3. Assignment; Binding Effect; Benefit........................ I-45
10.4. Entire Agreement........................................... I-45
10.5. Confidentiality............................................ I-45
10.6. Amendment.................................................. I-45
10.7. Governing Law.............................................. I-45
10.8. Counterparts............................................... I-45
10.9. Headings................................................... I-45
10.10. Interpretation............................................. I-45
10.11. Extension; Waiver.......................................... I-46
10.12. Severability............................................... I-46
10.13. Enforcement of Agreement................................... I-46
10.14. Interpretation and Certain Definitions..................... I-46
10.15. Limitation of Liability.................................... I-46
</TABLE>
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<PAGE>
<TABLE>
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EXHIBITS
A-1 Arnold Laubich Employment Agreement
A-2 Gary Sabin Employment Agreement
B-1 Gary Sabin voting Agreement
B-2 Laubich and Newman Voting Agreement
C-1 Gary Sabin Support Agreement
C-2 Laubich and Newman Support Agreement
D-1 Amendment to Administrative Services Agreement
D-2 Terms of Legacy Agreement
E Terms of Newman Consulting Agreement
F Executive Employment Agreements
</TABLE>
<TABLE>
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SCHEDULES
1.1 New Plan Trust Amendments
2.2 Trustees of Surviving Trust
2.3 Officers of Surviving Trust
3.1 Excel Charter Amendments
3.2 Amended and Restated Bylaws of Excel
3.3 Directors of Excel as of Effective Time
3.4 Officers of Excel as of Effective Time
4.1(b) Certificate of Designation for Excel Series D Preferred Stock
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated May 14, 1998, among
EXCEL REALTY TRUST, INC., a Maryland corporation ("Excel"), ERT MERGER SUB,
INC., a Maryland corporation and wholly-owned subsidiary of Excel ("Sub"), and
NEW PLAN REALTY TRUST, a Massachusetts business trust ("New Plan").
RECITALS
A. The Board of Directors of Excel and the Board of Trustees of New Plan
have both determined that a business combination between Excel and New Plan is
in the best interests of their respective companies and stockholders and
holders of shares of beneficial interest (sometimes hereinafter referred to as
"shareholders") and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits, and accordingly have
agreed to effect the merger of Sub with and into New Plan upon the terms and
subject to the conditions set forth herein.
B. For federal income tax purposes, it is intended that the merger provided
for herein shall qualify as a reorganization within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code").
C. Each of Excel and New Plan has received a fairness opinion relating to
the transactions contemplated hereby as more fully described herein.
D. Excel, Sub and New Plan desire to make certain representations,
warranties and agreements as provided in this Agreement.
E. Simultaneously herewith, (i) Excel and Arnold Laubich ("Laubich"),
currently New Plan's President and Chief Executive Officer, have entered into
an employment agreement (in the form of Exhibit A-1 hereto) to be effective as
of the Effective Time (as herein defined) and (ii) Excel and Gary Sabin
("Sabin"), currently Excel's Chairman and Chief Executive Officer, have
entered into an employment agreement (in the form of Exhibit A-2 hereto) to be
effective as of the Effective Time.
F. Simultaneous herewith, Laubich, Sabin and William Newman ("Newman") have
entered into (i) a Voting Agreement in the form of Exhibit B-1 hereto (for
Sabin) and Exibit B-2 hereto (for Laubich and Newman) with respect to approval
of the Merger, this Agreement and the transactions contemplated hereby and
(ii) a Support Agreement in the form of Exhibit C-1 hereto (for Sabin) and
Exhibit C-2 hereto (for Laubich and Newman) with respect to certain matters
from and after the Effective Time.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
The Merger
1.1. The Merger. On the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), Sub shall be
merged with and into New Plan in accordance with this Agreement and the
separate corporate existence of Sub shall thereupon cease (the "Merger"). New
Plan shall continue as the surviving trust in the Merger (sometimes
hereinafter referred to as the "Surviving Trust"). The Merger shall have the
effects specified in Section 3-114 of the Maryland General Corporation Law
(the "MGCL") and in the Amended and Restated Declaration of Trust of New Plan
dated January 15, 1996 (the "Declaration of Trust") as amended by the Trust
Amendments (the "Trust Amendments") set forth on Schedule 1.1 hereto under
Massachusetts law.
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1.2. The Closing. On the terms and subject to the conditions of this
Agreement, and provided that this Agreement has not been terminated under
Article 9 hereof, the closing of the Merger (the "Closing") shall take place
(a) at the offices of Latham & Watkins in New York, New York, at 9:00 a.m.,
local time, on the third business day immediately following the day on which
the condition set forth in Section 8.1(a) has been satisfied, provided that if
all the other conditions set forth in Article 8 are not then fulfilled or
waived on such third business day, the Closing shall be automatically extended
from time to time until the first subsequent business day on which all such
conditions are so fulfilled or waived, subject however, to Article 9 hereof,
or (b) at such other time, date or place as Excel and New Plan may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date." As used herein, "business day" shall mean a day on which banks are not
required or authorized to close in The City of New York.
1.3. Effective Time. At the Closing, the parties hereto shall cause Articles
of Merger meeting the requirements of the MGCL to be properly executed,
verified and delivered for filing in accordance with the MGCL on the Closing
Date, and the Trustees of New Plan shall cause to be properly executed and
filed with the Secretary of the Commonwealth of Massachusetts a certificate as
to the due adoption of the Trust Amendments and of the effectiveness of the
Merger provided for in this Agreement to which shall be attached a duplicate
copy of such Articles of Merger (the "Certificate of Amendment and Merger").
The Merger shall become effective upon the later of the acceptance for record
of the Articles of Merger by the State Department of Assessments and Taxation
of Maryland (the "SDAT") in accordance with the MGCL and the filing of the
Certificate of Amendment and Merger with the Secretary of the Commonwealth of
Massachusetts (the "Effective Time").
1.4. Revision of Form of Transaction. In the event that consummation of the
Merger as contemplated by this Agreement would result in a Excel Material
Adverse Effect (as defined herein) at or following the Effective Time as a
result of the failure of the Surviving Trust to be treated as a qualified REIT
subsidiary (as defined in the Code) under applicable provisions of state law,
then the parties shall effect the business combination of New Plan and Excel
as a direct merger of New Plan into Excel and such Merger shall be deemed the
"Merger" hereunder, and this Agreement shall be deemed automatically amended
by the parties as appropriate to give effect to the revised form of such
business combination with each party executing a written amendment to this
Agreement as necessary to reflect the foregoing, provided that in such case
the Excel Series D Preferred Stock (as herein defined) shall not have voting
rights on general stockholder matters. Such amendment shall not change the
substantive terms of this Agreement, including, without limitation, provisions
with respect to the consideration to be received by the holders of New Plan
Common Shares (as herein defined).
ARTICLE 2.
Organization of the Surviving Trust
2.1. Declaration of Trust. The Declaration of Trust in effect immediately
prior to the Effective Time (after giving effect to the Trust Amendments which
shall be submitted to the New Plan shareholders at the New Plan Shareholders
Meeting (as herein defined) and made effective immediately prior to the
Effective Time) shall be the Declaration of Trust of the Surviving Trust,
until duly amended in accordance with the provisions of the Declaration of
Trust and applicable law.
2.2. Trustees. The persons listed on Schedule 2.2 hereto shall become the
trustees of the Surviving Trust as of the Effective Time, subject to Section
3.3.
2.3. Officers. The persons listed on Schedule 2.3 hereto with their
respective titles shall be the officers of the Surviving Trust as of the
Effective Time, subject to Section 3.4.
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ARTICLE 3.
Organization of Excel
3.1. Articles of Incorporation. The charter, as amended (the "Charter") of
Excel in effect immediately prior to the Effective Time shall be the Charter
of Excel from and after the Effective Time until duly amended in accordance
with applicable law; provided that, as of the Effective Time and subject to
receipt of the requisite approval of the stockholders of Excel at the Excel
Stockholders Meeting (as herein defined), (i) Article II of the Charter shall
be amended to read in its entirety as follows: "The name of the corporation
(which is hereinafter called the "Corporation") is New Plan Excel Realty
Trust, Inc." and (ii) such Charter shall be further amended as set forth on
Schedule 3.1 to this Agreement (such amendment being referred to herein as the
"Excel Charter Amendment").
3.2. Bylaws. The Bylaws of Excel in effect immediately prior to the
Effective Time shall be the Bylaws of Excel from and after the Effective Time
until duly amended in accordance with applicable law; provided that, as of the
Effective Time, the Bylaws of Excel shall be amended and restated as set forth
on Schedule 3.2 to this Agreement.
3.3. Directors. As of the Effective Time, the Board of Directors of Excel
shall be reconstituted to have fifteen (15) members, nine (9) to be designated
by New Plan and six (6) to be designated by Excel, as further set forth on
Schedule 3.3 so that the persons listed on Schedule 3.3 hereto shall become
the directors of Excel as of the Effective Time. In the event that any person
designated on Schedule 2.2 or 3.3 (including by reason of this sentence) is
unable or unwilling to serve as a director of Excel or trustee of the
Surviving Trust as of the Effective Time, then New Plan shall designate the
replacement for any such persons who are trustees of or designated by New
Plan, and Excel shall designate the replacement for any such persons who are
directors of or designated by Excel and in each case, such replacement
designees shall be treated as if set forth on Schedule 2.2 or 3.3, as the case
may be, as of the date hereof in place of the person for whom he or she has
been designated as a replacement.
3.4. Officers. The persons listed on Schedule 3.4 hereto with their
respective titles shall be the officers of Excel as of the Effective Time. In
the event that prior to the Effective Time any person designated on Schedule
2.3 or 3.4 (including by reason of this sentence) is unable or unwilling to
serve as an officer of the Surviving Trust or Excel as set forth on Schedule
2.3 or 3.4, as the case may be, New Plan and Excel shall mutually determine
the person or persons to serve as such officer in replacement for such person.
3.5. Excel Stock Dividend. New Plan and Excel agree that Excel shall declare
and pay on each share of Excel Common Stock a dividend of .2 of a share of
Excel Common Stock (the "Excel Stock Dividend"). Both the record date and the
payment date for such dividend shall be before the Effective Time. In the case
of any holder of Excel Common Stock entitled to receive a dividend of a whole
number of shares plus a fraction of one share (after taking into account all
shares owned by such holder), such holder shall receive such whole number of
shares but, in satisfaction and redemption of such holder's right to receive
such fraction of one share, such holder shall receive cash in an amount equal
to such fraction of the value of one share of Excel Common Stock, determined
as the average of the high and low trading prices of a share of Excel Common
Stock on the New York Stock Exchange on the record date for the Excel Stock
Dividend.
ARTICLE 4.
Effect of the Merger on the Capital Stock of the Constituent
Parties; Exchange of Certificates
4.1. Effect on Capital Stock.
(a) At the Effective Time, each share of beneficial interest, no par value,
of New Plan ("New Plan Common Shares") together with the New Plan Rights (as
herein defined) outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of New Plan, Excel or
the holders of any
I-3
<PAGE>
of the securities of either of these entities, be cancelled and converted
into, subject to the prior distribution of the Excel Stock Dividend, the right
to receive one (1) (the "Exchange Ratio") share of common stock, par value
$.01 per share, of Excel ("Excel Common Stock"). The Exchange Ratio and
corresponding number of shares of Excel Common Stock to be issued in the
Merger shall be appropriately adjusted to reflect the effect of any stock
split, reverse stock split, stock dividend (other than the Excel Stock
Dividend), reorganization, recapitalization or other like change with respect
to the Excel Common Stock or New Plan Common Shares occurring after the date
hereof and prior to the Effective Time (subject, however, to Sections
7.3(b)(iv) and 7.3(c)(iv) hereof). Each New Plan Common Share to be converted
in the Merger shall be converted, without further consideration together with
its associated share purchase right (a "New Plan Right") issued pursuant to
the Rights Agreement between New Plan and Bank Boston, N.A., as rights agent.
References herein to New Plan Common Shares to be converted in the Merger are
deemed to include the associated New Plan Rights. Each share of Excel Common
Stock issued to holders of New Plan Common Shares in the Merger shall be
issued together with one associated preferred stock purchase right (an "Excel
Right") in accordance with the Rights Agreement between Excel and BankBoston,
N.A., as rights agent. References herein to shares of Excel Common Stock
issuable in connection with the Merger are deemed to include the associated
Excel Rights.
(b) At the Effective Time, each Depositary Share representing one-tenth of a
share of 7.8% Series A Cumulative Step-up Rate Premium Preferred Shares, par
value $1.00 per share, of New Plan ("New Plan Preferred Shares") outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of New Plan, Excel or the holders of any of the
securities of either of these entities, be cancelled and converted into the
right to receive one voting depositary share representing a one-tenth
fractional interest in a share of 7.8% Series D Cumulative Voting Step-up Rate
Premium Preferred Stock, par value $.01 per share, of Excel ("Excel Series D
Preferred Stock"), and shall have a liquidation preference of $50.00 per
share. The Excel Series D Preferred Stock shall have the same terms as the New
Plan Preferred Shares and such other terms which are reflected on Schedule
4.1(b) hereto and which other terms are hereafter approved by New Plan, shall
have ten (10) votes per share, with each depositary share representing a one-
tenth fractional interest in a share of Excel Series D Preferred Stock (a
"Excel Series D Depositary Share") having one vote per share (voting together
with the Excel Common Stock) and shall accrue dividends from the end of the
last period with respect to which the New Plan Preferred Shares received a
dividend payment (it being agreed that Excel shall cooperate with New Plan to
address such other terms promptly hereafter). The shares of Excel Common Stock
to be issued to holders of New Plan Common Shares and the Excel Series D
Depositary Shares to be issued in the Merger to holders of New Plan Preferred
Shares are sometimes referred to collectively herein as the "Merger
Consideration."
(c) At the Effective Time, each share of common stock, par value $.01 per
share, of Sub ("Sub Common Stock"), outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of New Plan, Sub or the holder of the securities of either of these
entities, be canceled and converted into the right to receive one New Plan
Common Share.
(d) As a result of the Merger and without any action on the part of the
holder thereof, all New Plan Common Shares and New Plan Preferred Shares
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and
each holder of a certificate (a "Certificate") representing any New Plan
Common Share or New Plan Preferred Share shall thereafter cease to have any
rights with respect to such New Plan Common Share or New Plan Preferred Share,
except the right to receive, without interest, the Merger Consideration
(including the rights described in Sections 4.2(c), 4.2(d) and 4.2(e) hereof)
and cash in lieu of fractional shares of Excel Common Stock upon the surrender
of such Certificate.
(e) Each New Plan Common Share or New Plan Preferred Share issued and held
in New Plan's treasury at the Effective Time or owned of record or
beneficially by Excel, if any, shall by virtue of the Merger cease to be
outstanding and shall be canceled and retired and shall cease to exist without
payment of any consideration therefor. Each share of Excel Common Stock and
Excel Series D Preferred Stock issued in connection with the Merger will be
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights.
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(f) To the extent that acceleration by New Plan of the exercisability of any
outstanding option to purchase New Plan Common Shares (each, an "New Plan
Option") is permitted but not required by the applicable governing instrument,
New Plan shall not elect to cause such acceleration to occur. In connection
therewith, at the Effective Time, to the extent not prohibited by the terms of
the relevant governing instrument, New Plan's obligations with respect to each
New Plan Option that is outstanding and unexercised immediately prior thereto
shall be assumed by Excel, as follows. Each New Plan Option shall cease to
represent a right to purchase New Plan Common Shares and shall instead
represent a right to purchase shares of Excel Common Stock in an amount and at
an exercise price determined as provided below (and otherwise subject to the
terms of whichever of New Plan's Amended and Restated 1985 Incentive Stock
Option Plan, March 1991 Stock Option Plan, Non-Qualified Stock Option Plan,
1991 Stock Option Plan or 1997 Stock Option Plan (collectively, the "New Plan
Employee Stock Plans"), that the New Plan Option was issued under and the
agreements evidencing grants thereunder, including subject to the provisions
of the first sentence of this Section 4.1(f), the accelerated vesting of New
Plan Options that shall occur in connection with and by virtue of the Merger
as and to the extent required by the New Plan Employee Stock Plans or such
agreements):
(i) the number of shares of Excel Common Stock to be subject to the
assumed New Plan Option shall be equal to the product of the number of New
Plan Common Shares that were subject to the option and the Exchange Ratio,
provided that any fractional share of Excel Common Stock resulting from
such multiplication shall be rounded up to the nearest whole share; and
(ii) the exercise price per share of Excel Common Stock under the assumed
New Plan Option shall be equal to the exercise price per New Plan Common
Share under the option before the assumption by Excel divided by the
Exchange Ratio, provided that such exercise price shall be rounded down to
the nearest whole cent.
Except as provided above, each such assumed New Plan Option shall be subject
to the same terms and conditions (including, without limitation, expiration
date, vesting and exercise provisions) as were applicable to New Plan Options
immediately prior to the Effective Time. No later than the Effective Time,
Excel will cause to be filed one or more registration statements on Form S-8
under the Securities Act (or any successor form) in order to register the
shares of Excel Common Stock issuable in connection with the assumed New Plan
Options, and Excel shall use its best efforts to maintain the effectiveness of
such registration statements (and maintain the current status of the
prospectuses contained therein or used pursuant thereto) for so long as such
assumed New Plan Options remain outstanding. At or prior to the Effective
Time, Excel shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Excel Common Stock for delivery in connection
with the assumed New Plan Options. The adjustment provided herein with respect
to any New Plan Options that are "incentive stock options" (as defined in
Section 422 of the Code) shall be and is intended to be effected in a manner
that is consistent with Section 424(a) of the Code and, to the extent it is
not so consistent, Section 424(a) shall override anything to the contrary
contained herein. The duration and other terms of the assumed New Plan Option
after its assumption by Excel shall be the same as before such assumption
except that all references to New Plan shall be deemed to be references to
Excel.
4.2. Exchange of Certificates.
(a) As of the Effective Time, Excel shall deposit, or shall cause to be
deposited, with an exchange agent selected by Excel, which shall be reasonably
satisfactory to New Plan (the "Exchange Agent"), for the benefit of the
holders of New Plan Common Shares and New Plan Preferred Shares, for exchange
in accordance with this Article 4, certificates representing the Merger
Consideration, cash in lieu of fractional shares of the Merger Consideration
to be issued pursuant to Section 4.1 and paid pursuant to this Section 4.2 in
exchange for outstanding New Plan Common Shares, and dividends and other
distributions on the Merger Consideration contemplated by Section 4.2(c).
(b) Promptly after the Effective Time, Excel shall cause the Exchange Agent
to mail to each holder of record of a Certificate or Certificates (i) a letter
of transmittal which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent
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and shall be in such form and have such other provisions as Excel may
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing the Merger
Consideration, cash in lieu of fractional shares of the Merger Consideration,
and dividends and other distributions on the Merger Consideration contemplated
by Section 4.2(c). Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) certificates
representing the number of whole shares of the Merger Consideration and (y) a
check representing the amount of cash in lieu of fractional shares of the
Merger Consideration, if any, and unpaid dividends and distributions, if any,
which such holder has the right to receive in respect of the Certificate
surrendered pursuant to the provisions of this Article 4, after giving effect
to any required withholding tax, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash in lieu
of fractional shares of the Merger Consideration and dividends and
distributions on the Merger Consideration contemplated by Section 4.2(c)
hereto payable to holders of Certificates. In the event of a transfer of
ownership of New Plan Common Shares or New Plan Preferred Shares which is not
registered in the transfer records of New Plan, certificates representing the
proper number of shares of the Merger Consideration, together with a check for
the cash to be paid in lieu of fractional shares of the Merger Consideration
and dividends and distributions on the Merger Consideration contemplated by
Section 4.2(c) hereof, may be issued to such a transferee if the Certificate
representing such New Plan Common Shares or New Plan Preferred Shares is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid. Notwithstanding any other provision of this
Agreement, the letter of transmittal referred to above will, at New Plan's
election, provide for the ability of a holder of one or more Certificates to
elect that shares of Excel Common Stock to be received in exchange for the New
Plan Common Shares formerly represented by such surrendered Certificates be
issued in uncertificated form or to elect that such shares of Excel Common
Stock be credited to an appropriate book entry account or, as applicable, an
account established for the holder under the dividend reinvestment and stock
purchase plan of Excel.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on the Merger Consideration with a record date after the
Effective Time shall be paid with respect to any New Plan Common Shares or New
Plan Preferred Shares represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of the Merger
Consideration issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of the Merger Consideration, less the amount of any withholding
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of the Merger
Consideration, less the amount of any withholding taxes which may be required
thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of New Plan of New Plan Common Shares and New Plan
Preferred Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Trust, they shall be canceled and exchanged for certificates for the
Merger Consideration and cash in lieu of fractional shares of the Merger
Consideration, if any, and unpaid dividends and distributions on the Merger
Consideration deliverable in respect thereof pursuant to this Agreement in
accordance with the procedures set forth in this Article 4. Appropriate
procedures shall be established by Excel and the Exchange Agent so that each
holder of a Certificate at the Effective Time shall be entitled to vote on all
matters subject to the vote of holders of Excel Common Stock or Excel Series D
Preferred Stock with a record date on or after the date of the Effective Time,
whether or not such Certificate holder shall have surrendered Certificates in
accordance with the provisions of this Agreement. For purposes of the
immediate foregoing sentence, Excel may rely conclusively on the shareholder
records of New Plan in determining the identity of and the number of New Plan
Common Shares or New Plan Preferred Shares held by each holder of a
Certificate at the Effective Time.
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(e) No fractional shares of the Merger Consideration shall be issued
pursuant hereto. In lieu of the issuance of any fractional shares of the
Merger Consideration pursuant to Section 4.1(b), cash adjustments will be paid
to holders in respect of any fractional shares of the Merger Consideration
that would otherwise be issuable (after taking into account all shares held by
each record or beneficial owner of the Merger Consideration), and the amount
of such cash adjustment shall be equal to such fractional proportion of the
closing sale prices of the Excel Common Stock on the New York Stock Exchange
("NYSE") as reported in The Wall Street Journal, or, if not reported thereby,
by another authoritative source, on the trading day on which the Effective
Time occurs.
(f) Any portion of the Merger Consideration held by the Exchange Agent
(together with any cash in lieu of fractional shares of the Merger
Consideration and the proceeds of any investments thereof) that remains
unclaimed by the former stockholders of New Plan one year after the Effective
Time shall be delivered to Excel. Any former stockholders of New Plan who have
not theretofore complied with this Article 4 shall thereafter look only to
Excel for payment of their shares constituting the Merger Consideration, cash
in lieu of fractional shares of the Merger Consideration and dividends and
other distributions on the Merger Consideration contemplated by Section
4.2(c), in each case, without any interest thereon.
(g) None of Excel, New Plan, the Exchange Agent or any other person shall be
liable to any former holder of New Plan Common Shares or New Plan Preferred
Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Excel, the
posting by such person of a bond in such reasonable amount as Excel may direct
as indemnity against any claim that may be made against it with respect to
such Certificate, the Exchange Agent or Excel will issue in exchange for such
lost, stolen or destroyed Certificate the Merger Consideration and cash in
lieu of fractional shares and unpaid dividends and distributions on shares of
the Merger Consideration as provided in Section 4.2(d), deliverable in respect
thereof pursuant to this Agreement.
(i) The holders of New Plan Common Shares and New Plan Preferred Shares
shall not be entitled to appraisal rights as a result of the Merger.
ARTICLE 5.
Representations and Warranties of New Plan
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to Excel (the "New Plan Disclosure Letter") or as set forth
in the New Plan Reports (as defined below) filed prior to the date of this
Agreement (it being understood and agreed that disclosure set forth in the New
Plan Disclosure Letter and such New Plan Reports shall be deemed applicable to
each particular representation and warranty of New Plan herein contained to
the extent it is reasonably evident on the face of such disclosure that such
disclosure applies to such representation and warranty), New Plan represents
and warrants to Excel as follows:
5.1. Existence; Good Standing; Authority; Compliance With Law. New Plan is
an unincorporated business trust duly established, validly existing and in
good standing under the laws of the Commonwealth of Massachusetts. New Plan is
duly licensed or qualified to do business and is in good standing under the
laws of any other state of the United States in which the character of the
properties owned or leased by it therein or in which the transaction of its
business therein as a Massachusetts business trust makes such licensing or
qualification necessary, except where the failure to be so licensed or
qualified or in good standing would not have a "New Plan Material Adverse
Effect." For purposes of this Agreement, a "New Plan Material Adverse Effect"
shall mean a material adverse effect on the business, assets, results of
operations or condition (financial or otherwise) of New Plan and its
Subsidiaries taken as a whole (or any matter which is reasonably likely to
have such an effect). The Declaration of Trust confers upon the trustees named
therein, and their successors in
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trust, power and authority to own, operate, lease and encumber its properties
and carry on its business as now conducted. Each of New Plan's Subsidiaries is
a corporation, limited liability company or partnership duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate, company or partnership power
and authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing
in each jurisdiction where the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions where such
failure to be so qualified or to be in good standing would not have a New Plan
Material Adverse Effect. Except as set forth in Schedule 5.1 of the New Plan
Disclosure Letter, or as disclosed in the New Plan Reports filed prior to the
date hereof, neither New Plan nor any of its Subsidiaries is in violation of
any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which New
Plan or any of its Subsidiaries or any of their respective properties or
assets is subject, where such violation would have a New Plan Material Adverse
Effect. To the knowledge of the executive officers of New Plan, New Plan and
its Subsidiaries have obtained all licenses, permits and other authorizations
and have taken all actions required by applicable law or governmental
regulations in connection with their business as now conducted, where the
failure to obtain any such item or to take any such action would have a New
Plan Material Adverse Effect. True and correct copies of New Plan's
Declaration of Trust and its Subsidiaries' charter and bylaws, and partnership
and joint venture agreements have been previously delivered or made available
to Excel.
5.2. Authorization, Validity, and Effect of Agreements. New Plan has the
requisite power and authority to execute and deliver this Agreement and,
subject to the Trust Amendments and the vote of holders of New Plan Common
Shares described herein, to consummate the transactions contemplated hereby.
The Board of Trustees of New Plan has unanimously approved the Trust
Amendments, this Agreement, the Merger, and the transactions contemplated by
this Agreement and declared such transactions advisable and in the best
interests of the holders of New Plan Common Shares and has resolved to
recommend that the holders of New Plan Common Shares adopt and approve the
Trust Amendments, this Agreement, the Merger and the transactions contemplated
by this Agreement at the New Plan Shareholders Meeting. Subject only to the
approval of this Agreement and the transactions contemplated hereby (including
the Trust Amendments) by the New Plan Required Vote (as herein defined), the
consummation by New Plan of the transactions contemplated hereby has been duly
authorized by all requisite action on the part of New Plan. This Agreement has
been duly executed and delivered by New Plan and constitutes the valid and
legally binding obligation of New Plan, enforceable against New Plan in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. The affirmative vote of the holders of not less than 66
2/3% of the issued and outstanding New Plan Common Shares is necessary to
approve the Trust Amendments and the Merger (the "New Plan Required Vote"). No
other vote of the holder of any capital stock of New Plan is required in
connection with the Merger or Trust Amendments.
5.3. Capitalization. The authorized capitalization of New Plan consists of
an unlimited number of New Plan Common Shares and 1,000,000 preferred shares,
par value $1.00 per share. As of May 13, 1998, there were 59,658,752 New Plan
Common Shares issued and outstanding and 150,000 New Plan Preferred Shares
issued and outstanding. New Plan has no outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) with
the holders of New Plan Common Shares on any matter. All such issued and
outstanding New Plan Common Shares and New Plan Preferred Shares are duly
authorized, validly issued, fully paid and nonassessable, except as described
in the section entitled "Summary of Declaration of Trust--Shareholders'
Liability to Third Persons and Indemnification by Trust" in an exhibit to New
Plan's Form 8-A dated May 30, 1986, and are free of preemptive or similar
rights. Other than the New Plan Options and New Plan Rights, there are not at
the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate New Plan or any of its Subsidiaries to issue,
transfer or sell any shares of beneficial interest or capital stock of New
Plan or any of its Subsidiaries. After the Effective Time, the Surviving Trust
will have no obligation to issue, transfer or sell any shares of beneficial
interest, capital stock or other equity interest of New Plan or the Surviving
Trust pursuant to any New Plan Benefit Plan (as defined in
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<PAGE>
Section 5.14). Except as set forth in Schedule 5.3 of the New Plan Disclosure
Letter, there are no agreements or understandings to which New Plan is a party
with respect to the voting of any New Plan Common Shares or which restrict the
transfer of any such shares, nor does New Plan have knowledge of any such
agreements or understandings with respect to the voting of any such shares or
which restrict the transfer of any such shares other than those set forth in
New Plan's Declaration of Trust with respect to the maintenance of New Plan as
a real estate investment trust ("REIT") and the share ownership-limit set
forth therein. Other than with respect to New Plan Options and New Plan
Rights, there are no outstanding contractual obligations of New Plan to
repurchase, redeem or otherwise acquire any New Plan Common Shares or any
other securities of New Plan. Except as set forth in Schedule 5.3 of the New
Plan Disclosure Letter, New Plan is not under any obligation, contingent or
otherwise, by reason of any agreement to register any of its securities under
the Securities Act.
5.4. Subsidiaries. Each Subsidiary of New Plan is set forth in Schedule 5.4
of the New Plan Disclosure Letter. Except as set forth in Schedule 5.4 of the
New Plan Disclosure Letter or as set forth in the New Plan Reports filed prior
to the date hereof, as of the date hereof New Plan owns directly or indirectly
each of the outstanding shares of capital stock or all of the partnership or
other equity interests of each of New Plan's Subsidiaries. Each of the
outstanding shares of capital stock of or other equity interests in each of
New Plan's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by New Plan free and
clear of all liens, pledges, security interests, claims or other encumbrances
other than liens imposed by local law which are not material. The following
information for each Subsidiary of New Plan is set forth in the New Plan
Disclosure Letter, if applicable: (i) its name and jurisdiction of
incorporation or organization; (ii) its authorized capital stock or share
capital (including options, rights, convertible securities and the like); and
(iii) the primary and fully diluted percentage ownership of New Plan (directly
or indirectly) in each Subsidiary.
5.5. Other Interests. Except for interests in the Subsidiaries of New Plan
and as otherwise set forth in the New Plan Disclosure Letter or the New Plan
Reports filed prior to the date hereof, neither New Plan nor any of its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, business,
trust or entity (other than investment securities held for sale and cash
equivalents).
5.6. No Violation. Except as set forth in Schedule 5.6 of the New Plan
Disclosure Letter, neither the execution and delivery by New Plan of this
Agreement nor the consummation by New Plan of the transactions contemplated
hereby in accordance with the terms hereof, will (i) conflict with or result
in a breach of any provisions of the Declaration of Trust of New Plan, subject
to approval of the Trust Amendments and the Merger at the New Plan
Shareholders Meeting, (ii) result in a breach or violation of, a default
under, or the triggering of any payment or other material obligations pursuant
to, or accelerate vesting under, any of the New Plan Employee Stock Plans, or
any grant or award made under any of the foregoing, (iii) violate, or conflict
with, or result in a breach of any provision of, or constitute a default (or
an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties of New Plan or its Subsidiaries under, or result in being declared
void, voidable or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which New Plan or any of its Subsidiaries is a
party, or by which New Plan or any of its Subsidiaries or any of their
properties is bound or affected, except for any of the foregoing matters
which, individually or in the aggregate, would not have a New Plan Material
Adverse Effect, or (iv) require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, other than the filings provided for in Article 1, any filings
required by the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Securities Act or applicable state securities and "Blue Sky" laws
(collectively, the "Regulatory Filings") and filings with the NYSE, except
where the failure to obtain any such consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority would not prevent or materially delay the consummation of the
transactions contemplated by this
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<PAGE>
Agreement or otherwise prevent New Plan from performing, or materially impair
New Plan's ability to perform, its obligations under this Agreement or have a
New Plan Material Adverse Effect. Clause (iii) of this Section 5.6 shall not
apply to any note, bond, mortgage, indenture or deed of trust or similar
instrument where the current principal amount or principal amount secured does
not exceed $20,000,000.
5.7. SEC Documents. New Plan has timely filed all required forms, reports
and documents with the Securities and Exchange Commission (the "SEC") since
August 1, 1995 (collectively, the "New Plan Reports"). As of their respective
dates, the New Plan Reports (i) complied as to form in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and
the rules and regulations promulgated thereunder (the "Securities Laws") and
(ii) 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 made therein, in the light of the circumstances under which they
were made, not misleading. Each of the consolidated balance sheets of New Plan
included in or incorporated by reference into the New Plan Reports (including
the related notes and schedules) fairly presents in all material respects the
consolidated financial position of New Plan and its Subsidiaries as of its
date and each of the consolidated statements of income, retained earnings and
cash flows of New Plan included in or incorporated by reference into the New
Plan Reports (including any related notes and schedules) fairly presents in
all material respects the results of operations, retained earnings or cash
flows, as the case may be, of New Plan and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal,
year-end audit adjustments which would not be material in amount or effect),
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein or in the notes thereto and except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC.
5.8. Litigation. There are (i) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which New Plan or any of
its Subsidiaries is a party or by which any of its properties or assets are
bound or, to the knowledge of New Plan, to which any of its directors,
officers, employees or agents acting in such capacity, is a party and (ii) no
actions, suits or proceedings pending against New Plan or any of its
Subsidiaries or, to the knowledge of New Plan, against any of its directors,
officers, employees or agents acting in such capacity or, to the knowledge of
New Plan, threatened in writing against New Plan or any of its Subsidiaries or
against any of its directors, officers, employees or agents acting in such
capacity, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clause (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have a New Plan Material Adverse Effect.
5.9. Absence of Certain Changes. Except as disclosed in the New Plan Reports
filed with the SEC prior to the date hereof or in Schedule 5.9 of the New Plan
Disclosure Letter, since January 31, 1998, New Plan and its Subsidiaries have
conducted their business only in the ordinary course of such business (which,
for purposes of this section only, shall include all acquisitions of real
estate properties and financing arrangements made in connection therewith) and
there has not been (i) any event, circumstance or occurrence which has had or
could reasonably be expected to have a New Plan Material Adverse Effect, other
than any such change that results from a decline or deterioration in general
economic conditions in the real estate markets in which either New Plan or
Excel operates and that affects both New Plan and Excel in a substantially
similar manner, (ii) as of the date hereof and other than the New Plan Rights,
any declaration, setting aside or payment of any dividend or other
distribution with respect to the New Plan Common Shares or New Plan Preferred
Shares, or (iii) any material change in New Plan's accounting principles,
practices or methods.
5.10. Taxes.
(a) Except as set forth in Schedule 5.10 of the New Plan Disclosure Letter
and except as has not resulted and would not result in a New Plan Material
Adverse Effect: New Plan and each of its Subsidiaries (i) has timely filed all
Returns required to be filed by any of them for tax years ended prior to the
date of this Agreement or requests for extensions have been timely filed and
any such request has been granted and has not expired and all such Returns are
correct and complete in all material respects and (ii) has paid or caused to
be paid or adequately
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accrued or reserved for all Taxes shown to be due and payable on such returns
or which have become due and payable pursuant to any assessment, deficiency
notice, 30-day letter or other notice received by it and (iii) has paid all
Taxes required to be paid and (iv) has complied with all applicable laws
relating to withholding Taxes. New Plan has not received notice of any audit
(not since closed) of any Return filed by New Plan with respect to any tax
year ending after December 31, 1995, and New Plan has not been notified by the
Internal Revenue Service ("IRS") or any State taxing authority that any such
audit is contemplated or pending. Neither New Plan nor any of its Subsidiaries
has executed or filed with the IRS or any other taxing authority any agreement
now in effect extending the period for assessment or collection of any income
or other Taxes. Neither New Plan nor any of its Subsidiaries is a party to any
pending audit, action or proceeding by any governmental authority for
assessment or collection of Taxes, and no claim for assessment or collection
of Taxes has been asserted against it. True, correct and complete copies of
all Returns filed by New Plan and each of its Subsidiaries since December 31,
1995, and all material communications relating thereto have been made
available for inspection to representatives of Excel. Since December 31, 1997,
New Plan has incurred no liability for Taxes under Sections 857(b) (other than
857(b)(1) or (3)), 860(c) or 4981 of the Code, including without limitation,
any Tax arising from a prohibited transaction described in Section 857(b)(6)
of the Code, and neither New Plan nor any New Plan Subsidiary has incurred any
liability for Taxes other than in the ordinary course of business. There are
no Tax liens upon the assets of New Plan or any of the New Plan Subsidiaries
except liens for Taxes not yet due. Except as between affiliates of New Plan,
neither New Plan nor any New Plan Subsidiary is a party to any agreement
relating to a sharing or allocation of Taxes, or has any liability for Taxes
of any person other than New Plan and the New Plan Subsidiaries under Treas.
Reg. (S)1.1502-6 (or similar provision of state, local or foreign law), by
contract or otherwise, is a party to any agreement, contract, or arrangement
that could result in the payment of any "excess parachute payments" under
Section 280G of the Code or any amount that would be non-deductible under
Section 162(m) of the Code. As used in this Agreement, "Taxes" shall include
all federal, state, local and foreign income, property, sales, franchise,
employment, excise and other taxes, tariffs or governmental charges of any
nature whatsoever, together with penalties, interest or additions to Tax with
respect thereto. The term "Returns" means all returns, declarations, reports,
statements, and other documents required to be filed in respect of Taxes, and
the term "Return" means any one of the foregoing Returns.
(b) New Plan (i) has elected to be taxed as a REIT commencing July 31, 1972,
(ii) has been subject to taxation as a REIT within the meaning of Section 856
of the Code and has satisfied all requirements to qualify as a REIT for all
taxable years commencing July 31, 1993 through its taxable year ended July 31,
1997, (iii) has operated since July 31, 1997 to the date of this
representation, and intends to continue to operate, in such a manner so as to
qualify as a REIT for its taxable year ending on the Closing Date, and (iv)
has not taken or omitted to take any action which would reasonably be expected
to result in a challenge to its status as a REIT, and to the knowledge of the
executive officers of New Plan, no such challenge is pending or threatened.
New Plan represents that each of its corporate Subsidiaries is, and at all
times since its affiliation with New Plan has qualified as, a qualified REIT
subsidiary as defined in Section 856(i) of the Code, and that each
partnership, limited liability company, joint venture or other legal entity
(other than a corporation) in which New Plan (either directly or indirectly)
owns any of the capital stock or other equity interests thereof has been
treated since its formation and continues to be treated for federal income tax
purposes as a partnership or disregarded as an entity separate from its owner
and not as an association taxable as a corporation. None of New Plan or the
New Plan Subsidiaries has a net unrealized built-in gain within the meaning of
Section 1374(d)(1) of the Code that would be subject to an election under IRS
Notice 88-19 or has any earnings and profits accumulated in any non-REIT year
within the meaning of Section 857 of the Code, in each case to the extent the
foregoing would result in a New Plan Material Adverse Effect.
(c) New Plan has not agreed to and is not required to make any adjustment
under Section 481(a) of the Code.
(d) New Plan has not, with regard to any assets or property held or acquired
by it, filed a consent to the application of Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the
Code) owned by New Plan.
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(e) New Plan is not a "foreign person" as such term is defined in Section
1445(f) of the Code.
5.11. Books and Records.
(a) The books of account and other financial records of New Plan and its
Subsidiaries are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
New Plan Reports.
(b) The minute books and other records of New Plan and its Subsidiaries for
the period since December 31, 1987 have been made available to Excel, contain
in all material respects accurate records of all meetings and accurately
reflect in all material respects all other trust, corporate or partnership
action of the shareholders, trustees, partners, members and directors and any
committees of the Board of Trustees of New Plan and its Subsidiaries.
5.12. Properties. New Plan and its Subsidiaries own fee simple title to, or
hold ground leases in, each of the real properties identified in Schedule 5.12
of the New Plan Disclosure Letter (the "New Plan Properties"), which are all
of the real estate properties owned or leased by them. The New Plan Properties
are not subject to any rights of way, written agreements (other than leases),
laws, ordinances and regulations affecting building use or occupancy, or
reservations of an interest in title (collectively, "Property Restrictions"),
except for (i) liens, mortgages or deeds of trust, charges which are liens and
security interests ("Encumbrances") and other Property Restrictions set forth
in Schedule 5.12 of the New Plan Disclosure Letter, (ii) Property Restrictions
imposed or promulgated by law or any governmental body or authority with
respect to real property, including zoning regulations, provided such Property
Restrictions do not adversely affect in any material respect the current use
of the applicable property, (iii) Encumbrances and other Property Restrictions
disclosed on existing title reports or current surveys (in either case copies
of which title reports and surveys have been delivered or made available to
Excel), and (iv) mechanics', carriers', workmen's and repairmen's liens, and
other Property Restrictions and limitations, if any, which individually or in
the aggregate do not materially interfere with the present use of any of the
New Plan Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conducted there by New Plan and its
Subsidiaries. Valid policies of title insurance have been issued insuring New
Plan's or any of its Subsidiaries' fee simple title to the New Plan Properties
owned in fee in amounts at least equal to the purchase price thereof, subject
only to the matters set forth therein or disclosed above, and such policies
are, at the date hereof, in full force and effect and there are no pending
claims against any such policy where the amount involved exceeds $50,000. Any
material certificate, permit or license from any governmental authority having
jurisdiction over any of the New Plan Properties and any agreement, easement
or other right which is necessary to permit the material lawful use and
operation of the buildings and improvements on any of the New Plan Properties
or which is necessary to permit the lawful use and operation in all material
respects of all driveways, roads and other means of egress and ingress, which
New Plan has rights to, to and from any of the New Plan Properties which are
currently occupied and are material to the operation of the property has been
obtained and is in full force and effect. New Plan is not in receipt of any
written notice of any violation of any material federal, state or municipal
law, ordinance, order, regulation or requirement affecting any portion of any
of the New Plan Properties issued by any governmental authority other than
such violations which would not reasonably be expected to have a New Plan
Material Adverse Effect. To the knowledge of New Plan, (A) there are no
material structural defects relating to the New Plan Properties, (B) there are
no New Plan Properties whose building systems are not in working order in any
material respect (except for normal maintenance and operating systems failures
which in any event are the subject of adequate pending repair procedures), (C)
there is no physical damage to any New Plan Property in excess of $250,000 for
which there is no insurance in effect covering the cost of the restoration as
of the date hereof, or (D) no current renovation or restoration to any New
Plan Property is underway or for which contracts have been entered into the
cost of which exceeds $250,000, except in each case, as set forth in Schedule
5.12 of the New Plan Disclosure Letter. Neither New Plan nor any of its
Subsidiaries has received any written notice to the effect that (x) any
condemnation or material rezoning proceedings are pending or threatened with
respect to any of the New Plan Properties where the fair market value of the
object of such proceeding exceeds $250,000 or (y) any zoning, building or
similar
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law, code, ordinance, order or regulation is or will be violated in any
material respect by New Plan or its Subsidiaries by the continued maintenance,
operation or use of any buildings or other improvements on any of the New Plan
Properties as currently maintained, used or operated by New Plan or its
Subsidiaries or by the continued maintenance, operation or use of the parking
areas as currently maintained, used or operated by New Plan or its
Subsidiaries which is not insured over and where the remedying of such
violations would materially and adversely affect the relevant New Plan
Property. All work to be performed, payments to be made and actions to be
taken by New Plan or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection
with a site approval, zoning reclassification or other similar action relating
to the New Plan Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, in all material respects, and New Plan is not aware of any
planned or proposed work, payments or actions that may be required after the
date hereof pursuant to such agreements. New Plan owns less than $15,000,000
of nonexempt assets under Section 802.4 of the rules and regulations
promulgated under the Hart-Scott-Rodino Antitrust Improvements Act.
5.13. Environmental Matters. Except as set forth in the New Plan Reports or
in Schedule 5.13 of the New Plan Disclosure Letter and any environmental
assessment or report listed therein to the actual knowledge of the executive
officers of New Plan: none of New Plan, any of its Subsidiaries or any other
person has caused or permitted (a) the unlawful presence of any hazardous
substances, hazardous materials, toxic substances or waste materials
(collectively, "Hazardous Materials") on any of the New Plan Properties, or
(b) any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the New Plan
Properties, which presence or occurrence would, individually or in the
aggregate, have a New Plan Material Adverse Effect; New Plan and its
Subsidiaries have not failed to comply with all applicable local, state and
federal environmental laws, regulations, ordinances and administrative and
judicial orders relating to the generation, recycling, reuse, sale, storage,
handling, transport and disposal of any Hazardous Materials or environmental
matters or contamination ("Environmental Laws"), except where the failure to
so comply would not reasonably be expected to have a New Plan Material Adverse
Effect; and New Plan, its assets and businesses and all operations related
thereto are now in compliance with all Environmental Laws and not subject to
any liability, or, with respect to any required remediation, corrective action
or prophylactic or other like action, obligation under any Environmental Law,
except where the failure to comply with any such Environmental Law would not
have a New Plan Material Adverse Effect.
5.14. Employee Benefit Plans. All employee benefits plans and other benefit
programs, policies and arrangements covering employees of New Plan and the New
Plan Subsidiaries (the "New Plan Benefit Plans") are listed in Schedule 5.14
of the New Plan Disclosure Letter. True and complete copies of the New Plan
Benefit Plans have been made available to Excel. To the extent applicable, the
New Plan Benefit Plans comply, in all material respects, with the requirements
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code, and any New Plan Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so qualified.
No New Plan Benefit Plan or any other plan with respect to which New Plan or
any entity under "common control" with New Plan within the meaning of ERISA
Section 4001 has or had any liability is or has been covered by Title IV of
ERISA or Section 412 of the Code. Neither any New Plan Benefit Plan nor any
fiduciary thereof nor New Plan has incurred any material liability or penalty
under Section 4975 of the Code or Section 502(i) of ERISA. Each New Plan
Benefit Plan has been maintained and administered in all material respects in
compliance with its terms and with ERISA and the Code to the extent applicable
thereto. To the knowledge of the executive officers of New Plan, there are no
pending or anticipated claims against or otherwise involving any of the New
Plan Benefit Plans and no suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of New Plan Benefit Plan
activities) has been brought against or with respect to any such New Plan
Benefit Plan, except for any of the foregoing which would not have a New Plan
Material Adverse Effect. All material contributions required to be made as of
the date hereof to the New Plan Benefit Plans have been timely made or
provided for. Neither New Plan nor any entity under "common control" with New
Plan within the meaning of ERISA Section 4001 has contributed to, or been
required to contribute to, any "multiemployer plan" (as defined in Sections
3(37) and 4001(a)(3) of ERISA). New Plan does not maintain or contribute to
any plan, program, policy or arrangement which provides or has
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any liability to provide life insurance, medical or other employee welfare
benefits or supplemental pension benefits to any employee or former employee
upon his retirement or termination of employment, except as required under
Section 4890B of the Code, and New Plan has never represented, promised or
contracted (whether in oral or written form) to any employee or former
employee that such benefits would be provided. Except as disclosed in Schedule
5.14 of the New Plan Disclosure Letter, the execution of, and performance of
the transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any additional subsequent events) constitute an event under
any benefit plan, program, policy, arrangement or agreement or any trust or
loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligations to fund benefits with respect to any
employee, director or consultant of New Plan or any of its Subsidiaries.
5.15. Labor Matters. Except as set forth in Schedule 5.15 of the New Plan
Disclosure Letter, neither New Plan nor any of its Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other agreement
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of New
Plan, threatened against New Plan or any of its Subsidiaries relating to their
business, except for any such proceeding which would not have a New Plan
Material Adverse Effect. To the knowledge of the executive officers of New
Plan, there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of New Plan or any of its Subsidiaries which would have a New Plan
Material Adverse Effect.
5.16. No Brokers. New Plan has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
New Plan or Excel to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that New Plan has retained Morgan Stanley & Co. ("Morgan Stanley") to serve as
its financial advisor pursuant to an engagement letter, a true and correct
copy of which has been delivered to Excel prior to the date hereof, and
retained Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch")
to render a fairness opinion pursuant to an engagement letter dated May 12,
1998. Other than the foregoing arrangements, New Plan is not aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations by New Plan leading to
this Agreement or the consummation of the transactions contemplated hereby.
5.17. Opinion of Financial Advisor. New Plan has received the opinion of
Merrill Lynch to the effect that, as of the date hereof, the Exchange Ratio is
fair from a financial point of view to the holders of New Plan Common Shares.
5.18. Excel Stock Ownership. Neither New Plan nor any of its Subsidiaries
owns any shares of Excel Common Stock or other securities convertible into any
shares of Excel Common Stock; and New Plan is not an "interested stockholder"
of Excel or an "affiliate of an interested stockholder" of Excel, within the
meaning of Section 3-602 of the MGCL.
5.19. Related Party Transactions. Schedule 5.19 of the New Plan Disclosure
Letter describes each: (i) business relationship (excluding employee
compensation and other ordinary incidents of employment) existing on the date
of this Agreement between (x) New Plan, and (y) any present or former officer,
director or Affiliate (as herein defined) of New Plan, any present or former
known spouse, ancestor or descendant of any of the aforementioned persons, any
trust or other similar entity for the benefit of any of the foregoing persons
or any entity which is an Affiliate of the foregoing persons (all such
persons, trusts and entities encompassed by this clause (y) being sometimes
collectively referred to herein as the "Related Parties" and individually as a
"Related Party"); (ii) transaction occurring between January 1, 1997 and the
date of this Agreement between New Plan and any Related Party of New Plan; and
(iii) amount owing by or to any of the Related Parties of New Plan,
respectively, to or from New Plan as of the date of this Agreement. No
property or interest in any property which relates to and is or will be
necessary or useful in the present or currently contemplated future operation
of New Plan, is presently owned by or leased by or to any Related Party of New
Plan.
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5.20. Contracts and Commitments. The New Plan Disclosure Letter or the New
Plan Reports filed prior to the date hereof sets forth, as of the date hereof,
(i) all notes, debentures, bonds and other evidence of indebtedness which are
secured or collateralized by mortgages, deeds of trust or other security
interests in the New Plan Properties or personal property of New Plan and its
Subsidiaries, (ii) each joint venture or partnership agreement involving New
Plan or any New Plan Subsidiary, and (iii) each other material undischarged
commitment entered into by New Plan or any of its Subsidiaries (excluding
tenant allowances, reimbursements and leases entered into in the ordinary
course) where the obligation of New Plan or any New Plan Subsidiary exceeds
$1,000,000 (excluding acquisitions described in the last sentence of this
Section 5.20). True and correct copies of the foregoing have been previously
delivered or made available to Excel. To the knowledge of New Plan, (i) each
of the contracts described in the preceding sentence is in full force and
effect and (ii) neither New Plan nor any New Plan Subsidiary or any other
party thereto is in default thereof except where such default would not have a
New Plan Material Adverse Effect. Schedule 5.20 of the New Plan Disclosure
Letter includes a summary of the material terms of each acquisition of a
business or real property which is the subject of a binding agreement or
letter of intent, memorandum of understanding or similar agreement which has
not been consummated (the "Pending New Plan Transactions").
5.21. Leases.
(a) Schedule 5.21 of the New Plan Disclosure Letter sets forth a list of all
New Plan Properties that are subject to or encumbered by any non-residential
lease accounting for 1% or more of New Plan's rental revenues for the most
recent period reflected in the financial statements included in the New Plan
Reports (a "Material New Plan Lease") and, with respect to each such Material
New Plan Lease, sets forth the following information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of monthly rentals
due under the lease; and
(iv) with respect to any Material New Plan Lease with a remaining term of
less than 24 months, whether the lessee has notified New Plan in writing of
any intention not to renew, or seek to renew, the lease.
(b) Except as set forth in Schedule 5.21 of the New Plan Disclosure Letter,
(i) all rental payments due under each Material New Plan Lease have been paid
during the period January 1, 1998 through March 31, 1998, and (ii) to New
Plan's knowledge, no lessee is in material default, and no condition or event
exists which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee, under any Material New Plan
Lease.
5.22. Investment Company Act of 1940. Neither New Plan nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended.
5.23. Certain Payments Resulting From Transactions. Except as set forth in
Schedule 5.23 of the New Plan Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any New Plan Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
Arrangements") that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of New Plan or any of its Subsidiaries
or (ii) result in the triggering or imposition of any restrictions or
limitations on the right of New Plan or its Subsidiaries to amend or terminate
any Employee Arrangement and receive the full amount of any excess assets
remaining or resulting from such amendment or termination, subject to
applicable taxes. Except as set forth in Schedule 5.23 of the New Plan
Disclosure Letter, no payment or benefit which will be required to be made
pursuant to the terms of any agreement, commitment or New Plan Benefit Plan,
as a result of the transactions contemplated by this Agreement, to any
officer, director or employee of New Plan or any of its Subsidiaries, will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
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5.24. State Takeover Statutes. To the knowledge of New Plan, New Plan has
taken all action necessary to exempt the transactions contemplated by this
Agreement from the operation of any applicable "fair price," "moratorium,"
"control share acquisition" or any other applicable anti-takeover statute or
similar statute enacted under the state or federal laws of the United States
or similar statute or regulation. The Board of Trustees of New Plan has
adopted a resolution as follows: "The transactions contemplated by the Merger
Agreement are hereby authorized and approved with the intent that no state
takeover law shall be applicable to the Merger, the Merger Agreement or the
transactions contemplated thereby."
ARTICLE 6.
Representations and Warranties of Excel
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to New Plan (the "Excel Disclosure Letter") or as set forth
in the Excel Reports (as defined below) filed prior to the date of this
Agreement (it being understood and agreed that disclosure set forth in the
Excel Disclosure Letter and such Excel Reports shall be deemed applicable to
each particular representation and warranty of Excel herein contained to the
extent it is reasonably evident on the face of such disclosure that such
disclosure applies to such representation and warranty), Excel represents and
warrants to New Plan as follows:
6.1. Existence; Good Standing; Authority; Compliance With Law. Excel is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maryland. Excel is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business
therein makes such licensing or qualification necessary, except where the
failure to be so licensed or qualified or in good standing would not have an
Excel Material Adverse Effect (as herein defined). For purposes of this
Agreement, an "Excel Material Adverse Effect" shall mean a material adverse
effect on the business, assets, results of operations or condition (financial
or otherwise) of Excel and its Subsidiaries taken as a whole (or any matter
which is reasonably likely to have such an effect). Each of Excel and Excel's
Subsidiaries has all requisite corporate power and authority to own, operate,
lease and encumber its properties and carry on its business as it is now being
conducted. Each of Excel's Subsidiaries is a corporation, limited liability
company or partnership duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has the
corporate, company or partnership power and authority to own its properties
and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction where
the ownership of its property or the conduct of its business requires such
qualification, except for jurisdictions where such failure to be so qualified
or to be in good standing would not have an Excel Material Adverse Effect.
Neither Excel nor any or its Subsidiaries is in violation of any order of any
court, governmental authority or arbitration board or tribunal, or any law,
ordinance, governmental rule or regulation to which Excel or any of its
Subsidiaries or any of their respective properties or assets is subject, where
such violation would have an Excel Material Adverse Effect. To the knowledge
of the executive officers of Excel, Excel and its Subsidiaries have obtained
all licenses, permits and other authorizations and have taken all actions
required by applicable law or governmental regulations in connection with
their business as now conducted, where the failure to obtain any such item or
to take any such action would have an Excel Material Adverse Effect. True and
correct copies of Excel's and its Subsidiaries' charter and bylaws and
partnership and joint venture agreements have been previously delivered or
made available to New Plan.
6.2. Authorization, Validity and Effect of Agreements. Excel has the
requisite corporate power and authority to execute and deliver this Agreement
and, subject to the vote of the holders of Excel Common Stock described
herein, to consummate the transactions contemplated hereby. The Board of
Directors of Excel has unanimously approved and declared as advisable and in
the best interests of the stockholders of Excel this Agreement, the Merger,
and the transactions contemplated by this Agreement, including the Excel
Charter Amendments and the issuance ("Share Issuance" and together with the
Excel Charter Amendments, the "Excel Stockholder Matters") of shares of Excel
Common Stock in accordance with the Merger and has resolved to recommend that
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the holders of Excel Common Stock approve the Excel Stockholder Matters at the
Excel Stockholders Meeting. Subject only to the approval of this Agreement and
the transactions contemplated hereby by the Excel Required Vote (as herein
defined), the consummation by Excel of the transactions contemplated hereby
has been duly authorized by all requisite corporate action on the part of
Excel. This Agreement has been duly executed and delivered by Excel and
constitutes the valid and legally binding obligation of Excel, enforceable
against Excel in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity. The affirmative vote of the holders of a
majority of the shares of Excel Common Stock issued and outstanding is
required to approve the Excel Charter Amendment, and the affirmative vote of
the holders of a majority of the shares of Excel Common Stock cast at the
Excel Stockholders Meeting is required to approve the Share Issuance; provided
that the total votes cast in respect of the Share Issuance represents over 50%
in interest of the Excel Common Stock entitled to vote thereon ("Excel
Required Vote"). No other vote of the holders of capital stock of Excel is
required in connection with the Excel Stockholder Matters or the transactions
contemplated hereby.
6.3. Capitalization. The authorized capital stock of Excel consists of
100,000,000 shares of Excel Common Stock and 10,000,000 shares of preferred
stock, of which 4,600,000 shares have been designated Excel Series A Preferred
Stock, 630,000 shares have been designated Excel Series B Preferred Stock,
each par value $.01 per share (collectively, the "Excel Preferred Stock") and
100,000 shares have been designated as Series C Junior Participating Preferred
Stock, par value $.01 per share ("Excel Series C Preferred Stock"). As of the
date hereof, there were 23,428,633 shares of Excel Common Stock, 2,126,380
shares of Excel Series A Preferred Stock and 630,000 shares of Excel Series B
Preferred Stock (6,300,000 Depositary Shares, each representing one-tenth of a
share of Excel Series B Preferred Stock) issued and outstanding, 100,000
shares of Excel Series C Preferred Stock reserved for issuance upon exercise
of the Excel Rights and no shares of Excel Common Stock are held in treasury.
Excel has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
Excel on any matter. All such issued and outstanding shares of Excel Common
Stock, Excel Series A Preferred Stock and Excel Series B Preferred Stock are
duly authorized, validly issued, fully paid and nonassessable, and are free of
preemptive rights. Other than the Excel Rights, there are not at the date of
this Agreement any existing options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate Excel or any of its Subsidiaries to issue, transfer or sell any
shares of stock or other equity interest of Excel or any of its Subsidiaries,
and other than the issuance after the date hereof by Excel of Excel Common
Stock, consistent with prior practice, upon the exercise of stock options
issued to employees and directors prior to the date hereof, the conversion of
shares of Excel Series A Preferred Stock outstanding on the date hereof, the
exercise of warrants outstanding on the date hereof and the exchange of
outstanding units of Excel Realty Partners, L.P. and EH Properties L.P. (the
"Down REITs") outstanding on the date hereof. As of the date hereof and taking
into account the Excel Stock Dividend and the distribution of shares of common
stock, par value $.01 per share, of Excel Legacy Corporation ("Legacy") on
March 31, 1998, options to purchase an aggregate of 1,763,250 shares of Excel
Common Stock are outstanding, of which options to purchase 1,681,583 are
exercisable, and Down REITs' units exchangeable for an aggregate of 1,677,910
shares of Excel Common Stock are outstanding. There are no agreements or
understandings to which Excel is a party with respect to the voting of any
shares of Excel Common Stock or which restrict the transfer of any such
shares, nor does Excel have knowledge of any such agreements or understandings
with respect to the voting of any such shares or which restrict the transfer
of any such shares other than those set forth in Excel's Charter with respect
to the maintenance of Excel as a REIT and the share ownership limit set forth
therein. Other than with respect to the Excel Rights, there are no outstanding
contractual obligations of Excel to repurchase, redeem or otherwise acquire
any shares of Excel Common Stock or any other securities of Excel. Except as
set forth in Schedule 6.3 of the Excel Disclosure Letter, Excel is not under
any obligation, contingent or otherwise, by reason of any agreement to
register any of its securities under the Securities Act.
6.4. Subsidiaries. Each Subsidiary of Excel is identified in Schedule 6.4 of
the Excel Disclosure Letter. Except as set forth in Schedule 6.4 of the Excel
Disclosure Letter or as set forth in the Excel Reports filed prior to the date
hereof, as of the date hereof, Excel owns directly or indirectly each of the
outstanding shares of capital
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stock or all of the partnership or other equity interests of each of Excel's
Subsidiaries. Each of the outstanding shares of capital stock of or other
equity interests in each of Excel's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
Excel free and clear of all liens, pledges, security interests, claims or
other encumbrances other than liens imposed by local law which are not
material. The following information for each Subsidiary of Excel is set forth
in the Excel Disclosure Letter, if applicable: (i) its name and jurisdiction
of incorporation or organization; (ii) its authorized capital stock or share
capital (including options, rights, convertible securities and the like); and
(iii) the primary and fully diluted percentage ownership of Excel (directly or
indirectly) in each Subsidiary. Sub has no assets and has conducted no
business except in connection with its organization and the transactions
contemplated hereby.
6.5. Other Interests. Except for interests in the Excel Subsidiaries and as
otherwise set forth in the Excel Disclosure Letter or the Excel Reports filed
prior to the date hereof, neither Excel nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than investments in investment securities held for sale and cash equivalents).
6.6. No Violation. Except as set forth in Schedule 6.6 of the Excel
Disclosure Letter, neither the execution and delivery by Excel of this
Agreement nor the consummation by Excel of the transactions contemplated
hereby in accordance with the terms hereof, will (i) conflict with or result
in a breach of any provisions of the Charter or Bylaws of Excel, subject to
approval of the Excel Stockholder Matters at the Excel Stockholders Meeting,
(ii) result in a breach or violation of, a default under, or the triggering of
any payment or other material obligations pursuant to, or accelerate vesting
under, any of Excel's stock option plans, or any grant or award made under any
of the foregoing, (iii) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of Excel or its
Subsidiaries under, or result in being declared void, voidable, or without
further binding effect, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust or any license, franchise,
permit, lease, contract, agreement or other instrument, commitment or
obligation to which Excel or any of its Subsidiaries is a party, or by which
Excel or any of its Subsidiaries or any of their properties is bound or
affected, except for any of the foregoing matters which, individually or in
the aggregate, would not have an Excel Material Adverse Effect, or (iv)
require any consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority, other than the
Regulatory Filings and filings with the NYSE, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority would not
prevent or materially delay the consummation of the transactions contemplated
by this Agreement or otherwise prevent Excel from performing, or materially
impair Excel's ability to perform, its obligations under this Agreement or
have an Excel Material Adverse Effect. Clause (iii) of this Section 6.6 shall
not apply to any note, bond, mortgage, indenture or deed of trust or similar
instrument where the current principal amount or principal amount secured does
not exceed $20,000,000.
6.7. SEC Documents. Except as set forth in Schedule 6.7 of the Excel
Disclosure Letter, Excel has timely filed all required forms, reports and
documents with the SEC since January 1, 1995 (collectively, the "Excel
Reports"). As of their respective dates, the Excel Reports (i) complied as to
form in all material respects with the applicable requirements of the
Securities Laws and (ii) 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 made therein, in the light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Excel included in or incorporated by reference
into the Excel Reports (including the related notes and schedules) fairly
presents in all material respects the consolidated financial position of Excel
and its Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of Excel included in or incorporated
by reference into the Excel Reports (including any related notes and
schedules) fairly presents in all material respects the results of operations,
retained earnings or cash flows, as the case may be, of
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Excel and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein or in the notes thereto and
except, in the case of the unaudited statements, as permitted by Form 10-Q of
the SEC.
6.8. Litigation. There are (i) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which Excel or any of
its Subsidiaries is a party or by which any of its properties or assets are
bound or, to the knowledge of Excel, to which any of its directors, officers,
employees or agents acting in such capacity, is a party and (ii) no actions,
suits or proceedings pending against Excel or any of its Subsidiaries or, to
the knowledge of Excel, against any of its directors, officers, employees or
agents acting such capacity, or, to the knowledge of Excel, threatened in
writing against Excel or any of its Subsidiaries or against any of its
directors, officers, employees or agents acting in such capacity, at law or in
equity, or before or by any federal or state commission, board, bureau, agency
or instrumentality that in the case of clause (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have an Excel Material Adverse
Effect.
6.9. Absence of Certain Changes. Except as disclosed in the Excel Reports
filed with the SEC prior to the date hereof or in Schedule 6.9 of the Excel
Disclosure Letter, since December 31, 1997, Excel and its Subsidiaries have
conducted their business only in the ordinary course of such business (which,
for purposes of this section only, shall include all acquisitions of real
estate properties and financing arrangements made in connection therewith) and
there has not been (i) any event, circumstance or occurrence which has had or
could reasonably be expected to have Excel Material Adverse Effect, other than
any such change that results from a decline or deterioration in general
economic conditions in the real estate markets in which either New Plan or
Excel operates and that affects both New Plan and Excel in a substantially
similar manner, (ii) as of the date hereof, any declaration, setting aside or
payment of any dividend or other distribution with respect to the Excel Common
Stock, Excel Series A Preferred Stock or Excel Series B Preferred Stock or
(iii) any material change in Excel's accounting principles, practices or
methods.
6.10. Taxes.
(a) Except as set forth in Schedule 6.10 of the Excel Disclosure Letter and
except as has not resulted and would not result in an Excel Material Adverse
Effect: Excel and each of its Subsidiaries (i) has timely filed all Returns
required to be filed by any of them for tax years ended prior to the date of
this Agreement or requests for extensions have been timely filed and any such
request has been granted and has not expired and all such Returns are correct
and complete in all material respects, and (ii) has paid or caused to be paid
or adequately accrued or reserved for all Taxes shown to be due and payable on
such Returns or which have become due and payable pursuant to any assessment,
deficiency notice, 30-day letter or other notice received by it, and (iii) has
paid all Taxes required to be paid, and (iv) has complied with all applicable
laws relating to withholding Taxes. Excel has not received notice of any audit
of any Return filed by Excel with respect to any tax year ending after
December 31, 1995, and Excel has not been notified by the IRS or any State
taxing authority that any such audit is contemplated or pending. Neither Excel
nor any of its Subsidiaries has executed or filed with the IRS or any other
taxing authority any agreement now in effect extending the period for
assessment or collection of any income or other Taxes. Neither Excel nor any
of its Subsidiaries is a party to any pending audit, action or proceeding by
any governmental authority for assessment or collection of Taxes, and no claim
for assessment or collection of Taxes has been asserted against it. True,
correct and complete copies of all Returns filed by Excel and each of its
Subsidiaries since December 31, 1995 and all material communications relating
thereto have been made available for inspection to representatives of New
Plan. Since December 31, 1997, Excel has incurred no liability for Taxes under
Sections 857(b), (other than 857(b)(1) or (3)), 860(c) or 4981 of the Code,
including without limitation, any Tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code, and neither Excel nor any Excel
Subsidiary has incurred any liability for Taxes other than in the ordinary
course of business. There are no tax liens upon the assets of Excel or any of
the Excel Subsidiaries except liens for Taxes not yet due. Except as between
affiliates of Excel (other than Legacy), neither Excel nor any Excel
Subsidiary is
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a party to any agreement relating to a sharing or allocation of Taxes, or has
any liability for Taxes of any person other than Excel and the Excel
Subsidiaries under Treas. Reg. (S)1.1502-6 (or similar provision of state,
local or foreign law), by contract or otherwise, is a party to any agreement,
contract, or arrangement that could result in the payment of any "excess
parachute payments" under Section 280G of the Code or any amount that would be
non-deductible under Section 162 (m) of the Code.
(b) Excel (i) has elected to be taxed as a REIT within the meaning of the
Code commencing with its taxable year ended December 31, 1985, (ii) has been
subject to taxation as a REIT within the meaning of Section 856 of the Code
and has satisfied all requirements to qualify as a REIT for all taxable years
commencing with its taxable year ended December 31, 1993 through its taxable
year ended December 31, 1997, (iii) has operated since December 31, 1997 to
the date of this representation, and intends to continue to operate in such a
manner so as to qualify as a REIT for its taxable year ending on December 31,
1998, and (iv) has not taken or omitted to take any action which would
reasonably be expected to result in a challenge to its status as a REIT, and
to the knowledge of the executive officers of Excel, no such challenge is
pending or threatened. Excel represents that each of its corporate
Subsidiaries is, and at all times since its affiliation with Excel has
qualified as, a qualified REIT subsidiary as defined in Section 856(i) of the
Code and that each partnership, limited liability company, joint venture or
other legal entity (other than a corporation) in which Excel (either directly
or indirectly) owns any of the capital stock or other equity interests thereof
has been treated since its formation and continues to be treated for federal
income tax purposes as a partnership or disregarded as an entity separate from
its owner and not as an association taxable as a corporation. None of Excel or
the Excel Subsidiaries has a net unrealized built-in gain within the meaning
of Section 1374(d)(1) of the Code that would be subject to an election under
IRS Notice 88-19 or has any earnings and profits accumulated in any non-REIT
year within the meaning of Section 857 of the Code, in each case to the extent
the foregoing would result in an Excel Material Adverse Effect.
(c) Excel has not agreed to and is not required to make any adjustment under
Section 481(a) of the Code.
(d) Excel has not, with regard to any assets or property held or acquired by
it, filed a consent to the application of Section 341(f) of the Code or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
Excel.
(e) Excel is not a "foreign person" as such term is defined in Section
1445(f) of the Code.
6.11. Books and Records.
(a) The books of account and other financial records of Excel and its
Subsidiaries are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
Excel Reports.
(b) The minute books and other records of Excel and its Subsidiaries for the
period since December 31, 1987 have been made available to New Plan, contain
in all material respects accurate records of all meetings and accurately
reflect in all material respects all other corporate or partnership action of
the stockholders, partners, members and directors and any committees of the
Board of Directors of Excel and its Subsidiaries.
6.12. Properties. Excel and its Subsidiaries own fee simple title to, or
hold ground leases in, each of the real properties identified in Schedule 6.12
of the Excel Disclosure Letter (the "Excel Properties"), which are all the
real estate properties owned or leased by them. The Excel Properties are not
subject to any Property Restrictions, except for (i) Encumbrances and other
Property Restrictions set forth in Schedule 6.12 of the Excel Disclosure
Letter, (ii) Property Restrictions imposed or promulgated by law or any
governmental body or authority with respect to real property, including zoning
regulations, provided such Property Restrictions do not adversely affect in
any material respect the current use of the applicable property, (iii)
Encumbrances and other Property Restrictions disclosed on existing title
reports or current surveys (in either case copies of which title reports and
surveys have been delivered or made available to New Plan) and (iv)
mechanics', carriers', workmen's and repairmen's liens, and other Property
Restrictions and limitations, if any, which individually or
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in the aggregate do not materially interfere with the present use of any of
the Excel Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conduced there by Excel and its
Subsidiaries. Valid policies of title insurance have been issued insuring
Excel's or any of its Subsidiaries' fee simple title to the Excel Properties
owned in fee in amounts at least equal to the purchase price thereof, subject
only to the matters set forth therein or disclosed above, and such policies
are, at the date hereof, in full force and effect and there are no pending
claims against any such policy where the amount involved exceeds $50,000. Any
material certificate, permit or license from any governmental authority having
jurisdiction over any of the Excel Properties and any agreement, easement or
other right which is necessary to permit the material lawful use and operation
of the buildings and improvements on any of the Excel Properties or which is
necessary to permit the lawful use and operation in all material respects of
all driveways, roads and other means of egress and ingress, which Excel has
rights to, to and from any of the Excel Properties which are currently
occupied and are material to the operation of the property has been obtained
and is in full force and effect. Excel is not in receipt of any written notice
of any violation of any material federal, state or municipal law, ordinance,
order, regulation or requirement affecting any portion of any of the Excel
Properties issued by any governmental authority, other than such violations
which would not reasonably be expected to have an Excel Material Adverse
Effect. To the knowledge of Excel (A) there are no material structural defects
relating to the Excel Properties, (B) there are no Excel Properties whose
building systems are not in working order in any material respect (except for
normal maintenance and operating systems failures which in any event are the
subject of adequate pending repair procedures), (C) there is no physical
damage to any Excel Property in excess of $250,000 for which there is no
insurance in effect covering the cost of the restoration as of the date hereof
or (D) no current renovation or restoration to any Excel Property is underway
or for which contracts have been entered into the cost of which exceeds
$250,000, except in each case, as set forth in Schedule 6.12 of the Excel
Disclosure Letter. Neither Excel nor any of its Subsidiaries has received any
written notice to the effect that (x) any condemnation or material rezoning
proceedings are pending or threatened with respect to any of the Excel
Properties where the fair market value of the object of such proceeding
exceeds $250,000 or (y) any zoning, building or similar law, code, ordinance,
order or regulation is or will be violated in any material respect by Excel or
its Subsidiaries by the continued maintenance, operation or use of any
buildings or other improvements on any of the Excel Properties as currently
maintained, used or operated or by the continued maintenance, operation by
Excel or its Subsidiaries or use of the parking areas as currently maintained,
used or operated by Excel or its Subsidiaries which is not insured over and
where the remedying of such violation would materially and adversely affect
the relevant Excel Property. All work to be performed, payments to be made and
actions to be taken by Excel or its Subsidiaries prior to the date hereof
pursuant to any agreement entered into with a governmental body or authority
in connection with a site approval, zoning reclassification or other similar
action relating to the Excel Properties (e.g., Local Improvement District,
Road Improvement District, Environmental Mitigation) has been performed, paid
or taken, as the case may be, in all material respects, and Excel is not aware
of any planned or proposed work, payments or actions that may be required
after the date hereof pursuant to such agreements. Excel owns less that
$15,000,000 of nonexempt assets under Section 802.4 of the rules and
regulations promulgated under the Hart-Scott-Rodino Antitrust Improvements
Act.
6.13. Environmental Matters. Except as set forth in the Excel Reports or in
Schedule 6.15 of the Excel Disclosure Letter and any environmental assessment
or report listed therein to the actual knowledge of the executive officers of
Excel: none of Excel, any of its Subsidiaries or any other person has caused
or permitted (a) the unlawful presence of any Hazardous Materials on any of
the Excel Properties, or (b) any unlawful spills, releases, discharges or
disposal of Hazardous Materials to have occurred or be presently occurring on
or from the Excel Properties, which presence or occurrence would, individually
or in the aggregate, have an Excel Material Adverse Effect; Excel and its
Subsidiaries have not failed to comply with all applicable local, state and
federal environmental laws, regulations, ordinances and administrative and
judicial orders relating to the Environmental Laws, except where the failure
to comply would not reasonably be expected to have an Excel Material Adverse
Effect and Excel, its assets and businesses and all operations related thereto
are now in compliance with all Environmental Laws and not subject to any
liability, or, with respect to required remediation, corrective action or
prophylactic or other like action, obligation under any Environmental Law,
except where the failure to comply with any such Environmental Law would not
have an Excel Material Adverse Effect.
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6.14. Employee Benefit Plans. All employee benefits plans and other benefit
programs, policies and arrangements covering employees of Excel and the Excel
Subsidiaries (the "Excel Benefit Plans") are listed in Schedule 6.14 of the
Excel Disclosure Letter. True and complete copies of the Excel Benefit Plans
have been made available to New Plan. To the extent applicable, the Excel
Benefit Plans comply, in all material respects, with the requirements of ERISA
and the Code, and any Excel Benefit Plan intended to be qualified under
Section 401(a) of the Code has been determined by the IRS to be so qualified.
No Excel Benefit Plan or any other plan with respect to which Excel or any
entity under "common control" with Excel within the meaning of ERISA Section
4001 has or had any liability is or has been covered by Title IV of ERISA or
Section 412 of the Code. Neither any Excel Benefit Plan nor any fiduciary
thereof nor Excel has incurred any material liability or penalty under Section
4975 of the Code or Section 502(i) of ERISA. Each Excel Benefit Plan has been
maintained and administered in all material respects in compliance with its
terms and with ERISA and the Code to the extent applicable thereto. To the
knowledge of the executive officers of Excel, there are no pending or
anticipated claims against or otherwise involving any of the Excel Benefit
Plans and no suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of Excel Benefit Plan activities) has been
brought against or with respect to any such Excel Benefit Plan, except for any
of the foregoing which would not have an Excel Material Adverse Effect. All
material contributions required to be made as of the date hereof to the Excel
Benefit Plans have been timely made or provided for. Neither Excel nor any
entity under "common control" with Excel within the meaning of ERISA Section
4001 has contributed to, or been required to contribute to, any "multiemployer
plan" (as defined in Sections 3(37) and 4001(a)(3) of ERISA). Excel does not
maintain or contribute to any plan, program, policy or arrangement which
provides or has any liability to provide life insurance, medical or other
employee welfare benefits or supplemental pension benefits to any employee or
former employee upon his retirement or termination of employment, except as
required under Section 4890B of the Code, and Excel has never represented,
promised or contracted (whether in oral or written form) to any employee or
former employee that such benefits would be provided. Except as disclosed in
Schedule 6.14 of the Excel Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional subsequent events)
constitute an event under any benefit plan, program, policy, arrangement or
agreement or any trust or loan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligations to fund benefits
with respect to any employee, director or consultant of Excel or any of its
Subsidiaries.
6.15. Labor Matters. Neither Excel nor any of its Subsidiaries is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement with a labor union or labor union organization. There is no unfair
labor practice or labor arbitration proceeding pending or, to the knowledge of
Excel, threatened against Excel or any of its Subsidiaries relating to their
business, except for any such proceeding which would not have an Excel
Material Adverse Effect. To the knowledge of the executive officers of Excel,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of Excel or any of its Subsidiaries which would have an Excel
Material Adverse Effect.
6.16. No Brokers. Excel has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
New Plan or Excel to pay any finder's fees, brokerage or agent's commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Excel has retained Triton Pacific Capital, LLC ("Triton") as its
financial advisor, pursuant to an engagement letter dated April 7, 1998, and
Prudential Securities Incorporated ("Prudential Securities") to render a
fairness opinion, pursuant to an engagement letter dated April 22, 1998, true
and correct copies of which have been delivered to New Plan prior to the date
hereof. Other than the foregoing arrangements, Excel is not aware of any claim
for payment of any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations by Excel leading to this
Agreement or the consummation of the transactions contemplated hereby.
6.17. Opinion of Financial Advisor. Excel has received the opinion of
Prudential Securities to the effect that, as of the date hereof, the Exchange
Ratio is fair to the holders of Excel Common Stock from a financial point of
view.
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6.18. New Plan Share Ownership. Neither Excel nor any of its Subsidiaries
owns any shares of beneficial interest or capital stock of New Plan or other
securities convertible into capital stock of New Plan.
6.19. Related Party Transactions. Schedule 6.19 of the Excel Disclosure
Letter describes each: (i) business relationship (excluding employee
compensation and other ordinary incidents of employment) existing on the date
of this Agreement between (x) Excel, and (y) any Related Party of Excel; (ii)
transaction occurring between January 1, 1997 and the date of this Agreement
between Excel and any Related Party of Excel; and (iii) amount owing by or to
any of the Related Parties of Excel, respectively, to or from Excel as of the
date of this Agreement. No property or interest in any property which relates
to and is or will be necessary or useful in the present or currently
contemplated future operation of Excel, is presently owned by or leased by or
to any Related Party of Excel.
6.20. Contracts and Commitments. The Excel Disclosure Letter or the Excel
Reports filed prior to the date hereof set forth, as of the date hereof, (i)
all notes, debentures, bonds and other evidence of indebtedness which are
secured or collateralized by mortgages, deeds of trust or other security
interests in the Excel Properties or personal property of Excel and its
Subsidiaries and (ii) each joint venture or partnership agreement involving
Excel or any Excel Subsidiary, and (iii) each other material undischarged
commitment entered into by Excel or any of its Subsidiaries (excluding tenant
allowances, reimbursements and leases entered into in the ordinary course),
where the obligation of Excel or any Excel Subsidiary exceeds $1,000,000
(excluding acquisitions described in the last sentence of this Section 6.20).
True and correct copies of the foregoing have been previously delivered or
made available to New Plan. To the knowledge of Excel, (i) each of the
contracts described in the preceding sentence is in full force and effect; and
(ii) neither Excel nor any Excel Subsidiary or other party thereto is in
default thereof except where such default would not have an Excel Material
Adverse Effect. Schedule 6.20 of the Excel Disclosure Letter includes a
summary of the material terms of each acquisition of a business or real
property which is the subject of a binding agreement or letter of intent,
memorandum of understanding or similar agreement which has not been
consummated (the "Pending Excel Transactions").
6.21. Leases.
(a) Schedule 6.21 of the Excel Disclosure Letter sets forth a list of all
Excel Properties that are subject to or encumbered by any non-residential
lease accounting for 1% or more of Excel's rental revenues for the most recent
period reflected in the financial statements included in the Excel Reports (a
"Material Excel Lease") and, with respect to each such Material Excel Lease,
sets forth the following information:
(i) the name of the lessee;
(ii) the expiration date of the lease;
(iii) the amount (or method of determining the amount) of monthly rentals
due under the lease; and
(iv) with respect to any Material Excel Lease with a remaining term of
less than 24 months, whether the lessee has notified Excel in writing of
any intention not to renew, or seek to renew, the lease.
(b) Except as set forth in Schedule 6.21 of the Excel Disclosure Letter, (i)
all rental payments due under each Material Excel Lease have been paid during
the period January 1, 1998 through March 31, 1998 and (ii) to Excel's
knowledge, no lessee is in material default, and no condition or event exists
which with the giving of notice or the passage of time, or both, would
constitute a material default by any lessee, under any Material Excel Lease.
6.22. Investment Company Act of 1940. Neither Excel nor any of its
Subsidiaries is, or at the Effective Time will be, required to be registered
under the Investment Company Act of 1940, as amended.
6.23. Certain Payments Resulting From Transactions. Except as set forth in
Schedule 6.23 of the Excel Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any Excel Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
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Arrangements") that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of Excel or any of its Subsidiaries or
(ii) result in the triggering or imposition of any restrictions or limitations
on the right of Excel or its Subsidiaries to amend or terminate any Employee
Arrangement and receive the full amount of any excess assets remaining or
resulting from such amendment or termination, subject to applicable taxes.
Except as set forth in Schedule 6.23 of the Excel Disclosure Letter, no
payment or benefit which will be required to be made pursuant to the terms of
any agreement, commitment or Excel Benefit Plan, as a result of the
transactions contemplated by this Agreement to any officer, director or
employee of Excel or any of its Subsidiaries, will be characterized as an
"excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code.
6.24. State Takeover Statutes. To the knowledge of Excel, assuming the
accuracy of the representation and warranty of New Plan in Section 5.18
hereof, Excel has taken all action necessary to exempt the transactions
contemplated by this Agreement from the operation of any applicable "fair
price," "moratorium," "control share acquisition" or any other applicable
anti-takeover statute or similar statute enacted under the state or federal
laws of the United States or similar statute or regulation. The Board of
Directors of Excel has adopted a resolution as follows: "The transactions
contemplated by the Merger Agreement are hereby authorized and approved with
the intent that no state takeover law shall be applicable to the Merger, the
Merger Agreement or the transactions contemplated thereby."
6.25. Legacy Arrangements. Excel and Legacy have entered into an Amendment
to the Intercompany Agreement, a true and correct copy of which has been
delivered to New Plan (the "Legacy Intercompany Amendment") and the Legacy
Intercompany Amendment constitutes a legal, valid and binding agreement of
Legacy enforceable against Legacy in accordance with its terms.
ARTICLE 7.
Covenants
7.1. No Solicitation by New Plan.
(a) Unless and until this Agreement shall have been terminated in accordance
with its terms, New Plan shall not, and shall cause its Subsidiaries and its
and their trustees, officers, employees, investment bankers, financial
advisors, attorneys, accountants and other representatives retained by it or
any of its Subsidiaries not to, directly or indirectly through another person,
(i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed to facilitate, any inquiries
or the making of any proposal which constitutes or may reasonably be expected
to lead to any New Plan Takeover Proposal (as defined below) or (ii)
participate in any discussions or negotiations regarding or relating to any
New Plan Takeover Proposal; provided, however, that prior to the New Plan
Shareholders Meeting, if the Board of Trustees of New Plan determines
reasonably and in good faith, based on the advice of its outside counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
shareholders of New Plan under applicable law, or, as applicable, its duties
under the Declaration of Trust, in each case in the context of the
transactions contemplated hereby, New Plan may, in response to a New Plan
Takeover Proposal which was not solicited by it and which did not result from
a breach of this Section 7.1(a), provided New Plan shall provide prior written
notice of its decision to take such action to Excel and shall comply with
Section 7.1(c), (x) furnish information with respect to New Plan and its
Subsidiaries to any person making such a New Plan Takeover Proposal pursuant
to a customary confidentiality agreement (as determined by New Plan after
consultation with its outside counsel) and (y) participate in discussions or
negotiations regarding such New Plan Takeover Proposal. For purposes of this
Agreement, "New Plan Takeover Proposal" means any proposal made by a third
party (other than Excel) to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, business
combination, recapitalization, reorganization, liquidation, dissolution or
similar transaction, more than 25% of the combined voting power of the New
Plan Common Shares or shares or equity interests in any significant New Plan
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Subsidiary, in each case then outstanding, or all or substantially all the
assets of New Plan or any significant New Plan Subsidiary.
(b) Except as expressly permitted by this Section 7.1 neither the Board of
Trustees of New Plan nor any committee thereof shall (i) withdraw or propose
publicly to withdraw, or modify or propose to modify in a manner adverse to
Excel, the approval or recommendation by such Board of Trustees or such
committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any New Plan Takeover Proposal or
(iii) cause New Plan to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "New Plan
Acquisition Agreement") related to any New Plan Takeover Proposal.
Notwithstanding the foregoing, in the event that a majority of the Board of
Trustees of New Plan determines reasonably and in good faith (A) (based on the
advice of a financial advisor of nationally recognized reputation) that a
pending New Plan Takeover Proposal is more favorable to New Plan's
shareholders than the Merger and the transactions contemplated hereby, (B)
that such New Plan Takeover Proposal is reasonably capable of being
consummated, (C) that there is a substantial probability that the approval of
the Merger by holders of New Plan Common Shares will not be obtained due to
the pending New Plan Takeover Proposal, and (D) (based on the advice of
outside counsel and taking into account the matters in clause (A), (B) and (C)
above) that it is necessary to terminate this Agreement to accept such New
Plan Takeover Proposal in order to comply with its fiduciary duties to the
shareholders of New Plan under applicable law or, as the case may be, its
duties under the Declaration of Trust, in each case in the context of the
transactions contemplated hereby, the Board of Trustees of New Plan may
(subject to this and the following sentences and in compliance with Section
9.3(a)) approve and recommend such New Plan Takeover Proposal and, in
connection therewith, withdraw its approval or recommendation of this
Agreement and the Merger, provided that in such case it simultaneously
therewith terminates this Agreement and concurrently with such termination
causes New Plan to enter into a definitive acquisition agreement with respect
to such New Plan Takeover Proposal), but only at a time that is after the
fifth business day following Excel's receipt of written notice advising Excel
that the Board of Trustees of New Plan is prepared to accept a New Plan
Takeover Proposal, specifying the material terms and conditions of such New
Plan Takeover Proposal and identifying the person making such New Plan
Takeover Proposal, provided that (x) at all reasonable times during such five-
day period New Plan shall have cooperated with Excel with the objective of
providing Excel a reasonable opportunity to propose and negotiate a
modification of the terms and conditions of this Agreement so that a business
combination may be effected between Excel and New Plan; (y) at the end of such
five-day period the Board of Trustees shall continue to believe in good faith
that clauses (A), (B), (C) and (D) above apply to the New Plan Takeover
Proposal; and (z) simultaneously with any such withdrawal or termination, New
Plan pays to Excel the Break-up Fee and Break-up Expenses pursuant to Section
9.5.
(c) In addition to the obligations of New Plan set forth in paragraphs (a)
and (b) of this Section 7.1, New Plan shall immediately cease any current
discussions and negotiations with respect to any New Plan Takeover Proposal
and hereafter immediately advise Excel orally and in writing of any request
for information or of any New Plan Takeover Proposal, the material terms and
conditions of such request or New Plan Takeover Proposal and the identity of
the person making such request or New Plan Takeover Proposal. New Plan will
keep Excel reasonably informed of the status and details (including amendments
or proposed amendments) of any such request or New Plan Takeover Proposal.
(d) Nothing contained in this Section 7.1 shall prohibit New Plan from
taking and disclosing to its shareholders a position contemplated by Rule 14d-
9 and Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to New Plan's shareholders if, in the good faith judgment of the
Board of Trustees of New Plan, after consultation with outside counsel,
failure so to disclose would be a violation of its obligations under
applicable law; provided, however, that neither New Plan nor its Board of
Trustees nor any committee thereof shall withdraw or modify, or propose
publicly to withdraw or modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose publicly to approve or
recommend, a New Plan Takeover Proposal, except in accordance with this
Section 7.1.
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(e) Notwithstanding any other provisions of this Section 7.1 to the
contrary, or any variation in the duties imposed upon trustees of a
Massachusetts business trust from those imposed on directors of a Maryland
corporation, the Trustees of New Plan shall be permitted to take any action
which they would be permitted to take under this Section 7.1 if they were
directors of a Maryland corporation and New Plan was a Maryland corporation.
7.2. No Solicitation by Excel.
(a) Unless and until this Agreement shall have been terminated in accordance
with its terms, Excel shall not, and shall cause its Subsidiaries and its and
their directors, officers, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it or any of its
Subsidiaries not to, directly or indirectly through another person, (i)
solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making
of any proposal which constitutes or may reasonably be expected to lead to any
Excel Takeover Proposal (as defined below) or (ii) participate in any
discussions or negotiations regarding or relating to any Excel Takeover
Proposal; provided, however, that prior to the Excel Stockholders Meeting, if
the Board of Directors of Excel determines reasonably and in good faith, based
on the advice of its outside counsel, that it is necessary to do so in order
to comply with its fiduciary duties to the stockholders of Excel under
applicable law in the context of the transactions contemplated hereby, Excel
may, in response to an Excel Takeover Proposal which was not solicited by it
and which did not result from a breach of this Section 7.2(a), and provided
Excel shall provide prior written notice of its decision to take such action
to New Plan and shall comply with Section 7.2(c), (x) furnish information with
respect to Excel and its Subsidiaries to any person making such an Excel
Takeover Proposal pursuant to a customary confidentiality agreement (as
determined by Excel after consultation with its outside counsel) and (y)
participate in discussions or negotiations regarding such Excel Takeover
Proposal. For purposes of this Agreement, "Excel Takeover Proposal" means any
proposal made by a third party (other than New Plan) to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, business combination, recapitalization, reorganization,
liquidation, dissolution or similar transaction, more than 25% of the combined
voting power of the shares of Excel Common Stock or shares or equity interests
in any significant Excel Subsidiary, in each case then outstanding or all or
substantially all the assets of Excel or any significant Excel Subsidiary.
(b) Except as expressly permitted by this Section 7.2, neither the Board of
Directors of Excel nor any committee thereof shall (i) withdraw or propose
publicly to withdraw, or modify or propose publicly to modify in a manner
adverse to New Plan, the approval or recommendation by such Board of Directors
or such committee of the Merger, this Agreement or the Excel Stockholder
Matters in connection with the Merger, (ii) approve or recommend, or propose
publicly to approve or recommend, any Excel Takeover Proposal or (iii) cause
Excel to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement (each, an "Excel Acquisition Agreement")
related to any Excel Takeover Proposal. Notwithstanding the foregoing, in the
event that a majority of the Board of Directors of Excel determines reasonably
and in good faith (A) (based on the advice of a financial advisor of
nationally recognized reputation) that a pending Excel Takeover Proposal is
more favorable to Excel's stockholders than the Merger and the transactions
contemplated hereby, (B) that such Excel Takeover Proposal is reasonably
capable of being consummated, (C) that there is a substantial probability that
the adoption of this Agreement by holders of Excel Common Stock will not be
obtained due to the pending Excel Takeover Proposal, and (D) (based upon the
advice of outside counsel and taking into account the matters in clause (A),
(B) and (C)) that it is necessary to terminate this Agreement to accept such
Excel Takeover Proposal in order to comply with its fiduciary duties to the
stockholders of Excel under applicable law in the context of the transactions
contemplated hereby, the Board of Directors of Excel may (subject to this and
the following sentences and in compliance with Section 9.4(a)) approve and
recommend such Excel Takeover Proposal and, in connection therewith, withdraw
its approval or recommendation of this Agreement, the Merger and the Excel
Stockholder Matters, provided that in such case it simultaneously therewith
terminates this Agreement and concurrently with such termination causes Excel
to enter into a definitive acquisition agreement with respect to such Excel
Takeover Proposal, but only at a time that is after the fifth business day
following
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New Plan's receipt of written notice advising New Plan that the Board of
Directors of Excel is prepared to accept an Excel Takeover Proposal,
specifying the material terms and conditions of such Excel Takeover Proposal
and identifying the person making such Excel Takeover Proposal, provided that
(x) at all reasonable times during such five-day period Excel shall have
cooperated with New Plan with the objective of providing New Plan a reasonable
opportunity to propose and negotiate a modification of the terms and
conditions of this Agreement so that a business combination may be effected
between Excel and New Plan; (y) at the end of such five-day period the Board
of Directors of Excel shall continue to believe in good faith that clauses
(A), (B), (C) and (D) above apply to the Excel Takeover Proposal; and (z)
simultaneously with any such withdrawal or termination, Excel pays New Plan
the Break-up Fee and Break-up Expenses pursuant to Section 9.5.
(c) In addition to the obligations of Excel set forth in paragraphs (a) and
(b) of this Section 7.2, Excel shall immediately cease any current discussions
or negotiations with respect to any Excel Takeover Proposal and hereafter,
immediately advise New Plan orally and in writing of any request for
information or of any Excel Takeover Proposal, the material terms and
conditions of such request or Excel Takeover Proposal and the identity of the
person making such request or Excel Takeover Proposal. Excel will keep New
Plan reasonably informed of the status and details (including amendments or
proposed amendments) of any such request or Excel Takeover Proposal.
(d) Nothing contained in this Section 7.2 shall prohibit Excel from taking
and disclosing to its stockholders a position contemplated by Rule 14d-9 and
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Excel's stockholders if, in the good faith judgment of the Board of
Directors of Excel, after consultation with outside counsel, failure so to
disclose would be a violation of its obligations under applicable law;
provided, however, that neither Excel nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement, the Merger, or the Excel
Stockholder Matters or approve or recommend, or propose publicly to approve or
recommend, an Excel Takeover Proposal, except in accordance with this Section
7.2.
7.3. Conduct of Businesses.
(a) During the period from the date of this Agreement until the earlier of
the termination of this Agreement and the Effective Time, except as set forth
in Schedule 7.3 of the New Plan Disclosure Letter or Schedule 7.3 of the Excel
Disclosure Letter or as expressly contemplated by this Agreement, unless the
other party has consented in writing thereto (which consent shall not be
unreasonably withheld or delayed), Excel and New Plan:
(i) shall use their reasonable best efforts, and shall cause each of
their respective Subsidiaries to use their reasonable best efforts, to
preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees subject
to the restrictions set forth in this Agreement;
(ii) subject to the other provisions of this Section 7.3, shall confer on
a regular basis with one or more representatives of the other to report
material operational matters and, subject to Sections 7.1 and 7.2,
respectively, any proposals to engage in material transactions;
(iii) shall coordinate the record date for the quarterly dividends
payable with respect to the Excel Common Stock, Excel Series A Preferred
Stock, Excel Series B Preferred Stock and New Plan Common Shares and New
Plan Preferred Shares, and
(iv) shall promptly deliver to the other true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement.
(b) During the period from the date of this Agreement until the earlier of
the Effective Time and the termination of this Agreement, except as set forth
in the New Plan Disclosure Letter, or as expressly contemplated by this
Agreement, unless Excel has consented in writing thereto which consent shall
not be unreasonably withheld or delayed, New Plan:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted, subject to the
restrictions of this Agreement below;
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(ii) shall not, and shall cause each of its Subsidiaries not to, acquire,
enter into an option to acquire or exercise an option or contract to
acquire additional real property, encumber assets or commence construction
of, or enter into any agreement or commitment to develop or construct
(other than (A) tenant improvements, reimbursements and allowances in the
ordinary course of business in accordance with past practice and (B) the
Pending New Plan Transactions), retail shopping center properties or other
real estate projects, in an amount (together with acquisitions permitted
under clause (xi) of this Section 7.3(b)) which exceeds $150,000,000 in the
aggregate;
(iii) shall not amend its Declaration of Trust (except for the Trust
Amendments) and shall cause each of its Subsidiaries not to amend its
articles of incorporation, by laws, partnership agreement, articles of
organization or other governing documents, as the case may be;
(iv) shall not, and shall cause its Subsidiaries to not (1) except
pursuant to the exercise of options, warrants, conversion rights and other
contractual rights existing on the date hereof or pursuant to New Plan's
dividend reinvestment plan and disclosed pursuant to this Agreement, issue
any shares of its capital stock (except to New Plan), effect any stock
split, reverse stock split, stock dividend, recapitalization or other
similar transaction, (2) grant, confer or award any option, warrant,
conversion or other right to acquire any shares of its capital stock, or
amend or permit the acceleration of vesting of any New Plan Options, (3)
increase any compensation or enter into or amend any employment agreement
with any of its present or future officers or directors except as expressly
contemplated by this Agreement (and except for the Employment Agreements
contemplated by Schedule 7.3(b)(iv) of the New Plan Disclosure Letter
providing for certain terms of employment for, and waiver of loan
acceleration for, certain officers of New Plan) or (4) adopt any new
employee benefit plan (including any stock option, stock benefit or stock
purchase plan) or amend any existing employee benefit plan in any material
respect, except for changes which are required by applicable law or are
less favorable to participants in such plans;
(v) shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock,
except (1) (x) regular quarterly dividends on the New Plan Common Shares
and regular quarterly dividends on the Depositary Shares representing one-
tenth of a share of New Plan Preferred Shares, as well as any other
required dividends, distributions or payments with respect to such New Plan
Preferred Shares, (which, with respect to the New Plan Common Shares, shall
have record dates to the extent occurring prior to the Effective Time of
June 30, 1998 and September 30, 1998 and corresponding payment dates of
July 10, 1998 and October 10, 1998), and (y) a dividend in an amount equal
to the greater of (I) the regular quarterly dividend per share of the New
Plan Common Shares pro-rated for the period from July 1, 1998 (or October
1, 1998 if the Effective Time has not yet then occurred) up to and
including the Closing Date and (II) the sum of (A) New Plan's estimated
undistributed real estate investment trust taxable income (calculated
without regard to the dividends paid deductions as defined in Section 561
of the Code and by excluding net capital gain) within the meaning of
Section 857(b)(2) of the Code for New Plan's 1999 taxable year ending on
the Closing Date and (B) New Plan's estimated undistributed net capital
gain within the meaning of Section 857(b)(3) of the Code for New Plan's
1999 taxable year ending on the Closing Date, and (2) in connection with
the use of shares of capital stock to pay the exercise price or tax
withholding in connection with stock-based employee benefit plans of New
Plan, directly or indirectly redeem, purchase or otherwise acquire any
shares of its capital stock or capital stock of any of its Subsidiaries, or
make any commitment for any such action; (it being understood and agreed
that for purposes of the foregoing, New Plan's regular quarterly dividend
shall include increases to prior quarterly dividend amounts consistent with
New Plan's past practice);
(vi) except in the ordinary course of business consistent with past
practice, shall not, and shall not permit any of its Subsidiaries to, sell,
mortgage or otherwise encumber or subject to any Encumbrances or otherwise
dispose of, except by leasing in the ordinary course of business, (i) any
material New Plan Properties or any of its capital stock of or other
interests in its Subsidiaries or (ii) any of its other assets which are
material, individually or in the aggregate;
(vii) shall not, and shall not permit any of its Subsidiaries to, (i)
incur, assume or prepay any indebtedness for borrowed money in an amount in
excess of (A) $150,000,000, which amounts will be applied to pay down
outstanding borrowings under New Plan's existing credit facilities or to
matters
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<PAGE>
specified in Section 7.3(b)(ii) and (B) the amount necessary to consummate
the Pending New Plan Transactions, in each case in a manner consistent with
New Plan's past practice, (ii) assume, guarantee, endorse (other than items
for collection) or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any third party
or (iii) make any loans, advances or capital contributions to, or (except
as permitted by Section 7.3(b)(xi)) investments in, any other person, other
than loans, advances and capital contributions to Subsidiaries;
(viii) shall not, and shall not permit any of its Subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of New Plan
included in the New Plan Reports or incurred in the ordinary course of
business consistent with past practice;
(ix) shall not, and shall not permit any of its Subsidiaries to, enter
into any contract, arrangement or understanding which may result in total
payments or liability by or to it in excess of $200,000, except (1) tenant
reimbursements and allowances and leases entered into in the ordinary
course consistent with past practice and (2) capital expenditures incurred
in the ordinary course consistent with past practice;
(x) shall not, and shall not permit any of its Subsidiaries to, enter
into any contract, arrangement or understanding with any officer, director,
consultant or affiliate of New Plan or any of its Subsidiaries (i) which is
not in the ordinary course of business and consistent with past practices
or (ii) where the amount involved exceeds $50,000.
(xi) shall not acquire, enter into any contract, arrangement or
understanding (whether or not binding) to acquire or announce any proposed
acquisition of, 25% or more of the equity interests or all or substantially
all of the assets, of another entity which has net assets in excess of
$25,000,000, subject to the limitation in clause (ii) of this Section
7.3(b);
(xii) shall not make any changes in its accounting methods or policies
except as required by law, the SEC or generally accepted accounting
principles;
(xiii) shall maintain, and cause its Subsidiaries to maintain, insurance
in such amounts and against such risks as are customary for companies like
New Plan; and
(xiv) shall not, and shall not permit any of its Subsidiaries to,
authorize, or commit or agree to take, any of the foregoing actions.
(c) During the period from the date of this Agreement until the earlier of
the Effective Time and the date on which this Agreement is terminated in
accordance with its terms, except as set forth in the Excel Disclosure Letter
or as contemplated by this Agreement, unless New Plan has consented in writing
thereto (which consent shall not be unreasonably withheld or delayed), Excel:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted, subject to the
restrictions of this Agreement;
(ii) shall not, and shall cause each of its Subsidiaries not to, acquire,
enter into an option to acquire or exercise an option or contract to
acquire additional real property, encumber assets or commence construction
of, or enter into any agreement or commitment to develop or construct
(other than (A) tenant improvements reimbursements and other allowances in
the ordinary course of business consistent with past practice and (B) the
Pending Excel Transactions), retail shopping center properties or other
real estate projects, in an amount (together with acquisitions permitted
under clause (xi) of this Section 7.3(c)) which exceeds $150,000,000 in the
aggregate;
(iii) shall not and shall cause each of its Subsidiaries not to amend its
Charter (except for the Excel Charter Amendment) or Bylaws, partnership
agreement, articles of organization or other governing documents, as the
case may be;
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<PAGE>
(iv) shall not and shall cause its Subsidiaries not to (1) except
pursuant to the exercise of options, warrants, conversion rights, Down REIT
units and other contractual rights existing on the date hereof or pursuant
to its dividend reinvestment plan and disclosed pursuant to this Agreement
or pursuant to the Excel Stock Dividend, issue any shares of its capital
stock (except to Excel), effect any stock split, reverse stock split, stock
dividend, recapitalization or other similar transaction, (2) other than the
issuance of the Excel Rights, grant, confer or award any option, warrant,
conversion or other right to acquire any shares of its capital stock or
amend the terms or permit the acceleration of any such option (except the
issuance of Down REIT units in Pending Excel Transactions), (3) increase
any compensation or enter into or amend any employment agreement with any
of its present or future officers or directors except as expressly
contemplated by this Agreement or (4) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect, except for
changes which are required by applicable law or are less favorable to
participants in such plans and except for changes proposed in the Excel
Proxy Statement for its 1998 Annual Meeting;
(v) shall not declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock,
except (1) (x) regular quarterly dividends of $.50 per share on the Excel
Common Stock and regular quarterly dividends on the Excel Series A
Preferred Stock and Excel Series B Preferred Stock as well as any other
required dividends, distributions or payments with respect to such Excel
Preferred Stock (which, with respect to the Excel Common Stock, shall have
record dates, to the extent occurring prior to the Effective Time of June
30, 1998 and September 30, 1998, and corresponding payment dates of July
10, 1998 and October 10, 1998) (y) a dividend in an amount equal to the
greater of (I) the regular quarterly dividend per share of Excel Common
Stock pro-rated for the period from July 1, 1998 (or October 1, 1998 if the
Effective Time has not yet then occurred) up to and including the Closing
Date and (II) the sum of (A) Excel's estimated undistributed real estate
investment trust taxable income (calculated without regard to the dividends
paid deductions as defined in Section 561 of the Code and by excluding net
capital gain) within the meaning of Section 857(b)(2) of the Code for
Excel's 1998 taxable year ending on the Closing Date, (B) Excel's estimated
undistributed net capital gain within the meaning of Section 857(b)(3) of
the Code for Excel's 1998 taxable year ending on the Closing Date and (z)
dividends determined by Excel to be necessary to maintain Excel's status as
a REIT under the Code and (2) in connection with the use of shares of
capital stock to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of Excel, directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock or
capital stock of any of its Subsidiaries, or make any commitment for any
such action;
(vi) except in the ordinary course of business consistent with past
practice, shall not, and shall not permit any of its Subsidiaries to, sell,
mortgage or otherwise encumber or subject to any Encumbrances or otherwise
dispose of, except by leasing in the ordinary course of business, (i)
material Excel Properties or any of its capital stock of or other interests
in its Subsidiaries or (ii) any of its other assets which are material,
individually or in the aggregate;
(vii) shall not, and shall not permit any of its Subsidiaries to, (i)
incur, assume or prepay any indebtedness for borrowed money in an amount in
excess of (A) $150,000,000, which amounts will be applied to pay down
outstanding borrowings under Excel's existing credit facilities or to
matters specified in Section 7.3(c)(ii) and (B) the amount necessary to
consummate the Pending Excel Transactions, in each case in a manner
consistent with Excel's past practice, (ii) assume, guarantee, endorse
(other than items for collection) or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
third party or (iii) make any loans, advances or capital contributions to,
or (except as permitted by Section 7.3(c)(xi)) investments in, any other
person, other than loans, advances and capital contributions to
Subsidiaries;
(viii) shall not, and shall not permit any of its Subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
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<PAGE>
recent consolidated financial statements (or the notes thereto) of Excel
included in the Excel Reports or incurred in the ordinary course of
business consistent with past practice;
(ix) shall not, and shall not permit any of its Subsidiaries to, enter
into any contract, arrangement or understanding which may result in total
payments or liability by or to it in excess of $200,000, except (1) tenant
reimbursements and allowances and leases entered into in the ordinary
course consistent with past practice and (2) capital expenditures incurred
in the ordinary course of business consistent with past practice;
(x) shall not, and shall not permit any of its Subsidiaries to, enter
into any contract, arrangement or understanding with any officer, director,
consultant or affiliate of Excel or any of its Subsidiaries (i) which is
not in the ordinary course of business and consistent with past practices
or (ii) where the amount involved exceeds $50,000.
(xi) shall not acquire, enter into any contract, arrangement or
understanding (whether or not binding) to acquire or announce any proposed
acquisition of, 25% or more of the equity interests or all or substantially
all of the assets, of another entity which has net assets in excess of
$25,000,000, subject to the limitations in clause (ii) of this Section
7.3(c).
(xii) shall not make any changes in its accounting methods or policies
except as required by law, the SEC or generally accepted accounting
principles;
(xiii) shall maintain, and cause its Subsidiaries to maintain, insurance
in such amounts and against such risks as are customary for companies like
Excel;
(xiv) Notwithstanding anything to the contrary herein contained, neither
Excel nor any of its Subsidiaries shall make any loan of money to or
investment in, or purchase any equity interest in, buy any property from or
sell any property to, or enter into any partnership or joint venture with
Legacy. Excel will fully enforce and not waive the provisions of each
material agreement between Excel and Legacy in effect on the date hereof;
and
(xv) shall not, and shall not permit any of its Subsidiaries to,
authorize, or commit or agree to take, any of the foregoing actions.
(d) Except as required by law, Excel and Sub, on the one hand, and New Plan,
on the other hand, shall not, and shall not permit any of their respective
Subsidiaries to, voluntarily take any action that would, or that could
reasonably be expected to, result in, except as contemplated by Sections 7.1
and 7.2, any of the conditions to the Merger set forth in Article 8 not being
satisfied.
7.4. Meetings of Stockholders. Each of New Plan and Excel will take all
action necessary in accordance with applicable law and its Declaration of
Trust and Charter and Bylaws, as applicable, to convene a meeting of its
shareholders or stockholders, as the case may be, as promptly as practicable
to consider and vote upon, in the case of New Plan (including any adjournment
thereof, the "New Plan Shareholders Meeting") the approval of the Trust
Amendments, this Agreement, the Merger and the other transactions contemplated
hereby, and, in the case of Excel (including any adjournment thereof, the
"Excel Stockholders Meeting") the approval of the Excel Stockholder Matters.
The Board of Directors of Excel and the Board of Trustees of New Plan shall
each recommend such approval and Excel and New Plan shall each take all
lawful, commercially reasonable action to solicit such approval, including,
without limitation, timely mailing the Proxy Statement/Prospectus (as defined
in Section 7.8). Excel and New Plan shall coordinate and cooperate with
respect to the timing of such meetings and shall use their reasonable efforts
to hold such meetings on the same day. If on the date of the meetings of Excel
and New Plan established pursuant to this paragraph, either Excel or New Plan
has respectively received less than the requisite vote and neither a New Plan
Takeover Proposal nor an Excel Takeover Proposal has been publicly disclosed
and not withdrawn prior to the date of such meeting, then both parties shall
recommend the adjournment of their respective meetings until the first to
occur of (i) the date ten (10) days after the originally scheduled date of
such meetings or (ii) the date on which duly executed proxies for the
requisite number of votes approving the Merger (in the case of New Plan) or
the Excel Stockholder Matters (in the case of Excel) shall have been obtained.
Notwithstanding the foregoing, New Plan and Excel and their respective Boards
of Trustees
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<PAGE>
and Boards of Directors may take and disclose to shareholders or stockholders
a position contemplated by Rule 14e-2 promulgated under the Exchange Act if
required to do so by the Exchange Act, comply with Rule 14d-9 thereunder and
make all other disclosures required by applicable law. It shall be a condition
to the mailing of the Proxy Statement/Prospectus that (i) Excel shall have
received a "comfort" letter from Coopers & Lybrand L.L.P., independent public
accountants for New Plan, dated as of a date within two business days before
the date on which the Form S-4 (as defined in Section 7.8) shall become
effective, with respect to the financial statements of New Plan included in
the Proxy Statement/Prospectus, in form and substance reasonably satisfactory
to Excel, and customary in scope and substance for "comfort" letters delivered
by independent public accountants in connection with registration statements
and proxy statements similar to the Form S-4 and the Proxy
Statement/Prospectus, and (ii) New Plan shall have received a "comfort" letter
from Coopers & Lybrand L.L.P., independent public accountants for Excel, dated
as of a date within two business days before the date on which the Form S-4
shall become effective, with respect to the financial statements of Excel
included in the Proxy Statement/Prospectus, in form and substance reasonably
satisfactory to New Plan, and customary in scope and substance for "comfort"
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Form S-4 and the
Proxy Statement/Prospectus.
7.5. Filings; Other Action. Subject to the terms and conditions herein
provided, New Plan, Excel and Sub shall: (a) to the extent required, promptly
make their respective filings with respect to the Merger; (b) use all
reasonable efforts to cooperate with one another in (i) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be obtained
prior to the Effective Time from, governmental or regulatory authorities of
the United States, the several states and foreign jurisdictions in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all such filings and
timely seek all such consents, approvals, permits or authorizations; (c) use
all reasonable efforts to obtain in writing any consents required from third
parties in form reasonably satisfactory to New Plan and Excel necessary to
effectuate the Merger; and (d) use all reasonable efforts to 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. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of Excel and Sub,
and New Plan shall take all such necessary action. If any "fair price" or
"control share acquisition" statute or similar statute or regulation shall
become applicable to the transactions contemplated hereby, New Plan, Excel and
Sub and their respective Boards of Trustees or Directors shall use their
reasonable best efforts to grant such approvals and to take such other actions
as are necessary so that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
shall otherwise use their reasonable best efforts to minimize or eliminate the
effects of any such statute or regulation on the transactions contemplated
hereby. Excel and New Plan shall promptly advise each other of and confer and
consult with respect to any communications from governmental agencies with
respect to the transactions contemplated by this Agreement. Each of New Plan
and Excel shall use its reasonable efforts to cause to be delivered by its
accountants the "comfort letters" referred to in Sections 7.4, 8.2 and 8.3.
7.6. Inspection of Records. Until the earlier of the Effective Time or the
date in which this Agreement is terminated in accordance with its terms, each
of New Plan, Excel and Sub shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of New Plan and
Excel and their respective Subsidiaries for purposes related to an evaluation
of the transactions contemplated hereby, subject to any restrictions arising
under applicable law. All information furnished under this Section 7.6 is
subject to the Confidentiality Agreement (as herein defined).
7.7. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter New Plan and Excel shall, subject to
their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon
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<PAGE>
the text of any press release, before issuing any such press release or
otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange
with respect thereto.
7.8. Registration Statement. Excel and New Plan shall cooperate and promptly
prepare and Excel shall file with the SEC as soon as practicable but no later
than June 10, 1998, a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, with respect to the Merger Consideration issuable in
the Merger, a portion of which Registration Statement shall also serve as the
joint proxy statement with respect to the New Plan Shareholders Meeting and
the Excel Stockholders Meeting (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Each of New Plan and Excel shall furnish all information about
itself and its business and operations and all necessary financial information
to the other as the other may reasonably request in connection with the
preparation of the Form S-4. Excel shall use its reasonable best efforts, and
New Plan will cooperate with Excel, to have the Form S-4 declared effective by
the SEC as promptly as practicable. Excel shall use its best efforts to
obtain, prior to the effective date of the Form S-4, all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement and will pay all expenses incident
thereto. Excel agrees that the Proxy Statement/Prospectus and each amendment
or supplement thereto at the time of mailing thereof and at the time of the
respective meetings of stockholders of Excel and New Plan, and, in the case of
the Form S-4 and each amendment or supplement thereto, at the time it is filed
or becomes effective, will not include an 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 light of the circumstances under which they
were made, not misleading; provided, however, that the foregoing shall not
apply to the extent that any such untrue statement of a material fact or
omission to state a material fact was made by Excel in reliance upon and in
conformity with information concerning New Plan furnished to Excel by New Plan
in writing specifically for use in the Proxy Statement/Prospectus. New Plan
agrees that the information provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the New Plan Shareholders Meeting and Excel
Stockholders Meeting, respectively, and, in the case of information provided
by New Plan in writing for inclusion in the Form S-4 or any amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an 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 light of the circumstances under which they were made, not
misleading. Excel will advise New Plan, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective or any supplement
or amendment has been filed, the issuance of any stop order, the suspension of
the qualification of the Excel Common Stock or Excel Series D Preferred Stock
(represented by Depositary Shares) issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment
of the Proxy Statement/Prospectus or the Form S-4 or comments thereon (which
Excel agrees to promptly respond to) and responses thereto or requests by the
SEC for additional information (which Excel agrees to promptly provide).
7.9. Listing Application. Excel shall promptly prepare and submit to the
NYSE a listing application covering the Excel Common Stock and the Excel
Series D Depositary Shares representing shares of Excel Series D Preferred
Stock issuable in the Merger and issuable upon exercise of the New Plan
Options being assumed hereunder and new symbols, and shall use its reasonable
efforts to obtain, prior to the Effective Time, approval for the listing of
such Excel Common Stock and such Depositary Shares, subject to official notice
of issuance.
7.10. Affiliates of New Plan.
(a) At least 30 days prior to the Closing Date, New Plan shall deliver to
Excel a list of names and addresses of those persons who were, in New Plan's
reasonable judgment, at the record date for the New Plan Shareholders' Meeting
"affiliates" (each such person, an "Affiliate") of New Plan within the meaning
of Rule 145 of the rules and regulations promulgated under the Securities Act
("Rule 145"). New Plan shall provide Excel such information and documents as
Excel shall reasonably request for purposes of reviewing such list. New Plan
shall use all reasonable efforts to deliver or cause to be delivered to Excel,
on or prior to the Closing
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Date, from each of the Affiliates of New Plan identified in the foregoing
list, an Affiliate Letter in customary form reasonably acceptable to Excel.
Excel shall be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any shares of the Merger Consideration
to be received by such Affiliates pursuant to the terms of this Agreement, and
to issue appropriate stop transfer instructions to the transfer agent for the
Merger Consideration, consistent with the terms of such Affiliate Letters.
(b) Excel shall file the reports required to be filed by it under the
Exchange Act and the rules and regulations adopted by the SEC thereunder, and
it will take such further action as any Affiliate of New Plan may reasonably
request, all to the extent required from time to time to enable each Affiliate
to sell (subject to Section 7.22 hereof) the Merger Consideration received by
such Affiliate in the Merger without registration under the Securities Act
pursuant to (i) Rule 145(d) under the Securities Act, as such Rule may be
amended from time to time, or (ii) any successor rule or regulation hereafter
adopted by the SEC.
7.11. Expenses. Subject to Section 9.5 and whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, in particular (a) the filing fees in connection with the filing
of the Form S-4 and Proxy Statement/Prospectus with the SEC and (b) the
expenses incurred in connection with printing and mailing the Form S-4 and the
Proxy Statement/Prospectus, shall be shared equally by New Plan and Excel.
7.12. Indemnification.
(a) In the event of any threatened or actual claim, action, suit, proceeding
or investigation, whether civil, criminal or administrative, including,
without limitation, any such claim, action, suit, proceeding or investigation
in which any person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a trustee, officer,
employee, fiduciary or agent of New Plan (the "Indemnified Parties") is, or is
threatened to be, made a party based in whole or in part on, or arising in
whole or in part out of, or pertaining to (i) the fact that he, she or it is
or was a trustee, officer, employee or agent of New Plan, or is or was serving
at the request of New Plan as a trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (ii)
this Agreement or any of the transactions contemplated hereby, whether in any
case asserted or arising before or after the Effective Time (and including
with respect to any matters occurring at the Effective Time), the parties
hereto agree to cooperate and use their reasonable best efforts to defend
against and respond thereto. It is understood and agreed that New Plan shall
indemnify and hold harmless, and after the Effective Time Excel shall
indemnify and hold harmless, as and to the full extent permitted by applicable
law or the Declaration of Trust of New Plan, each Indemnified Party against
any losses, claims, damages, liabilities, costs, expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
in connection with any such threatened or actual claim, action, suit,
proceeding or investigation, and in the event of any such threatened or actual
claim, action, suit, proceeding or investigation (whether asserted or arising
before or after the Effective Time (and including with respect to any matters
occurring at the Effective Time)); (i) New Plan, and Excel after the Effective
Time, shall promptly pay expenses in advance of the final disposition of any
claim, suit, proceeding or investigation to each Indemnified Party to the full
extent permitted by law, (ii) the Indemnified Parties may retain counsel
satisfactory to them, provided such counsel is reasonably satisfactory to
Excel, and New Plan, and Excel after the Effective Time, shall promptly pay
all fees and expenses of such counsel for the Indemnified Parties after
reasonably detailed statements therefor are received, and (iii) New Plan and
Excel will use their respective reasonable best efforts to assist in the
vigorous defense of any such matter; provided, that neither New Plan nor Excel
shall be liable for any settlement effected without its prior written consent
(which consent shall not be unreasonably withheld or delayed); and provided
further that Excel shall have no obligation hereunder to any Indemnified Party
when and if a court of competent jurisdiction shall ultimately determine, and
such determination shall have become final and non-appealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. The Indemnified Parties as a group may retain
only one law firm to represent them with respect to any single action unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties. Any Indemnified Party wishing to claim indemnification under this
Section 7.12, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify New Plan
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and, after the Effective Time, Excel, thereof, provided that the failure to so
notify shall not affect the obligations of New Plan or Excel except to the
extent such failure to notify materially prejudices such party.
(b) Excel agrees that all rights to indemnification existing in favor, and
all limitations on the personal liability, of the Indemnified Parties provided
for in New Plan's Declaration or Trust or similar organizational documents as
in effect as of the Effective Time with respect to matters occurring at or
prior to the Effective Time are contract rights and shall survive the Merger
and shall continue in full force and effect thereafter.
(c) From and after the Effective Time, Excel and the Surviving Trust shall
and Excel shall cause the Surviving Trust to keep in effect provisions in
their respective charters and Declaration of Trust providing for exculpation
of director liability and indemnification of Trustees, directors, officers,
employees and agents at New Plan to the extent that such persons are entitled
thereto thereunder on the date hereof (or, if more favorable to such persons,
at the Effective Time as contemplated by Articles 2 and 3 hereof), which
provisions shall not be amended, repealed or otherwise modified for a period
of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of any such individuals unless such modification
is required by law.
(d) For a period of six years after the Effective Time, the Surviving Trust
shall cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by New Plan (provided that the
Surviving Trust may substitute therefor policies of at New Plan the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time; provided, however, that in no event shall
the Surviving Trust be required to expend pursuant to this Section 7.12(b)
more than an amount equal to 200% of current annual premiums paid by New Plan
for such insurance. In addition, Excel shall, from and after the Effective
Time, carry directors' and officers' liability insurance which is no less
favorable than the foregoing.
(e) In the event that Excel or the Surviving Trust or any of its respective
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each such case the
successors and assigns of such entity shall assume the obligations set forth
in this Section 7.12, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each Indemnified Party.
(f) From and after the Effective Time, Excel guarantees all obligations of
the Surviving Trust under this Section 7.12. This Section 7.12 is intended to
be for the benefit of, and to grant third party rights to, the Indemnified
Parties, their heirs and personal representatives and shall be binding on
Excel, the Surviving Trust and their respective representatives, successors
and assigns. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 7.12 and Excel and the Surviving Trust
each acknowledges and agrees that each Indemnified Party would suffer
irreparable harm in the event of and that no adequate remedy at law exists for
a breach of such covenants.
(g) To the extent reasonably requested by New Plan, (i) Excel will amend its
Bylaws to make more favorable to the persons covered thereby the
indemnification, exculpation and similar provisions of the Bylaws and (ii) if
requested reasonably in advance of the effectiveness of the Form S-4, adopt
and include on Schedule 3.1 and in the Excel Charter Amendment, amendments to
the Charter to make more favorable to the persons covered thereby the
indemnification, exculpation and similar provisions of the Charter.
7.13. Employees.
(a) Subject to considerations relating to the particular geographic region
in which the employee is located, it is the intent of the parties hereto that
the employees of New Plan employed by the Surviving Trust after the Effective
Time (the "Former New Plan Employees") shall in general receive credit with
respect to each employee benefit plan, program, policy or arrangement of the
Surviving Trust or Excel, for service with New Plan or any of its Subsidiaries
(as applicable) for purposes of determining eligibility to participate
(including waiting periods, and without being subject to any entry date
requirement after the waiting period has been satisfied), vesting (as
applicable) and entitlement to benefits.
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(b) For purposes of this Section 7.13, the term "employees" shall mean all
current employees of New Plan and its Subsidiaries (including those on
disability or approved leave of absence, paid or unpaid).
7.14. Reorganization. Neither Excel nor New Plan nor any of their respective
Subsidiaries or other Affiliates shall take any action, or omit to take any
action if such action taken or such omission would jeopardize qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the
Code.
7.15. Advice of Changes. Excel and New Plan shall each promptly advise the
other party orally and in writing to the extent it has knowledge of any change
or event having, or which, insofar as can reasonably be foreseen, could
reasonably be expected to have a New Plan Material Adverse Effect or Excel
Material Adverse Effect, as the case may be, or a material adverse effect on
the ability of the conditions set forth in Article 8 to be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties (or remedies with respect
thereto) or the conditions to the obligations of the parties under this
Agreement.
7.16. REIT Status. Notwithstanding anything to the contrary set forth in
this Agreement, nothing in this Agreement shall prohibit New Plan or Excel
from taking, and New Plan and Excel hereby agree, respectively, to take any
action at any time or from time to time that in the reasonable judgment of the
Board of Trustees of New Plan or Board of Directors of Excel, as the case may
be, upon advice of counsel, is legally necessary for New Plan or Excel, as the
case may be, to maintain its qualification as REIT or to eliminate or reduce
income or excise taxes under Sections 856-860 and 4981 of the Code (and
similar provisions of state or local tax law) for any period or portion
thereof ending on or prior to the Effective Time, including without
limitation, making dividend or distribution payments to shareholders of New
Plan or stockholders of Excel, as the case may be. Following the Merger, Excel
shall use its best efforts to take any such actions as may be necessary to
maintain New Plan's status as a REIT for any period or portion thereof ending
on or prior to the Effective Time (including, without limitation, the mailing
of stockholder demand letters as required by Treasury Regulations Section
1.857-8).
7.17. Governance. Excel's Board of Directors shall take all action necessary
to cause the number of directors comprising the Board of Directors of Excel at
the Effective Time to be increased by eight Directors to a total of fifteen
Directors and shall take all such action necessary to cause the Trustees of
New Plan immediately prior to the Effective Time to be selected as Directors
of Excel at the Effective Time in accordance with Section 3.1 and Schedule
3.1. Prior to the Merger, the Board of Directors of Excel will designate a
four-person Investment Committee which, as of the Effective Time, will consist
of the four Directors with an (I) next to their names in Schedule 3.1. Under
Excel's Bylaws as in effect at the Effective Time, subject to the requirements
of Board of Directors or stockholder approval for certain matters under the
MGCL, the Investment Committee will have the power and authority (i) but only
by the consent of at least three members, to approve on behalf of Excel any
acquisition or disposition with a purchase price (taking into account purchase
money financing and assumption of existing mortgage indebtedness) of less than
five percent (5%) of the total assets (before accumulated depreciation and
amortization) of Excel and its consolidated Subsidiaries determined in
accordance with generally accepted accounting principles at the time such
transaction is entered into and (ii) also to approve any such transaction in
an amount in excess of five percent (5%), but less than ten percent (10%), of
total assets (before accumulated depreciation and amortization) of Excel and
its consolidated subsidiaries, determined in accordance with generally
accepted accounting principles, by the consent of all four members of the
Investment Committee and two additional members of the Board of Directors of
Excel. Any such foregoing consent shall be valid whether or not it is obtained
at a formal meeting. The Investment Committee shall not have the power or
authority to approve any refinancing, unsecured financing or new financing,
other than purchase money financing or debt assumed as described above. At the
Effective Time, Sabin shall be appointed to serve as Chairman of the
Investment Committee. In addition, all committee members of Excel committees,
other than as contemplated with respect to the Investment Committee as
contemplated above, shall resign or be removed as of the Effective Time.
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7.18. Corporate Headquarters. The Surviving Trust and Excel will have their
corporate headquarters in New York, New York, with operational headquarters in
both New York, New York, and San Diego, California, following the Merger. The
office of the Chairman and Chief Executive Officer will be located in New
York, New York.
7.19. Amendments to Excel DRIP. The Board of Directors of Excel will take
all action necessary in accordance with applicable law to cause the following
to occur with respect to the Excel Dividend Reinvestment Plan (the "Excel
DRIP"): (a) file and have declared effective at or prior to the Effective Time
a registration statement (the "DRIP Registration Statement") covering the
issuance and sale of 5,000,000 shares of Excel Common Stock under the Excel
DRIP as amended in accordance with this Section 7.19; (b) include with the
letter of transmittal sent pursuant to Section 4.2 hereof, the prospectus
included in the DRIP Registration Statement for the Excel DRIP as so amended
and an enrollment form with instructions as to how to become a participant in
the Excel DRIP; (c) amend the Excel DRIP to (i) provide that at the time of
effectiveness of the DRIP Registration Statement all dividends reinvested
shall be reinvested as new shares of Excel at 95% of the market price as
defined in the New Plan DRIP and (ii) permit any participants in the Excel
DRIP to purchase shares of Excel Common Stock at 100% of "market value" as so
defined and as is currently provided as to New Plan Common Shares in the New
Plan DRIP (collectively (i) and (ii), the "Excel DRIP Amendments").
7.20. Legacy Arrangements. Excel shall use its reasonable best efforts to
enter into, and cause Legacy to enter into as soon as reasonably practical but
not later than June 1, 1998: (i) an amendment to the Administrative Services
Agreement dated March 31, 1998 substantially in the form of Exhibit D-1 hereto
(the "Legacy Services Amendments"), and (ii) an agreement between Excel and
Legacy with respect to the matters set forth as Exhibit D-2 hereto in form and
substance reasonably satisfactory to New Plan (the "Legacy Agreement").
7.21. Consulting Agreement. Excel shall enter into a consulting agreement
with William Newman to become effective as of the Effective Time which shall
contain the terms set forth on Exhibit E hereto and such other terms not
inconsistent therewith which are reasonably acceptable to Excel and Mr. Newman
(the "Newman Consulting Agreement").
7.22. No Sale Agreements. New Plan and Excel shall each use their respective
reasonable best efforts to obtain from their respective executive officers and
directors an agreement in favor of Excel, effective as of the Effective Time,
restricting their right to sell their respective shares of Excel Common Stock,
including shares received in the Merger, for a period of 180 days following
the Effective Time in a form reasonably acceptable to New Plan and Excel.
7.23. Dividends. Excel and New Plan agree that it will be the policy of the
Board of Directors of Excel effective as of the Effective Time subject to the
exercise of its fiduciary duties to the Excel stockholders under applicable
law that cash dividends on the Excel Common Stock for the first year following
the Effective Time will be payable at the annual rate equal to the greater of
(a) $1.60 with anticipated minimum increases of $.0025 per share per quarter
until the current quarterly dividend (expressed as an annual rate) is $1.67
per share and (b) the amount necessary to maintain Excel's status as a REIT
and to avoid or reduce income and excise taxes under the Code (and similar
provisions of state and local tax law).
7.24. Executive Employment Agreements. New Plan and Excel shall, each acting
reasonably, establish the terms of employment with Excel and the Surviving
Trust following the Effective Time of such of their respective officers as are
jointly agreed by New Plan and Excel; such terms will be reflected in written
employment agreements substantially in the form of composite Exhibit F hereto,
provided, however, that the level of salary and bonus for any such individual
will not be less than his salary as of the date hereof and last year's bonus,
respectively. New Plan and Excel each acting reasonably shall establish the
fringe benefits for all such individuals which are consistent in the aggregate
with the fringe benefits currently enjoyed by such individuals as a group. The
provisions of this Section 7.24 do not apply to Laubich or Sabin whose
employment arrangements are set forth on Exhibit A-1 and A-2 hereto.
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7.25. Certain Agreements. Without the prior written consent of New Plan,
Excel shall not amend, waive or fail to fully enforce any provision of or
permit or suffer to occur any activity prohibited by, the Support Agreement or
Legacy Intercompany Amendment.
ARTICLE 8.
Conditions
8.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and the other
transactions contemplated hereby to occur at the Effective Time shall be
subject to the fulfillment on or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, by the
parties hereto, to the extent permitted by applicable law:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the New Plan Required Vote, with respect to the Merger and
Trust Amendments, and by the Excel Required Vote, with respect to the Excel
Stockholder Matters.
(b) None of the parties hereto shall be subject to any order, ruling or
injunction of a court of competent jurisdiction, and there shall not have
been enacted any statute or regulation, which prohibits or makes illegal
the consummation of the transactions contemplated by this Agreement. In the
event any such order, ruling or injunction shall have been issued, each
party agrees to use its reasonable efforts to have any such order, ruling
or injunction lifted, stayed or reversed.
(c) The Form S-4 shall have become effective and all necessary state
securities law or "Blue Sky" permits or approvals required to carry out the
transactions contemplated by this Agreement shall have been obtained and no
stop order with respect to any of the foregoing shall be in effect and no
proceedings for that purpose shall have been initiated or, to the knowledge
of Excel or New Plan, threatened by the SEC.
(d) Excel shall have obtained the approval for the listing of the Excel
Common Stock and Excel Series D Depositary Shares issuable in the Merger or
upon exercise of the New Plan Options assumed by Excel hereunder, in each
case on the NYSE, subject to official notice of issuance.
(e) All consents, authorizations, order and approvals of (or filings of
registrations with) any governmental commission, board, other regulatory
body or third parties required in connection with the execution, delivery
and performance of this Agreement shall have been obtained or made, except
for filings in connection with the Merger and any other documents required
to be filed after the Effective Time and except where the failure to have
obtained or made any such consent, authorization, order, approval, filing
or registration would not have been material adverse effect on the
business, results of operations or financial condition of Excel or New Plan
(together with their respective Subsidiaries), taken as a whole, following
the Effective Time.
8.2. Conditions to Obligations of New Plan to Effect the Merger. The
obligation of New Plan to effect the Merger and the other transactions
contemplated hereby to occur at the Effective Time shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions,
unless waived by New Plan:
(a) Excel shall have performed in all material respects its covenants and
agreements contained in this Agreement required to be performed at or prior
to the Effective Time and the representations and warranties of Excel
contained in this Agreement that are qualified as to an Excel Material
Adverse Effect shall be true and correct and any of such representations
and warranties that are not so qualified shall be true and correct except
where the failure to be so true and correct individually or in the
aggregate would not have an Excel Material Adverse Effect, in each case, as
of the Effective Time as if made as of the Effective Time (except to the
extent that the representation or warranty is expressly limited by its
terms to another date), and New Plan shall have received a certificate of
the President or a Vice President of Excel on behalf of Excel, dated the
Closing Date, certifying to such effect.
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(b) New Plan shall have received the opinion dated the Closing Date of
Altheimer & Gray or another nationally recognized law firm selected by New
Plan, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that New Plan and Excel will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering its opinion such firm may rely on representations of New Plan,
Excel and others. Excel and its counsel shall cooperate with such firm in
its investigation as to factual matters.
(c) New Plan shall have received the opinion of Latham & Watkins dated
the Closing Date, to the effect that, commencing with its taxable year
ended December 31, 1993, Excel was organized in conformity with the
requirements for qualification and taxation as a REIT under Section 856 of
the Code, and its method of operation has enabled it and will enable it to
continue to meet the requirements for qualification and taxation as a REIT
under the Code. In rendering its opinion, Latham & Watkins may rely on
representations of Excel and others.
(d) New Plan shall have received the (i) opinion of Ballard Spahr Andrews
& Ingersoll, LLP, which is acting as Maryland counsel to Excel, to the
effect that assuming due authorization and approval of the Merger and the
Articles of Merger by New Plan and its shareholders, the effectiveness of
the Merger under Massachusetts law and other matters customarily assumed in
opinions with respect to transactions such as the Merger, upon filing of
the Articles of Merger with the SDAT, the Merger will be effective as a
matter of Maryland law, and as to such other matters of Maryland law as are
customary in a transaction such as the Merger and (ii) the opinion of
Goodwin, Procter & Hoar, LLP, which is acting as Massachusetts counsel to
New Plan to the effect that, assuming the due authorization and approval of
the Merger and the Articles of Merger by Excel and by Sub, the
effectiveness of the Merger under Maryland law and other matters
customarily assumed in opinions with respect to transactions such as the
Merger, upon filing of the Certificate of Amendment and Merger with the
Secretary of the Commonwealth of Massachusetts in accordance with this
Agreement, the Merger will be effective under the Declaration of Trust of
New Plan and Massachusetts law, and as to such other matters of
Massachusetts law as are customary in a transaction such as the Merger.
(e) New Plan shall have received a "comfort" letter from Coopers &
Lybrand L.L.P., dated the Closing Date, with respect to the financial
statements of Excel included in the Proxy Statement/Prospectus,
substantially in the form described in Section 7.4.
(f) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Excel and its Subsidiaries, taken as a whole, that would have
or would be reasonably likely to have an Excel Material Adverse Effect
other than any such change that results from a decline or deterioration in
general economic conditions or in conditions in the real estate markets in
which either New Plan or Excel operate and that affects both New Plan and
Excel in a substantially similar manner.
(g) The Charter of Excel shall have been amended as provided in Section
3.1 hereof, and the Bylaws of Excel shall have been amended as provided in
Section 3.2 hereof, and such amendments shall be in full force and effect.
(h) The Board of Directors of Excel shall have been reconstituted as
provided in Section 3.3 hereof and the officers of Excel shall have been
appointed in accordance with Section 3.4 hereof.
(i) Sabin shall be serving as President of Excel as of the Effective Time
in accordance with the Employment Agreement attached as Exhibit A-2 hereto.
(j) Excel shall have executed and delivered the Newman Consulting
Agreement.
(k) The Excel DRIP Amendments shall be effective, the Legacy Intercompany
Amendment shall have remained in full force and effect without waiver or
modification of any of its provisions and the Legacy Services Amendment and
Legacy Agreement shall each have been executed and delivered by Excel and
Legacy and be in full force and effect.
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8.3. Conditions to Obligation of Excel to Effect the Merger. The obligations
of Excel to effect the Merger and the transactions contemplated hereby to
occur at the Effective Time shall be subject to the fulfillment at or prior to
the Effective Time of the following conditions, unless waived by Excel:
(a) New Plan shall have performed in all material respects its covenants
and agreements contained in this Agreement required to be performed at or
prior to the Effective Time and the representations and warranties of New
Plan contained in this Agreement that are qualified as to a New Plan
Material Adverse Effect shall be true and correct and any such
representations and warranties that are not so qualified shall be true and
correct except where the failure to be true and correct individually or in
the aggregate would not have a New Plan Material Adverse Effect in each
case, as of the Effective Time as if made as of the Effective Time (except
to the extent that the representation or warranty is expressly limited by
its terms to another date), and Excel shall have received a certificate of
the President or a Vice President of New Plan, on behalf of New Plan, dated
the Closing Date, certifying to such effect.
(b) Excel shall have received the opinion dated the Closing Date of
Latham & Watkins or another nationally recognized law firm selected by
Excel, to the effect that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, and that Excel and New Plan will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. In
rendering its opinion such firm may rely on representations of New Plan,
Excel and others. New Plan and its counsel shall cooperate with such firm
in its investigation as to factual matters.
(c) Excel shall have received the opinion of Altheimer & Gray dated the
Closing Date, to the effect that, commencing July 31, 1993, New Plan was
organized in conformity with the requirements for qualification and
taxation as a REIT under Section 856 of the Code, and its method of
operation has enabled it to meet the requirements for qualification and
taxation as a REIT under the Code. In rendering its opinion, Altheimer &
Gray may rely on representations of New Plan and others.
(d) Excel shall have received the opinion of Ballard Spahr Andrews &
Ingersoll, LLP, which is acting as Maryland counsel to Excel, to the effect
that assuming due authorization and approval of the Merger and the Articles
of Merger by New Plan and its shareholders, the effectiveness of the Merger
under Massachusetts law and other matters customarily assumed in opinions
with respect to transactions such as the Merger, upon filing of the
Articles of Merger with the SDAT, the Merger will be effective as a matter
of Maryland law, and as to such other matters of Maryland law as are
customary in a transaction such as the Merger.
(e) Excel shall have received a "comfort" letter from Coopers & Lybrand
L.L.P., dated the Closing Date, with respect to the financial statements of
New Plan included in the Proxy Statement/Prospectus, substantially in the
form described in Section 7.4.
(f) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of New Plan and its Subsidiaries, taken as a whole, that would
have or would be reasonably likely to have a New Plan Material Adverse
Effect other than any such change that results from a decline or
deterioration in general economic conditions or in conditions in the real
estate markets in which either New Plan or Excel operate and that affects
both New Plan and Excel in a substantially similar manner.
ARTICLE 9.
Termination
9.1. 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 New Plan Shareholders Meeting or Excel Stockholders Meeting by the
mutual written consent of Excel and New Plan.
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9.2. Termination by Either Excel or New Plan. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Trustees
of New Plan or the Board of Directors of Excel before or after the New Plan
Shareholders Meeting or Excel Stockholders Meeting if:
(a) the Merger shall not have been consummated by December 31, 1998
provided however that the right to terminate this Agreement under this
clause (a) shall not be available to the party whose failure to fulfill any
covenant or other obligation under this Agreement has caused the failure of
the Merger to occur on or before such date; or
(b) a meeting of New Plan's shareholders shall have been duly convened
and held and the approval of New Plan's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof; or
(c) a meeting of Excel's stockholders shall have been duly convened and
held and the approval of Excel's stockholders required by Section 8.1(a)
shall not have been obtained at such meeting or at any adjournment thereof;
or
(d) a United States federal or state court of competent jurisdiction or
United States federal or state governmental, regulatory or administrative
agency or commission shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and non-appealable, provided, that the party seeking to
terminate this Agreement pursuant to this clause (d) shall have used its
best efforts to remove or appeal such order, decree, ruling or injunction
or there shall have been enacted any statute or regulation which makes
consummation of the Merger illegal.
9.3. Termination by New Plan. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the New Plan Shareholders Meeting, by action of the Board of Trustees of
New Plan:
(a) in accordance with Section 7.1(b); provided, however, that in order
for the termination of this Agreement pursuant to this Section 9.3(a) to be
deemed effective, New Plan shall have complied with all provisions
contained in Section 7.1, including the payment of all amounts due under
Section 9.5; or
(b) if Excel shall knowingly and materially breach Section 7.2, including
as a result of any action by the persons or entities referred to in the
first sentence of Section 7.2(a); or
(c) if there has been a breach by Excel of any representation or warranty
contained in this Agreement which is qualified by Excel Material Adverse
Effect or if not so qualified which individually or in the aggregate with
any such other breaches, would have or would be reasonably likely to have
an Excel Material Adverse Effect, which breach is not curable or, if
curable, is not cured within ten (10) business days after written notice of
such breach is given by New Plan to Excel; or
(d) if there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Excel, which breach
is not curable or, if curable, is not cured within ten (10) business days
after written notice of such breach is given by New Plan to Excel; or
(e) if Sabin shall not be serving as both the Chairman and Chief
Executive Officer of Excel.
Notwithstanding the foregoing, any termination pursuant to Section 9.3(a)
shall only be effective if, simultaneously with such termination, all sums, if
any, that New Plan is required to pay to Excel or deposit with the escrow
agent pursuant to Section 9.5 have been paid or deposited in immediately
available funds.
9.4. Termination by Excel. 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 the Excel Stockholders Meeting, by action of the Board of
Directors of Excel:
(a) in accordance with Section 7.2(b); provided, however, that in order
for the termination of this Agreement pursuant to this Section 9.4(a) to be
deemed effective, Excel shall have complied with all provisions contained
in Section 7.2, including the payment of all amounts due under Section 9.5;
or
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(b) if New Plan shall knowingly and materially breach Section 7.1,
including as a result of any action by the person or entities referred to
in the first sentence of Section 7.1(a); or
(c) if there has been a breach by New Plan of any representation or
warranty contained in this Agreement which is qualified as to New Plan
Material Adverse Effect or if not so qualified which individually or in the
aggregate with any such other breaches, would have or would be reasonably
likely to have a New Plan Material Adverse Effect, which breach is not
curable or, if curable, is not cured within ten (10) business days after
written notice of such breach is given by Excel to New Plan; or
(d) if there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of New Plan, which
breach is not curable or, if curable, is not cured within ten (10) business
days after written notice of such breach is given by Excel to New Plan.
Notwithstanding the foregoing, any termination pursuant to Section 9.4(a)
shall only be effective if, simultaneously with such termination, all sums, if
any, that Excel is required to pay to New Plan or deposit with the escrow
agent pursuant to Section 9.5 have been paid or deposited in immediately
available funds.
9.5. Certain Fees and Expenses Upon Effect of Termination and Abandonment.
(a) If this Agreement shall be terminated (i) pursuant to Section 9.3(a) or
9.4(b), then New Plan will pay Excel (provided New Plan was not entitled to
terminate this Agreement at the time of such termination) a fee equal to the
Break-up Fee (as defined below) or (ii) pursuant to Section 9.4(c) or 9.4(d),
then New Plan will pay Excel (provided New Plan was not entitled to terminate
this Agreement at the time of such termination) an amount equal to the Break-
Up Expenses (as defined below).
(b) If this Agreement shall be terminated (i) pursuant to Section 9.4(a) or
9.3(b), then Excel will pay New Plan (provided Excel was not entitled to
terminate this Agreement at the time of such termination) a fee equal to the
Break-up Fee or (ii) pursuant to Sections 9.3(c) or 9.3(d), then Excel will
pay New Plan (provided Excel was not entitled to terminate this Agreement at
the time of such termination) an amount equal to the Break-Up Expenses.
(c) If the Merger is not consummated (other than due to the termination of
this Agreement pursuant to Section 9.1, 9.2(c) or 9.3(b) or Excel's failure to
perform its obligations under this Agreement in such a manner so as to entitle
New Plan to terminate this Agreement pursuant to Section 9.3(c) or 9.3(d)) and
at the time of the termination of this Agreement a New Plan Takeover Proposal
has been received by New Plan, and either prior to the termination of this
Agreement or within twelve (12) months thereafter New Plan enters into any
written New Plan Acquisition Agreement which is subsequently consummated
(whether or not such New Plan Acquisition Agreement is related to the New Plan
Takeover Proposal which had been received at the time of the termination of
this Agreement), then New Plan shall pay the Break-Up Fee to Excel. If the
Merger is not consummated (other than due to the termination of this Agreement
pursuant to Section 9.1, 9.2(b) or 9.4(b) or New Plan's failure to perform its
obligations under this Agreement in such a manner so as to entitle Excel to
terminate this Agreement pursuant to Section 9.4(c) or 9.4(d)) and at the time
of the termination of this Agreement an Excel Takeover Proposal has been
received by Excel, and either prior to the termination of this Agreement or
within twelve (12) months thereafter Excel enters into any written Excel
Acquisition Agreement which is subsequently consummated (whether or not such
Excel Acquisition Agreement is related to the Excel Takeover Proposal which
had been received at the time of the termination of this Agreement), then
Excel shall pay the Break-Up Fee to New Plan. Any and all amounts to be paid
pursuant to this Section 9.5 shall be paid, except as provided in 9.5(d), by
New Plan to Excel or Excel to New Plan (as applicable), immediately upon the
occurrence of the event giving rise to such fee in immediately available
funds.
(d) As used in this Agreement, "Break-Up Fee" shall be an amount equal to
the lesser of (i) $32,500,000 plus Break-Up Expenses (the "Base Amount") and
(ii) the maximum amount that can be paid to Excel or New Plan, as applicable,
without causing it to fail to meet the requirements of Sections 856(c)(2) and
(3) of the Code (the "REIT Income Requirements") determined as if the payment
of such amount did not constitute income
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described in Sections 856(c)(2) and 856(c)(3) of the Code ("Qualifying
Income"), as determined by independent accountants to the party hereto which
becomes entitled to the Break-Up Fee (the "Fee Recipient"). Notwithstanding
the foregoing, in the event the Fee Recipient receives a letter from outside
counsel (the "Break-Up Fee Tax Opinion") or ruling from the IRS (the "IRS Fee
Ruling") to the effect that the Fee Recipient's receipt of the Base Amount
would either constitute Qualifying Income or would otherwise not cause the Fee
Recipient to fail to meet the REIT Income Requirements, the Break-Up Fee shall
be an amount equal to the Base Amount and shall be payable in full within
three business days after receipt of such opinion or IRS Ruling. The
obligation of the party required to pay the Break-Up Fee to pay any unpaid
portion of the Break-Up Fee not payable by reason of clause (ii) above shall
terminate five years from the date of this Agreement. In the event that the
Fee Recipient is not able to receive the full Base Amount by reason of clause
(ii), the other party shall place the unpaid portion of the Base Amount in
escrow by wire transfer within three days of termination (except as otherwise
provided in Section 9.3), and the escrow agent shall not release any portion
thereof to the Fee Recipient, and such portion shall not be payable, except in
accordance with, and unless and until the other party receives, either one or
a combination of the following: (iii) a letter from the Fee Recipient's
independent accountants indicating the maximum amount that can be paid at that
time to the Fee Recipient without causing the Fee Recipient to fail to meet
the REIT Income Requirements or (iv) a Break-Up Fee Tax Opinion or IRS Fee
Ruling, in either of which events the escrow agent or the other party shall
pay to the Fee Recipient the lesser of the unpaid portion of the Base Amount
or in the case of clause (iii), the maximum amount stated in the letter
referred to in clause (iii) above. Each of New Plan and Excel agrees to amend
this Section 9.5 at the request of the Fee Recipient in order to (x) maximize
the portion of the Base Amount that may be paid to the Fee Recipient hereunder
without causing the Fee Recipient to fail to meet the REIT Income Requirements
or (y) improve the Fee Recipient's chances of securing a Break-Up Fee Tax
Opinion or IRS Fee Ruling, provided that no such amendment may result in any
additional cost or expense to the other party other than reasonable attorneys'
fees. Amounts remaining in escrow after the obligation of a party to pay the
Break-Up Fee is satisfied or otherwise terminates shall be released to the
party making such escrow deposit.
(e) The "Break-Up Expenses" payable to Excel or New Plan, as the case may be
(the "Expenses Recipient"), shall be an amount equal to the lesser of (i)
$2,500,000 and (ii) the maximum amount that can be paid to the Expenses
Recipient without causing it to fail to meet the REIT Income Requirements
determined as if the payment of such amount did not constitute Qualifying
Income, as determined by independent accountants to the Expenses Recipient.
Notwithstanding the foregoing, in the event the Expenses Recipient receives a
letter from outside counsel (the "Break-Up Expenses Tax Opinion") or a ruling
from the IRS (the "IRS Expense Ruling") to the effect that the Expenses
Recipient's receipt of the Break-Up Expenses would either constitute
Qualifying Income or would otherwise not cause the Expenses Recipient to fail
to meet the REIT Income Requirements, the Break-Up Expenses shall be
determined without regard to clause (ii) above. The obligation of Excel or New
Plan, as applicable ("Payor"), to pay any unpaid portion of the Break-Up
Expenses not payable by reason of clause (ii) above shall terminate five years
from the date of this Agreement. In the event that the Expenses Recipient is
not able to receive the full Break-Up Expenses by reason of clause (ii) above,
the Payor shall place the unpaid amount of the Break-Up Expenses in escrow,
and the escrow agent shall not release any portion thereof to the Expenses
Recipient, and such portion shall not be payable, except in accordance with,
and unless and until the Payor receives any one or a combination of the
following: (iii) a letter from the Expenses Recipient's independent
accountants indicating the maximum amount that can be paid at that time to the
Expenses Recipient without causing the Expenses Recipient to fail to meet the
REIT Income Requirements or (iv) a Break-Up Expenses Tax Opinion or IRS
Expense Ruling, in either of which events the escrow agent or the Payor shall
pay to the Expenses Recipient the lesser of the unpaid Break-Up Expenses or,
in the case of clause (iii), the maximum amount stated in the letter referred
to in clause (iii) above. Amounts remaining in escrow after the obligation of
a party to pay the Break-Up Expenses is satisfied or otherwise terminates
shall be released to the party making such escrow deposit.
(f) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 9, this Agreement shall forthwith become void
without any liability hereunder and all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this
Section 9.5 and Section 7.12 and
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except for the provisions of Sections 10.3, 10.4, 10.5, 10.6, 10.7, 10.9,
10.10, 10.13, and 10.14, provided that nothing in this paragraph (f) shall
relieve any party from liability for a wilful and material breach of this
Agreement. In the event either party is required to file suit to seek all or a
portion of the Break-up Fee and/or Break-up Expenses, and it ultimately
succeeds, it shall be entitled to all expenses, including attorneys' fees and
expenses, which it has incurred in enforcing its rights hereunder.
9.6. Investigation. The right of any party hereto to terminate this
Agreement pursuant to this Article 9 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any party
hereto, any person controlling any such party or any of their respective
employees, officers, trustees, directors, agents, representatives or advisors,
whether prior to or after the execution of this Agreement.
ARTICLE 10.
General Provisions
10.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate as of the
Effective Time and shall not survive the Merger; provided, however, that the
agreements contained in Article 4, the penultimate sentence of Section 7.5 and
Sections 7.10, 7.12 and 7.13, and this Article 10 shall survive the Merger and
nothing herein contained shall limit any covenant or agreement which
contemplates performance at or after the Effective Time.
10.2. Notices. Any notice required to be given hereunder shall be in writing
and shall be sent by facsimile transmission (confirmed by any of the methods
that follow), overnight courier service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and first-class
postage prepaid) and addressed as follows:
If to Excel: Gary B. Sabin
Chairman and Chief Executive Officer
Excel Realty Trust, Inc.
1955 Via Del Campo, Suite 110
San Diego, California 92127
Facsimile: (619) 485-8530
With a copy to: Scott N. Wolfe, Esq.
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101
Facsimile: (619) 696-7419
If to New Plan: Arnold Laubich
President and Chief Executive
Officer
New Plan Realty Trust
1120 Avenue of the Americas
New York, New York 10036
Facsimile: (212) 869-9585
With a copy to: Norman M. Gold, Esq.
Altheimer & Gray
10 South Wacker Dr., Suite 4000
Chicago, IL 60606
Facsimile: (312) 715-4800
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so delivered or delivery is refused.
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10.3. Assignment; Binding Effect; Benefit. 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 shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article 9 and Sections 7.12, 7.13, and 7.24 (collectively, the "Third Party
Provisions"), nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement. The Third
Party Provisions may be enforced by the beneficiaries thereof.
10.4. Entire Agreement. This Agreement, the Exhibits, the New Plan
Disclosure Letter and the Excel Disclosure Letter and any documents delivered
by the parties in connection herewith constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto except that the Confidentiality Agreement (as hereinafter defined)
shall remain in effect and, except as inconsistent with the terms of this
Agreement, shall be binding upon New Plan and Excel in accordance with its
terms.
10.5. Confidentiality. Except to the extent that any of the provisions of
that certain confidentiality agreement dated March 26, 1998 between Excel and
New Plan (the "Confidentiality Agreement") are inconsistent with this
Agreement, in which case the terms of this Agreement shall govern and
supersede such provisions, the parties hereto acknowledge and agree that the
Confidentiality Agreement remains in full force and effect and shall survive
any termination of this Agreement.
10.6. Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors or Board of Trustees, at
any time before or after receipt of the approvals to be obtained at the New
Plan Shareholders Meeting or Excel Stockholders Meeting in accordance with
this Agreement and prior to the filing of the Articles of Merger with the
SDAT; provided, however, that after any such approval is obtained, no
amendment shall be made which by law requires the further approval of
stockholders or shareholders, as the case may be, without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
10.7. Governing Law. This Agreement shall be governed, by and construed in
accordance with the laws of the State of New York without regard to its rules
of conflict of laws, except that the validity of the Merger shall be governed
by the MGCL in the case of Excel and Sub, and by Massachusetts law in the case
of New Plan. Each of New Plan, Sub and Excel hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
State of New York (the "New York Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and
agrees not to commence any litigation relating thereto except in such courts),
waives any objection to the laying of venue of any such litigation in the New
York Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum. The
parties hereby waive any right to trial by jury in connection with this
Agreement and the transactions contemplated hereby.
10.8. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships, and vice
versa.
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10.11. Extension; Waiver. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other party, (b) waive any inaccuracies in the
representations or warranties of the other party contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 10.6, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. Except as
provided in this Agreement, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of any provision
hereunder shall not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
10.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.13. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any New York Court, this being
in addition to any other remedy to which they are entitled at law or in
equity.
10.14. Interpretation and Certain Definitions. As used in this Agreement:
(a) "Subsidiary" when used with respect to any party means any corporation,
partnership, limited liability company, joint venture, business trust or other
entity, (i) of which such party directly or indirectly owns or controls at New
Plan a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization or (ii) as to which such party owns, directly or indirectly, a
majority of the equity interests therein it being understood that Excel
Development Corporation is a "subsidiary" of Excel for all purposes of this
Agreement; (b) "knowledge" or "best knowledge" of any person means the actual
knowledge of such person or of such person's directors and executive officers
after reasonable inquiry; and (c) "including" means "including without
limitation" and the words "herein" and "hereof" mean "in this Agreement" and
"of this Agreement".
10.15. Limitation of Liability. This agreement and all documents,
agreements, understandings and arrangements relating to this transaction have
been negotiated, executed and delivered on behalf of New Plan by the Trustees
or officers thereof in their representative capacity under the Declaration of
Trust, and not individually, and bind only the trust estate of New Plan, and
no Trustee, officer, employee, agent or shareholder of New Plan shall be bound
or held to any personal liability in connection with the obligations of New
Plan thereunder, and any person or entity dealing with New Plan in connection
therewith shall look solely to the trust estate for the payment of any claim
or for the performance of any obligation thereunder. The foregoing shall also
apply to any future documents, agreements, understandings, and arrangements
which may relate to this transaction.
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<PAGE>
In Witness Whereof, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
Attest: New Plan Realty Trust
By: /s/ Steven F. Siegel By: /s/ Arnold Laubich
----------------------------- ----------------------------------
Title: Secretary Name: Arnold Laubich
Title: President
Attest: Excel Realty Trust, Inc.
By: /s/ Richard B. Muir By: /s/ Gary B. Sabin
----------------------------- ----------------------------------
Title: Secretary Name: Gary B. Sabin
Title: President
Attest: ERT Merger Sub, Inc.
By: /s/ Richard B. Muir By: /s/ Gary B. Sabin
----------------------------- ----------------------------------
Title: Secretary Name: Gary B. Sabin
Title: President
I-47
<PAGE>
ANNEX I-A
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
This AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "Amendment") is made
and entered into as of August 7, 1998, by and between Excel Realty Trust,
Inc., a Maryland corporation ("Excel"), ERT Merger Sub, Inc., a Maryland
corporation and wholly-owned subsidiary of Excel ("Sub"), and New Plan Realty
Trust, a Massachusetts business trust ("New Plan").
RECITALS
WHEREAS, Excel, Sub and New Plan entered into that certain Agreement and
Plan of Merger dated as of May 14, 1998 (the "Agreement");
WHEREAS, Excel, Sub and New Plan now desire to amend certain terms and
provisions of the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Excel, Sub and New Plan hereby agree as follows:
1. Relation to Agreement. Except as amended hereby, the Agreement shall
continue in full force and effect.
2. Capitalized Terms. Capitalized terms used herein and not otherwise
defined herein are used as defined in the Agreement.
3. Trust Amendments. Schedule 1.1 to the Agreement is hereby amended by
deleting the current Schedule 1.1 in its entirety and substituting therefor a
new Schedule 1.1 in the form attached hereto.
4. Excel Charter Amendment. Schedule 3.1 to the Agreement is hereby amended
by deleting the current Schedule 3.1 in its entirety and substituting therefor
a new Schedule 3.1 in the form attached hereto.
5. Excel Series D Preferred Stock. Schedule 4.1(b) to the Agreement is
hereby amended by deleting the current Schedule 4.1(b) in its entirety and
substituting therefor a new Schedule 4.1(b) in the form attached hereto.
6. Effect on Capital Stock. Section 4.1(b) of the Agreement is hereby
amended by deleting the current Section 4.1(b) in its entirety and replacing
it with the following:
"At the Effective Time, each 7.8% Series A Cumulative Step-Up Premium
Rate Preferred Share, par value $1.00 per share, of New Plan (a "New Plan
Preferred Share") outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of New
Plan, Excel or the holders of any of the securities of either of these
entities, be canceled and converted into the right to receive one share of
7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock, par
value $.01 per share, of Excel ("Excel Series D Preferred Stock"), and each
depositary share representing a one-tenth fractional interest in a New Plan
Preferred Share outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of New Plan,
Excel or the holders of any of the securities of either of these entities,
be canceled and converted into the right to receive one voting depositary
share representing a one-tenth fractional interest in a share of Excel
Series D Preferred Stock with a liquidation preference of $50.00 per
depositary share. The Excel Series D Preferred Stock shall have the same
economic terms as the New Plan Preferred Shares and such other terms which
are reflected on Schedule 4.1(b) hereto and which other terms are hereafter
approved by New Plan, shall have ten (10) votes per share, with each
depositary share representing a one-tenth fractional interest in a share of
Excel Series D Preferred Stock (an "Excel Series D Depositary Share")
having one vote per share (voting together with
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<PAGE>
the Excel Common Stock) and shall accrue dividends from the end of the last
period with respect to which the New Plan Preferred Shares received a
dividend payment (it being agreed that Excel shall cooperate with New Plan
to address such other terms promptly hereafter). The shares of Excel Common
Stock to be issued to holders of New Plan Common Shares and the Excel
Series D Depositary Shares to be issued in the Merger to holders of New
Plan Preferred Shares are sometimes referred to collectively herein as the
"Merger Consideration."
7. Comfort Letters. The Agreement is hereby amended as follows:
(a) Section 7.4 of the Agreement is hereby amended by deleting the sixth
sentence thereof at the end of Section 7.4 in its entirety.
(b) Section 7.5 of the Agreement is hereby amended by deleting the sixth
sentence thereof at the end of Section 7.5 in its entirety.
(c) Section 8.2(e) of the Agreement is hereby amended by deleting Section
8.2(e) in its entirety.
(d) Section 8.3(e) of the Agreement is hereby amended by deleting Section
8.3(e) in its entirety.
8. Conduct of Business. Section 7.3 of the Agreement is hereby amended as
follows:
(a) Section 7.3(b)(v) of the Agreement is hereby amended by deleting the
current Section 7.3(b)(v) in its entirety and replacing it with the
following:
"(v) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, except (1) (x) regular quarterly dividends on the New Plan
Common Shares and regular quarterly dividends on the depositary shares
representing a one-tenth fractional interest in a New Plan Preferred
Share, as well as any other required dividends, distributions or
payments with respect to such New Plan Preferred Shares (which, with
respect to the New Plan Common Shares, the declaration date, record
date and payment date may be accelerated by New Plan at its discretion
for any such regular quarterly dividend payable prior to the Effective
Time) and (y) an additional one-time partial dividend (the "New Plan
Pre-Merger Dividend") with respect to the New Plan Common Shares in the
amount that is necessary or appropriate to satisfy the dividend payment
requirements imposed on New Plan as a REIT, and to eliminate or reduce
federal income or excise taxes imposed on New Plan as a REIT, for New
Plan's taxable year ending on or before the Effective Time and (2) in
connection with the use of shares of capital stock to pay the exercise
price or tax withholding in connection with stock-based employee
benefit plans of New Plan, directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of
any of its Subsidiaries, or make any commitment for any such action;
(it being understood and agreed that for purposes of the foregoing, New
Plan's regular quarterly dividend shall include increases to prior
quarterly dividend amounts consistent with New Plan's past practice);"
(b) Section 7.3(c)(v) of the Agreement is hereby amended by deleting the
current Section 7.3(c)(v) in its entirety and replacing it with the
following:
"(v) shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, except (1) (x) regular quarterly dividends of $.50 per share on
the Excel Common Stock and regular quarterly dividends on the Excel
Series A Preferred Stock, Excel Series B Preferred Stock and Excel
Series C Preferred Stock as well as any other required dividends,
distributions or payments with respect to such Excel Preferred Stock,
(y) if New Plan elects to accelerate the declaration date, record date
and payment date of any regular quarterly dividend prior to the
Effective Time as provided for in Section 7.3(b)(v) hereof, a regular
quarterly dividend in respect of the Excel Common Stock, the
declaration date, record date and payment date of which shall be
correspondingly accelerated, as well as any dividends, distributions,
or payments, or the setting aside thereof, with respect to the Excel
Series A Preferred Stock, Excel Series B Preferred Stock and Excel
Series C Preferred Stock required as a result of or as a condition to
any such acceleration in the payment of any regular quarterly dividend
in respect of the Excel Common Stock and (z) to the extent New Plan is
required to declare and pay the New Plan Pre-Merger Dividend, a
dividend per share of
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<PAGE>
Excel Common Stock in an amount equal to 1.20 times the New Plan Pre-
Merger Dividend per New Plan Common Share to be declared and paid prior
to the declaration and payment of the Excel Stock Dividend and prior to
the Effective Time, as well as any other dividends, distributions or
payments, or the setting aside thereof, with respect to the Excel
Series A Preferred Stock, Excel Series B Preferred Stock or Excel
Series C Preferred Stock or required as a result of or as a condition
to the declaration or payment of such dividends in respect of the Excel
Common Stock and (2) in connection with the use of shares of capital
stock to pay the exercise price or tax withholding in connection with
stock-based employee benefit plans of Excel, directly or indirectly
redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of any of its Subsidiaries, or make any commitment for
any such action;"
9. Amendments to Excel DRIP. Section 7.19 of the Agreement is hereby amended
by deleting the current Section 7.19 in its entirety and replacing it with the
following:
"Excel will take all action necessary in accordance with applicable law
to cause the following to occur with respect to the Excel Dividend
Reinvestment Plan (the "Excel DRIP"): (a) file and have declared effective
promptly after the Effective Time a registration statement (the "DRIP
Registration Statement") covering the issuance and sale of 5,000,000 shares
of Excel Common Stock under the Excel DRIP as amended in accordance with
this Section 7.19 and (b) amend the Excel DRIP to or adopt a substitute
plan which will (i) provide that at the time of effectiveness of the DRIP
Registration Statement all dividends reinvested shall be reinvested as new
shares of Excel at 95% of the market price as defined in the New Plan DRIP
and (ii) permit any participants in the Excel DRIP to purchase shares of
Excel Common Stock at 100% of "market value" as so defined and as is
currently provided as to New Plan Common Shares in the New Plan DRIP
(collectively (i) and (ii), the "Excel DRIP Amendments")."
10. Dividends. Section 7.23 of the Agreement is hereby amended by adding the
following phrase to the end of that section:
"provided that the amount of the initial quarterly dividend to be paid on
the Excel Common Stock following the Effective Time (i.e., $.40 per share)
shall be reduced by the amount of the New Plan Pre-Merger Dividend
(however, such reduced dividend when aggregated with the amount of the New
Plan Pre-Merger Dividend will equal the full $.40 per share initial
quarterly dividend)."
11. Conditions to Obligations of New Plan to Effect the Merger. Section
8.2(k) of the Agreement is hereby amended by deleting the following from the
first line thereof:
"Excel DRIP Amendments shall be effective, the"
12. Counterparts. This Amendment may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
ATTEST: New Plan Realty Trust
/s/ Steven F. Siegel /s/ James M. Steuterman
By: _________________________________ By: _________________________________
Title: Secretary Name: James M. Steuterman
Title:Executive Vice President
ATTEST: Excel Realty Trust, Inc.
/s/ Richard B. Muir /s/ Gary B. Sabin
By: _________________________________ By: _________________________________
Title: Secretary Name: Gary B. Sabin
Title:President
ATTEST: ERT Merger Sub, Inc.
/s/ Richard B. Muir /s/ Gary B. Sabin
By: _________________________________ By: _________________________________
Title: Secretary Name: Gary B. Sabin
Title:President
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<PAGE>
ANNEX II
NEW PLAN TRUST AMENDMENTS
The following new Section 13.4 is added to the New Plan Declaration of Trust:
Section 13.4 Alternative Business Combination.
13.4.1 General. In lieu of a reorganization or business combination followed
by the termination of the Trust and the distribution of the securities of the
successor organization among the Shareholders in redemption of their Shares
according to their respective rights pursuant to Section 13.3, the Trustees
may cause the Trust to merge with another entity in a reorganization or
business combination transaction ("Alternative Business Combination
Transaction") pursuant to which (a) the Shares of the Trust are exchanged for
such securities of a Person of which such other entity is a subsidiary or for
such other consideration as is provided for in the agreement among the Trust,
such other entity and such Person, and (b) the Trust is not terminated but
remains in existence as a subsidiary of such Person.
13.4.2 Excel Realty Trust, Inc. Merger Approved. Specifically, the Trustees
may implement the merger provided for in the Agreement and Plan of Merger
among New Plan Realty Trust, ERT Merger Sub, Inc. and Excel Realty Trust,
Inc., as amended as of August 7, 1998, approved by the affirmative vote of 66
2/3% or more of all outstanding Shares of the Trust having the right to vote
thereon at the meeting of Shareholders held on [September 25,] 1998, a copy of
which is attached as an Annex to the notice and proxy statement for such
meeting (such merger and agreement hereinafter the "Excel Merger" and the
"Excel Merger Agreement," respectively). Upon effectiveness of the Excel
Merger as provided in the Excel Merger Agreement, (a) the outstanding Shares
of Beneficial Interest and the outstanding Preferred Shares of the Trust shall
be exchanged for the securities or rights to securities of Excel Realty Trust,
Inc. (whose name may thereupon be changed to New Plan Excel Realty Trust, Inc.
(hereinafter referred to as "Surviving REIT")) as provided in the Excel Merger
Agreement; (b) Surviving REIT shall become the sole holder of Shares of
Beneficial Interest of the Trust as provided in the Excel Merger Agreement,
with the Trust thereupon becoming a wholly-owned subsidiary of Surviving REIT;
and (c) the number and identity of the Trustees shall be as set forth in the
Excel Merger Agreement. The Trustees shall have full power and authority to,
and shall, take or authorize such actions as they determine to be appropriate
or convenient to carry out and to implement the Excel Merger Agreement and to
effect the Excel Merger.
13.4.3 Approval of Shareholders. This Section 13.4 has been added to the
Declaration of Trust by an amendment thereto approved by the Trustees and by
the affirmative vote of 66 2/3% or more of all outstanding Shares of the Trust
having the right to vote thereon at the meeting of Shareholders held on
[September 25,] 1998, as a part of the same meeting and/or vote that approved
the Excel Merger provided for in Section 13.4.2. Accordingly, the Excel Merger
having been approved by the affirmative vote of 66 2/3% or more of all
outstanding Shares of the Trust having the right to vote thereon, no further
action by the Shareholders is necessary to approve and effect the Excel
Merger. However, in the event that the Excel Merger should not be effected for
any reason and the Trustees recommend an Alternative Business Combination
Transaction of the type authorized in Section 13.4.1 with some other Person,
the authority of the Trustees to implement such other Alternative Business
Combination Transaction shall be subject to the prior approval by the
affirmative vote of 66 2/3% or more of all outstanding Shares of the Trust
having the right to vote thereon at a meeting of Shareholders the notice for
which includes a description of the principal terms of such Alternative
Business Combination Transaction.
13.4.4 Consummation of Alternative Business Combination Transaction.
Notwithstanding any other provision hereof, including without limitation any
provision with respect to shareholder ownership limitations or REIT status,
any Alternative Business Combination Transaction (including the Excel Merger)
may be consummated in accordance with this Section 13.4.
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ANNEX III
ARTICLES OF AMENDMENT
Excel Realty Trust, Inc., a Maryland corporation (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland (the
"Department") that:
FIRST: The Corporation hereby amends its Charter as currently in effect by
deleting therefrom in their entirety Articles FIRST through NINTH of the
Articles of Amendment and Restatement of the Corporation filed with the
Department on May 23, 1995 and inserting in lieu thereof, the following:
ARTICLE I
INCORPORATOR
The undersigned, Daniel T. Howard, whose address is 701 "B" Street, Suite
2100, San Diego, California 92101-8197, being at least 18 years of age, does
hereby form a corporation under the general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (which is hereinafter called the "Corporation")
is New Plan Excel Realty Trust, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage in any lawful
act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which
corporations may be organized under the general laws of the State of Maryland
as now or hereafter in force. For purposes of these Articles, "REIT" means a
real estate investment trust qualifying under Section 856 through 860 of the
Code.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, LLP, 300 East
Lombard Street, 19th Floor, Baltimore City, Maryland 21202, Attention: Douglas
M. Fox. The name of the resident agent of the Corporation in the State of
Maryland is Douglas M. Fox, c/o Ballard Spahr Andrews & Ingersoll, LLP, 300
East Lombard Street, 19th Floor, Baltimore City, Maryland 21202. The resident
agent is an individual resident of the State of Maryland.
ARTICLE V
STOCK
Section 1. Authorized Shares. The total number of shares of stock that the
Corporation has authority to issue is 275,000,000 shares, of which 250,000,000
are shares of Common Stock, $.01 par value per share ("Common Stock"), and
25,000,000 are shares of Preferred Stock ("Preferred Stock"), $.01 par value
per share. The aggregate par value of all authorized shares of stock having
par value is $2,750,000.
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Section 2. Voting Rights. Each share of Common Stock shall entitle the
holder thereof to one vote.
Section 3. Issuance of Preferred Stock. The Preferred Stock may be issued,
from time to time, in one or more series or classes as authorized by the Board
of Directors. Prior to issuance of shares of each series or class, the Board
of Directors by resolution shall designate that series or class to distinguish
it from all other series and classes of stock of the Corporation, shall
specify the number of shares to be included in the series or class and shall
set the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption. Subject to the express
terms of any other series or class of Preferred Stock outstanding at the time
and notwithstanding any other provision of the charter, the Board of Directors
may increase or decrease the number of shares of, or alter the designation or
classify or reclassify, any unissued shares of any series or class of
Preferred Stock by setting or changing, in any one or more respects, from time
to time before issuing the shares, the terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications or terms or conditions of redemption of the
shares of any series or class of Preferred Stock.
Section 4. Charter and Bylaws. All persons who shall acquire stock in the
Corporation shall acquire the same subject to the provisions of the charter
and the Bylaws of the Corporation.
ARTICLE VI
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE CORPORATION
AND OF THE STOCKHOLDERS AND DIRECTORS
Section 1. Number and Classification. The business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
The number of directors of the Corporation initially shall be fifteen (15),
which number may be increased or decreased pursuant to the Bylaws of the
Corporation, but shall never be less than the minimum required by the Maryland
General Corporation Law nor more than twenty-one (21). The directors may
increase the number of directors and may fill any vacancy on the Board of
Directors, whether resulting from an increase in the number of directors or
otherwise, subject, however, to any limitations imposed thereupon in the
Bylaws of the Corporation, and subject further to the limitation on the
maximum number of directors as set forth hereinabove.
The directors shall be classified, with respect to the terms for which they
severally hold office, into three classes, as nearly equal in number as
possible, one class, to be designated as Class I, to hold office initially for
a term expiring at the next succeeding annual meeting of stockholders, another
class, to be designated as Class II, to hold office initially for a term
expiring at the second succeeding annual meeting of stockholders, and another
class, to be designated as Class III, to hold office initially for a term
expiring at the third succeeding annual meeting of stockholders, with the
members of each class to hold office until their successors are duly elected
and qualified.
At each annual meeting of the stockholders, the successors to the class of
directors whose term expires at such meeting shall be elected to hold office
for a term expiring at the annual meeting of stockholders held in the third
year following the year of their election and until their successors are duly
elected and qualified.
Section 2. Removal of Directors. Subject to the rights of holders of one or
more classes or series of Preferred Stock to elect or remove one or more
directors, any director or the entire Board of Directors may be removed from
office at any time, but only for cause.
Section 3. Authorization by Board of Stock Issuance. The Board of Directors
of the Corporation may authorize the issuance from time to time of shares of
its stock of any class, whether now or hereafter authorized, or securities
convertible into shares of its stock of any class, whether now or hereafter
authorized, for such
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consideration as the Board of Directors may deem advisable, subject to such
restrictions or limitations, if any, as may be set forth in the charter or the
Bylaws of the Corporation or in the general laws of the State of Maryland.
Section 4. No Preemptive Rights. Except as may be provided by the Board of
Directors in authorizing the issuance of shares of Preferred Stock pursuant to
Section 3 of Article V, no holder of shares of stock of the Corporation shall,
as such holder, have any preemptive right to purchase or subscribe for any
additional shares of the stock of the Corporation or any other security of the
Corporation that it may issue or sell.
Section 5. Indemnification. The Corporation may, and may obligate itself to,
to the maximum extent permitted by Maryland law in effect from time to time,
indemnify, and pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (i) any individual who is a present or former
director or officer of the Corporation or (ii) any individual who, while a
director of the Corporation and at the request of the Corporation, serves or
has served another corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise. The Corporation shall have the power, with
the approval of its Board of Directors, to provide such indemnification and
advancement of expenses to a person who served a predecessor of the
Corporation in any of the capacities described in (i) or (ii) above and to any
employee or agent of the Corporation or a predecessor of the Corporation.
Section 6. Advisor Agreements. Subject to such approval of stockholders and
other conditions, if any, as may be required by any applicable statute, rule
or regulation, the Board of Directors may authorize the execution and
performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the
Board of Directors, any such other person, corporation, association, company,
trust, partnership (limited or general) or other organization shall render or
make available to the Corporation managerial, investment, advisory and/or
related services, office space and other services and facilities (including,
if deemed advisable by the Board of Directors, the management or supervision
of the investments of the Corporation) upon such terms and conditions as may
be provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Directors, the compensation payable thereunder by
the Corporation).
Section 7. Related Party Transactions. Without limiting any other procedures
available by law or otherwise to the Corporation, the Board of Directors may
authorize any agreement of the character described in Section 6 of this
Article VI or other transaction with any person, corporation, association,
company, trust, partnership (limited or general) or other organization,
although one or more of the directors or officers of the Corporation may be a
party to any such agreement or an officer, director, stockholder or member of
such other party, and no such agreement or transaction shall be invalidated or
rendered void or voidable solely by reason of the existence of any such
relationship if the existence is disclosed or known to the Board of Directors,
and the contract or transaction is approved by the affirmative vote of a
majority of the disinterested directors, even if they constitute less than a
quorum of the Board. Any director of the Corporation who is also a director,
officer, stockholder or member of such other entity may be counted in
determining the existence of a quorum at any meeting of the Board of Directors
considering such matter.
Section 8. Determinations by Board. The determination as to any of the
following matters, made in good faith by or pursuant to the direction of the
Board of Directors consistent with the charter of the Corporation and in the
absence of actual receipt of an improper benefit in money, property or
services or active and deliberate dishonesty established by a court, shall be
final and conclusive and shall be binding upon the Corporation and every
holder of shares of its stock: the amount of the net income of the Corporation
for any period and the amount of assets at any time legally available for the
payment of dividends, redemption of its stock or the payment of other
distributions on its stock; the amount of paid-in surplus, net assets, other
surplus, annual or other net profit, net assets in excess of capital,
undivided profits or excess of profits over losses on sales of assets; the
amount, purpose, time of creation, increase or decrease, alteration or
cancellation of any reserves or charges and the propriety thereof (whether or
not any obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged); the fair value, or any sale,
bid or asked price to be applied in
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determining the fair value, of any asset owned or held by the Corporation; and
any matters relating to the acquisition, holding and disposition of any assets
by the Corporation.
Section 9. Reserved Powers of Board. The enumeration and definition of
particular powers of the Board of Directors included in this Article VI shall
in no way be limited or restricted by reference to or inference from the terms
of any other clause of this or any other provision of the charter of the
Corporation, or construed or deemed by inference or otherwise in any manner to
exclude or limit the powers conferred upon the Board of Directors under the
general laws of the State of Maryland as now or hereafter in force.
Section 10. REIT Qualification. The Board of Directors shall use its
reasonable best efforts to cause the Corporation and its stockholders to
qualify for U.S. Federal income tax treatment in accordance with the
provisions of the Code applicable to a REIT. In furtherance of the foregoing,
the Board of Directors shall use its reasonable best efforts to take such
actions as are necessary, and may take such actions as in its sole judgment
and discretion are desirable, to preserve the status of the Corporation as a
REIT; provided, however, that if the Board of Directors determines that it is
no longer in the best interests of the Corporation to continue to have the
Corporation qualify as a REIT, the Board of Directors may revoke or otherwise
terminate the Corporation's REIT election pursuant to Section 856(g) of the
Code.
Section 11. Stockholder Approval. Notwithstanding any provision of law
requiring the affirmative vote of the holders of a greater number of votes,
the affirmative vote of a majority of all votes entitled to be cast on any
matter or act requiring approval of the stockholders of the Corporation
(including, but not limited to, any amendment to the charter, merger,
consolidation, share exchange, transfer of assets or dissolution) shall be
sufficient, valid and effective, after due authorization, approval or advice
of the Board of Directors.
ARTICLE VII
RESTRICTION ON TRANSFER,
ACQUISITION AND REDEMPTION OF SHARES
Section 1. Definitions. For the purposes of this Article VII, the following
terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Equity Stock by a Person who
is or would be treated as an owner of such Equity Stock under Section
542(a)(2) of the Code either actually or constructively through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. The terms "Beneficially Own," "Beneficially Owned" and "Beneficial
Owner" shall have the correlative meanings.
"Charitable Beneficiary" shall mean one or more beneficiaries of the Trust
as determined pursuant to Section 3(g) of this Article VII, each of which
shall be an organization described in Sections 170(b)(1)(A), 170(c)(2) or
501(c)(3) of the Code.
"Constructive Ownership" shall mean ownership of Equity Stock by a Person
who is or would be treated as an owner of such shares of Equity Stock either
actually or constructively through the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code. The terms "Constructively Own,"
"Constructively Owned" and "Constructive Owner" shall have the correlative
meanings.
"Equity Stock" shall mean stock which is either Common Stock or Preferred
Stock.
"Excess Transfer" has the meaning specified in Section 3(a) of this Article
VII.
"Market Price" shall mean the last reported sales price reported on the New
York Stock Exchange of the applicable class or series of Equity Stock, on the
trading day immediately preceding the relevant date, or if not then traded on
the New York Stock Exchange, the last reported sales price of the applicable
class or series of
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Equity Stock, on the trading day immediately preceding the relevant date as
reported on any exchange or quotation system over which the applicable class
or series of Equity Stock, may be traded, or if not then traded over any
exchange or quotation system, then the market price of the applicable class or
series of Equity Stock, on the relevant date as determined in good faith by
the Board of Directors of the Corporation.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Ownership Limit" shall mean 9.8% of the outstanding Equity Stock determined
separately on a class by class and series by series basis and in each case
without regard to any other class or series of stock comprising a portion of
the outstanding Equity Stock; provided, however, that as respects the Series A
Preferred Stock and the Series D Preferred Stock the Ownership Limit shall
mean 9.8% of the outstanding Equity Stock considered together and shall not be
determined separately on a class by class or series by series basis; and
provided further that determination as to the Ownership Limit shall be by
value or number of shares, whichever is more restrictive, except in the case
of the Series A Preferred Stock and the Series B Preferred Stock, as respects
each of which the determination as to the Ownership Limit shall be by value.
The number and value of shares of outstanding Equity Stock of the Corporation
shall be determined by the Board of Directors in good faith, which
determination shall be conclusive for all purposes hereof.
"Person" shall mean an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code),
a portion of a trust permanently set aside for or to be used exclusively for
the purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock
company or other entity; but does not include an underwriter acting in a
capacity as such in a public offering of shares of Equity Stock provided that
the ownership of such shares of Equity Stock by such underwriter would not
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or otherwise result in the Corporation failing to qualify
as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to any purported
Transfer (or other event) that results in a transfer to a Trust as described
in Section 3 of this Article VII, the Purported Record Transferee unless the
Purported Record Transferee would have acquired or owned shares of Equity
Stock, for another Person who is the beneficial transferee or owner of such
shares, in which case the Purported Beneficial Transferee shall be such
Person.
"Purported Record Transferee" shall mean, with respect to any purported
Transfer (or other event) that results in a transfer to the Trust as described
in Section 3 of this Article VII, the record holder of Equity Stock if such
Transfer had been valid under Section 2 of this Article VII.
"Restriction Termination Date" shall mean the first day on which the Board
of Directors of the Corporation determines that it is no longer in the best
interests of the Corporation to attempt to, or continue to, qualify as a REIT.
"Series A Preferred Stock" shall mean the 8 1/2% Series A Cumulative
Convertible Preferred Stock, par value $.01 per share, of the Corporation as
now or hereafter classified by the Board of Directors.
"Series B Preferred Stock" shall mean the 8 5/8% Series B Cumulative
Redeemable Preferred Stock, par value $.01 per share, of the Corporation, as
now or hereafter classified by the Board of Directors.
"Series D Preferred Stock" shall mean the 7.8% Series D Cumulative Voting
Step-Up Premium Rate Preferred Stock, par value $.01 per share, of the
Corporation, as now or hereafter classified by the Board of Directors.
"Transfer" shall mean any sale, transfer, gift, assignment, devise or other
disposition of Equity Stock (including (i) the granting of any option or
entering into any agreement for the sale, transfer or other disposition of
Equity Stock or (ii) the sale, transfer, assignment or other disposition of
any securities or rights convertible into or exchangeable for Equity Stock),
whether voluntary or involuntary, whether of record or Beneficially or
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Constructively (including but not limited to transfers of interests in other
entities that result in changes in Beneficial Ownership or Constructive
Ownership of Equity Stock), and whether such transfer has occurred by
operation of law or otherwise. The terms "Transfers" and "Transferred" shall
have the correlative meanings.
"Trust" shall mean the trust created pursuant to Section 3 of this Article
VII.
"Trustee" shall mean a Person unaffiliated with either the Corporation, the
Purported Beneficial Transferee or the Purported Record Transferee, that is
appointed by the Corporation to serve as trustee of the Trust, and any
successor trustee appointed by the Corporation.
Section 2. Ownership Limitation.
(a) Except as provided in Section 10 of this Article VII, prior to the
Restriction Termination Date, no Person shall Beneficially Own or
Constructively Own shares of Equity Stock in excess of the Ownership Limit.
(b) Except as provided in Section 10 of this Article VII, prior to the
Restriction Termination Date, any Transfer that, if effective, would result in
any Person Beneficially Owning or Constructively Owning Equity Stock in excess
of the Ownership Limit shall be void ab initio as to the Transfer of such
shares of Equity Stock that would be otherwise Beneficially Owned or
Constructively Owned (as the case may be) by such Person in excess of the
Ownership Limit, and the intended transferee shall acquire no rights in such
shares of Equity Stock.
(c) Except as provided in Section 10 of this Article VII, prior to the
Restriction Termination Date, any Transfer that, if effective, would result in
Equity Stock being beneficially owned by less than 100 Persons (determined
without reference to any rules of attribution) shall be void ab initio as to
the Transfer of such shares of Equity Stock that would be otherwise
Beneficially Owned by the transferee; and the intended transferee shall
acquire no rights in such shares of Equity Stock.
(d) Prior to the Restriction Termination Date, any Transfer that, if
effective, would result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, or would otherwise result in the
Corporation failing to qualify as a REIT (including, but not limited to, a
Transfer or other event that would result in the Corporation owning (directly
or Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from such
tenant would cause the Corporation to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code), shall be void ab initio as to the
Transfer of the shares of Equity Stock that would cause the Corporation (i) to
be "closely held" within the meaning of Section 856(h) of the Code or (ii)
otherwise to fail to qualify as a REIT, as the case may be; and the intended
transferee shall acquire no rights in such shares of Equity Stock.
(e) A Transfer of a share of Equity Stock that is null and void under
Section 2(b), Section 2(c) or Section 2(d) of this Article VII because it
could, if effective, result in (i) the ownership of Equity Stock in excess of
the Ownership Limit, (ii) the Equity Stock being beneficially owned by less
than 100 Persons (determined without reference to any rules of attribution),
(iii) the Corporation being "closely held" within the meaning of Section
856(h) of the Code or (iv) the Corporation otherwise failing to qualify as a
REIT, shall not adversely affect the validity of the Transfer of any other
share of Equity Stock in the same or any other related transaction.
Section 3. Transfers to Trust.
(a) If, notwithstanding the other provisions contained in this Article VII,
at any time prior to the Restriction Termination Date there is a purported
Transfer (whether or not such Transfer is the result of transactions entered
into through the facilities of the NYSE or other securities exchange or an
automated inter-dealer quotation system) or other change in the capital
structure of the Corporation or other event (an "Excess Transfer") (i) such
that any Person would Beneficially Own or Constructively Own Equity Stock in
excess of the Ownership Limit or (ii) that, if effective, would cause the
Corporation (1) to become "closely held" within the meaning of Section 856(h)
of the Code or (2) otherwise to fail to qualify as a REIT (including, but not
limited to, a Transfer or other event that would result in the Corporation
owning (directly or Constructively) an interest in a tenant that
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is described in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation from such tenant would cause the Corporation to fail to satisfy
any of the gross income requirements of Section 856(c) of the Code), then,
except as otherwise provided in Section 10 of this Article VII, (x) in the
case of an event described in clause (i) of this Section 3(a), such shares of
Equity Stock in excess of the Ownership Limit or (y) in the case of an event
described in clause (ii)(1) or clause (ii)(2) of this Section 3(a), the shares
of Equity Stock being Transferred that would cause the Corporation to be
"closely held" within the meaning of Section 856(h) of the Code or otherwise
to fail to qualify as a REIT, as the case may be, (rounded up to the nearest
whole share) shall be automatically transferred to the Trustee in his or its
capacity as trustee of the Trust for the exclusive benefit of one or more
Charitable Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the business day prior to the date of
the Excess Transfer giving rise to (I) the potential violation of the
Ownership Limit or (II) the event described in clause (ii)(1) or clause
(ii)(2) of this Section 3(a).
(b) The Trustee shall be appointed by the Corporation and shall be a Person
unaffiliated with either the Corporation, any Purported Beneficial Transferee
or any Purported Record Transferee. The Trustee may be an individual or a bank
or trust company duly licensed to conduct a trust business.
(c) Shares of Equity Stock held by the Trustee shall be issued and
outstanding shares of capital stock of the Corporation. Except to the extent
provided in Section 3(e) of this Article VII, neither the Purported Beneficial
Transferee nor the Purported Record Transferee shall have any rights in the
Equity Stock held by the Trustee, and neither the Purported Beneficial
Transferee nor the Purported Record Transferee shall benefit economically from
ownership of any shares held in trust by the Trustee, have any rights to
dividends or possess any rights to vote or other rights attributable to the
shares held in the Trust.
(d) The Trustee shall have all voting rights and rights to dividends with
respect to shares of Equity Stock held in the Trust, which rights shall be
exercised for the benefit of the Charitable Beneficiary. Any dividend or
distribution paid prior to the discovery by the Corporation that the shares of
Equity Stock have been transferred to the Trustee shall be repaid to the
Corporation upon demand, and any dividend or distribution declared but unpaid
shall be rescinded as void ab initio with respect to such shares of Equity
Stock. Any dividends or distributions so disgorged or rescinded shall be paid
over to the Trustee and held in trust for the Charitable Beneficiary. Subject
to Maryland law and provided that the Corporation has not already taken
irrevocable corporate action on the basis thereof, any vote cast by a
Purported Record Transferee prior to the discovery by the Corporation that the
shares of Equity Stock have been transferred to the Trustee will be rescinded
as void ab initio and shall be recast in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary. The owner of the
shares at the time of the Excess Transfer giving rise to (i) a potential
violation of the Ownership Limit or (ii) the event described in clause (ii)(1)
or clause (ii)(2) of Section 3(a) of this Article VII shall be deemed to have
given an irrevocable proxy to the Trustee to vote the shares of Equity Stock
for the benefit of the Charitable Beneficiary. Notwithstanding any provision
hereof to the contrary, until the Corporation has received notification of the
transfer of Equity Stock into a Trust, the Corporation shall be entitled to
rely on its share transfer and other stockholder records for purposes of
preparing lists of stockholders entitled to vote at meetings, determining the
validity and authority of proxies, and otherwise conducting votes of
stockholders.
(e) The Trustee of the Trust may transfer the shares held in the Trust to a
person, designated by the Trustee, whose ownership of the shares will not
violate the Ownership Limit or the other limitations of Section 2 of this
Article VII. If such a transfer is made, the interest of the Charitable
Beneficiary shall terminate and proceeds of the sale shall be payable to the
Purported Beneficial Transferee and to the Charitable Beneficiary as provided
in this Section 3(e). The Purported Record Transferee shall have no right or
interest in any such proceeds. The Purported Beneficial Transferee shall
receive the lesser of (1) the price paid by the Purported Beneficial
Transferee for the shares or, if the Purported Beneficial Transferee did not
give value for the shares (through a gift, devise or other transaction), the
Market Price of the shares on the day of the event causing the shares to be
held in the Trust and (2) the price per share received by the Trustee from the
sale or other disposition of the shares held in the Trust. Any proceeds in
excess of the amount payable to the Purported Beneficial Transferee shall be
payable to the Charitable Beneficiary. If any of the transfer restrictions set
forth in this Section 3(e) or any application thereof is determined in a final
judgment to be void, invalid or unenforceable by any court having jurisdiction
over the issue, the Purported Beneficial Transferee and the Purported Record
Transferee may be
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deemed, at the option of the Corporation, to have acted as the agent of the
Corporation in acquiring the Equity Stock as to which such restrictions would,
by their terms, apply, and to hold such Equity Stock on behalf of the
Corporation.
(f) Shares of Equity Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift,
the Market Price at the time of such devise or gift) and (ii) the Market Price
on the date the Corporation, or its designee, accepts such offer. The
Corporation shall have the right to accept such offer for a period of 90 days
after the later of (i) the date of the Excess Transfer resulting in a transfer
to the Trust and (ii) the date that the Board of Directors determines in good
faith that an Excess Transfer occurred.
(g) By written notice to the Trustee, the Corporation shall designate one or
more nonprofit organizations to be the Charitable Beneficiary of the interest
in the Trust relating to such Purported Beneficial Transferee and Purported
Record Transferee if (i) the shares of Equity Stock held in the Trust would
not violate the Ownership Limit in the hands of such Charitable Beneficiary
and (ii) each Charitable Beneficiary is an organization described in Sections
170(b)(1)(A), 170(c)(2) or 501(c)(3) of the Code.
Section 4. Prevention of Transfer. If the Board of Directors or its designee
shall at any time determine in good faith that a Transfer has taken place in
violation of Section 2 of this Article VII or that a Person intends to acquire
or has attempted to acquire beneficial ownership (determined without reference
to any rules of attribution), Beneficial Ownership or Constructive Ownership
of any shares of stock of the Corporation in violation of Section 2 of this
Article VII, the Board of Directors or its designee shall take such action as
it deems advisable to refuse to give effect to or to prevent such Transfer,
including, but not limited to, refusing to give effect to such Transfer on the
books of the Corporation or instituting proceedings to enjoin such Transfer;
provided, however, that any Transfers or attempted Transfers in violation of
Section 2(b), Section 2(c) or Section 2(d) of this Article VII shall (i) be
void ab initio and (ii) automatically result in the transfer to the Trust
described in Section 3, irrespective of any action (or non-action) by the
Board of Directors; provided, further, that the provisions of this Section 4
shall be subject to the provisions of Section 5 of this Article VII.
Section 5. Settlement. Nothing in Section 3 of this Article VII shall be
interpreted to preclude the settlement of any transaction entered into through
the facilities of the NYSE or other securities exchange or an automated inter-
dealer quotation system.
Section 6. Notice To Corporation. Any Person who acquires or attempts to
acquire shares in violation of Section 2 of this Article VII, or any Person
who is a transferee such that a transfer to the Trust results under Section 3
of this Article VII, shall immediately give written notice or, in the event of
a proposed or attempted Transfer, give at least 15 days' prior written notice
to the Corporation of such event and shall provide to the Corporation such
other information as the Corporation may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on the Corporation's
status as a REIT.
Section 7. Information For Corporation. Prior to the Restriction Termination
Date:
(a) every Beneficial Owner or Constructive Owner of 5.0% or more (or such
other percentage, between 0.5% and 5.0%, as provided in the income tax
regulations promulgated under the Code) of the number or value of outstanding
shares of Equity Stock of the Corporation shall, within 30 days after January
1 of each year, give written notice to the Corporation stating the name and
address of such Beneficial Owner or Constructive Owner, the number of shares
Beneficially or Constructively Owned, and a description of how such shares are
held. Each such Beneficial Owner or Constructive Owner shall provide to the
Corporation such additional information as the Corporation may reasonably
request in order to determine the effect, if any, of such Beneficial or
Constructive Ownership on the Corporation's status as a REIT; and
(b) each Person who is a Beneficial Owner or Constructive Owner of Equity
Stock and each Person (including the stockholder of record) who is holding
Equity Stock for a Beneficial Owner or Constructive Owner shall provide to the
Corporation such information that the Corporation may reasonably request in
order to determine the Corporation's status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.
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Section 8. Other Action by Board. Nothing contained in this Article VII
shall limit the authority of the Board of Directors to take such other action
as it deems necessary or advisable to protect the Corporation and the
interests of its stockholders by preservation of the Corporation's status as a
REIT.
Section 9. Ambiguities. In the case of an ambiguity in the application of
any of the provisions of this Article VII, including any definition contained
in Section 1, the Board of Directors shall have the power to determine the
application of the provisions of this Article VII with respect to any
situation based on the facts known to it.
Section 10. Exemptions by Board.
(a) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to the
Board of Directors and upon at least 15 days' written notice from a Transferee
prior to the proposed Transfer that, if consummated, would result in the
intended Transferee Beneficially Owning shares in excess of the Ownership
Limit, and upon such other conditions as the Board of Directors may direct,
may exempt a Person from the Ownership Limit.
(b) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence satisfactory to the
Board of Directors, may exempt a Person from the limitation on a Person
Constructively Owning shares of Equity Stock in excess of the Ownership Limit,
if such Person does not and represents that it will not own, directly or
Constructively, more than a 9.9% interest (as set forth in Section
856(d)(2)(B)) in a tenant of the Corporation and the Corporation obtains such
representations and undertakings from such Person as are reasonably necessary
to ascertain this fact and agrees that any violation or attempted violation
will result in such shares of Equity Stock in excess of the Ownership Limit
being transferred to the Trust in accordance with Section 3 of this Article
VII.
Section 11. Legend. The Board may elect that each certificate for shares of
Common Stock and for shares of Preferred Stock shall bear substantially the
following legend:
The securities represented by this certificate are subject to
restrictions on transfer for the purpose of the Corporation's maintenance
of its status as a "real estate investment trust" under the Internal
Revenue Code of 1986, as amended. Except as otherwise provided pursuant to
the charter of the Corporation, no Person may Beneficially Own or
Constructively Own shares of any class or series of the Corporation's
Common or Preferred Stock in excess of 9.8% (or such greater percentage as
may be determined by the Board of Directors of the Corporation) of the
value or number of shares outstanding (whichever is more restrictive) of
such class or series of the Corporation's Common or Preferred Stock. Any
Person who attempts or proposes to Beneficially Own or Constructively Own
shares of Equity Stock in excess of the above limitation must notify the
Corporation in writing at least 15 days prior to such proposed or attempted
Transfer. All capitalized terms in this legend have the meanings defined in
the charter of the Corporation, a copy of which, including the restrictions
on transfer, will be sent without charge to each stockholder who so
requests. If the restrictions on transfer are violated, the securities
represented hereby may be automatically transferred to a trust for the
benefit of one or more charitable organizations to be designated by the
Corporation.
Section 12. Severability. If any provision of this Article VII or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity
and enforceability of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent necessary
to comply with the determination of such court.
Section 13. Discretion of Board of Directors. Anything to the contrary in
this Article VII notwithstanding, the Board of Directors shall be entitled to
take or omit to take such actions as it in its discretion shall determine to
be advisable in order that the Corporation maintain its status as and continue
to qualify as a REIT, including, but not limited to, reducing, restricting or
redefining the Ownership Limit in the event of a change in law.
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ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any amendment
to its charter, now or hereafter authorized by law, including any amendment
altering the terms or contract rights, as expressly set forth in this charter,
of any shares of outstanding stock. Any amendment to the charter of the
Corporation shall be valid only if such amendment shall have been approved by
the affirmative vote of a majority of all the votes of stockholders entitled
to be cast on the matter. All rights and powers conferred by the charter of
the Corporation on stockholders, directors and officers are granted subject to
this reservation; provided, however, that: (i) neither the repeal or amendment
of Section 5 of Article VI of the charter nor the adoption or amendment of any
other provision of the charter inconsistent with said Section 5 shall
adversely affect the rights of any person entitled to indemnification or
advancement of expenses under said Section 5 or Article XII of the Bylaws of
the Corporation with respect to any act or omission to act which occurred
prior to such repeal, amendment or adoption; and (ii) neither the repeal or
amendment of Article XII of the Bylaws of the Corporation nor the adoption or
amendment of any other provision of the Bylaws inconsistent with said Article
XII shall adversely affect the rights of any person entitled to
indemnification or advancement of expenses under said Article XII or Section 5
of Article VI of the charter with respect to any act or omission to act which
occurred prior to such repeal, amendment or adoption.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time permits
limitation of the liability of directors and officers, no director or officer
of the Corporation shall be liable to the Corporation or its stockholders for
money damages. Neither the amendment nor repeal of this Article IX, nor the
adoption or amendment of any other provision of the charter or Bylaws of the
Corporation inconsistent with this Article IX, shall apply to or affect in any
respect the applicability of the preceding sentence with respect to any act or
failure to act that occurred prior to such amendment, repeal or adoption.
SECOND: These Articles of Amendment of the Corporation as hereinabove set
forth have been duly advised by the Board of Directors of the Corporation and
approved by the stockholders of the Corporation as required by law.
THIRD: Immediately prior to the foregoing amendments, the Corporation had
the authority to issue One Hundred Ten Million (110,000,000) shares of the
Corporation's stock, consisting of Ten Million (10,000,000)shares of Preferred
Stock, par value One Cent ($.01) per share, and One Hundred Million
(100,000,000) shares of Common Stock, par value One Cent ($.01) per share. The
aggregate par value of all such shares of stock which the Corporation had
authority to issue being One Million One Hundred Thousand Dollars
($1,100,000).
FOURTH: After giving effect to the foregoing amendments, the Corporation
will have authority to issue Two Hundred Seventy Five Million (275,000,000)
shares of the Corporation's stock, consisting of Twenty Five Million
(25,000,000) shares of Preferred Stock, par value One Cent ($.01) per share
and Two Hundred Fifty Million (250,000,000) shares of Common Stock, par value
One Cent ($.01) per share. The aggregate par value of all such shares of stock
which the Corporation has authority to issue being Two Million Seven Hundred
Fifty Thousand Dollars ($2,750,000).
FIFTH: The Articles Supplementary filed with the Department on February 4,
1997, in respect of the Corporation's 8 1/2% Series A Cumulative Convertible
Preferred Stock, on January 12, 1998, in respect of the Corporation's 8 5/8%
of Series B Cumulative Redeemable Preferred Stock, on June 5, 1998, in respect
of the Corporation's Series C Junior Participating Preferred Stock, and on
, 1998 in respect of the
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Corporation's 7.80% Series D Cumulative Voting Step-Up Premium Rate Preferred
Stock, and in each case setting forth with respect to the such stock the
terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption applicable thereto remain in full force and effect
without modification or amendment hereby, and the information required by
Section 2-607(b)(2)(i) of the Maryland General Corporation Law was not changed
by the foregoing amendments.
SIXTH: The undersigned President acknowledges these Articles of Amendment to
be the corporate act of the Corporation and, as to all matters or facts
required to be verified under oath, the undersigned President acknowledges
that, to the best of his knowledge, information and belief, these matters and
facts are true in all material respects and that this statement is made under
the penalties for perjury.
In Witness Whereof, the Corporation has caused these Articles of Amendment
to be signed in its name and on its behalf by its President and attested to by
its Secretary as of this day of , 1998.
Attest:
Excel Realty Trust, Inc.
- ------------------------------- By: _________________________________
Richard B. Muir, Secretary Gary B. Sabin, President
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<PAGE>
ANNEX IV
EXCEL REALTY TRUST, INC.
ARTICLES SUPPLEMENTARY CLASSIFYING
7.80% SERIES D CUMULATIVE VOTING STEP-UP
PREMIUM RATE PREFERRED STOCK
Pursuant to Section 2-105 of the Maryland General Corporation Law ("MGCL"),
Excel Realty Trust, Inc., a corporation organized and existing under the laws
of the State of Maryland and having its principal office in the State of
Maryland located at c/o The Prentice Hall Corporation System, Maryland, 11
East Chase Street, Baltimore City, Maryland 21202 (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland
that:
FIRST: Pursuant to the authority expressly vested in the Board of Directors
of the Corporation by Article V of the Corporation's Charter (inclusive of
these Articles Supplementary) and Section 2-105 of the MGCL, the Board of
Directors has adopted resolutions (i) classifying a separate class of
authorized but unissued Preferred Stock of the Corporation to consist of not
more than 150,000 shares, (ii) designating the aforesaid class of Preferred
Stock as 7.80% Series D Cumulative Voting Step-up Premium Rate Preferred Stock
(the "Series D Preferred Stock"), (iii) setting the preferences, conversion
and other rights, voting powers, restrictions and limitations as to
distributions, qualifications and terms and conditions of redemption of the
Series D Preferred Stock and (iv) authorizing the issuance of 150,000 shares
of Series D Preferred Stock.
SECOND: The class of Preferred Stock of the Corporation created by the
resolutions duly adopted by the Board of Directors of the Corporation and
referred to in Article FIRST of these Articles Supplementary shall have the
following designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions and limitations as to distributions,
qualifications, terms and conditions of redemption and other terms and
conditions:
Section 1. Certain Definitions. Unless the context otherwise requires, the
terms defined in this Section 1 shall have, for all purposes of these Articles
Supplementary, the meanings herein specified (with terms defined in the
singular having comparable meanings when used in the plural):
"Board of Directors" shall mean the Board of Directors of the Corporation or
any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Series D Preferred Stock.
"Business Day" shall mean any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in New York
City are authorized or required by law, regulation or executive order to
close.
"Capital Gains Amount" shall have the meaning set forth in Section (2)(c)
hereof.
"Carry-Over Distribution" shall have the meaning set forth in Section 2(c)
hereof.
"Carry-Over Distribution Date" shall have the meaning set forth in Section
2(c) hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the Common Stock, par value $0.01 per share, of
the Corporation.
"Depositary Shares" shall mean the Depositary Shares each representing a
one-tenth ( 1/10) fractional interest in a share of Series D Preferred Stock.
"Distribution Payment Date" shall mean, with respect to each Distribution
Period, as applicable, the fifteenth (15th) day of January, April, July and
October in each year, commencing with the first Distribution
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<PAGE>
Payment Date following the Effective Date; provided, however, that if the
Distribution Payment Date falls on any day other than a Business Day, the
distribution payment due on such Distribution Payment Date shall be paid on
the Business Day immediately following such Distribution Payment Date.
"Distribution Periods" shall mean quarterly distribution periods commencing
January 1, April 1, July 1 and October 1 of each year and ending on and
including the day preceding the first day of the next succeeding Distribution
Period (other than (i) the first Distribution Period following the Effective
Date, which shall commence on the day immediately following the Carry-Over
Distribution Payment Date in the event that the Carry-Over Distribution
accrues pursuant to Section 2(c)(w) hereof, or on the day following the last
New Plan Distribution Date immediately preceding the Effective Date in the
event that the Carry-Over Distribution does not accrue pursuant to Section
2(c)(w) hereof, and will in either event end on and include the initial
Distribution Payment Date, and (ii) the Distribution Period immediately
succeeding the first Distribution Period following the Effective Date, which
shall commence on the day immediately following the first Distribution Period
following the Effective Date and will end on and include the day preceding the
first day of the next succeeding Distribution Period). The length or term of
any Distribution Period occurring in whole or in part prior to the Effective
Date will not be affected by the fact that the Distribution period is deemed
hereunder to have commenced prior to the Effective Date.
"Effective Date" shall mean the effective date of the Merger under
applicable law.
"Excel Distribution Period" shall mean, with respect to the Series A
Preferred Stock and the Series B Preferred Stock, quarterly distribution
periods commencing January 1, April 1, July 1 and October 1 of each year and
ending on and including the day preceding the first day of the next succeeding
Excel Distribution Period.
"Junior Stock" shall have the meaning set forth in Section 2(b) hereof.
"Merger" shall mean the merger of ERT Merger Sub, Inc., a Maryland
corporation and wholly owned subsidiary of the Corporation ("Merger Sub"),
with and into New Plan Realty Trust, a Massachusetts business trust ("New
Plan"), as contemplated by the Merger Agreement.
"Merger Agreement" shall mean that certain Agreement and Plan of Merger
dated as of May 14, 1998, by and among the Corporation, New Plan and Merger
Sub, as amended as of August 7, 1998, as such Agreement may be further amended
from time to time.
"New Plan Distribution Date" shall mean the fifteenth (15th) day, or if not
a Business Day, the next succeeding Business Day, of March, June, September
and December of any year.
"Preferred Stock" shall mean the Preferred Stock, par value $0.01 per share,
of the Corporation.
"Preferred Stock Director" shall have the meaning set forth in Section 2(f)
hereof.
"Record Date" shall mean the date designated by the Board of Directors of
the Corporation at the time a distribution is declared; provided, however,
that (i) except as provided below, such Record Date shall be the first day of
the calendar month in which the applicable Distribution Payment Date occurs in
the case of a distribution made with respect to a Distribution Period, or such
other date designated by the Board of Directors for the payment of
distributions that is not more than thirty (30) days nor less than ten (10)
days prior to such Distribution Payment Date; (ii) in the case of any Carry-
Over Distribution and in the case of the distribution made with respect to the
initial Distribution Period such Record Date shall not be prior to the
Effective Date nor less than ten (10) nor more than thirty (30) days preceding
the Carry-Over Distribution Date or the initial Distribution Payment Date, as
the case may be, except in the event that the Effective Date is less than ten
(10) days prior to the Carry-Over Distribution Date or the initial
Distribution Payment Date, as the case may be, in which case the applicable
Record Date may be less than ten (10) days prior.
"REIT" shall mean a Real Estate Investment Trust under Section 856 of the
Code.
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"Series A Preferred Stock" shall mean the 8 1/2% Series A Cumulative
Convertible Preferred Stock, par value $0.01 per share, of the Corporation.
"Series B Preferred Stock" shall mean the 8 5/8% Series B Cumulative
Redeemable Preferred Stock, par value $0.01 per share, of the Corporation.
"Series C Preferred Stock" shall mean the Series C Junior Participating
Preferred Stock, par value $0.01 per share, of the Corporation.
"Series D Redemption Date" shall have the meaning set forth in Section 2(e)
hereof.
"Series D Redemption Price" shall have the meaning set forth in Section 2(e)
hereof.
"Total Dividends" shall have the meaning set forth in Section 2(c) hereof.
Section 2. Series D Preferred Stock.
(a) Number. The maximum number of shares of the Series D Preferred Stock
shall be 150,000.
(b) Relative Seniority. In respect of rights to receive distributions and to
participate in distributions or payments in the event of any liquidation,
dissolution or winding-up of the Corporation, the Series D Preferred Stock
shall rank pari passu with any other Preferred Stock of the Corporation,
including without limitation the Series A Preferred Stock and the Series B
Preferred Stock, unless the terms of such other Preferred Stock provide
otherwise, and will rank senior to the Common Stock, the Series C Preferred
Stock and any other class or series of capital stock of the Corporation
ranking, as to distributions and upon liquidation, dissolution or winding-up,
junior (collectively, the "Junior Stock") to the Series D Preferred Stock. The
Corporation may authorize or increase any class or series of shares ranking on
a parity with or junior to the Series D Preferred Stock as to distribution
rights and upon liquidation, dissolution or winding-up, without the vote or
consent of the holders of the Series D Preferred Stock.
(c) Distributions. The holders of the then outstanding shares of Series D
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available therefor
(w) provided that the Effective Date occurs during the period following
the date on which a distribution is made in respect of the most recently
ended Excel Distribution Period and preceding or concurrently with the
immediately following New Plan Distribution Date, a special cumulative
carry-over distribution (the "Carry-Over Distribution") at the rate of
$39.00 per share per year (or $9.75 per share quarterly) in cash on the
first New Plan Distribution Date following the Effective Date (the "Carry-
Over Distribution Payment Date"), which shall constitute the distribution
payable for the full quarterly period commencing on the last New Plan
Distribution Date immediately preceding the Effective Date and ending on
the Carry-Over Distribution Payment Date; and
(x) in any event, a special cumulative distribution at the rate of $39.00
per share per year (or $9.75 per share quarterly) in cash on the first
Distribution Payment Date following the Effective Date, with such
distribution to be made in respect of the first applicable Distribution
Period, and with the amount of such distribution to be pro rated and
computed on the basis of a 360-day year of twelve 30-day months (or a 90-
day quarter of three 30-day months); and
(y) a special cumulative distribution at the rate of $39.00 per share per
year (or $9.75 per share quarterly) in cash on the Distribution Payment
Date first succeeding the first Distribution Payment Date following the
Effective Date, with such distribution to be made in respect of the
Distribution Period immediately succeeding the first Distribution Period
following the Effective Date, and with the amount of such distribution to
be pro rated and computed on the basis of a 360-day year of twelve 30-day
months (or a 90-day quarter of three 30-day months); and
(z) cumulative distributions thereafter in respect of each successive
Distribution Period, at the rate of $39.00 per share per year through
September 15, 2012 and at the rate of $49.00 per share per year thereafter,
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payable in equal amounts of $9.75 per share quarterly in arrears in cash
through September 15, 2012 and in equal amounts of $12.25 per share
quarterly in arrears in cash thereafter, on the applicable Distribution
Payment Date, beginning on the second Distribution Payment Date to occur
following the first Distribution Payment Date following the Effective Date,
as referred to in (x) above;
in each case, to stockholders of record at the close of business on the Record
Date for such distribution. The amount of any distribution payable for any
Distribution Period shorter than a full Distribution Period shall be pro rated
and computed on the basis of a 360-day year of twelve 30-day months (or a 90-
day quarter of three 30-day months). Distributions on each share of Series D
Preferred Stock shall accrue and be cumulative from and including the date of
original issue thereof (or in the case of the Carry Over Distribution or, if
the Carry Over Distribution does not accrue under subparagraph (w) above, in
the case of the distribution otherwise occurring under subparagraph (x) above,
from and including the last New Plan Distribution Date immediately preceding
or concurrently with the Effective Date), whether or not (i) the Corporation
has earnings, (ii) on any Distribution Payment Date (or on the Carry-Over
Distribution Payment Date, as the case may be) there shall be funds legally
available for the payment of distributions, or (iii) such distributions are
authorized. Distributions paid on shares of Series D Preferred Stock in an
amount less than the total amount of such distributions at the time accrued
and payable on such shares shall be allocated pro rata on a per share basis
among all such shares at the time outstanding. Accrued but unpaid
distributions on shares of Series D Preferred Stock will not bear interest and
holders of the Series D Preferred Stock will not be entitled to any
distributions in excess of full cumulative distributions as described above.
Any distribution payment on shares of Series D Preferred Stock shall first be
credited against the earliest accrued but unpaid distribution due with respect
to such shares which remains payable.
The amount of any distributions accrued on any shares of Series D Preferred
Stock at any date shall be the amount of any unpaid distributions accumulated
thereon, to and including such date, whether or not earned or declared, and in
the case of any period other than a full Distribution Period shall be equal to
the sum of the amount of any distributions accumulated thereon to and
including the most recently ended Distribution Period (or the Carry-Over
Distribution Payment Date, as the case may be) and remaining unpaid, plus an
amount, calculated on the basis of the applicable annual distribution rate,
for the period after the ending of such last preceding Distribution Period (or
the Carry-Over Distribution Payment Date, as the case may be) to and including
the date on which the calculation is made, based on a 360-day year of twelve
30-day months (or a 90-day quarter of three 30-day months).
If, for any taxable year, the Corporation elects to designate as "capital
gain dividends" (as defined in Section 857 of the Code) any portion (the
"Capital Gains Amount") of the dividends paid or made available for the year
to holders of classes of stock (the "Total Dividends"), then that portion of
the Capital Gains Amount that shall be allocable to holders of the Series D
Preferred Stock shall be the amount that the total dividends paid or made
available to the holders of the Series D Preferred Stock for the year bears to
the Total Dividends.
Except as provided in these Articles Supplementary, the Series D Preferred
Stock shall not be entitled to participate in the earnings or assets of the
Corporation.
(d) Liquidation Rights.
(i) Upon the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, the holders of the shares of Series D
Preferred Stock then outstanding shall be entitled to receive and to be
paid out of the assets of the Corporation legally available for
distribution to its stockholders, before any payment or distribution shall
be made on any Junior Stock, the amount of $500.00 per share of Series D
Preferred Stock, plus accrued and unpaid distributions thereon to the date
of such dissolution, liquidation or winding-up.
(ii) After the payment to the holders of the Series D Preferred Stock of
full preferential amounts provided for in these Articles Supplementary, the
holders of the Series D Preferred Stock as such shall have no right or
claim to any of the remaining assets of the Corporation.
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(iii) If, upon any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, the amounts payable with respect to the
preference value of the Series D Preferred Stock and any other shares of
capital stock of the Corporation ranking as to any such distribution on a
parity with the Series D Preferred Stock are not paid in full, the holders
of shares of Series D Preferred Stock and of such other shares will share
ratably in any such distribution of assets of the Corporation in proportion
to the full respective preference amounts to which they are entitled. The
Series D Preferred Stock will rank on a parity with the Series A Preferred
Stock and the Series B Preferred Stock as to liquidation rights.
(iv) Neither (A) the sale or other disposition of all or substantially
all of the property or business of the Corporation, (B) the merger or
consolidation of the Corporation into or with any other entity, nor (C) the
dissolution, liquidation, winding-up or reorganization of the Corporation
immediately followed by organization of another entity to which the assets
in such dissolution, liquidation or winding-up are distributed, shall be
deemed to be a dissolution, liquidation or winding-up, voluntary or
involuntary, for the purposes of this subsection (d); provided that, in
each case, effective provision is made in the charter of the resulting and
surviving entity or otherwise for the recognition, preservation and
protection of the rights of the holders of the Series D Preferred Stock.
(v) In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of
shares of stock of the Corporation or otherwise is permitted under the
MGCL, no effect shall be given to amounts that would be needed, if the
Corporation were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of holders of shares of
stock of the Corporation, whose preferential rights upon dissolution are
superior to those receiving the distribution.
(e) Redemption.
(i) Optional Redemption. On and after June 15, 2007, the Corporation may,
at its option, redeem in whole or in part, at any time or from time to
time, the Series D Preferred Stock at a price per share (the "Series D
Redemption Price"), of $500.00 per share of Series D Preferred Stock,
together with all accrued and unpaid distributions to and including the
date fixed for redemption (the "Series D Redemption Date").
(ii) Procedures for Redemption.
(A) Notice of any redemption will be given by publication in an
edition of The Wall Street Journal or The New York Times published in
the City of New York, or if neither newspaper is then being published
in the City of New York, any other daily newspaper of general
circulation in the City of New York, such publication to be made once a
week for two successive weeks commencing not less than 30 nor more than
60 days prior to the Series D Redemption Date. A similar notice of any
redemption will be mailed by the Corporation, postage prepaid, not less
than 30 nor more than 60 days prior to the Series D Redemption Date,
addressed to the holders of record of the Series D Preferred Stock to
be redeemed at their addresses as they appear on the share transfer
records of the Corporation. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of
the proceedings for the redemption of any Series D Preferred Stock
except as to the holder to whom the notice was defective or not given.
In addition to any information required by law or by the applicable
rules of any exchange upon which the Series D Preferred Stock may be
listed or admitted to trading, such notice shall state: (1) the Series
D Redemption Date; (2) the Series D Redemption Price; (3) the number of
shares of Series D Preferred Stock to be redeemed; (4) the place or
places where certificates representing such shares are to be
surrendered for payment of the Series D Redemption Price; and (5) that
distributions on the shares to be redeemed will cease to accrue on the
Series D Redemption Date. If fewer than all of the shares of Series D
Preferred Stock held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of shares to be
redeemed from such holder.
(B) If notice has been mailed in accordance with subsection
(e)(ii)(A) above and provided that on or before the Series D Redemption
Date specified in such notice all funds necessary for such redemption
shall have been irrevocably set aside by the Corporation, separate and
apart from its other
IV-5
<PAGE>
funds in trust for the pro rata benefit of the holders of shares of
Series D Preferred Stock so called for redemption, so as to be, and to
continue to be available therefor, then, from and after the Series D
Redemption Date, distributions on the shares of Series D Preferred
Stock so called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding and shall not have the
status of Series D Preferred Stock and all rights of the holders
thereof as stockholders of the Corporation (except the right to receive
the Series D Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares of
Series D Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice shall so
state), such shares of Series D Preferred Stock shall be redeemed by
the Corporation at the Series D Redemption Price. In case fewer than
all of the shares of Series D Preferred Stock represented by any such
certificate are redeemed, a new certificate or certificates shall be
issued representing the unredeemed shares of Series D Preferred Stock
without cost to the holder thereof.
(C) Any funds deposited with a bank or trust company for the purpose
of redeeming shares of Series D Preferred Stock shall be irrevocable
except that:
(1) the Corporation shall be entitled to receive from such bank or
trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(2) any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series D Preferred Stock entitled
thereto at the expiration of two years from the applicable Series D
Redemption Date shall be repaid, together with any interest or other
earnings earned thereon, to the Corporation, and after any such
repayment, the holders of the shares entitled to the funds so repaid
to the Corporation shall look only to the Corporation for payment
without interest or other earnings.
(D) No shares of Series D Preferred Stock may be redeemed except with
funds legally available for the payment of the Series D Redemption
Price. The Series D Redemption Price (other than any portion thereof
consisting of accrued and unpaid distributions) shall be paid solely
from the sales proceeds of other capital stock of the Corporation and
not from any other source. For purposes of the preceding sentence,
"capital stock" means any equity securities (including Common Stock and
Preferred Stock), depositary shares, interests, participations or other
ownership interests (however designated) and any rights (other than
debt securities convertible into or exchangeable for equity securities)
or options to purchase any of the foregoing.
(E) Unless full accumulated distributions on all shares of Series D
Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart
for payment for all past Distribution Periods and the then current
Distribution Period, no shares of Series D Preferred Stock shall be
redeemed (unless all outstanding shares of Series D Preferred Stock are
simultaneously redeemed) or purchased or otherwise acquired directly or
indirectly (except by conversion into or exchange for capital stock of
the Corporation ranking junior to the Series D Preferred Stock as to
distributions and upon liquidation); provided, however, that the
foregoing shall not prevent the redemption of shares of Series D
Preferred Stock pursuant to Article VII of the Corporation's Charter or
the purchase or acquisition of shares of Series D Preferred Stock
pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Series D Preferred Stock.
(F) If the Series D Redemption Date occurs after a Record Date and
before the related Distribution Date, the distribution payable on such
Distribution Date shall be paid to the holder in whose name the shares
of Series D Preferred Stock to be redeemed are registered at the close
of business on such Record Date notwithstanding the redemption thereof
between such Record Date and the related Distribution Date or the
Corporation's default in the payment of the distribution due.
(G) In case of redemption of less than all of the shares of Series D
Preferred Stock at the time outstanding, the shares of Series D
Preferred Stock to be redeemed shall be selected pro rata from the
IV-6
<PAGE>
holders of record of such shares in proportion to the number of shares
of Series D Preferred Stock held by such holders (with adjustments to
avoid redemption of fractional shares) or by any other equitable
method, including without limitation pro rata from the holders of
record of Depositary Shares representing interests in shares of Series
D Preferred Stock in proportion to the number of such Depositary Shares
held by such holders, determined by the Corporation.
(H) All shares of Series D Preferred Stock which have been issued and
reacquired in any manner by the Corporation shall be restored to the
status of authorized but unissued shares of Preferred Stock, without
further designation as to series or class. The Corporation may also
retire any unissued shares of Series D Preferred Stock and such shares
shall then be restored to the status of authorized but unissued shares
of Preferred Stock, without further designation as to series or class.
(f) Voting Rights.
(i) The Series D Preferred Stock shall have voting rights as provided
herein. In any matter in which the Series D Preferred Stock is entitled to
vote, including any action by written consent, each share of Series D
Preferred Stock shall be entitled to 10 votes, each of which 10 votes may
be directed separately by the holder thereof (or by any proxy or proxies of
such holder), except that when any other class or series of Preferred Stock
shall have the right to vote together with the Series D Preferred Stock as
if they were a single class on any matter, then the Series D Preferred
Stock and such other class or series shall have with respect to such
matters one (1) vote per $25.00 of stated liquidation preference and
fractional votes shall be ignored. With respect to each share of Series D
Preferred Stock, the holder thereof may designate up to that number of
proxies equal to the number of votes represented thereby, with each such
proxy having the right to vote a whole number of votes.
(ii) The holders of the Series D Preferred Stock shall have the right to
vote with the Common Stock on all matters on which the holders of the
Common Stock are entitled to vote, or give written consent in lieu of a
vote, as though part of the same class as holders of the Common Stock. The
holders of the Series D Preferred Stock shall receive all notices of
meetings of the holders of the Common Stock, and all other notices and
correspondence to the holders of the Common Stock provided by the
Corporation, and shall be entitled to take such actions, and shall have
such rights, as are set forth in these Articles Supplementary or are
otherwise available to the holders of the Common Stock in the Charter and
in the Bylaws of the Corporation as are in effect on the date hereof and
from time to time hereafter.
(iii) Whenever distributions on any shares of Series D Preferred Stock
shall be in arrears for six or more Distribution Periods, the holders of
the Series D Preferred Stock, voting separately as a class with all other
series or classes of Preferred Stock upon which like voting rights have
been conferred and are exercisable, will be entitled to vote for the
election of two additional directors of the Corporation at a special
meeting called by the Secretary of the Corporation upon the written request
(addressed to the Secretary at the principal office of the Corporation) of
any holder of any series or class of Preferred Stock so in arrears (unless
such request is received less than 90 days before the date fixed for the
next annual or special meeting of the stockholders) or at the next annual
meeting of stockholders or special meeting held in place thereof, and at
each subsequent annual meeting until all distributions accumulated on such
shares of Series D Preferred Stock for the past Distribution Periods and
the then current Distribution Period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment. If any
such special meeting required to be called as above provided shall not be
called by the Secretary within 20 days after receipt of any such request,
then any such holder may call such meeting, upon the notice provided, and
for that purpose shall have access to the stock books of the Corporation.
In such case, the entire Board of Directors of the Corporation will be
increased by two directors. If and when all accumulated distributions on
the Series D Preferred Stock have been declared and paid or set aside for
payment in full, the holders of the Series D Preferred Stock shall be
divested of the special voting rights provided by this subsection (f)(iii).
Upon termination of such special voting rights attributable to all holders
of the Series D Preferred Stock, the term of office of each director
elected by the holders of the Series D Preferred Stock and all other series
of Preferred Stock upon which like voting rights had been conferred (a
"Preferred Stock Director")
IV-7
<PAGE>
pursuant to such special voting rights shall forthwith terminate and the
number of directors constituting the entire Board of Directors shall be
reduced by the number of Preferred Stock Directors. Except as provided in
the immediately preceding sentence, any Preferred Stock Director may be
removed only by the vote of the holders of record of a majority of the
outstanding shares of Series D Preferred Stock and all other series of
Preferred Stock of the Corporation upon which like voting rights had been
conferred, voting together as a separate class, at a meeting called for
such purpose.
So long as any shares of Series D Preferred Stock are outstanding, the
number of directors constituting the entire Board of Directors of the
Corporation shall at all times be such that the exercise, by the holders of
the Series D Preferred Stock and the holders of Preferred Stock of the
Corporation upon which like voting rights have been conferred, of the right
to elect directors under the circumstances provided above will not
contravene any provision of the Corporation's Charter or Bylaws restricting
the number of directors which may constitute the entire Board of Directors.
Any vacancy in the office of a Preferred Stock Director shall be filled
for the remainder of the term of the Preferred Stock Director creating the
vacancy, by vote of the Board of Directors, upon the nomination of the then
remaining Preferred Stock Director or the successor of such remaining
Preferred Stock Director.
(iv) So long as any shares of Series D Preferred Stock remain
outstanding, the Corporation will not, without the affirmative vote or
consent of the holders of at least two-thirds of the shares of Series D
Preferred Stock outstanding at the time, given in person or by proxy,
either in writing or at a meeting (such series voting separately as a
class), (A) authorize or create, or increase the authorized or issued
amount of, any class or series of shares of capital stock ranking prior or
senior to the Series D Preferred Stock with respect to the payment of
distributions or the distribution of assets upon liquidation, dissolution
or winding-up or reclassify any authorized shares of capital stock of the
Corporation into such shares, or create, authorize or issue any obligation
or security convertible into or evidencing the right to purchase any such
shares; or (B) amend, alter or repeal the provisions of the Corporation's
Charter or these Articles Supplementary whether by merger, consolidation or
otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series D Preferred Stock or
the holders thereof; provided, however, with respect to the occurrence of
any of the Events set forth in (B) above, so long as the shares of Series D
Preferred Stock remain outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, the
Corporation may not be the surviving entity, the occurrence of any such
Event shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Series D Preferred
Stock and provided further that (X) any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other shares
of Series D Preferred Stock, or (Y) any increase in the amount of
authorized Series D Preferred Stock or any other Preferred Stock, in each
case ranking on a parity with or junior to the Series D Preferred Stock
with respect to payment of distributions or the distribution of assets upon
liquidation, dissolution or winding-up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
(v) The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series D Preferred
Stock shall have been redeemed or called for redemption upon proper notice
and sufficient funds shall have been irrevocably deposited in trust to
effect such redemption.
(g) Conversion. The Series D Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation.
(h) Restrictions on Transfer, Acquisition and Redemption of Shares. The
Series D Preferred Stock constitutes a class of Preferred Stock of the
Corporation and Preferred Stock constitutes Equity Stock of the Corporation.
Therefore, the Series D Preferred Stock, being Equity Stock, is governed by
and issued subject to all of the limitations, terms and conditions of the
Charter of the Corporation applicable to the Equity Stock generally, including
but not limited to the terms and conditions (including exceptions and
exemptions) of Article
IV-8
<PAGE>
VII of the Charter applicable to Equity Stock. The foregoing sentence shall
not be construed to limit to the Series D Preferred Stock the applicability of
any other term or provision of the Charter.
In addition to the legend contemplated by Article VII, Section 11 of the
Charter, each certificate for Series D Preferred Stock shall bear
substantially the following legend:
"The Corporation will furnish to any stockholder, on request and without
charge, a full statement of the information required by Section 2-211(b) of
the Corporations and Associations Article of the Annotated Code of Maryland
with respect to the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemptions of the stock of
each class which the Corporation has authority to issue and, if the
Corporation is authorized to issue any preferred or special class in series
or classes, (i) the difference in the relative rights and preferences
between the shares of each series and class to the extent set, and (ii) the
authority of the Board of Directors to set such rights and preferences of
subsequent series and classes. The foregoing summary does not purport to be
complete and is subject to and qualified in its entirety by reference to
the Charter of the Corporation, a copy of which will be sent without charge
to each stockholder who so requests. Such request must be made to the
Secretary of the Corporation at its principal office."
Section 3. Exclusion of Other Rights. Except as may otherwise be required by
law, the Series D Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights,
other than those specifically set forth in these Articles Supplementary and in
the Corporation's Charter (as such Articles Supplementary or Charter may be
amended from time to time). The Series D Preferred Stock shall have no
preemptive or subscription rights.
Section 4. Severability of Provisions. If any voting powers, preferences and
relative, participating, optional and other special rights of the Series D
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in these Articles Supplementary (as such Articles Supplementary may be
amended from time to time) is invalid, unlawful or incapable of being enforced
by reason of any rule of law or public policy, all other voting powers,
preferences and relative, participating, optional and other special rights of
the Series D Preferred Stock and qualifications, limitations and restrictions
thereof set forth in these Articles Supplementary (as so amended) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional or other special rights of
the Series D Preferred Stock and qualifications, limitations and restrictions
thereof herein set forth shall remain in full force and effect and shall not
be deemed dependent upon any other such voting powers, preferences and
relative, participating, optional or other special right of the Series D
Preferred Stock and qualifications, limitations and restrictions thereof
unless so expressed herein.
Section 5. Registration as Depositary Shares. Shares of Series D Preferred
Stock may be registered in the form of Depositary Shares each representing a
one-tenth ( 1/10) fractional interest in a share of Series D Preferred Stock
on such terms and conditions as may be provided for in any agreement binding
upon the Corporation (whether directly or through merger with any other
corporation or business entity).
THIRD: The shares of Series D Preferred Stock have been classified and
designated by the Board of Directors under the authority contained in the
Charter.
FOURTH: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FIFTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
IV-9
<PAGE>
In Witness Whereof, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested to by its Assistant Secretary on this day of , 1998.
Attest: Excel Realty Trust, Inc.
- ------------------------------- By: _________________________________
S. Eric Ottesen Name: Gary B. Sabin
Assistant Secretary Title: President and Chief Executive
Officer
IV-10
<PAGE>
[MERRILL LYNCH LETTERHEAD]
ANNEX V
May 13, 1998
Board of Trustees
New Plan Realty Trust
1120 Avenue of the Americas
New York, New York 10036
Board of Trustees:
New Plan Realty Trust, a Massachusetts business trust ("New Plan" or the
"Company"), and Excel Realty Trust, Inc., a Maryland corporation ("Excel")
propose to enter into an Agreement and Plan of Merger, dated May 13, 1998 (the
"Agreement"), pursuant to which Excel will create a wholly-owned subsidiary
("Sub") which will merge with and into New Plan, with New Plan as the
surviving trust in the merger (the "Transaction"). New Plan will survive as a
wholly-owned subsidiary of Excel (for purposes herein the surviving entity
will be referred to as the "Combined Company"). Under the terms of the
Agreement (and as a result of the West Stock Dividend as defined in the
Agreement), each outstanding share of common stock of New Plan, no par value,
together with each associated share purchase right attached thereto, shall be
converted into 1.00 share of common stock, $.01 par value of Excel (the
"Exchange Ratio").
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view to the shareholders of the Company.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial information
relating to New Plan and Excel which we deemed to be relevant;
(2) Reviewed certain information, including financial forecasts, relating
to the business, earnings, funds from operations, adjusted funds from
operations, cash flow, assets, liabilities and prospects of New Plan
and Excel furnished to us by New Plan and Excel;
(3) Conducted discussions with members of senior management and
representatives of New Plan and Excel concerning the matters described
in clauses (1) and (2) above, as well as the businesses and prospects
of New Plan and Excel before giving effect to the Transaction;
(4) Reviewed the market prices and valuation multiples for New Plan and
Excel and compared them with those of certain publicly traded companies
that we deemed to be relevant;
(5) Reviewed the results of operations of New Plan and Excel and compared
them with those of certain publicly traded companies that we deemed to
be relevant;
(6) Compared the proposed financial terms of the Transaction with the
financial terms of certain other transactions which we deemed to be
relevant;
(7) Participated in certain discussions and negotiations among
representatives of New Plan and Excel and their respective financial
and legal advisors;
(8) Reviewed a draft dated May 11, 1998 of the Agreement; and
(9) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have
not assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of New Plan or Excel or been furnished
V-1
<PAGE>
with any such evaluation or appraisal. In addition, we have not assumed any
obligation to conduct any physical inspection of the properties or facilities
of New Plan or Excel. With respect to the financial forecast information
furnished to or discussed with us by New Plan or Excel, we have assumed that
it has been reasonably prepared and reflects the best currently available
estimates and judgment of New Plan's or Excel's management as to the expected
future financial performance of New Plan or Excel. Merrill Lynch has assumed
that there are no synergies resulting from the Transaction. For purposes of
this opinion, we have assumed that the surviving trust will be a qualified
REIT subsidiary and Excel will continue to qualify as a REIT, under all
relevant provisions of the Internal Revenue Code of 1986, as amended. We have
also assumed that the final form of the Agreement will be substantially
similar to the last draft thereof reviewed by us.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available
to us as of, the date hereof. We have assumed that in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the Transaction, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the contemplated benefits of the Transaction.
We are preparing a fairness opinion for the Company in connection with the
Transaction and will receive a fee from the Company or Excel for our services
rendering of this opinion. In addition, the Company has agreed to indemnify us
for certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory and financing services to the Company and Excel
and may continue to do so and have received, and may receive, fees for the
rendering of such services. In addition, in the ordinary course of our
business, we may actively trade the securities of the Company or Excel, for
our own account and for the accounts of customers and, accordingly, may at any
time hold a long or short position in such securities.
This opinion is for the use and benefit of the Trustees of the Company. Our
opinion does not address the merits of the underlying decision by the Company
to engage in the Transaction and does not constitute a recommendation to any
shareholder as to how such shareholder should vote on the proposed
Transaction.
We are not expressing any opinion herein as to the prices at which the
shares of New Plan or Excel's common stock will trade following the
announcement or the Combined Company's common stock will trade following the
consummation of the Transaction.
On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Exchange Ratio is fair from a financial point of view
to the shareholder of the Company.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
V-2
<PAGE>
[PRUDENTIAL SECURITIES LETTERHEAD]
ANNEX VI
May 13, 1998
The Board of Directors
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 110
San Diego, CA 92127
Members of the Board:
We understand Excel Realty Trust, Inc. ("Excel" or the "Company"), ERT
Merger Sub, Inc., a wholly owned subsidiary of Excel, and New Plan Realty
Trust ("New Plan") propose to enter into an Agreement and Plan of Merger (the
"Agreement"). Pursuant to the Agreement, ERT Merger Sub, Inc. shall be merged
with and into New Plan (the "Merger"). In the Merger, each outstanding share
of beneficial interest, no par value, of New Plan ("New Plan Shares") will be
converted into the right to receive 1.0 share of common stock, par value $.01
per share, of Excel ("Excel Common Stock") (the "Exchange Ratio"). Prior to
the consummation of the Merger, Excel shall declare and pay on each share of
Excel Common Stock a dividend of 0.2 shares of Excel Common Stock.
You have requested our opinion as to the fairness from a financial point of
view of the Exchange Ratio to the Company. In conducting our analysis and
arriving at the opinion expressed herein, we have reviewed such materials and
considered such financial and other factors as we deemed relevant under the
circumstances, including:
(i) a draft dated May 13, 1998 of the Agreement;
(ii) certain publicly-available historical financial and operating data of
the Company including, but not limited to, (a) the Annual Report to
Shareholders and Annual Report on Form 10-K of the Company for the
three fiscal years ended December 31, 1997, 1996 and 1995, (b) the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997, (c) the Proxy Statement for the Annual Meeting of Shareholders
to be held on May 28, 1998, (d) the Form 10 dated December 12, 1997
relating to the spin-off of Excel Legacy Corporation from the Company,
(e) the Prospectus dated January 7, 1998 relating to the sale of
6,000,000 depositary shares of Excel Series B Cumulative Redeemable
Preferred Stock, (f) the Prospectus dated December 12, 1996 relating
to the sale of 2,600,000 shares of Excel Common Stock and (g) the
Prospectus dated June 20, 1995 relating to the sale of 2,000,000
shares of Excel Common Stock;
(iii) certain publicly-available historical financial and operating data
for New Plan including, but not limited to, (a) the Annual Report to
Shareholders and Annual Report on Form 10-K of New Plan for the three
fiscal years ended July 31, 1997, 1996 and 1995, (b) the Quarterly
Report on Form 10-Q for the quarter ended January 31, 1998, (c) the
Proxy Statement for the Annual Meeting of Shareholders held on
December 10, 1997 and (d) the Prospectus dated November 8, 1995
relating to the sale of 4,000,000 New Plan Shares;
(iv) certain information relating to New Plan, including financial
forecasts for the fiscal years ending July 31, 1998 and 1999 prepared
by the management of New Plan and a schedule of future investment
projects and acquisitions;
(v) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable
to the Company and New Plan, respectively, or otherwise relevant to our
inquiry,
(vi) the financial terms of certain recent comparable transactions we
deemed relevant to our inquiry;
(vii) the historical stock prices and trading volumes of the Excel Common
Stock and New Plan Shares; and
(viii) such other financial studies, analyses and investigations as we
deemed appropriate.
VI-1
<PAGE>
We have assumed, with your consent, the draft of the Agreement which we
reviewed (as referred to above) will conform in all material respects to that
document when in final form.
We have met with the senior management of the Company and New Plan to
discuss (i) the prospects for their respective businesses, (ii) their
estimates of such businesses' future financial performance, (iii) the
financial impact of the Merger on the respective companies, and (iv) such
other matters as we deemed relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and New Plan and have not undertaken
any independent verification of such information or any independent valuation
or appraisal of any of the assets or liabilities of the Company or New Plan.
With respect to certain financial forecasts provided to us by the management
of New Plan, we have assumed such information (and the assumptions and bases
therefor) represents the best currently available estimates and judgments of
New Plan's management as to the future financial performance of New Plan. Our
opinion is predicated on the Merger qualifying as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986.
Further, our opinion is necessarily based on economic, financial, and market
conditions as they exist and can only be evaluated as of the date hereof.
Our opinion does not address nor should it be construed to address the
relative merits of the Merger and alternative business strategies. In
addition, this opinion does not in any manner address the prices at which
Excel Common Stock will actually trade following consummation of the Merger.
As you know, we have been retained by the Company to render this opinion in
connection with the Merger and will receive a fee for such services. In
addition to having underwritten Excel's and New Plan's common stock offerings,
in the ordinary course of business we may actively trade the shares of Excel
Common Stock and New Plan Shares for our own account and for the accounts of
customers and we may, therefore, at any time hold a long or short position in
such securities.
This letter and the opinion expressed herein are for the use of the Board of
Directors of the Company. This opinion does not constitute a recommendation to
the shareholders of the Company as to how such shareholders should vote or as
to any other action such shareholders should take regarding the Merger. This
opinion may not be reproduced, summarized, excerpted from or otherwise
publicly referred to or disclosed in any manner, without our prior written
consent, except that the Company may include this opinion in its entirety in
any proxy statement or information statement relating to the Merger sent to
the Company's shareholders.
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
Prudential Securities Incorporated
VI-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Registrant's articles and bylaws require the Registrant to indemnify
its directors, officers and certain other persons to the fullest extent
permitted from time to time by Maryland law. The Maryland General Corporation
Law permits a corporation to indemnify its directors, officers and certain other
persons against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the corporation,
unless it is established that the act or omission of the indemnified party was
material to the matter giving rise to the proceedings and (i) was committed in
bad faith or was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit, or (iii) in
the case of any criminal proceeding the indemnified party had reasonable cause
to believe that the act or omission was unlawful. Indemnification may be made
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by the director or officer in connection with the proceeding;
provided, however, that if the proceeding is one by or in the right of the
corporation, indemnification may not be made with respect to any proceeding in
which the director or officer has been adjudged to be liable to the corporation.
In addition, a director or officer may not be indemnified with respect to any
proceeding charging improper personal benefit to the director or officer in
which the director or officer was adjudged to be liable on the basis that
personal benefit was improperly received. The termination of any proceeding by
conviction, or upon a plea of nolo contendere or its equivalent, or an entry of
any order of probation prior to judgment, creates a rebuttal presumption that
the director or officer did not meet the requisite standard of conduct required
for indemnification to be permitted. It is the position of the Commission that
indemnification of directors and officers for liabilities arising under the
Securities Act is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of May 14, 1998 by and among Excel Realty Trust, Inc., ERT
Merger Sub, Inc. and New Plan Realty Trust, as amended as of August 7, 1998 (filed as Annex I
and Annex I-A to the Joint Proxy Statement/Prospectus included in this Registration Statement).
3.1 Amended and Restated Articles of Incorporation of Excel (filed as Annex III to the Joint Proxy
Statement/Prospectus included in this Registration Statement).
3.2 Amended and Restated Bylaws of Excel.
4.1 Articles Supplementary classifying 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred
Stock of Excel (filed as Annex IV to the Joint Proxy Statement/Prospectus included in this
Registration Statement).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
8.1 Opinion of Latham & Watkins regarding certain tax matters.
8.2 Opinion of Altheimer & Gray regarding certain tax matters.
9.1 Voting Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
9.2 Voting Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
9.3 Voting Agreement dated May 14, 1998 by and between Excel and William Newman.
10.1 Employment Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S>
10.2 Employment Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
10.3 Form of Employment Agreement by and between Excel and certain executive officers of New Plan.
10.4 Form of Employment Agreement by and between Excel and certain executive officers of Excel.
10.5 Support Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
10.6 Support Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
10.7 Support Agreement dated May 14, 1998 by and between Excel and William Newman.
10.8 Form of Employment Agreement dated ______ __, 1998 by and between Excel and William Newman.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Prudential Securities Incorporated.
23.3 Consent of Merrill Lynch Pierce Fenner & Smith Incorporated.
23.4 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in Exhibit 5.1).
23.5 Consent of Latham & Watkins (contained in Exhibit 8.1).
23.6 Consent of Altheimer & Gray (contained in Exhibit 8.2).
24.1 Power of Attorney (contained on signature page).
99.1 Form of Excel Proxy Card.
99.2 Form of New Plan Proxy Card.
99.3 Other Soliciting Materials of New Plan.
</TABLE>
<PAGE>
(b) Financial Statement Schedules.
All required information is set forth in the financial statements included
or incorporated by reference in the Joint Proxy Statement/Prospectus
constituting part of this Registration Statement.
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through the use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to such securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that
<PAGE>
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
Registration Statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, State of
California, on the 10th day of August, 1998.
EXCEL REALTY TRUST, INC.
By:/s/ Gary B. Sabin
----------------------------------------
Gary B. Sabin
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated. Each person whose signature appears below hereby authorizes
Gary B. Sabin and Richard B. Muir, and either of them, with full power of
substitution and resubstitution, as his true and lawful attorneys-in-fact, for
him in any and all capacities, to sign any amendments (including post-effective
amendments or supplements) to this Registration Statement and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Commission.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Gary B. Sabin President, Chief Executive Officer and August 10, 1998
- --------------------------------------- Chairman of the Board (Principal
Gary B. Sabin Executive Officer)
/s/ Richard B. Muir Executive Vice President, Secretary and August 10, 1998
- --------------------------------------- Director
Richard B. Muir
/s/ David A. Lund Chief Financial Officer (Principal August 10, 1998
- --------------------------------------- Financial and Accounting Officer)
David A. Lund
/s/ Boyd A. Lindquist Director August 10, 1998
- ---------------------------------------
Boyd A. Lindquist
/s/ Robert E. Parsons, Jr. Director August 10, 1998
- ---------------------------------------
Robert E. Parsons, Jr.
/s/ Bruce A. Staller Director August 10, 1998
- ---------------------------------------
Bruce A. Staller
/s/ John H. Wilmot Director August 10, 1998
- ---------------------------------------
John H. Wilmot
</TABLE>
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement on
Form S-4 or are incorporated herein by reference.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger dated as of May 14, 1998 by and among Excel Realty
Trust, Inc., ERT Merger Sub, Inc. and New Plan Realty Trust, as amended as of August 7,
1998 (filed as Annex I and Annex I-A to the Joint Proxy Statement/Prospectus
included in this Registration Statement).
3.1 Amended and Restated Articles of Incorporation of Excel (filed as Annex III to the
Joint Proxy Statement/Prospectus included in this Registration Statement).
3.2 Amended and Restated Bylaws of Excel.
4.1 Articles Supplementary classifying 7.8% Series D Cumulative Voting Step-Up Premium
Rate Preferred Stock of Excel (filed as Annex IV to the Joint Proxy
Statement/Prospectus included in this Registration Statement).
5.1 Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
8.1 Opinion of Latham & Watkins regarding certain tax matters.
8.2 Opinion of Altheimer & Gray regarding certain tax matters.
9.1 Voting Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
9.2 Voting Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
9.3 Voting Agreement dated May 14, 1998 by and between Excel and William Newman.
10.1 Employment Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
10.2 Employment Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
10.3 Form of Employment Agreement by and between Excel and certain executive officers of
New Plan.
10.4 Form of Employment Agreement by and between Excel and certain executive officers of
Excel.
10.5 Support Agreement dated May 14, 1998 by and between Excel and Arnold Laubich.
10.6 Support Agreement dated May 14, 1998 by and between Excel and Gary B. Sabin.
10.7 Support Agreement dated May 14, 1998 by and between Excel and William Newman.
10.8 Form of Employment Agreement dated August __, 1998 by and between Excel and
William Newman.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Prudential Securities Incorporated.
23.3 Consent of Merrill Lynch Pierce Fenner & Smith Incorporated.
23.4 Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in Exhibit 5.1).
23.5 Consent of Latham & Watkins (contained in Exhibit 8.1).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<C> <S>
23.6 Consent of Altheimer & Gray (contained in Exhibit 8.2).
24.1 Power of Attorney (contained on signature page).
99.1 Form of Excel Proxy Card.
99.2 Form of New Plan Proxy Card.
99.3 Other Soliciting Materials of New Plan.
</TABLE>
<PAGE>
Exhibit 3.2
NEW PLAN EXCEL REALTY TRUST, INC.
---------------------------------
AMENDED AND RESTATED BYLAWS
---------------------------
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
----------------
shall be located in New York, New York, or at such other place or places as the
Board of Directors may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have additional
------------------
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held at the
-----
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
--------------
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders may
----------------
be called only (i) by the chairman of the board or (ii) by action of the Board
of Directors or (iii) by the holders of shares entitled to cast not less than
fifty percent of all the votes entitled to be cast at such meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days before
------
each meeting of stockholders, the secretary shall give to each stockholder
entitled to vote at such meeting and to each stockholder not entitled to vote
who is entitled to notice of the meeting written or printed notice stating the
time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by statute, the purpose for which the meeting is
called, either by mail or by
<PAGE>
presenting it to such stockholder personally or by leaving it at his residence
or usual place of business. If mailed, such notice shall be deemed to be given
when deposited in the United States mail addressed to the stockholder at his
post office address as it appears on the records of the Corporation, with
postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
---------------
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by statute to be
stated in such notice. No business shall be transacted at a special meeting of
stockholders except as specifically designated in the notice.
Section 6. QUORUM. At any meeting of stockholders, the presence in
------
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the Charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have power to adjourn the meeting from time to time to a date not
more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 7. VOTING. A plurality of all the votes cast at a meeting of
------
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the Charter of the Corporation. Unless
otherwise provided in the Charter, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
Section 8. PROXIES. A stockholder may vote the stock owned of record
-------
by him, either in person or by proxy executed in writing by the stockholder or
by his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 9. VOTING OF STOCK BY CERTAIN HOLDERS. Stock registered in
----------------------------------
the name of a corporation, partnership, trust or other entity, if entitled to be
voted, may be voted by the president or a vice president, a general partner or
trustee thereof, as the case may be, or a proxy appointed by any of the
foregoing individuals, unless some other person who has been appointed to vote
such stock pursuant to a bylaw or a resolution of the board of directors (or
equivalent body) of such corporation or other entity presents a certified copy
of such bylaw or
2
<PAGE>
resolution, in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date of closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Notwithstanding any other provision of the Charter of the Corporation
or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations
Article of the Annotated Code of Maryland (or any successor statute) shall not
apply to any acquisition by any person of stock of the Corporation.
Section 10. INSPECTORS. At any meeting of stockholders, the chairman
----------
of the meeting may, or upon the request of any stockholder shall, appoint one or
more persons as inspectors for such meeting. Such inspectors shall ascertain
and report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be prima facie evidence thereof.
Section 11. NOMINATIONS AND STOCKHOLDER BUSINESS.
------------------------------------
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be
3
<PAGE>
made at an annual meeting of stockholders (i) pursuant to the Corporation's
notice of meeting, (ii) by or at the direction of the Board of Directors or
(iii) by any stockholder of the Corporation who was a stockholder of record at
the time of giving of notice provided for in this Section 11(a), who is entitled
to vote at the meeting and who complied with the notice procedures set forth in
this Section 11(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of
this Section 11, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the secretary at the principal executive offices of
the Corporation not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced by more than 30 days
or delayed by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the tenth day following
the day on which public announcement of the date of such meeting is first made.
Such stockholders' notice shall be set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (ii) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the beneficial
owner, if any, on whose behalf the proposal is made; and (iii) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made, (x) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner and (y) the class and number of shares of stock of the Corporation which
are owned beneficially and of record by such stockholder and such beneficial
owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 11 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 11(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the
4
<PAGE>
Corporation's notice of meeting. Nominations of persons for election to the
Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected (i) pursuant to the Corporation's notice of meeting,
(ii) by or at the direction of the Board of Directors or (iii) provided that the
Board of Directors has determined that directors shall be elected at such
special meeting, by any stockholder of the Corporation who is a stockholder of
record at the time of giving of notice provided for in this Section 11(b), who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 11(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice required by paragraph (a)(2) of
this Section 11(b) shall be delivered to the secretary at the principal
executive offices of the Corporation not earlier than the 90th day prior to such
special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the tenth day following the day on
which public announcement is the first made of the date of the special meeting
and of the nominees proposed by the Board of Directors to be elected at such
meeting.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 11. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance with
the procedures set forth in this Section 11 and, if any proposed nomination or
business is not in compliance with this Section 11, to declare that such
defective nomination or proposal be disregarded.
(2) For purposes of this Section 11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of state law and
of the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section 11. Nothing in this Section 11 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
Section 12. INFORMAL ACTION BY STOCKHOLDER. Any action required or
------------------------------
permitted to be taken at a meeting of stockholders may be taken without a
meeting if (i) a consent in writing, setting forth such action, is signed by
each stockholder entitled to vote on the matter and (ii) a written waiver of any
right to dissent is signed by each stockholder entitled to notice of the meeting
of stockholders but not to vote thereat, and such consent and waiver are filed
with the minutes of proceedings of the stockholders.
5
<PAGE>
Section 13. VOTING BY BALLOT. Voting on any question or in any
----------------
election may be viva voce unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS; QUALIFICATIONS. The business and affairs
------------------------------
of the Corporation shall be managed under the direction of its Board of
Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
---------------------------------
or at any special meeting called for that purpose, the Board of Directors may
establish, increase or decrease the number of directors, provided that the
number thereof shall never be less than the minimum number required by the
Maryland General Corporation Law, nor more than 21 (including two directorships
which shall be reserved to the extent necessary to comply with any default
director provisions under the Corporation's preferred stock), and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors. Pursuant to the charter of the
Corporation, the directors have been divided into classes with terms of three
years, with the term of office of one class expiring at the annual meeting of
stockholders in each year. Each director shall hold office for the term for
which he is elected and until his successor is elected and qualified.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
---------------------------
Board of Directors shall be held immediately after and at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being necessary.
Unless the Board of Directors shall provide by resolution the time and place,
either within or without the State of Maryland, for the holding of regular
meetings of the Board of Directors, the chairman of the board shall fix such
time and place for such meetings.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of
----------------
Directors may be called only by or at the request of (i) the chairman of the
board, the chief executive officer, the president or (ii) directors constituting
a majority of the directors then in office. The chairman of the board shall fix
the time and place, either within or without the State of Maryland, as the time
and place for holding any special meeting of the Board of Directors.
Section 5. NOTICE. Notice of any meeting of the Board of Directors
------
shall be given by written notice delivered personally or transmitted by
facsimile to each director at his business address. Personally delivered or
facsimile transmitted notices shall be given at least five business days prior
to such meeting (or such shorter period, not shorter than two calendar days in
any event, as may be approved by the chairman of the board with respect to a
particular meeting or meetings under exigent circumstances). Personally
delivered notices may be delivered to a director's
6
<PAGE>
business address by a reputable courier service. Neither the business to be
transacted at, nor the purpose of, any annual or regular meeting of the Board of
Directors need be stated in this notice, unless specifically required by statute
or these Bylaws. No business shall be transacted at a special meeting of the
Board of Directors except as specifically designated in the notice thereof.
Section 6. QUORUM. Directors constituting a majority of the total
------
number of directorships then constituting the Board of Directors (including
vacant Board of Directors seats, except any vacancy created by an increase in
the number of Board of Directors seats) (such a majority being referred to in
these Bylaws as a "Majority of the Board") and who are present in person shall
constitute a quorum for transaction of business at any meeting of the Board of
Directors, provided that if, pursuant to the Charter of the Corporation or these
Bylaws, the vote of a majority of a particular group of directors is required
for action, a quorum must also include a majority of such group.
If at any time during any meeting of the Board of Directors, directors
constituting a Majority of the Board shall cease to be present in person at the
meeting, then the Board of Directors shall cease at such time to have a quorum
for transaction of business and such meeting shall immediately terminate.
Section 7. VOTING. The action of the majority of the directors
------
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, except as otherwise expressly provided herein or unless the
concurrence of a greater proportion is required for such action by applicable
statute, the Corporation's Charter or these Bylaws.
Section 8. TELEPHONE MEETINGS. Subject to Section 6 of this Article
------------------
III, directors may participate in a meeting by means of a conference telephone
or similar communications equipment if all persons participating in the meeting
can hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
----------------------------
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors
---------
cease to be directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining directors hereunder (even if fewer
than three directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors may be filled by a
majority of the remaining directors, although such majority is less than a
quorum Any vacancy on the Board of Directors created by an increase in the
number of directors may be filled by directors constituting a Majority of the
Board. The stockholders may elect a successor to fill a vacancy on the Board of
Directors which results from the removal of a director (other than the removal
of a director elected separately by any class or series). If the stockholders of
any class or series are
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entitled separately to elect one or more directors, the stockholders of that
class or series may elect a successor to fill a vacancy on the Board of
Directors which results from the removal of a director elected by that class or
series. A director elected by the Board of Directors to fill a vacancy serves
until the next annual meeting of stockholders and until his successor is elected
and qualifies. A director elected by the stockholders to fill a vacancy which
results from the removal of a director serves for the balance of the term of the
removed director.
Section 11. COMPENSATION. Directors shall not receive any stated
------------
salary for their services as directors but, by resolution of the Board of
Directors, fixed sums per year and/or per meeting. Expenses of attendance, if
any, may be allowed to directors for attendance at each annual, regular or
special meeting of the Board of Directors or of any committee thereof; but
nothing herein contained shall be construed to preclude any directors from
serving the Corporation in any other capacity and receiving compensation
therefor.
Section 12. REMOVAL OF DIRECTORS. Directors may only be removed for
--------------------
cause.
Section 13. LOSS OF DEPOSIT. No director shall be liable for any
---------------
loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or stock
have been deposited.
Section 14. SURETY BONDS. Unless required by law, no director shall
------------
be obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 15. RELIANCE. Each director, officer, employee and agent of
--------
the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
----------------------------------------------------
AGENTS. The directors shall have no responsibility to devote their full time to
- ------
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to those
of or relating to the Corporation; provided that in no event shall any such
person appropriate any opportunity of the Corporation.
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ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
---------------------------------
may appoint from among its members an Investment Committee and other committees
composed of two or more directors (provided that the Investment Committee shall
be composed of four directors), to serve at the pleasure of the Board of
Directors. Notwithstanding the foregoing, the Corporation shall not have an
Executive Committee.
Section 2. POWERS. Subject to Section 5 of this Article, the Board of
------
Directors may delegate to committees appointed under Section 1 of this Article
any of the powers of the Board of Directors, except as prohibited by law.
Section 3. TELEPHONE MEETINGS. Members of a committee of the Board
------------------
of Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 4. INFORMAL ACTION BY COMMITTEES. Any action required or
-----------------------------
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.
Section 5. INVESTMENT COMMITTEE. The Board of Directors shall appoint
--------------------
an Investment Committee composed of four directors. Subject to requirements
under applicable law regarding action or approval by the Board of Directors or
any Stockholders, as the case may be, the Investment Committee will have the
power and authority (i) but only by the consent of at least three members, to
approve on behalf of the Corporation any acquisition or disposition with a
purchase price (taking into account purchase money financing and assumption of
existing mortgage indebtedness) of less than five percent (5%) of the total
assets (before accumulated depreciation and amortization) of the Corporation and
its consolidated subsidiaries determined in accordance with generally accepted
accounting principles at the time such transaction is entered into and (ii) also
to approve any such transaction with such a purchase price in an amount in
excess of five percent (5%), but less than ten percent (10%), of total assets
(before accumulated depreciation and amortization) of the Corporation and its
consolidated subsidiaries, determined in accordance with generally accepted
accounting principles, by the consent of all four members of the Investment
Committee and two additional members of the Board of Directors of the
Corporation. Subject to authority which the Board of Directors shall delegate
from time to time, the Investment Committee shall be entitled to authorize and
approve the use of so-called Down-REIT Units in connection with such a
transaction and authorize and reserve for issuance shares of the Corporation's
capital stock upon conversion of such Down-REIT Units. The Investment Committee
shall not have the power or authority to
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approve any refinancing, unsecured financing or new financing, other than
purchase money financing or debt assumed as described above.
ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
------------------
include a chairman of the board, a chief executive officer, a president, a chief
operating officer (or, as the Board of Directors shall determine, co-chief
operating officers), one or more executive vice presidents, a chief financial
officer, a treasurer and a secretary and may include one or more vice
presidents, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Board of Directors may from time to time appoint
such other officers with such powers and duties as they shall deem necessary or
desirable. The officers of the Corporation shall be elected annually by the
Board of Directors at the first meeting of the Board of Directors held after
each annual meeting of stockholders, except that the chief executive officer may
appoint one or more vice presidents, assistant secretaries and assistant
treasurers. If the election of officers shall not be held at such meeting, such
election shall be held as soon thereafter as may be convenient. Each officer
shall hold office until his successor is elected and qualifies or until his
death, resignation or removal in the manner hereinafter provided. Any two or
more offices may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of chief executive officer,
president, treasurer and secretary. Election of an officer or agent shall not
of itself create contract rights between the Corporation and such officer or
agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
-----------------------
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the chief
executive officer, the president or the secretary. Any resignation shall take
effect at any time subsequent to its receipt at the time specified therein or,
if the time when it shall become effective is not specified therein, immediately
upon its receipt. The acceptance of a resignation shall not be necessary to
make it effective unless otherwise stated in the resignation.
Section 3. VACANCIES. A vacancy in any office may be filled by the
---------
Board of Directors for the balance of the term.
Section 4. CHAIRMAN OF THE BOARD. The Board of Directors shall
---------------------
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him by the Board of Directors. The chairman
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of the board shall call regular and special meetings of the Board of Directors
and/or stockholders as the chairman shall determine are necessary or appropriate
for the conduct of the business and affairs of the Corporation.
Section 5. CHIEF EXECUTIVE OFFICER. The Board of Directors shall
-----------------------
designate a chief executive officer. The chief executive officer shall have
general responsibility for implementation of the policies of the Corporation, as
determined by the Board of Directors, and for the management (under the
direction of the Board of Directors) of the business and affairs of the
Corporation, shall in general supervise and control such business and affairs
and shall report to the Board of Directors. He shall make reports to the Board
of Directors and the stockholders and shall see that all orders of the Board of
Directors and any committee thereof are carried into effect. The chief
executive officer may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed.
The chief executive officer shall in general perform all duties incident to the
office of chief executive officer and such other duties as may be properly
prescribed by the Board of Directors from time to time. The chief executive
officer shall, in the absence of or because of the inability to act of the
chairman of the board, perform all duties of the chairman of the board.
Section 6. PRESIDENT. The president shall be the most senior
---------
executive officer of the Corporation below the chief executive officer and shall
assist the chief executive officer in the implementation of the policies of and
management of the business and affairs of the Corporation and in the supervision
and control of such business and affairs. The president shall report to the
chief executive officer. The president shall, in the absence of or because of
the inability to act of the chief executive officer, perform all duties of the
chief executive officer. In the absence of a designation of a chief operating
officer by the Board of Directors, the president shall also be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be properly prescribed by the chief executive officer
or the Board of Directors from time to time.
Section 7. CHIEF OPERATING OFFICER. The Board of Directors shall
-----------------------
designate a chief operating officer (or co-chief operating officers as the Board
of Directors shall determine). The chief operating officer(s) shall report to
the president of the Corporation and shall oversee the day-to-day administration
and operation of the Corporation's business. The chief operating officer(s)
shall have such other responsibilities and duties as set forth by the Board of
Directors or the chief executive officer or the president and as are normally
incident to the office of a chief operating officer.
Section 8. VICE PRESIDENTS. The Board of Directors shall designate
---------------
one or more executive vice presidents. The executive vice president(s) shall
have such duties and
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responsibilities as set forth by the Board of Directors or the chief executive
officer or the president. The Board of Directors may also designate one or more
vice presidents and designate such vice presidents for particular areas of
responsibility.
Section 9. CHIEF FINANCIAL OFFICER. The Board of Directors shall
-----------------------
designate a chief financial officer. The chief financial officer shall have
responsibility for the financial affairs of the Corporation and shall exercise
supervisory responsibility for the performance of the duties of the Treasurer.
The chief financial officer shall have such other responsibilities and duties as
set forth by the Board of Directors or the chief executive officer or the
president.
Section 10. SECRETARY. The secretary shall (a) keep the minutes of
---------
the proceedings of the stockholders, the Board of Directors and committees of
the Board of Directors in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the trust records and of the
seal of the Corporation; (d) keep a register of the post office address of each
stockholder which shall be furnished to the secretary by such stockholder; (e)
have general charge of the share transfer books of the Corporation; and (f) in
general perform such other duties as from time to time may be assigned to him by
the chief executive officer, the president or by the Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of the
---------
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.
If required by the Board of Directors, he shall give the Corporation a
bond in such sum and with such surety or sureties as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, all books, papers, vouchers, moneys and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
----------------------------------------------
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president, the chief executive officer or the Board of Directors. The
assistant treasurers shall, if required by the Board of Directors,
12
<PAGE>
give bonds for the faithful performance of their duties in such sums and with
such surety or sureties as shall be satisfactory to the Board of Directors.
Section 13. SALARIES. The salaries of the officers shall be fixed
--------
from time to time by the Board of Directors and no officer shall be prevented
from receiving such salary by reason of the fact that he is also a director.
Section 14. NON-CONTRAVENTION. Whenever in this Article V, the
-----------------
responsibilities and duties of an officer may be specified by the chief
executive officer and/or the president, neither the chief executive officer nor
the president shall contravene the instructions of the Board of Directors with
respect to such responsibilities and duties or the performance thereof and the
president shall not contravene the instructions of the chief executive officer
with respect to such responsibilities and duties or the performance thereof.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any
---------
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed,
mortgage, lease or other document executed by one or more of the directors or by
an authorized person shall be valid and binding upon the Board of Directors and
upon the Corporation when authorized or ratified by action of the Board of
Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
-----------------
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, agent or
agents of the Corporation and in such manner as shall from time to time be
determined by the Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
--------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
------------
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation; provided, however,
that the Board of Directors may authorize the issue of
13
<PAGE>
some or all of the shares of some or all of its classes or series without
certificates. Each certificate shall be signed by the chief executive officer,
the president or a vice president and countersigned by the secretary or an
assistant secretary or the treasurer or an assistant treasurer and may be sealed
with the seal, if any, of the Corporation. The signatures may be either manual
or facsimile. Certificates shall be consecutively numbered; and if the
Corporation shall, from time to time, issue several classes of stock, each class
may have its own number series. A certificate is valid and may be issued whether
or not an officer who signed it is still an officer when it is issued. Each
certificate representing shares which are restricted as to their transferability
or voting powers, which are preferred or limited as to their dividends or as to
their allocable portion of the assets upon liquidation or which are redeemable
at the option of the Corporation, shall have a statement of such restriction,
limitation, preference or redemption provision, or a summary thereof, plainly
stated on the certificate. In lieu of such statement or summary, the Corporation
may set forth upon the face or back of the certificate a statement that the
Corporation will furnish to any stockholder, upon request and without charge, a
full statement of such information.
Section 2. TRANSFERS. Upon surrender to the Corporation or the
---------
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the Charter of the Corporation and all
of the terms and conditions.
Section 3. LOST CERTIFICATES. The Board of Directors (or any officer
-----------------
designated by it) may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or his legal representative to advertise
the same in such manner as they shall require and/or to give bond, with
sufficient surety, to the Corporation to indemnify it against any loss or claim
which may arise as a result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
--------------------------------------------------
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders, or stockholders entitled to receive payment of any dividend or the
allotment of any other rights, or in order to make a determination of
stockholders for any other purpose. Such date, in any case, shall not be prior
to the
14
<PAGE>
close of business on the day the record date is fixed and shall be not more than
90 days and, in the case of a meeting of stockholders, not less than ten days,
before the date on which the meeting or particular action requiring such
determination of stockholders is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not longer
than 20 days. If the stock transfer books are closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except where the determination has been
made through the closing of the transfer books and the stated period of closing
has expired.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
------------
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
-----------------------------------
Directors may issue fractional stock or provide for the issuance of scrip, all
on such terms and under such conditions as they may determine. Notwithstanding
any other provision of the Charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board of Directors may provide that
for a specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
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The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DIVIDENDS
Section 1. DECLARATION. Dividends upon the stock of the Corporation
-----------
may be declared by the Board of Directors, subject to the provisions of law and
the Charter of the Corporation. Dividends may be paid in cash, property or
stock of the Corporation, subject to the provisions of law and the Charter.
Section 2. CONTINGENCIES. Before payment of any dividends, there
-------------
may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the Board of Directors may from time to time, in its
absolute discretion, think proper as a reserve fund for contingencies, for
equalizing dividends, for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall determine
to be in the best interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the Charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the adoption
----
of a seal by the Corporation. The seal shall have inscribed thereon the name of
the Corporation and the year of its organization. The Board of Directors may
authorize one or more duplicate seals and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is required to
-------------
place its seal to a document, it shall be sufficient to meet the requirements of
any law, rule or regulation
16
<PAGE>
relating to a seal to place the word "(SEAL)" adjacent to the signature of the
person authorized to execute the document on behalf of the Corporation.
ARTICLE XII
INDEMNIFICATION
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(i) any individual who is a present or former director or officer of the
Corporation or (ii) any individual who, while a director of the Corporation and
at the request of the Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (i) or (ii) above and
to any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any provision of the Bylaws or Charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated herein, shall be deemed equivalent to the giving
of such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
ARTICLE XIV
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AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter
or repeal any provision of these Bylaws and to make new Bylaws; provided that no
amendment to increase the size of the board of directors above 21 members (or to
amend this proviso) shall be made without the approval of the stockholders of
the Corporation by the affirmative vote of a majority of all votes entitled to
be cast on the matter.
18
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Exhibit 5.1
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
August 10, 1998
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 110
San Diego, California 92127
Re: Excel Realty Trust, Inc.
Registration Statement on Form S-4
filed on or about August 10, 1998
---------------------------------
Ladies and Gentlemen:
We have acted as special Maryland corporate counsel to Excel Realty Trust,
Inc., a Maryland corporation (the "Company"), in connection with certain matters
arising out of the registration of up to (i) 1,500,000 depositary shares (the
"Series D Depositary Shares"), each of which represents a one-tenth fractional
interest in a share of 7.8% Series D Cumulative Voting Step-Up Premium Rate
Preferred Stock, par value $.01 per share (the "Series D Preferred Shares"), of
the Company and (ii) 63,324,745 shares (the "Common Shares", collectively with
the Series D Preferred Shares, the "Shares") of common stock, par value $.01 per
share, of the Company (the "Common Stock"), covered by the above-referenced
Registration Statement, and all amendments thereto (the "Registration
Statement"), under the Securities Act of 1933, as amended. Such Shares are to be
issued in connection with the proposed merger (the "Merger") of ERT Merger Sub,
Inc., a Maryland corporation and a wholly owned subsidiary of Excel, and New
Plan Realty Trust, a Massachusetts business trust, pursuant to the Agreement and
Plan of Merger dated May 14, 1998, as amended to date (the "Merger Agreement"),
and the transactions related thereto. Capitalized terms used but not defined
herein shall have the meanings assigned to them in the Registration Statement.
In our capacity as special Maryland corporate counsel to the Company and as
a basis for the opinions hereinafter set forth, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the following
documents:
<PAGE>
Excel Realty Trust, Inc.
August 10, 1998
Page 2
(i) The charter of the Company (the "Charter"), consisting of Articles
of Incorporation filed with the State Department of Assessments and Taxation of
Maryland (the "Department") on May 13, 1993, Articles of Amendment and
Restatement of the Company filed with the Department on July 9, 1993, Articles
of Amendment and Restatement of the Company filed with the Department on May 23,
1995, Articles Supplementary filed with the Department on February 4, 1997
classifying 4,600,000 shares of the Preferred Stock, par value $.01, of the
Company (the "Preferred Stock") as the Series A Preferred Stock, Articles
Supplementary filed with the Department on January 12, 1998 classifying 690,000
shares of the Preferred Stock as the Series B Preferred Stock, and the Articles
Supplementary filed with the Department on June 5, 1998 classifying 100,000
shares of the Preferred Stock as the Series C Preferred Stock;
(ii) The Amended and Restated Bylaws of the Company (the "Bylaws") as
adopted on January 12, 1995;
(iii) An unexecuted copy of Articles of Amendment (the "Articles of
Amendment") in the form attached as an exhibit to the Registration Statement
which, once effective, will, among other things, increase the number of
authorized shares of stock of the Company to 275,000,000, consisting of
225,000,000 shares of Common Stock and 50,000,000 shares of Preferred Stock.
(iv) An unexecuted copy of Articles Supplementary (the "Series D Articles
Supplementary") in the form attached as an exhibit to the Registration
Statement, which, once effective, will classify 150,000 shares of Preferred
Stock as Series D Preferred Stock;
(v) The form of Deposit Agreement pursuant to which the Series D
Depositary Shares are to be issued (the "Deposit Agreement") upon consummation
of the Merger, and the related form of depositary receipt (the "Depositary
Receipt") representing the Series D Depositary Shares;
(vi) A status certificate of recent date issued by the Department to the
effect that the Company is duly incorporated and existing under the laws of the
State of Maryland;
(vii) The Registration Statement, including the related form of prospectus
therein, and the related Proxy Statement (the "Proxy Statement") of the Company;
(viii) The Merger Agreement; and
<PAGE>
Excel Realty Trust, Inc.
August 10, 1998
Page 3
(ix) Such other documents, corporate and other records of the Company and
certificates of public officials and officers of the Company as we have deemed
necessary or appropriate to provide a basis for the opinion set forth below,
subject to the limitations, assumptions and qualifications noted below.
In reaching the opinions set forth below, we have assumed the following:
(a) each person executing any instrument, document or agreement on behalf
of any party (other than the Company) is duly authorized to do so;
(b) each natural person executing any instrument, document or agreement is
legally competent to do so;
(c) all documents submitted to us as originals are authentic; all
documents submitted to us as certified, facsimile or photostatic copies conform
to the original document; all signatures on all documents submitted to us for
examination are genuine; the form and content of any documents submitted to us
as unexecuted drafts do not and will not differ in any respect relevant to this
opinion from such documents as executed and delivered; and all public records
reviewed are accurate and complete;
(d) none of the Shares will be issued in violation of the provisions of
the Charter of the Company imposing restrictions on ownership and transfer of
shares of stock of the Company;
(e) the form of certificate representing a share of Common Stock of the
Company and the form of certificate representing a share of Series D Preferred
Stock of the Company, in each case following the effectiveness of the Merger,
will be in accordance with the Maryland General Corporation Law;
(f) the proposals to be submitted pursuant to the Proxy Statement to the
Stockholders of the Company for approval, including the Share Issuance, the
Charter Amendments (i.e the Articles of Amendment), and the Election of
Directors, have been or will be prior to the effective time of the Merger, duly
authorized and advised by the directors of the Company and duly approved and
adopted by the Stockholders of the Company by the requisite vote, and the
classification of Preferred Stock as Series D Preferred Stock, the final form of
the Series D Articles Supplementary, Deposit Agreement and Depositary Receipt,
and the issuance and deposit of the Series D Preferred Shares with the
depositary named in the Deposit Agreement, have been or will be prior to the
effectiveness of the Merger duly approved by the Board of Directors
<PAGE>
Excel Realty Trust, Inc.
August 10, 1998
Page 4
of the Company, all in the manner described, proposed or contemplated by the
Registration Statement and Proxy Statement and in accordance with the Charter
and Bylaws of the Company and applicable law;
(g) the Articles of Amendment and Articles Supplementary will be duly
executed and properly filed with and accepted for record by the Department prior
to the effective time of the Merger; and
(h) Articles of Merger will be duly executed and properly filed with and
accepted for record by the Department in a timely manner as contemplated by and
pursuant to the Merger Agreement (the proceedings contemplated by and described
in subparagraphs (f) and (g) above and this subparagraph (h) being herein
referred to collectively as the "Corporate Proceedings").
Based on the foregoing, and subject to the assumptions and qualifications
set forth herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under and
by virtue of the laws of the State of Maryland and is in good standing with the
SDAT.
2. Upon completion of all necessary Corporate Proceedings, and when issued
and delivered in accordance with the Corporate Proceedings and in the manner
contemplated by the Merger Agreement, the Common Shares will be validly issued,
fully paid and non-assessable.
3. Upon completion of all necessary Corporate Proceedings and when issued
and delivered in accordance with the Corporate Proceedings and in the manner
contemplated by the Merger Agreement, the Series D Preferred Shares will be
validly issued, fully paid and non-assessable, and upon completion of all
necessary Corporate Proceedings, the execution and delivery by or on behalf of
the Company of the Deposit Agreement and the issuance by the depositary named in
the Deposit Agreement of Depositary Receipts evidencing the Series D Preferred
Shares will be duly approved by all necessary corporate action on the part of
the Company.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and further consent to the filing of this opinion as an exhibit to
applications to the securities commissioners of the various states of the United
States for registration of the Shares. We also consent to the identification of
our firm as Maryland counsel to the Company in the section of the Prospectus
(which is a part of the Registration Statement) entitled "Legal Matters."
<PAGE>
Excel Realty Trust, Inc.
August 10, 1998
Page 5
This opinion is limited to the present corporate laws of the State of
Maryland and we express no opinion with respect to the laws of any other
jurisdiction. Furthermore, the opinions presented in this letter are limited to
the matters specifically set forth herein and no other opinion shall be inferred
beyond the matters expressly set forth herein.
The opinions set forth in this letter are rendered as of the date hereof
and are necessarily limited to laws now in effect and facts and circumstances
presently existing and brought to our attention. We assume no obligation to
supplement this opinion if any applicable law is changed after the date hereof
or if we become aware of any facts or circumstances which now exist or which
occur or arise in the future and may change the opinions expressed herein after
the date hereof.
This opinion is being furnished to you solely for your benefit.
Accordingly, it may not be relied upon by, quoted in any manner to or delivered
to any other person or entity without, in each instance, our prior written
consent.
Very truly yours,
/s/ Ballard Sphan Andrews & Ingersoll, LLP
<PAGE>
Exhibit 8.1
[LETTERHEAD OF LATHAM & WATKINS]
August 10, 1998
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 100
San Diego, California 92127
Re: Excel Realty Trust, Inc.--Merger of ERT Merger Sub, Inc. with and into
----------------------------------------------------------------------
New Plan Realty Trust
---------------------
Ladies & Gentlemen:
We have acted as special tax counsel to Excel Realty Trust, Inc., a
Maryland corporation (the "Company"), in connection with the merger (the
"Merger") of ERT Merger Sub, Inc., a Maryland corporation ("Sub") and wholly-
owned subsidiary of the Company, with and into New Plan Realty Trust, a
Massachusetts business trust ("New Plan"). You have requested our opinion
regarding certain federal income tax consequences of the Merger.
In formulating our opinion, we have examined such documents as we deemed
appropriate, including (i) the Agreement and Plan of Merger (together with all
exhibits and the first amendment thereto, the "Merger Agreement"), dated as of
May 14, 1998, by and among the Company, Sub and New Plan, and (ii) the
Registration Statement on Form S-4, as filed by the Company with the Securities
and Exchange Commission as of August 10, 1998, in which the Joint Proxy
Statement/Prospectus of the Company and New Plan is included as a prospectus
(with all amendments thereto, the "Registration Statement"). In addition, we
have obtained such additional information as we deemed relevant and necessary
through consultation with various officers and representatives of the Company,
Sub and New Plan.
<PAGE>
LATHAM & WATKINS
Excel Realty Trust, Inc.
August 10, 1998
Page 2
Our opinion set forth below assumes (1) the accuracy and completeness of
the statements and facts concerning the Merger set forth in the Merger Agreement
and the Registration Statement, (2) the consummation of the Merger in the manner
contemplated by, and in accordance with the terms set forth in, the Merger
Agreement and the Registration Statement, and (3) the accuracy and completeness
of the representations made by New Plan, Sub and Excel, which are set forth in
the certificate delivered to us by New Plan, Sub and Excel, dated the date
hereof (the "Certificate"). The opinions expressed herein are conditioned on the
initial and continuing accuracy of the facts, information, statements and
representations set forth in the documents, filings and the Certificate referred
to herein.
In our examination, we have assumed the genuineness of all signatures, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such documents.
Except as otherwise indicated in this opinion, capitalized terms not otherwise
defined herein shall have the same meanings assigned to such terms by the Merger
Agreement.
Based upon the facts and statements set forth above, our examination and
review of the documents referred to above and subject to the assumptions and
limitations set forth herein, we are of the opinion that:
(i) for federal income tax purposes, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
(ii) each of the Company and New Plan will be a party to such
reorganization within the meaning of Section 368(b) of the Code.
(iii) the statements set forth in the Registration Statement under the
caption "Federal Income Tax Consequences of the Merger" appearing on pages 50
and 51 of the Registration Statement, to the extent that such statements
constitute matters of law, summaries of legal matters, or legal conclusions, are
an accurate summary of the material federal income tax consequences of the
Merger of the Company.
We express no opinion concerning any tax consequences of the Merger other
than those specifically set forth herein.
Our opinion is based on current provisions of the Code, the Treasury
Regulations promulgated thereunder, published pronouncements of the Internal
Revenue Service and case law, any of which may be changed at any time with
retroactive effect. Any change in applicable laws or facts and circumstances
surrounding the Merger, or any inaccuracy in the statements, facts, assumptions
and representations on which we have relied, including those contained in the
Merger Agreement, the Registration Statement, or the Certificate, may affect the
continuing validity of the opinions set forth herein. We assume no
responsibility to inform you of any such change or inaccuracy that may occur or
come to our attention.
<PAGE>
LATHAM & WATKINS
Excel Realty Trust, Inc.
August 10, 1998
Page 3
Except as set forth above, we express no other opinion as to the tax
consequences of the Merger and related transactions to any party under federal,
state, local or foreign laws. This opinion is rendered to you solely in
connection with the satisfaction of Section 8.3(b) of the Merger Agreement. This
opinion may not be relied upon by you for any other purpose, or furnished to,
quoted to, or relied upon by any other person, firm or corporation, for any
purpose, without our prior written consent. Our opinion is not binding on the
Internal Revenue Service or the courts, and there is no assurance that the
Internal Revenue Service will not assert a contrary position. No assurance can
be given that future legislative, judicial or administrative changes, on either
a prospective or retroactive basis, would not adversely affect the accuracy of
the conclusions herein and, further, transactions and events occurring after the
Effective Time may adversely affect the accuracy of the conclusions herein.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references in the Registration Statement to our
firm and to the inclusion of a copy of this opinion letter as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ Latham & Watkins
<PAGE>
Exhibit 8.2
[LETTERHEAD OF ALTHEIMER & GRAY]
August 10, 1998
New Plan Realty Trust
1120 Avenue of the Americas
New York, NY 10036
Ladies and Gentlemen:
At your request, we have examined the registration statement to which this
opinion is an Exhibit (the "Registration Statement") of Excel Realty Trust,
Inc., a Maryland corporation ("Excel"), in connection with the registration
under the Securities Act of 1933, as amended, of shares of Common Stock and
shares of 7.8% Series D Cumulative Voting Step-Up Premium Rate Preferred Stock
of Excel to be issued in connection with the proposed merger (the "Merger") of
ERT Merger Sub, Inc., a Maryland corporation ("Merger Sub") and wholly owned
subsidiary of Excel, with and into New Plan Realty Trust, a Massachusetts
business trust ("New Plan"). Our opinion has been requested regarding certain
federal income tax consequences of this Merger.
The terms of the proposed Merger are contained in the Agreement and Plan of
Merger dated as of May 14, 1998, among New Plan, Merger Sub and Excel (the
"Merger Agreement"). Terms not otherwise defined in this letter shall have the
meanings assigned to them in the Merger Agreement.
We assume in rendering this opinion that the Merger will be consummated in
accordance with the terms, conditions and other provisions of the Merger
Agreement, and that all of the factual information, descriptions,
representations and assumptions set forth in the Merger Agreement and in the
letter to us from New Plan and Excel, dated August 10, 1998, were accurate and
complete at the respective dates of such letters or other writings, and will be
accurate and complete at the time the Merger becomes effective (the "Effective
Time"), and that the disclosure set forth in the Joint Proxy
Statement/Prospectus ("Proxy Statement/Prospectus") contained in the
Registration Statement that is to be mailed to New Plan shareholders in
connection with the special meeting of stockholders (at which New Plan
shareholders will be asked to approve the Merger Agreement and the transactions
contemplated thereby, among other proposals) is accurate and complete. We have
relied on the opinion of Goodwin, Procter & Hoar dated August 5, 1998, as to
matters of Massachusetts law. We have made no independent investigation as to
the facts set forth in any of the foregoing. Nothing has come to our attention,
however, that would indicate in any material respect that such facts as so set
forth are not accurate or complete or do not include all material facts relevant
to our opinion.
<PAGE>
New Plan Realy Trust
August 10, 1998
Page 2
Subject to and based on the foregoing and on the other matters set forth
herein, it is our opinion that the Merger should qualify as a "reorganization"
for U.S. federal income tax purposes under Section 368(a) of the Code, and that
Excel and New Plan should each be a party to such reorganization within the
meaning of Section 368(b) of the Code. We are also of the opinion that the
descriptions of the law contained in the Prospectus under the caption "Federal
Income Tax Consequences of the Merger" appearing on pages 50 and 51 of the Proxy
Statement/Prospectus, are correct in all material respects, and the discussion
thereunder fairly summarizes the material federal income tax consequences of the
Merger to a New Plan shareholder.
Our opinion is based on the understanding that the relevant facts are, and
will be at the Effective Time, as set forth or referred to in this letter. If
this understanding is incorrect or incomplete in any respect, our opinion could
be affected.
This opinion is based on the Code and the regulations thereunder, and on
the interpretations thereof by the Internal Revenue Service and courts having
jurisdiction over such matters, none of which squarely addresses every precise
factual circumstance present in connection with the Merger but all of which,
taken together, in our opinion provide a sufficient legal basis for our opinions
set forth herein. However, the possibility exists that our opinion as to the
proper application of the law to the facts of the Merger would not be accepted
by the Internal Revenue Service or would not prevail in court. In addition, the
authorities upon which we have relied are all subject to change and such change
may be made with retroactive effect. We can give no assurance that after any
such change, our opinion would not be different. Lastly, any variation or
difference in the facts as incorporated herein might affect the conclusions
stated herein.
This opinion is for your benefit and is not to be used, circulated, quoted
or otherwise referred to for any purpose, except that we consent in accordance
with the requirements of Item 601(a)(23) of Regulation S-K under the Securities
Act, to the filing of this opinion as Exhibit 8.2 of the Registration Statement,
and to the use of our name under the captions "The Merger - Federal Income Tax
Consequences of the Merger" and "Legal Opinions" in the Proxy
Statement/Prospectus. In giving such consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act.
Very truly yours,
/s/ Altheimer & Gray
ALTHEIMER & GRAY
<PAGE>
EXHIBIT 9.1
VOTING AGREEMENT
This Voting Agreement ("Agreement") is entered into this 14th day of May,
---------
1998, by and among Excel Realty Trust, Inc., a Maryland corporation ("Excel"),
-----
and Arnold Laubich, in his capacity as a shareholder ("Shareholder") of New Plan
-----------
Realty Trust, a Massachusetts business trust ("East").
----
RECITALS
A. Concurrently herewith, New Plan, Excel and ERT Merger Sub, Inc., a
Maryland corporation and wholly-owned subsidiary of Excel ("Sub") are entering
---
into an Agreement and Plan of Merger, dated May 14, 1998 providing for merger
(the "Merger") of Sub with and into New Plan with New Plan surviving as a
wholly-owned subsidiary of Excel (the "Merger Agreement"). Capitalized terms
----------------
used without definition herein having the meanings ascribed thereto in the
Merger Agreement;
B. In connection with the Merger Agreement the Board of Trustees of New
Plan have approved and recommended to the shareholders of New Plan the Merger
Agreement, the Merger and the Trust Amendments (collectively, the "New Plan
--------
Shareholder Matters");
- -------------------
C. Shareholder is as of the date hereof the record and beneficial owner of
the number of shares of beneficial interest, no par value, of New Plan set forth
below his name on the signature page hereof (collectively, the "Shares");
------
D. Approval of the New Plan Shareholder Matters by the New Plan
shareholders is a condition to the consummation of the Merger; and
E. As a condition to its entering into the Merger Agreement, Excel has
required that Shareholder agree, and Shareholder has agreed, to enter into this
Agreement.
AGREEMENTS
Now, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Agreement to Vote and Restrictions on Dispositions. Shareholder
--------------------------------------------------
hereby agrees as follows:
<PAGE>
(a) Shareholder hereby agrees to attend any shareholders meeting of New
Plan, in person or by proxy, and to vote (or cause to be voted) all Shares, and
any other voting securities of New Plan, whether issued heretofore or hereafter,
that Shareholder owns or has the right to vote, for approval and adoption of the
New Plan Shareholder Matters and the transactions contemplated by the Merger
Agreement, such agreement to vote to apply also to any adjournment of the
shareholder meeting of New Plan. Shareholder agrees not to grant any proxies or
enter into any voting agreement or arrangement inconsistent with this Agreement.
(b) Shareholder hereby agrees that, without the prior written consent of
Excel, Shareholder shall not, directly or indirectly, sell, offer to sell, grant
any option for the sale of or otherwise transfer or dispose of, or enter into
any agreement to sell, any Shares and any other voting securities of Excel that
Shareholder owns beneficially or otherwise. Shareholder agrees that Excel may
instruct New Plan to enter stop transfer orders with the transfer agent(s) and
the registrar(s) of the Shares against the transfer of Shares and any other
voting securities of New Plan that Shareholder owns beneficially or otherwise.
If requested by Excel, Shareholder agrees to surrender or cause to be
surrendered to the transfer agent(s) and registrar(s) of the Shares certificates
representing Shares registered in the name of Shareholder, in exchange for
certificates representing Shares containing a legend to the effect of the
following:
(i) The shares represented by this certificate are subject to
restrictions on transfer, and disposition as set forth in the Voting
Agreement dated as of May 14, 1998, between Excel Realty Trust, Inc., a
Maryland corporation, and Shareholder. A copy of such agreement may be
obtained from the Secretary of New Plan.
(ii) Upon the termination of this Agreement pursuant to Section 5,
Shareholder shall have the right to unilaterally instruct the transfer
agent(s) and registrar(s) of the Shares to deliver to Shareholder
certificates representing Shares registered in the name of the Shareholder
and not bearing the foregoing legend in exchange for certificates
representing Shares registered in the name of Shareholder and bearing such
legend.
2
<PAGE>
(c) Shareholder agrees to vote (or cause to be voted) all Shares, and any
other voting securities of New Plan, owned by Shareholder whether issued
heretofore or hereafter, that such person owns or has the right to vote, (i)
against any New Plan Takeover Proposal which is not endorsed in writing by Excel
and (ii) any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of New
Plan under the Merger Agreement or which could result in any of the conditions
to Excel's obligations under the Merger Agreement not being fulfilled.
(d) Shareholder agrees not to directly or indirectly or through any person,
(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes or may reasonably be expected to lead to any New
Plan Takeover Proposal or (ii) participate in any discussions or negotiations
regarding or relating to any New Plan Takeover Proposal. Nothing contained
herein shall be construed to limit or otherwise affect Shareholder, from taking
any action permitted by Section 7.1 of the Merger Agreement in his capacity as
an officer or director of New Plan.
(e) Shareholder agrees to promptly notify Excel in writing of the nature
and amount of any acquisition by Shareholder after the date hereof of any voting
securities of Excel.
2. Agreement Following Effective Time. Shareholder agrees to enter into
----------------------------------
the agreement contemplated by Section 7.22 of the Merger Agreement no later than
the Effective Time.
3. Representations and Warranties of Shareholder. Shareholder represents
---------------------------------------------
and warrants to Excel as follows:
(a) Shareholder has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by Shareholder, and
assuming the due authorization, execution and delivery of this Agreement by
Excel, this Agreement constitutes the valid and legally binding obligation of
Shareholder enforceable against Shareholder in accordance with its terms,
subject
3
<PAGE>
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to creditors' rights and general principles of equity.
(c) The Shares are the only voting securities of New Plan owned
(beneficially or of record) by Shareholder and are owned free and clear of all
liens, charges, encumbrances, restrictions and commitments of any kind other
than shares pledged as margin stock. Shareholder has not appointed or granted
any irrevocable proxy, which appointment or grant is still effective, with
respect to the Shares.
(d) The execution and delivery of this Agreement by Shareholder does not
(i) conflict with or violate any agreement, law, rule, regulation, order,
judgment or decision or other instrument binding upon it, nor require any
consent, notification, regulatory filing or approval or (ii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Shares owned by Shareholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Shareholder is a party or by which Shareholder or the Shares owned by
Shareholder are bound or affected.
(e) Shareholder acknowledges that the restrictions imposed upon it are so
imposed only in Shareholder's capacity as a shareholder of New Plan.
4. Further Assurances. Each party shall execute and deliver such
------------------
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of their obligations under this Agreement. Without limiting the generality of
the foregoing, neither of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
if such action would materially impair the ability of either party to
effectuate, carry out or comply with all the terms of this Agreement.
5. Representations and Warranties of Excel. Excel represents and
---------------------------------------
warrants to the Shareholder as follows:
4
<PAGE>
(a) Each of this Agreement and the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement (including the Excel
Stockholder Matters) has been approved by the Board of Directors of Excel.
(b) Each of this Agreement and the Merger Agreement has been duly executed
and delivered by a duly authorized officer of Excel and, assuming the due
authorization, execution and delivery of this Agreement by the Shareholder and
the Merger Agreement by New Plan, each of this Agreement and the Merger
Agreement constitutes a valid and binding agreement of Excel, enforceable
against Excel in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
creditors' rights generally and general principles of equity.
6. Effectiveness and Termination. It is a condition precedent to the
-----------------------------
effectiveness of this Agreement that the Merger Agreement shall have been
executed and delivered and be in full force and effect. This Agreement shall
automatically terminate and be of no further force or effect: upon the
termination of the Merger Agreement in accordance with its terms. Upon any
termination of this Agreement, except for any rights either party may have in
respect of any knowing and material breach by either party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder. The provisions of Section 1 of this Agreement shall
terminate and be of no further force or effect from and after the Effective Time
of the Merger.
7. Covenants of Shareholder Not to Enter Into Inconsistent Agreements.
------------------------------------------------------------------
Shareholder hereby agrees that, except as contemplated by this Agreement and the
Merger Agreement, Shareholder shall not enter into any voting agreement or grant
an irrevocable proxy or power of attorney with respect to the Shares which is
inconsistent with this Agreement.
8. Miscellaneous.
-------------
a. Notices, Etc. All notices, requests, demands or other communications
------------
required by or otherwise given with respect to this Agreement shall be in
writing and shall be deemed to have been duly given to either party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or seven days after being mailed by
5
<PAGE>
first-class mail, postage prepaid in each case to the applicable addresses set
forth below:
If to Excel:
c/o Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, California 92127
Facsimile: 619-485-8580
with a copy to:
Latham & Watkins
70 "B" Street
Suite 2100
San Diego, California 92101
Attention: Scott N. Wolfe
Facsimile: 619-696-7419
If to Shareholder:
c/o New Plan Realty Trust
1120 Avenue of the Americas
New York, New York 10036
Facsimile: 212-869-9585
with a copy to:
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
Attention: Norman M. Gold
Facsimile: 312-715-4800
or to such other address as such party shall have designated by notice so given
to each other party.
b. Amendments, Waivers, Etc. This Agreement may not be amended, changed,
------------------------
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by Excel and Shareholder.
c. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including without limitation any corporate successor by
merger or otherwise. Notwithstanding any transfer of Shares, the transferor
6
<PAGE>
shall remain liable for the performance of all obligations of the transferor
under this Agreement.
d. Entire Agreement. This Agreement (together with the Merger Agreement)
-----------------
embodies the entire agreement and understanding among the parties relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. There are no representations, warranties or
covenants by the parties hereto relating to such subject matter other than those
expressly set forth in this Agreement and the Merger Agreement.
e. Severability. If any term of this Agreement or the application thereof
------------
to either party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law; provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
f. Specific Performance. The parties acknowledge that money damages are
--------------------
not an adequate remedy for violations of this Agreement and that either party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunction or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
g. Remedies Cumulative. All rights, powers and remedies provided under
-------------------
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by either party shall not preclude the simultaneous or
later exercise of any other such rights, power or remedy by such party.
h. No Waiver. The failure of either party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by the other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the
7
<PAGE>
terms hereof, shall not constitute a waiver by such party of its right to
exercise any such or other right, power or remedy or to demand such compliance.
i. No Third Party Beneficiaries. This Agreement is not intended to be for
----------------------------
the benefit of and shall not be enforceable by any person or entity who or which
is not a party hereto.
j. Jurisdiction. Each party hereby irrevocably and unconditionally
------------
consents to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States of America located in the State of New York
(the "New York Courts") for any litigation arising out of or relating to this
Agreement (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the New York Courts and agrees not to plead or claim in any New York Court
that such litigation brought therein has been brought in an inconvenient forum.
Each party hereto waives any right to a trial by jury in connection with any
such action, suit or proceeding.
k. Governing Law. This Agreement and all disputes hereunder shall be
-------------
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to rules of conflicts of law.
l. Name, Captions, Gender. The name assigned this Agreement and the
----------------------
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
m. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
n. Expenses. Each party shall bear its own expenses incurred in connection
--------
with this Agreement and the transactions contemplated hereby.
[Signatures Follow]
8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
/s/ Arnold Laubich
_______________________________
Name: Arnold Laubich
Number of Shares: 317,870
9
<PAGE>
EXHIBIT 9.2
VOTING AGREEMENT
This Voting Agreement ("Agreement") is entered into this 14th day of May,
---------
1998, by and among New Plan Realty Trust, a Massachusetts business trust ("New
---
Plan"), and Gary B. Sabin, in his capacity as a stockholder ("Stockholder") of
- ---- -----------
Excel Realty Trust, Inc., a Maryland corporation ("Excel").
-----
RECITALS
A. Concurrently herewith, New Plan, Excel and ERT Merger Sub, Inc., a
Maryland corporation and wholly-owned subsidiary of Excel ("Sub") are entering
---
into an Agreement and Plan of Merger dated May 14, 1998 providing for the merger
(the "Merger") of Sub with and into New Plan with New Plan surviving as a
------
wholly-owned subsidiary of Excel (the "Merger Agreement"). Capitalized terms
----------------
used without definition herein having the meanings ascribed thereto in the
Merger Agreement;
B. In connection with the Merger Agreement, the Board of Directors of Excel
has approved and recommended to the stockholders of Excel, the approval and
adoption of the Merger Agreement, the Merger and the Excel Charter Amendments
and Share Issuance (collectively, the "Excel Stockholder Matters");
-------------------------
C. Stockholder is as of the date hereof the record and beneficial owner of
the number of shares of Common Stock, par value $.01 per share, of Excel set
forth below his name on the signature page hereof (collectively, the "Shares";
------
it being understood that all Shares held of record by the Sabin Children's
Foundation are not considered Shares for purposes of this Agreement);
D. Approval of the Excel Stockholder Matters by Excel's stockholders is a
condition to the consummation of the Merger; and
E. As a condition to its entering into the Merger Agreement, New Plan has
required that Stockholder agree, and Stockholder has agreed, to enter into this
Agreement.
AGREEMENTS
Now, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
<PAGE>
1. Agreement to Vote and Restrictions on Dispositions. Stockholder
--------------------------------------------------
hereby agrees as follows:
(a) Stockholder hereby agrees to attend any stockholders meeting of Excel,
in person or by proxy, and to vote (or cause to be voted) all Shares, and any
other voting securities of Excel, whether issued heretofore or hereafter, that
Stockholder owns or has the right to vote, for approval and adoption of the
Excel Stockholder Matters, the Merger and the transactions contemplated by the
Merger Agreement, such agreement to vote to apply also to any adjournment of the
stockholder meeting of Excel. Stockholder agrees not to grant any proxies or
enter into any voting agreement or arrangement inconsistent with this Agreement.
(b) Stockholder hereby agrees that, without the prior written consent of
New Plan, Stockholder shall not, directly or indirectly, sell, offer to sell,
grant any option for the sale of or otherwise transfer or dispose of, or enter
into any agreement to sell, any Shares and any other voting securities of Excel
that Stockholder owns beneficially or otherwise. Stockholder agrees that New
Plan may instruct Excel to enter stop transfer orders with the transfer agent(s)
and the registrar(s) of the Shares against the transfer of Shares and any other
voting securities of Excel that Stockholder owns beneficially or otherwise. If
requested by New Plan, Stockholder agrees to surrender or cause to be
surrendered to the transfer agent(s) and registrar(s) of the Shares certificates
representing Shares registered in the name of Stockholder, in exchange for
certificates representing Shares containing a legend to the effect of the
following:
(i) The shares represented by this certificate are subject to
restrictions on transfer, and disposition as set forth in the Voting
Agreement dated as of May 14, 1998, among New Plan Realty Trust, a
Massachusetts business trust, and Stockholder. A copy of such agreement may
be obtained from the Secretary of Excel.
(ii) Upon the termination of this Agreement pursuant to Section 5,
Stockholder shall have the right to unilaterally instruct the transfer
agent(s) and registrar(s) of the Shares to deliver to Stockholder
certificates representing Shares registered in the name of the Stockholder
and not bearing the foregoing legend in exchange for
2
<PAGE>
certificates representing Shares registered in the name of Stockholder and
bearing such legend.
(c) Stockholder agrees to vote (or cause to be voted) all Shares, and any
other voting securities of Excel, owned by Stockholder whether issued heretofore
or hereafter, that such person owns or has the right to vote, (i) against any
Excel Takeover Proposal which is not endorsed in writing by New Plan and (ii)
any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Excel under
the Merger Agreement or which could result in any of the conditions to New
Plan's obligations under the Merger Agreement not being fulfilled.
(d) Stockholder agrees not to directly or indirectly or through any person,
(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes or may reasonably be expected to lead to any
Excel Takeover Proposal or (ii) participate in any discussions or negotiations
regarding or relating to any Excel Takeover Proposal. Nothing contained herein
shall be construed to limit or otherwise affect Stockholder from taking any
action permitted by Section 7.2 of the Merger Agreement in his capacity as an
officer or director of Excel.
(e) Stockholder agrees to promptly notify New Plan in writing of the nature
and amount of any acquisition by Stockholder after the date hereof of any voting
securities of Excel.
2. Agreement Following Effective Time. Stockholder agrees to enter into
----------------------------------
the agreement contemplated by Section 7.22 of the Merger Agreement no later than
the Effective Time.
3. Representations and Warranties of Stockholder. Stockholder represents
---------------------------------------------
and warrants to New Plan as follows:
(a) Stockholder has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by Stockholder, and
assuming the due
3
<PAGE>
authorization, execution and delivery of this Agreement by New Plan, this
Agreement constitutes the valid and legally binding obligation of Stockholder
enforceable against Stockholder in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to creditors' rights and general principles of equity.
(c) The Shares are the only voting securities of Excel owned (beneficially
or of record) by Stockholder and are owned free and clear of all liens, charges,
encumbrances, restrictions and commitments of any kind other than Shares pledged
as margin stock or to secure a personal line of credit with BankBoston, N.A.
Stockholder has not appointed or granted any irrevocable proxy, which
appointment or grant is still effective, with respect to the Shares.
(d) The execution and delivery of this Agreement by Stockholder does not
(i) conflict with or violate any agreement, law, rule, regulation, order,
judgment or decision or other instrument binding upon it, nor require any
consent, notification, regulatory filing or approval or (ii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Shares owned by Stockholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Stockholder is a party or by which Stockholder or the Shares owned by
Stockholder are bound or affected.
(e) Stockholder acknowledges that the restrictions imposed upon it are so
imposed only in Stockholder's capacity as a stockholder of Excel.
4. Further Assurances. Each party shall execute and deliver such
------------------
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of their obligations under this Agreement. Without limiting the generality of
the foregoing, neither of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
if such action would materially impair the ability of either party to
effectuate, carry out or comply with all the terms of this Agreement.
4
<PAGE>
5. Representations and Warranties of New Plan. New Plan represents and
------------------------------------------
warrants to the Stockholder as follows:
(a) Each of this Agreement, the Merger Agreement and the Trust Amendments
has been approved by the Board of Trustees of New Plan.
(b) Each of this Agreement and the Merger Agreement has been duly executed
and delivered by a duly authorized officer of New Plan and, assuming the due
authorization, execution and delivery of this Agreement by the Stockholder and
the Merger Agreement by Excel, each of this Agreement and the Merger Agreement
constitutes a valid and binding agreement of New Plan, enforceable against New
Plan in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to creditors' rights
generally and general principles of equity.
6. Effectiveness and Termination. It is a condition precedent to the
-----------------------------
effectiveness of this Agreement that the Merger Agreement shall have been
executed and delivered and be in full force and effect. This Agreement shall
automatically terminate and be of no further force or effect upon the
termination of the Merger Agreement in accordance with its terms. Upon any
termination of this Agreement, except for any rights either party may have in
respect of any knowing and material breach by either party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder. The provisions of Section 1 of this Agreement shall
terminate and be of no further force or effect from and after the Effective Time
of the Merger.
7. Covenants of Stockholder Not to Enter Into Inconsistent Agreements.
------------------------------------------------------------------
Stockholder hereby agrees that, except as contemplated by this Agreement, and
the Merger Agreement, Stockholder shall not enter into any voting agreement or
grant an irrevocable proxy or power of attorney with respect to the Shares which
is inconsistent with this Agreement.
8. Miscellaneous.
-------------
(a) Notices, Etc. All notices, requests, demands or other communications
------------
required by or otherwise given with respect to this Agreement shall be in
writing and shall be deemed to have been duly given to either party when
delivered personally (by courier service or
5
<PAGE>
otherwise), when delivered by telecopy and confirmed by return telecopy, or
seven days after being mailed by first-class mail, postage prepaid in each case
to the applicable addresses set forth below:
If to New Plan:
1120 Avenue of the Americas
New York, New York 10036
Attention: Chief Executive Officer
Facsimile: 212-869-9585
with a copy to:
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
Attention: Norman M. Gold
Facsimile: 312-715-4800
If to Stockholder:
c/o Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, California 92127
Facsimile: 619-485-8580
with a copy to:
Latham & Watkins
70 "B" Street
Suite 2100
San Diego, California 92101
Attention: Scott N. Wolfe
Facsimile: 619-696-7419
or to such other address as such party shall have designated by notice so given
to each other party.
(b) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
------------------------
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by New Plan and Stockholder.
(c) Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including without limitation any corporate successor by
merger or otherwise. Notwithstanding any transfer of Shares, the transferor
6
<PAGE>
shall remain liable for the performance of all obligations of the transferor
under this Agreement.
(d) Entire Agreement. This Agreement (together with the Merger Agreement)
-----------------
embodies the entire agreement and understanding among the parties relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. There are no representations, warranties or
covenants by the parties hereto relating to such subject matter other than those
expressly set forth in this Agreement and the Merger Agreement.
(e) Severability. If any term of this Agreement or the application thereof
------------
to either party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law; provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money damages are not
--------------------
an adequate remedy for violations of this Agreement and that either party may,
in its sole discretion, apply to a court of competent jurisdiction for specific
performance or injunction or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any violation hereof and,
to the extent permitted by applicable law, each party waives any objection to
the imposition of such relief.
(g) Remedies Cumulative. All rights, powers and remedies provided under this
-------------------
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise or beginning of the exercise of
any thereof by either party shall not preclude the simultaneous or later
exercise of any other such rights, power or remedy by such party.
(h) No Waiver. The failure of either party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by the other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the
7
<PAGE>
terms hereof, shall not constitute a waiver by such party of its right to
exercise any such or other right, power or remedy or to demand such compliance.
(i) No Third Party Beneficiaries. This Agreement is not intended to be for
----------------------------
the benefit of and shall not be enforceable by any person or entity who or which
is not a party hereto.
(j) Jurisdiction. Each party hereby irrevocably and unconditionally consents
------------
to submit to the exclusive jurisdiction of the courts of the State of New York
and of the United States of America located in the State of New York (the "New
York Courts") for any litigation arising out of or relating to this Agreement
(and agrees not to commence any litigation relating thereto except in such
courts), waives any objection to the laying of venue of any such litigation in
the New York Courts and agrees not to plead or claim in any New York Court that
such litigation brought therein has been brought in an inconvenient forum. Each
party hereto waives any right to a trial by jury in connection with any such
action, suit or proceeding.
(k) Governing Law. This Agreement and all disputes hereunder shall be
-------------
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to rules of conflicts of law.
(l) Name, Captions, Gender. The name assigned this Agreement and the section
----------------------
captions used herein are for convenience of reference only and shall not affect
the interpretation or construction hereof. Whenever the context may require,
any pronoun used herein shall include the corresponding masculine, feminine or
neuter forms.
(m) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
(n) Expenses. Each party shall bear its own expenses incurred in connection
--------
with this Agreement and the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
8
<PAGE>
/s/ Gary B. Sabin
----------------------------------
Name: Gary B. Sabin
Number of Shares: 823,225
9
<PAGE>
EXHIBIT 9.3
VOTING AGREEMENT
This Voting Agreement ("Agreement") is entered into this 14th day of May,
---------
1998, by and among Excel Realty Trust, Inc., a Maryland corporation ("Excel"),
-----
and William Newman, in his capacity as a shareholder ("Shareholder") of New Plan
-----------
Realty Trust, a Massachusetts business trust ("East").
----
RECITALS
A. Concurrently herewith, New Plan, Excel and ERT Merger Sub, Inc., a
Maryland corporation and wholly owned subsidiary of Excel ("Sub") are entering
---
into an Agreement and Plan of Merger, dated May 14, 1998 providing for merger
(the "Merger") of Sub with and into New Plan with New Plan surviving as a
wholly-owned subsidiary of Excel (the "Merger Agreement"). Capitalized terms
----------------
used without definition herein having the meanings ascribed thereto in the
Merger Agreement;
B. In connection with the Merger Agreement the Board of Trustees of New
Plan have approved and recommended to the shareholders of New Plan the Merger
Agreement, the Merger and the Trust Amendments (collectively, the "New Plan
--------
Shareholder Matters");
- -------------------
C. Shareholder is as of the date hereof the record and beneficial owner of
the number of shares of beneficial interest, no par value, of New Plan set forth
below his name on the signature page hereof (collectively, the "Shares");
------
D. Approval of the New Plan Shareholder Matters by the New Plan
shareholders is a condition to the consummation of the Merger; and
E. As a condition to its entering into the Merger Agreement, Excel has
required that Shareholder agree, and Shareholder has agreed, to enter into this
Agreement.
AGREEMENTS
Now, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Agreement to Vote and Restrictions on Dispositions. Shareholder
--------------------------------------------------
hereby agrees as follows:
<PAGE>
(a) Shareholder hereby agrees to attend any shareholders meeting of New
Plan, in person or by proxy, and to vote (or cause to be voted) all Shares, and
any other voting securities of New Plan, whether issued heretofore or hereafter,
that Shareholder owns or has the right to vote, for approval and adoption of the
New Plan Shareholder Matters and the transactions contemplated by the Merger
Agreement, such agreement to vote to apply also to any adjournment of the
shareholder meeting of New Plan. Shareholder agrees not to grant any proxies or
enter into any voting agreement or arrangement inconsistent with this Agreement.
(b) Shareholder hereby agrees that, without the prior written consent of
Excel, Shareholder shall not, directly or indirectly, sell, offer to sell, grant
any option for the sale of or otherwise transfer or dispose of, or enter into
any agreement to sell, any Shares and any other voting securities of Excel that
Shareholder owns beneficially or otherwise. Shareholder agrees that Excel may
instruct New Plan to enter stop transfer orders with the transfer agent(s) and
the registrar(s) of the Shares against the transfer of Shares and any other
voting securities of New Plan that Shareholder owns beneficially or otherwise.
If requested by Excel, Shareholder agrees to surrender or cause to be
surrendered to the transfer agent(s) and registrar(s) of the Shares certificates
representing Shares registered in the name of Shareholder, in exchange for
certificates representing Shares containing a legend to the effect of the
following:
(i) The shares represented by this certificate are subject to
restrictions on transfer, and disposition as set forth in the Voting
Agreement dated as of May 14, 1998, between Excel Realty Trust, Inc., a
Maryland corporation, and Shareholder. A copy of such agreement may be
obtained from the Secretary of New Plan.
(ii) Upon the termination of this Agreement pursuant to Section 5,
Shareholder shall have the right to unilaterally instruct the transfer
agent(s) and registrar(s) of the Shares to deliver to Shareholder
certificates representing Shares registered in the name of the Shareholder
and not bearing the foregoing legend in exchange for certificates
representing Shares registered in the name of Shareholder and bearing such
legend.
2
<PAGE>
(c) Shareholder agrees to vote (or cause to be voted) all Shares, and any
other voting securities of New Plan, owned by Shareholder whether issued
heretofore or hereafter, that such person owns or has the right to vote, (i)
against any New Plan Takeover Proposal which is not endorsed in writing by Excel
and (ii) any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of New
Plan under the Merger Agreement or which could result in any of the conditions
to Excel's obligations under the Merger Agreement not being fulfilled.
(d) Shareholder agrees not to directly or indirectly or through any person,
(i) solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed to facilitate, any inquiries or the making of
any proposal which constitutes or may reasonably be expected to lead to any New
Plan Takeover Proposal or (ii) participate in any discussions or negotiations
regarding or relating to any New Plan Takeover Proposal. Nothing contained
herein shall be construed to limit or otherwise affect Shareholder, from taking
any action permitted by Section 7.1 of the Merger Agreement in his capacity as
an officer or director of New Plan.
(e) Shareholder agrees to promptly notify Excel in writing of the nature
and amount of any acquisition by Shareholder after the date hereof of any voting
securities of Excel.
2. Agreement Following Effective Time. Shareholder agrees to enter into
----------------------------------
the agreement contemplated by Section 7.22 of the Merger Agreement no later than
the Effective Time.
3. Representations and Warranties of Shareholder. Shareholder represents
---------------------------------------------
and warrants to Excel as follows:
(a) Shareholder has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by Shareholder, and
assuming the due authorization, execution and delivery of this Agreement by
Excel, this Agreement constitutes the valid and legally binding obligation of
Shareholder enforceable against Shareholder in accordance with its terms,
subject
3
<PAGE>
to applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws relating to creditors' rights and general principles of equity.
(c) The Shares are the only voting securities of New Plan owned
(beneficially or of record) by Shareholder and are owned free and clear of all
liens, charges, encumbrances, restrictions and commitments of any kind other
than shares pledged as margin stock. Shareholder has not appointed or granted
any irrevocable proxy, which appointment or grant is still effective, with
respect to the Shares.
(d) The execution and delivery of this Agreement by Shareholder does not
(i) conflict with or violate any agreement, law, rule, regulation, order,
judgment or decision or other instrument binding upon it, nor require any
consent, notification, regulatory filing or approval or (ii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Shares owned by Shareholder
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which
Shareholder is a party or by which Shareholder or the Shares owned by
Shareholder are bound or affected.
(e) Shareholder acknowledges that the restrictions imposed upon it are so
imposed only in Shareholder's capacity as a shareholder of New Plan.
4. Further Assurances. Each party shall execute and deliver such
------------------
additional instruments and other documents and shall take such further actions
as may be necessary or appropriate to effectuate, carry out and comply with all
of their obligations under this Agreement. Without limiting the generality of
the foregoing, neither of the parties hereto shall enter into any agreement or
arrangement (or alter, amend or terminate any existing agreement or arrangement)
if such action would materially impair the ability of either party to
effectuate, carry out or comply with all the terms of this Agreement.
5. Representations and Warranties of Excel. Excel represents and
---------------------------------------
warrants to the Shareholder as follows:
4
<PAGE>
(a) Each of this Agreement and the Merger Agreement and the Merger and the
other transactions contemplated by the Merger Agreement (including the Excel
Stockholder Matters) has been approved by the Board of Directors of Excel.
(b) Each of this Agreement and the Merger Agreement has been duly executed
and delivered by a duly authorized officer of Excel and, assuming the due
authorization, execution and delivery of this Agreement by the Shareholder and
the Merger Agreement by New Plan, each of this Agreement and the Merger
Agreement constitutes a valid and binding agreement of Excel, enforceable
against Excel in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to
creditors' rights generally and general principles of equity.
6. Effectiveness and Termination. It is a condition precedent to the
-----------------------------
effectiveness of this Agreement that the Merger Agreement shall have been
executed and delivered and be in full force and effect. This Agreement shall
automatically terminate and be of no further force or effect upon the
termination of the Merger Agreement in accordance with its terms. Upon any
termination of this Agreement, except for any rights either party may have in
respect of any knowing and material breach by either party of its obligations
hereunder, none of the parties hereto shall have any further obligation or
liability hereunder. The provisions of Section 1 of this Agreement shall
terminate and be of no further force or effect from and after the Effective Time
of the Merger.
7. Covenants of Shareholder Not to Enter Into Inconsistent Agreements.
------------------------------------------------------------------
Shareholder hereby agrees that, except as contemplated by this Agreement and the
Merger Agreement, Shareholder shall not enter into any voting agreement or grant
an irrevocable proxy or power of attorney with respect to the Shares which is
inconsistent with this Agreement.
8. Miscellaneous.
-------------
a. Notices, Etc. All notices, requests, demands or other communications
------------
required by or otherwise given with respect to this Agreement shall be in
writing and shall be deemed to have been duly given to either party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or seven days after being mailed by
5
<PAGE>
first-class mail, postage prepaid in each case to the applicable addresses set
forth below:
If to Excel:
c/o Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, California 92127
Facsimile: 619-485-8580
with a copy to:
Latham & Watkins
70 "B" Street
Suite 2100
San Diego, California 92101
Attention: Scott N. Wolfe
Facsimile: 619-696-7419
If to Shareholder:
c/o New Plan Realty Trust
1120 Avenue of the Americas
New York, New York 10036
Facsimile: 212-869-9585
with a copy to:
Altheimer & Gray
10 South Wacker Drive
Chicago, Illinois 60606
Attention: Norman M. Gold
Facsimile: 312-715-4800
or to such other address as such party shall have designated by notice so given
to each other party.
b. Amendments, Waivers, Etc. This Agreement may not be amended, changed,
------------------------
supplemented, waived or otherwise modified or terminated except by an instrument
in writing signed by Excel and Shareholder.
c. Successors and Assigns. This Agreement shall be binding upon and shall
----------------------
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns, including without limitation any corporate successor by
merger or otherwise. Notwithstanding any transfer of Shares, the transferor
6
<PAGE>
shall remain liable for the performance of all obligations of the transferor
under this Agreement.
d. Entire Agreement. This Agreement (together with the Merger Agreement)
----------------
embodies the entire agreement and understanding among the parties relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. There are no representations, warranties or
covenants by the parties hereto relating to such subject matter other than those
expressly set forth in this Agreement and the Merger Agreement.
e. Severability. If any term of this Agreement or the application thereof
------------
to either party or circumstance shall be held invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such term to the
other parties or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by applicable law; provided that in
such event the parties shall negotiate in good faith in an attempt to agree to
another provision (in lieu of the term or application held to be invalid or
unenforceable) that will be valid and enforceable and will carry out the
parties' intentions hereunder.
f. Specific Performance. The parties acknowledge that money damages are
--------------------
not an adequate remedy for violations of this Agreement and that either party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunction or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
g. Remedies Cumulative. All rights, powers and remedies provided under
-------------------
this Agreement or otherwise available in respect hereof at law or in equity
shall be cumulative and not alternative, and the exercise or beginning of the
exercise of any thereof by either party shall not preclude the simultaneous or
later exercise of any other such rights, power or remedy by such party.
h. No Waiver. The failure of either party hereto to exercise any right,
---------
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by the other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the
7
<PAGE>
terms hereof, shall not constitute a waiver by such party of its right to
exercise any such or other right, power or remedy or to demand such compliance.
i. No Third Party Beneficiaries. This Agreement is not intended to be for
----------------------------
the benefit of and shall not be enforceable by any person or entity who or which
is not a party hereto.
j. Jurisdiction. Each party hereby irrevocably and unconditionally
------------
consents to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States of America located in the State of New York
(the "New York Courts") for any litigation arising out of or relating to this
Agreement (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the New York Courts and agrees not to plead or claim in any New York Court
that such litigation brought therein has been brought in an inconvenient forum.
Each party hereto waives any right to a trial by jury in connection with any
such action, suit or proceeding.
k. Governing Law. This Agreement and all disputes hereunder shall be
-------------
governed by and construed and enforced in accordance with the internal laws of
the State of New York without regard to rules of conflicts of law.
l. Name, Captions, Gender. The name assigned this Agreement and the
----------------------
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Whenever the context may
require, any pronoun used herein shall include the corresponding masculine,
feminine or neuter forms.
m. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
n. Expenses. Each party shall bear its own expenses incurred in connection
--------
with this Agreement and the transactions contemplated hereby.
[Signatures Follow]
8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
/s/ William Newman
------------------------------
Name: William Newman
Number of Shares: 1,383,788
9
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 14, 1998, by and between Excel Realty Trust,
Inc., a Maryland corporation (the "Company") and Arnold Laubich ("Executive").
RECITALS
A. Executive is currently President and Chief Operating Officer of New
Plan Realty Trust, a Massachusetts business trust ("New Plan").
B. The Company, a wholly owned subsidiary of the Company ("Sub"), and New
Plan are entering into an Agreement and Plan of Merger ("Merger Agreement"),
pursuant to which Sub shall merge with and into New Plan (the "Merger").
C. The Company desires to employ Employee, effective as of the time the
Merger is consummated (the "Effective Time"), on the terms and conditions set
forth in this Agreement, and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth below,
the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as Chief
----------
Executive Officer of the Company, and Executive hereby accepts such employment,
on the terms and conditions hereinafter set forth. Notwithstanding the
employment of Executive by the Company, the Company shall be entitled to pay
Executive from the payroll of New Plan.
2. Term. The period of employment of Executive by the Company hereunder
----
(the "Employment Period") shall commence at the Effective Time of the Merger
(the "Commencement Date") and shall continue through December 31, 2002;
provided, that, commencing January 1, 2003, and on each January 1 thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such extension would be effectuated. The Employment
Period may be sooner terminated by either party in accordance
<PAGE>
with Section 6 of this Agreement. Employment hereunder and entering into this
Agreement shall not be deemed to constitute termination of employment of
Executive with New Plan and shall not trigger any obligations resulting from
such termination. Therefore, without limiting the generality of the foregoing,
the note(s) of Executive payable to New Plan shall not be accelerated as a
result of this Agreement or any action taken in accordance with the terms
hereof.
3. Position and Duties.
-------------------
(a) Position. During the Employment Period, Executive shall serve as
Chief Executive Officer of the Company, and shall report solely and directly to
the Board of Directors of the Company (the "Board"). Executive shall have those
powers and duties normally associated with the position of Chief Executive
Officer, and such other powers and duties as may be properly prescribed by the
Board, provided that such other powers and duties are consistent with
Executive's position as Chief Executive Officer. Executive shall devote such
time, attention and energies to Company affairs as are necessary to fully
perform his duties (other than absences due to illness or vacation) for the
Company. Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not materially and adversely affect the ability of Executive
to fully perform his duties and responsibilities hereunder, to (i) manage
Executive's personal, financial and legal affairs, and (ii) serve on civic or
charitable boards or committees and/or donate a reasonable portion of his time
to various charitable endeavors and organizations. Upon William Newman's
ceasing to serve as Chairman of the Board, the Company intends and expects to
appoint Executive as Chairman of the Board.
(b) No Senior Employee. During the Employment Period, the Company
shall not hire or retain any person to replace him as Chief Executive Officer or
anyone to serve as Chairman of the Board or any other position senior to him
other than William Newman.
(c) Investment Committee. At the Effective Time, Executive shall be
appointed by the Board to the Board's Investment Committee (the "Investment
Committee"). During the Employment Period, the Investment Committee shall
consist of four persons, two of which shall be (i) Executive, if he is then a
director, and (ii) an additional director of the Company designated by Executive
if he is then a director. During
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<PAGE>
the Employment Period, neither the Company nor the Board shall (w) appoint or
create any other committee to act as the Investment Committee or as an Executive
Committee of the Board without Executive's prior written consent, (x) delegate
any of the duties of the Investment Committee to the Board (subject only to
matters required by law to be voted upon by the Board) or any other committee of
the Board, (y) limit the scope or authority of the Investment Committee except
as provided by the Merger Agreement and its ancillary documents, schedules and
exhibits, or (z) change the size or composition of the Investment Committee. A
similar arrangement shall prevail with respect to the Investment Committee of
the Company's principal subsidiary, New Plan, and the term "Investment
Committee" shall apply to each or both of such Committees.
(d) During the term of this Agreement, Executive shall be nominated
by the Board to serve as a director of the Company.
4. Place of Performance. The principal place of employment of Executive
--------------------
shall be at the Company's corporate headquarters in New York, New York.
5. Compensation and Related Matters.
--------------------------------
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary at the rate of not less than the annual salary
paid to the President of the Company, but in no event less than $525,000 per
year ("Base Salary"). Executive's Base Salary shall be paid in approximately
equal installments in accordance with the Company's customary payroll practices.
If Executive's Base Salary is increased by the Company, such increased Base
Salary shall then constitute the Base Salary for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the company to award Executive a cash
bonus in an amount equal to up to 50% of the Base Salary, as provided in Section
5(a) above, which the Compensation Committee shall reasonably determine as
fairly compensating and rewarding Executive for services rendered to the Company
and/or as an incentive for continued service to the Company; provided, however,
that the cash bonus paid to Executive under this Section 5(b) during the first
year of the Employment Period shall not
3
<PAGE>
be less than $262,500. Subject to the proviso set forth in the preceding
sentence, the amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain performance levels by the
Company, including, without limitation, growth in funds from operations, and
Executive's performance and contribution to increasing the funds from
operations.
(c) Stock Options. Incentive stock options (the "Stock Options") are
to be awarded in the future at the times and in the amounts awarded to Gary
Sabin. Each share subject to the Stock Options shall have an exercise price
equal to the closing price of a share of Common Stock of the Company on the date
of grant. The Stock Options shall be subject to the terms and conditions of the
Company's 1993 Stock Option Plan (the "Company Option Plan"). The Company
hereby represents and warrants to Executive that at the time of grant (a) the
Company Option Plan will have sufficient shares available to effect the grant
and exercise of the Stock Options and the Company Option Plan has been approved
by its shareholders, (b) the Stock Options shall be granted by the Board or by a
compensation committee of the Board satisfying the conditions for "non-employee
directors" under Rule 16b-3, promulgated under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"), (c) the Stock Options will be properly
authorized and approved by the Board and/or its compensation committee, (d) the
Common Stock underlying the Stock Options will be registered on Form S-8 and (e)
the Common Stock underlying the Stock Options will be listed on the New York
Stock Exchange.
(d) Automobile. During the Employment Period, the Company shall
provide Executive with an automobile allowance of at least $12,000 per year or
in lieu thereof purchase a comparable new automobile for the Executive every
three years.
(e) Expenses. The Company shall promptly reimburse Executive for all
reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(f) Vacation. Executive shall be entitled to the number of weeks of
vacation per year provided to the
4
<PAGE>
Company's President, but in no event less than four (4) weeks annually.
(g) Services Furnished. During the Employment Period, the Company
shall furnish Executive with office space, stenographic and secretarial
assistance and such other facilities and services comparable to those provided
to the Company's President.
(h) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs. The Company shall at all
times provide to Executive (and his spouse and dependents to the extent provided
under the applicable plans or programs) (subject to modifications affecting all
senior executive officers) the same type and levels of participation and
benefits as are being provided to the Company's President (and his spouse and
dependents to the extent provided under the applicable plans or programs) during
the Employment Period. In addition, during the Employment Period, Executive
shall be eligible to participate in all pension, retirement, savings and other
employee benefit plans and programs maintained from time to time by the Company
for the benefit of its senior executives, or any annual incentive or long-term
performance plans. With respect to each such employee benefit plan, program,
policy or arrangement, service with New Plan or any of its Subsidiaries (as
applicable) shall be included for purposes of determining eligibility to
participate (including waiting periods, and without being subject to any entry
date requirement after the waiting period has been satisfied), vesting (as
applicable) and entitlement to benefits. The medical plan or plans maintained
by the Company after the Effective Time shall waive all limitations as to pre-
existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements. With respect to vacation benefits
provided by the Company, the vacation benefit of Executive shall include all
hours of accrued but unused vacation and sick time hours, respectively, with
New Plan or its affiliates.
5
<PAGE>
6. Termination. Executive's employment hereunder may be terminated
-----------
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to a
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a) is given after such six (6) months period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Executive's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, the Company shall have "Cause" to terminate Executive's employment
upon Executive's:
(i) conviction of, or plea or guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes Executive
has not used reasonable best efforts to substantially perform his duties);
or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
6
<PAGE>
For purposes of this Section 6(c), no act, or failure to act, by Executive
shall be considered "willful" unless committed in bad faith and without a
reasonable belief that the act or omission was in the best interests of the
Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within thirty (30) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Executive to the Company; provided, however, that with
respect to this Section 6(d), the Company shall have the right to challenge in
any court of competent jurisdiction the Executive's determination that he has
the right to terminate his employment for "Good Reason".
(i) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as Chief Executive Officer
of the Company or a material and adverse alteration in the nature of
Executive's duties and/or responsibilities, reporting obligations, titles
or authority;
(ii) the assignment to Executive of duties materially and
adversely inconsistent with
7
<PAGE>
Executive's status as a member of the Investment Committee or a material
and adverse alteration in the nature of Executive's duties and/or
responsibilities, titles or authority in such capacity as a member of the
Investment Committee;
(iii) a breach of the Company's obligations under Section 3;
(iv) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(v) the hiring of any person during the Employment Period
whose position or authority would be senior to that of Executive other than
William Newman;
(vi) the relocation of the Company's corporate headquarters or
Executive's own office location to a location outside of New York, New York
and more than thirty (30) miles from Scarsdale, New York;
(vii) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c) (and
for purposes of this Agreement, no such purported termination shall be
effective);
(viii) the Company's failure to provide the Stock Options or the
Company's material breach of one or more of the stock option agreements
pursuant to which the Stock Options were issued to Executive;
(ix) the Company's failure to substantially provide any
material employee benefits due to be provided to Executive;
(x) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement;
(xi) a Change in Control (as defined below) of the Company; or
(xii) the failure of Executive to be elected Chairman of the
Board within thirty (30) days after William Newman ceases to serve as
Chairman of the Board.
8
<PAGE>
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Without Good Reason. Executive shall have the right to terminate
his employment hereunder without good Reason by providing the Company with a
Notice of Termination, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement.
(f) Change of Control. For purposes of this Agreement, a "Change in
Control" of the Company means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the Commencement Date whose election or nomination for
election was approved by a vote of a majority of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3 (a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after the
Commencement Date, a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the Board (the
"Company Voting Securities"); provided,
9
<PAGE>
however, that an event described in this paragraph (2) shall not be deemed
to be a Change in Control if any of following becomes such a beneficial
owner: (A) the Company or any majority-owned subsidiary (provided, that
this exclusion applies solely to the ownership levels of the Company or the
majority-owned subsidiary), (B) any tax-qualified, broad-based employee
benefit plan sponsored or maintained by the Company or any majority-owned
subsidiary, (C) any underwriter temporarily holding securities pursuant to
an offering of such securities, (D) any person pursuant to a Non-Qualifying
Transaction (as defined in paragraph (3)), or (E) Executive or any group of
persons including Executive (or any entity controlled by Executive or any
group of persons including Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring the
Company's assets in such Business Transaction (the "Surviving Corporation")
is beneficially owned, directly or indirectly, by the Company's
shareholders immediately prior to any such Business Transaction, and (ii)
no person (other than the persons set forth in clauses (A), (B), or (C) of
paragraph (2) above or any tax-qualified, broad-based employee benefit plan
of the Surviving Corporation or its Affiliates beneficially owns, directly
or indirectly, 30% or more of the total voting power of the Surviving
Corporation (a "Non-Qualifying Transaction"); o r
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to Executive
under this Agreement and the Stock Option Agreements pursuant to which the
Stock Options were granted.
10
<PAGE>
(g) Executive retains the right at any time upon six (6) months
notice to the Company to shorten his Employment Period to a date specified in
such notice, but such action shall not require him to resign as a director.
7. Termination Procedure
---------------------
(a) Notice of Termination. Any termination of Executive's employment
by the Company or by Executive during the Employment Period (other than
termination pursuant to Section 6(a)) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 14. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Date of termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
--------------------------------------------------
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for Good
Reason. If Executive's employment is terminated by the Company without Cause or
by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and accrued
vacation pay through
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<PAGE>
the Date of Termination, as soon as practicable following the Date of
Termination, and (B) a lump sum cash payment of Two Million Five Hundred
Thousand Dollars ($2,500,000), as soon as practicable following the Date of
Termination, provided, however, to the extent that the Company would not be
able to deduct any portion of such payments pursuant to (S)162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), such portion of the
payment, together with accrued interest as provided below, shall be made at
the earliest time that such portion first would be deductible by the
Company under Code (S)162(m); and provided, further that to the extent that
any portion of such payment is deferred as provided in this Section
8(a)(i), such portion shall accrue interest at the rate of 8% per annum
from the Date of Termination until the payment is made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, and life insurance program in which Executive, his
spouse and his dependents were participating immediately prior to the Date
of Termination at the level in effect and upon substantially the same terms
and conditions (including without limitation contributions required by
Executive for such benefits) as existed immediately prior to the Date of
Termination; provided, that if Executive, his spouse or his dependents
cannot continue to participate in the Company programs providing such
benefits, the Company shall arrange to provide Executive, his spouse and
his dependents with the economic equivalent of such benefits which they
otherwise would have been entitled to receive under such plans and programs
("Continued Benefits"), provided, that such Continued Benefits shall
terminate on the date or dates Executive receives substantially equivalent
coverage and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(e) for reasonable
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<PAGE>
expenses incurred, but not paid prior to such termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company;
(v) all stock options and other pension or employment benefits
granted to Executive during the Employment Period and more than one year
prior to the Date of Termination shall fully vest as of the Date of
Termination and all stock options granted before the Employment Period
shall fully vest;
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive during the Employment Period, if any,
and shall take all actions and execute all documents necessary to evidence
the forgiveness and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without limitation,
the restrictions set forth in Section 10(c) of this Agreement but not the
restrictions set forth in Sections 10(a) and (b)), or to make any
investment in competition with the Company and shall execute all documents
necessary or reasonably requested by Executive to reflect such elimination
of restrictions.
The foregoing notwithstanding, the total of the severance payments payable
under this Section 8(a) shall be reduced to the extent the payment of such
amounts would cause Executive's total termination benefits (as determined by
Executive's tax advisor) to constitute and "excess" parachute payment under
Section 280G of the Code and by reason of such excess parachute payment
Executive would be subject to an excise tax under Section 4999(a) of the Code,
but only if Executive determines that the after-tax value of the termination
benefits calculated with the foregoing restrictions exceed those calculated
without the foregoing restriction:
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<PAGE>
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason);
(i) the Company shall pay Executive his Base Salary and, to
the extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(e) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company.
(c) Disability. During any period that Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b) ;
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up to
a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(e) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and
14
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provisions of any agreements, plans or programs of the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1) times
Executive's annual rate of Base Salary, and shall provide Executive's
spouse and dependents with Continued Benefits for one (1) year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(e)
for reasonable expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation and
benefits as may be due to any such persons or estate in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
(e) Failure to Extend or Election to Shorten Term. A failure to
extend the Agreement pursuant to Section 2 by either party or by Executive
electing to shorten the term of his employment pursuant to paragraph 6(g) shall
not be treated as a termination of Executive's employment for purposes of this
Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
----------
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein. Additionally,
amounts owed to Executive under this Agreement shall not be offset by any claims
the Company may have against Executive, and the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any other circumstances, including, without
limitation, any counterclaim, recoupment, defense or other right which the
Company may have against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
-----------------------------------------------------------------
15
<PAGE>
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with the Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until
the first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company or any of its Affiliates (the "Designated Entities")
are conducting their business operations or providing services as of the
16
<PAGE>
Date of Termination, in any business which is being engaged in by the Designated
Entities as of the Date of Termination or pursue or attempt to develop any
project known to Executive and which the Designated Entities are pursuing,
developing or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity which is engaged in any business conducted by the
Designated Entities in the same geographic area as the Designated Entities, any
Project or any customer of any of the Designated Entities, or (iii) solicit any
officer, employee (other than secretarial staff) or consultant of any of the
Designated Entities to leave the employ of any of the Designated Entities.
Notwithstanding the preceding sentence, Executive shall not be prohibited from
owning less than three 3% percent of any publicly traded corporation, whether or
not such corporation is in competition with the Company. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(d) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on this continuing operation of this Section 10.
11. Indemnification.
---------------
17
<PAGE>
(a) General. The Company agrees that if Executive is made a party or
threatened to be made a party to any action, suits or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that Executive is or was a trustee, director or officer of the Company
or any subsidiary of the Company or is or was serving at the request of the
Company or any subsidiary as a trustee, director, officer, member, employee or
agent of another corporation or a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a trustee, director, officer, member, employee or agent
while serving as a trustee, director, officer, member, employee or agent,
Executive shall be indemnified and held harmless by the Company to the fullest
extent authorized by Maryland law, as the same exits or may hereafter be
amended, against all Expenses incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even if
Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in his Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement of indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount
18
<PAGE>
thereof, the Company, shall nevertheless indemnify Executive for the portion of
such Expenses to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive which in the Company's sole
discretion may be regular counsel to the Company and may be counsel to
other officers and directors of the Company or any subsidiary. Executive
also shall have the right to employ his own counsel in such action, suit or
proceeding if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and Executive, and under such
circumstances the fees and expenses of such counsel shall be at the expense
of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner
19
<PAGE>
which would impose any penalty or limitation on Executive without
Executive's written consent. Neither the Company nor Executive will
unreasonably withhold or delay their consent to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any
other right which Executive may have or hereafter may acquire under any
statute, provision of the declaration of trust or certificate of
incorporation or by-laws of the Company or any subsidiary, agreement, vote
of shareholders or disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
-----------------------
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred in by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
-----------------------------
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
20
<PAGE>
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the event any such person succeeds to Executive's
interests under this Agreement. Executive shall be entitled to select and change
a beneficiary or beneficiaries to receive any benefit or compensation payable
hereunder following Executive's death by giving the Company written notice
thereof. In the event of Executive's death or a judicial determination of his
incompetence, reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary(ies), estate or other legal
representative(s). If Executive should die following his Date of Termination
while any amounts would still be payable to him hereunder if he had continued to
live, all such amounts unless otherwise provided herein shall be paid in
accordance with the terms of this Agreement to such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive:
Arnold Laubich
1120 Avenue of the Americas, 12th Floor
New York, New York 10036
If to the Company:
Excel Realty Trust
1120 Avenue of the Americas, 12th Floor
New York, New York 10036
21
<PAGE>
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Miscellaneous. No provisions of this Agreement may be amended,
-------------
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such fights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of the Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
----------------
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
22
<PAGE>
19. Shareholder Approval. The Company represents and warrants to Executive
--------------------
that no shareholder approval is required for the Company to enter into this
Agreement and provide the benefits hereunder and to enter into the agreements
described in Section 5.
20. Withholding. All payment he renders shall be subject to any required
-----------
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
21. Noncontravention. The Company represents that the Company is not
----------------
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. Section Heading. The section headings in this Employment Agreement
---------------
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
23. Resignation and Termination. As of the Effective Date, Executive
---------------------------
shall resign as President and Chief Operating Officer of East.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EXCEL REALTY TRUST, INC.
a Maryland corporation
By: /s/ Gary B. Sabin
----------------------
Name: Gary B. Sabin
--------------------
Title: President
-------------------
/s/ Arnold Laubich
-------------------------
Arnold Laubich
<PAGE>
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of May 14, 1998, by and between Excel Realty Trust,
Inc., a Maryland corporation (the "Company") and Gary B. Sabin ("Executive").
RECITALS
A. Executive is currently the Chief Executive Officer of the Company.
B. The Company, a wholly owned subsidiary of the Company ("Sub"), and New
Plan Realty Trust, a Massachusetts business trust ("New Plan"), have entered
into an Agreement and Plan of Merger ("Merger Agreement"), pursuant to which Sub
shall merge with and into New Plan (the "Merger").
C. The Company desires to employ Employee, effective as of the time the
Merger is consummated (the "Effective Time"), on the terms and conditions set
forth in this Agreement, and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth below,
the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as the
----------
President of the Company, and Executive hereby accepts such employment, on the
terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
----
(the "Employment Period") shall commence at the Effective Time of the Merger
(the "Commencement Date") and shall continue through December 31, 2002;
provided, that, commencing on January 1, 2003, and on each January 1 thereafter,
the Employment Period shall automatically be extended for one (1) additional
year unless either party gives written notice not to extend this Agreement prior
to six (6) months before such extension would be effectuated. The Employment
Period may be sooner terminated by either party in accordance with Section 6 of
this Agreement.
3. Position and Duties.
-------------------
(a) Position. Subject to Section 3(b) of this Agreement, during the
Employment Period, Executive shall serve as President of the Company, and shall
report
<PAGE>
solely and directly to the Chief Executive Officer. Executive shall have those
powers and duties normally associated with the position of President and, in
particular, shall be responsible for the acquisitions and dispositions by the
Company and such other powers and duties as may be properly prescribed by the
Chief Executive Officer or the Board of Directors of the Company (the "Board"),
provided that such other powers and duties are consistent with Executive's
position as President. Executive shall devote such time, attention and energies
to Company affairs as are necessary to fully perform his duties (other than
absences due to illness or vacation) for the Company. Notwithstanding the above,
Executive shall be permitted, to the extent such activities do not materially
and adversely affect the ability of Executive to fully perform his duties and
responsibilities hereunder, to (i) subject to Section 6(d)(i), serve as an
officer and director of Excel Legacy Corporation, a Delaware corporation
("Legacy"), (ii) manage Executive's personal, financial and legal affairs, and
(iii) serve on civic or charitable boards or committees and/or donate a
reasonable portion of his time to various charitable endeavors and
organizations.
(b) Appointment as Chief Executive Officer. Upon Arnold Laubich's
resignation or cessation of service as Chief Executive Officer of the Company,
the Company intends and expects to appoint Executive as the Chief Executive
Officer of the Company.
(c) No Senior Employee. During the Employment Period, the Company
shall not hire or retain any person (other than Arnold Laubich) as Chief
Executive Officer of the Company or as Chairman of the Board of the Company, or
in any other position of the Company that is senior to the position of President
held by Executive; provided, that nothing herein is intended to limit the role
of William Newman as Chairman of the Board of the Company.
(d) Investment Committee. At the Effective Time, Executive shall be
appointed by the Board as Chairman of the Board's Investment Committee (the
"Investment Committee") and shall be given authority to direct the activities of
the Investment Committee in accordance with the applicable provisions of the
Merger Agreement and its ancillary documents, exhibits and schedules. During
the Employment Period, the Investment Committee shall consist of four persons,
as follows: (i) Executive, who shall act as Chairman of the Investment
Committee, (ii) an additional director of the Company designated by Executive,
and (iii) Arnold Laubich and an additional director appointed by Laubich or if
Laubich is not then a director two additional persons appointed by
<PAGE>
the Board. During the Employment Period, neither the Company nor the Board shall
(w) appoint or create any other committee to act as the Investment Committee or
as an Executive Committee of the Board without Executive's prior written
consent, (x) delegate any of the duties of the Investment Committee to the Board
(subject only to matters required by law to be voted upon by the Board) or any
other committee of the Board, (y) limit the scope or authority of the Investment
Committee, except as provided in the Merger Agreement and its ancillary
documents, exhibits and schedules, or (z) change the size or composition of the
Investment Committee (except as provided in clause (iii) above). A similar
arrangement shall prevail with respect to the Investment Committee of the
Company's principal subsidiary, New Plan Realty Trust, and the term "Investment
Committee" shall apply to each or both of such Committees.
(e) During the term of this Agreement, Executive shall be nominated by
the Board to serve as a director of the Company.
4. Place of Performance. The principal place of employment of Executive
--------------------
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
--------------------------------
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary at the rate of not less than the annual salary
paid to the Chief Executive Officer of the Company, but in no event less than
$525,000 per year ("Base Salary"). With respect to the services to be performed
by Executive for Legacy from time to time, agreements between the Company and
Legacy provide for reimbursement to Company by Legacy of a portion of the
salary, bonus, and other compensation benefits payable hereunder, none of which
reimbursement shall accrue to Executive. Executive's Base Salary shall be paid
in approximately equal installments in accordance with the Company's customary
payroll practices. If Executive's Base Salary is increased by the Company, such
increased Base Salary shall then constitute the Base Salary for all purposes of
this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus in an amount equal to up to 50% of the Base Salary, as provided in Section
5(a) above, which the Compensation Committee shall reasonably determine as
fairly compensating and rewarding Executive for services
<PAGE>
rendered to the Company and/or as an incentive for continued service to the
Company; provided, however, that the cash bonus paid to Executive under this
Section 5(b) during the first year of the Employment Period shall not be less
than $262,500. Subject to the proviso set forth in the preceding sentence, the
amount of Executive's cash bonus shall be determined in the reasonable
discretion of the Compensation Committee and shall be dependent upon, among
other things, the achievement of certain performance levels by the Company,
including, without limitation, growth in funds from operations, and Executive's
performance and contribution to increasing the funds from operations.
(c) Stock Options. Effective as of the Effective Time, Executive shall
be awarded (i) an incentive stock option to purchase an amount of shares of
Common Stock of the Company, par value $.01 per share (the "Common Stock"),
equal to the difference between the number of stock options currently held by
Arnold Laubich and those held by Executive on May 12, 1998, which options shall
vest pro-rata over the remaining time period for the options issued to Laubich
but in no event shall such options vest less favorably to Executive than on the
first, second, third and fourth anniversaries of the date of grant in equal
installments (collectively, the "Stock Options"); and (ii) incentive stock
options to be awarded in the future at the times and in the amounts awarded to
Arnold Laubich. Each share of the Common Stock subject to the Stock Options
shall have an exercise price equal to the closing price of a share of Common
Stock on the date the Effective Time occurs. The Stock Options shall be subject
to the terms and conditions of the Company's 1993 Stock Option Plan (the
"Company Option Plan"). The Company hereby represents and warrants to Executive
that, at the time of grant: (a) the Company Option Plan will have sufficient
shares available to effect the grant and exercise of the Stock Options and the
Company Option Plan has been approved by its shareholders, (b) the Stock Options
shall be granted by the Board or by a compensation committee of the Board
satisfying the conditions for "non-employee directors" under Rule 16b-3,
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3"), (c) the Stock Options will be properly authorized and approved by the Board
and/or its compensation committee, (d) the Common Stock underlying the Stock
Options will be registered on Form S-8 and (e) the Common Stock underlying the
Stock Options will be listed on the New York Stock Exchange.
<PAGE>
(d) Automobile. During the Employment Period, the Company shall
provide Executive with an automobile allowance of at least $12,000 per year.
(e) Expenses. The Company shall promptly reimburse Executive for all
reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(f) Vacation. Executive shall be entitled to the number of weeks of
vacation per year provided to the Company's Chief Executive Officer, but in no
event less than four (4) weeks annually.
(g) Services Furnished. During the Employment Period, the Company
shall furnish Executive with office space, stenographic and secretarial
assistance and such other facilities and services comparable to those provided
to the Company's Chief Executive Officer.
(h) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs. The Company shall at all times
provide to Executive (and his spouse and dependents to the extent provided under
the applicable plans or programs) (subject to modifications affecting all senior
executive officers) the same type and levels of participation and benefits as
are being provided to the Company's Chief Executive Officer (and his spouse and
dependents to the extent provided under the applicable plans or programs) during
the Employment Period. In addition, during the Employment Period, Executive
shall be eligible to participate in all pension, retirement, savings and other
employee benefit plans and programs maintained from time to time by the Company
for the benefit of its senior executives, or any annual incentive or long-term
performance plans.
6. Termination. Executive's employment hereunder may be terminated
-----------
during the Employment Period under the following circumstances:
<PAGE>
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Executive's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, the Company shall have "Cause" to terminate Executive's employment
upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best efforts
to substantially perform his duties hereunder (other than such failure
resulting from Executive's incapacity due to physical or mental illness or
subsequent to the issuance of a Notice of Termination by Executive for Good
Reason (as defined in Section 6(d)) after demand for substantial performance
is delivered by the Company in writing that specifically identifies the
manner in which the Company believes Executive has not used reasonable best
efforts to substantially perform his duties; or
(iii) willful misconduct (including, but not limited to, a willful
breach of the provisions of Section 10) that is materially economically
injurious to the Company or to any entity in control of, controlled by or
under common control with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by Executive
shall be considered "willful" unless committed in bad faith and without a
reasonable belief that the act or omission was in the best interests of the
Company or any Affiliates thereof.; provided, however, that the willful
requirement outlined
<PAGE>
in paragraphs (ii) or (iii) above shall be deemed to have occurred if the
Executive's action or non-action continues for more than ten (10) days after
Executive has received written notice of the inappropriate action or non-action.
Cause shall not exist under paragraph (ii) or (iii) above unless and until the
Company has delivered to Executive a copy of a resolution duly adopted by a
majority of the Board (excluding Executive for purposes of determining such
majority) at a meeting of the Board called and held for such purpose (after
reasonable (but in no event less than thirty (30) days) notice to Executive and
an opportunity for Executive, together with his counsel, to be heard before the
Board), finding that in the good faith opinion of the Board, Executive was
guilty of the conduct set forth in paragraph (ii) or (iii) and specifying the
particulars thereof in detail. This Section 6(c) shall not prevent Executive
from challenging in any court of competent jurisdiction the Board's
determination that Cause exists or that Executive has failed to cure any act (or
failure to act) that purportedly formed the basis for the Board's determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within thirty (30) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Executive to the Company; provided, however, that with
respect to Section 6(d), the Company shall have the right to challenge in any
court of competent jurisdiction the Executive's determination that he has the
right to terminate his employment for "Good Reason."
(i) the failure of Executive to be appointed as Chief Executive
Officer of the Company within thirty (30) days after Arnold Laubich ceases to
serve as Chief Executive Officer of the Company; provided, however, if at
such time Executive is an executive officer of Legacy, he shall have six
months to resign such position and his appointment shall not be effective
until such resignation, but will become effective only upon such resignation,
but in no event will Executive be required to resign as a director or
Chairman of the Board of Legacy. If such resignation is not effected within
six (6) months, then the Company's failure to so appoint shall not constitute
"Good Reason." Discontinuing Executive's employment as Chief Executive
Officer shall not be deemed to be "Good Reason" if he, during such
employment, resumes being an executive officer of Legacy;
<PAGE>
(ii) the assignment to Executive of duties materially and adversely
inconsistent with Executive's status as President of the Company or a
material and adverse alteration in the nature of Executive's duties and/or
responsibilities, reporting obligations, titles or authority;
(iii) the assignment to Executive of duties materially and adversely
inconsistent with Executive's status as Chairman of the Investment Committee
or a material and adverse alteration in the nature of Executive's duties
and/or responsibilities, titles or authority in such capacity as Chairman of
the Investment Committee;
(iv) a breach of the Company's obligations under the last two
sentences of Section 3(d);
(v) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(vi) Except as provided in Section 6(d)(i) hereof the hiring of any
person (other than Arnold Laubich in his capacity as Chief Executive Officer
or Chairman of the Board of the Company) during the Employment Period whose
position or authority would be senior to that of Executive;
(vii) the relocation of the Company's operating offices or
Executive's own office location to a location more than thirty (30) miles
from San Diego, California;
(viii) any purported termination of Executive's employment for Cause
which is not effected pursuant to the procedures of Section 6(c) (and for
purposes of this Agreement, no such purported termination shall be
effective);
(ix) the Company's failure to provide the Stock Options or the
Company's material breach of one or more of the stock option agreements
pursuant to which the Stock Options were issued to Executive;
(x) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(xi) the Company's failure to provide in all material respects the
indemnification set forth in Section 11 of this Agreement; or
<PAGE>
(xii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Without Good Reason. Executive shall have the right to terminate
his employment hereunder without Good Reason by providing the Company with a
Notice of Termination, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement.
For purposes of this Agreement, a "Change in Control" of the Company means
the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to the Commencement Date whose election or nomination for election
was approved by a vote of a majority of the Incumbent Directors then on the
Board (either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director, without
objection to such nomination) shall be an Incumbent Director; provided,
however, that no individual initially elected or nominated as a director of
the Company as a result of an actual or threatened election contest with
respect to directors or as a result of any other actual or threatened
solicitation of proxies by or on behalf of any person other than the Board
shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the "Exchange Act") and as used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after the
Commencement Date, a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the
<PAGE>
Board (the "Company Voting Securities"); provided, however, that an event
described in this paragraph (2) shall not be deemed to be a Change in Control
if any of following becomes such a beneficial owner: (A) the Company or any
majority-owned subsidiary (provided, that this exclusion applies solely to
the ownership levels of the Company or the majority-owned subsidiary), (B)
any tax-qualified, broad-based employee benefit plan sponsored or maintained
by the Company or any majority-owned subsidiary, (C) any underwriter
temporarily holding securities pursuant to an offering of such securities,
(D) any person pursuant to a Non-Qualifying Transaction (as defined in
paragraph (3)), or (E) Executive or any group of persons including Executive
(or any entity controlled by Executive or any group of persons including
Executive);
(3) the consummation of a merger, consolidation, share exchange or
similar form of transaction involving the Company or any of its subsidiaries,
or the sale of all or substantially all of the Company's assets (a "Business
Transaction"), unless immediately following such Business Transaction (i)
more than 50% of the total voting power of the entity resulting from such
Business Transaction or the entity acquiring the Company's assets in such
Business Transaction (the "Surviving Corporation") is beneficially owned,
directly or indirectly, by the Company's shareholders immediately prior to
any such Business Transaction, and (ii) no person (other than the persons set
forth in clauses (A), (B), or (C) of paragraph (2) above or any tax-
qualified, broad-based employee benefit plan of the Surviving Corporation or
its Affiliates beneficially owns, directly or indirectly, 30% or more of the
total voting power of the Surviving Corporation (a "Non-Qualifying
Transaction")); or
(4) Board approval of a liquidation or dissolution of the Company,
unless the voting common equity interests of an ongoing entity (other than a
liquidating trust) are beneficially owned, directly or indirectly, by the
Company's shareholders in substantially the same proportions as such
shareholders owned the Company's outstanding voting common equity interests
immediately prior to such liquidation and such ongoing entity assumes all
existing obligations of the Company to Executive under this Agreement and the
Stock Option Agreements pursuant to which the Stock Options were granted.
<PAGE>
7. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of Executive's employment
by the Company or by Executive during the Employment Period (other than
termination pursuant to Section 6(a)) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 14. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
--------------------------------------------------
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for Good
Reason. If Executive's employment is terminated by the Company without Cause or
by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination, and to Executive (B) a lump sum cash
payment of Two Million Five Hundred Thousand Dollars ($2,500,000), as soon as
practicable following the Date of Termination; provided, however, to the
extent that the Company would not be able to deduct any portion of such
payment pursuant to Section 162(m) of the Internal
<PAGE>
Revenue Code of 1986, as amended (the "Code"), such portion of the payment,
together with accrued interest as provided below, shall be made at the
earliest time that such portion first would be deductible by the Company
under Code Section 162(m); and provided, further that to the extent that any
portion of such payment is deferred as provided in this Section 8(a)(i), such
portion shall accrue interest at the rate of 8% per annum from the Date of
Termination until the payment is made;
(ii) the Company shall maintain in full force and effect, for the
continued benefit of Executive, his spouse and his dependents for a period of
three (3) years following the Date of Termination the medical,
hospitalization, dental, and life insurance programs in which Executive, his
spouse and his dependents were participating immediately prior to the Date of
Termination at the level in effect and upon substantially the same terms and
conditions (including without limitation contributions required by Executive
for such benefits) as existed immediately prior to the Date of Termination;
provided, that if Executive, his spouse or his dependents cannot continue to
participate in the Company programs providing such benefits, the Company
shall arrange to provide Executive, his spouse and his dependents with the
economic equivalent of such benefits which they otherwise would have been
entitled to receive under such plans and programs ("Continued Benefits"),
provided, that such Continued Benefits shall terminate on the date or dates
Executive receives substantially equivalent coverage and benefits, without
waiting period or pre-existing condition limitations, under the plans and
programs of a subsequent employer (such coverage and benefits to be
determined on a coverage-by-coverage, or benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section 5(e)
for reasonable expenses incurred, but not paid prior to such termination of
employment;
(iv) Executive shall be entitled to any other rights, compensation
and/or benefits as may be due to Executive in accordance with the terms and
provisions of any agreements, plans or programs of the Company;
(v) all stock options and other pension or employment benefits
granted to Executive during the Employment Period and more than one year
prior
<PAGE>
to the Date of Termination shall fully vest as of the Date of Termination and
all stock options granted before the Employment Period shall also fully vest;
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive during the Employment Period, if any,
and shall take all actions and execute all documents necessary to evidence
the forgiveness and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without limitation,
the restrictions set forth in Section 10(c) of this Agreement but not the
restrictions set forth in Sections 10(a) and (b), or to make any investment
in competition with the Company, and shall execute all documents necessary or
reasonably requested by Executive to reflect such elimination of
restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Code and by reason of such excess parachute payment
Executive would be subject to an excise tax under Section 4999(a) of the Code,
but only if Executive determines that the after-tax value of the termination
benefits calculated with the foregoing restriction exceed those calculated
without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued vacation
pay through the Date of Termination, as soon as practicable following the
Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(e) for reasonable expenses incurred, but not paid prior to such termination
of employment, unless such termination resulted from a misappropriation of
Company funds; and
<PAGE>
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the Company.
(c) Disability. During any period that Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination, and (B) continued Base Salary (as provided
for in Section 5(a)) and Continued Benefits for the longer of (i) six (6)
months or (ii) the date on which Executive becomes entitled to long-term
disability benefits under the applicable plan or program of the Company
paying the benefits described in Section 5(h), up to a maximum of three (3)
years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(e) for reasonable expenses incurred, but not paid prior to such termination
of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be, Executive's
Base Salary through the Date of Termination and one (1) times Executive's
annual rate of Base Salary, and shall provide Executive's spouse and
dependents with Continued Benefits for one (1) year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(e)
<PAGE>
for reasonable expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation and
benefits as may be due to any such persons or estate in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
(e) Failure to Extend. A failure to extend the Agreement pursuant to
Section 2 by either party shall not be treated as a termination of Executive's
employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
----------
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein. Additionally,
amounts owed to Executive under this Agreement shall not be offset by any claims
the Company may have against Executive, and the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any other circumstances, including, without
limitation, any counterclaim, recoupment, defense or other right which the
Company may have against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
-----------------------------------------------------------------
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the
<PAGE>
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until the
first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company or any of its Affiliates (the "Designated Entities")
are conducting their business operations or providing services as of the Date of
Termination, in any business which is being engaged in by the Designated
Entities as of the Date of Termination or pursue or attempt to develop any
project known to Executive and which the Designated Entities are pursuing,
developing or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity which is engaged in any business conducted by the
Designated Entities in the same geographic area as the Designated Entities, any
Project or any customer of any of the Designated Entities, or (iii) solicit any
officer, employee (other than secretarial staff) or consultant of any of the
Designated Entities to leave the employ of any of the Designated Entities.
Notwithstanding the preceding sentence, Executive shall not be
<PAGE>
prohibited from owning less than three (3%) percent of any publicly traded
corporation, whether or not such corporation is in competition with the Company,
and Executive shall not be prohibited from owning equity securities of, and
acting as an officer and director of, Legacy. If, at any time, the provisions of
this Section 10(c) shall be determined to be invalid or unenforceable, by reason
of being vague or unreasonable as to area, duration or scope of activity, this
Section 10(c) shall be considered divisible and shall become and be immediately
amended to only such area, duration and scope of activity as shall be determined
to be reasonable and enforceable by the court or other body having jurisdiction
over the matter; and Executive agrees that this Section 10(c) as so amended
shall be valid and binding as though any invalid or unenforceable provision had
not been included herein.
(d) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
11. Indemnification.
---------------
(a) General. The Company agrees that if Executive is made a party or a
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that Executive is or was a trustee, director or officer of the Company or
any subsidiary of the Company or is or was serving at the request of the Company
or any subsidiary as a trustee, director, officer, member, employee or agent of
another corporation or a partnership, joint venture, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a trustee, director, officer, member, employee or agent while
serving as a trustee, director, officer, member, employee or agent, Executive
shall be indemnified and held harmless by the Company to the fullest extent
authorized by Maryland law, as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by Executive in connection therewith,
and such indemnification shall continue as to Executive even if Executive has
ceased to be an officer, director, trustee or agent, or is no longer employed by
<PAGE>
the Company and shall inure to the benefit of his heirs, executors and
administrators.
(b) Expenses. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Section 11 is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in connection
with any Proceeding shall be paid by the Company in advance upon request of
Executive that the Company pay such Expenses; but, only in the event that
Executive shall have delivered in writing to the Company (i) an undertaking to
reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of any
claim made against him for which indemnification will or could be sought under
this Agreement. In addition, Executive shall give the Company such information
and cooperation as it may reasonably require and as shall be within Executive's
power and at such times and places as are convenient for Executive.
<PAGE>
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it may
wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive, which in the Company's sole
discretion may be regular counsel to the Company and may be counsel to other
officers and directors of the Company or any subsidiary. Executive also shall
have the right to employ his own counsel in such action, suit or proceeding
if he reasonably concludes that failure to do so would involve a conflict of
interest between the Company and Executive, and under such circumstances the
fees and expenses of such counsel shall be at the expense of the Company.
(iii) The Company shall not be liable to indemnify Executive under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action
or claim in any manner which would impose any penalty or limitation on
Executive without Executive's written consent. Neither the Company nor
Executive will unreasonably withhold or delay their consent to any proposed
settlement.
(h) Non-exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in this Section 11 shall not be exclusive of any other right which
Executive may have or hereafter may acquire under any statute, provision of the
declaration of trust or certificate of incorporation or by-laws of the Company
or any subsidiary, agreement, vote of shareholders or disinterested directors or
trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise between
-----------------------
the Company and Executive regarding any provision of this Agreement, the Company
shall reimburse Executive for all legal fees and expenses reasonably incurred by
Executive in connection with such contest or dispute, but only if Executive is
successful in respect of substantially all of Executive's claims brought and
pursued in connection with such contest or dispute. Such reimbursement shall be
made as soon as
<PAGE>
practicable following the final resolution of such contest or dispute to the
extent the Company receives reasonable written evidence of such fees and
expenses.
13. Successors; Binding Agreement.
-----------------------------
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided
<PAGE>
for in this Agreement shall be in writing and shall be deemed to have been duly
given when delivered either personally or by United States certified or
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to Executive:
Gary B. Sabin
c/o Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, CA 92127
If to the Company:
Excel Realty Trust, Inc.
1120 Ave of the Americas
New York, NY 10036
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Miscellaneous. No provisions of this Agreement may be amended,
-------------
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
<PAGE>
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
----------------
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to Executive
--------------------
that no shareholder approval is required for the Company to enter into this
Agreement and provide the benefits hereunder and to enter into the agreements
described in Section 5.
20. Withholding. All payments hereunder shall be subject to any required
-----------
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
21. Noncontravention. The Company represents that the Company is not
----------------
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. Section Headings. The section headings in this Employment Agreement
----------------
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
23. Resignation and Termination. As of the Effective Time, (i) Executive
---------------------------
shall resign as Chief Executive Officer of the Company and Chairman of the
Board, and (ii) Executive's Employment Agreement with the Company dated April 1,
1993 shall be deemed terminated without any termination payments being owed to
him; provided, that for purposes of vesting any existing stock options, his
employment shall not be terminated and his employment after the relevant grant
date (whether before or after the Effective Time) shall be counted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
<PAGE>
EXCEL REALTY TRUST, INC.,
a Maryland corporation
By: /s/ Richard B. Muir
------------------------
Name: /s/ Richard B. Muir
------------------------
Title: Executive Vice President
------------------------
/s/ Gary B. Sabin
-------------------------------
GARY B. SABIN
<PAGE>
EXHIBIT 10.3
[FORM OF EMPLOYMENT AGREEMENT]
AGREEMENT, dated as of __________, 1998, by and between Excel Realty Trust,
Inc., a Maryland corporation, with its principal offices at __________ (the
"Company") and __________ ("Executive").
RECITALS
A. Executive is currently the __________ of New Plan Realty Trust, a
Massachusetts business trust ("New Plan").
B. The Company, a wholly owned subsidiary of the Company ("Sub"), and New
Plan have entered into an Agreement and Plan of Merger ("Merger Agreement"),
pursuant to which Sub shall merge with and into New Plan (the "Merger").
C. The Company desires to employ Employee, effective as of the time the
Merger is consummated (the "Effective Time"), on the terms and conditions set
forth in this Agreement, and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth below,
the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as
----------
__________ and Executive hereby accepts such employment, on the terms and
conditions hereinafter set forth. Notwithstanding the employment of Executive by
West, West shall be entitled to pay Executive from the payroll of New Plan.
2. Term. The period of employment of Executive by the Company hereunder
----
(the "Employment Period") shall commence on the Effective Time of the Merger
(the "Commencement Date") and shall continue through December 31, 2001;
provided, that, commencing on January 1, 2002, and on each anniversary date
thereafter, the Employment Period shall automatically be extended for one (1)
additional year unless either party gives written notice not to extend this
Agreement prior to six (6) months before such automatic extension would be
effectuated. The Employment Period may be sooner terminated by either party in
accordance with Section 6 of this Agreement. Employment hereunder and entering
into this Agreement shall not be deemed to constitute termination of employment
of Executive with New Plan and shall not trigger any obligations resulting from
such termination. Therefore, without limiting the generality of the foregoing,
the note(s) of Executive payable to New Plan shall not be accelerated as a
result of this Agreement or any action taken in accordance with the terms
hereof.
3. Position and Duties. During the Employment Period, Executive shall
-------------------
serve as __________ of the Company. Executive shall have those powers and duties
normally associated
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with the position of __________ and such other powers and duties as may be
prescribed by the Board of Directors of the Company (the "Board"). Executive
shall devote such time, attention and energies to Company affairs as are
necessary to fully perform his duties (other than absences due to illness or
vacation) for the Company. Notwithstanding the above, Executive shall be
permitted, to the extent such activities do not materially and adversely affect
the ability of Executive to fully perform his duties and responsibilities
hereunder, to (i) manage Executive's personal, financial and legal affairs, and
(ii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
--------------------
shall be at the Company's corporate offices in New York, New York.
5. Compensation and Related Matters.
--------------------------------
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $__________ ("Base Salary"). Executive's Base
Salary shall be paid in approximately equal installments in accordance with the
Company's customary payroll practices. If Executive's Base Salary is increased
by the Company, such increased Base Salary shall then constitute the Base Salary
for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 50% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company, but in no event shall Executive's combined bonus and Base Salary for
the first full calendar year after the Effective Time be less than the aggregate
of Executive's salary immediately prior to the Effective Time and bonus received
in 1997. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain performance levels by the
Company, including, without limitation, growth in funds from operations, and
Executive's performance and contribution to increasing the funds from
operations.
(c) Expenses. The Company shall promptly reimburse Executive for all
reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(d) Vacation. Executive shall be entitled to the number of weeks of
vacation per year provided to the Company's Senior Executive Officers, but in no
event less than four (4) weeks annually.
(e) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled
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<PAGE>
to participate in and be covered under all the welfare benefit plans or programs
maintained by the Company from time to time for the benefit of its senior
executives including, without limitation, all medical, hospitalization, dental,
disability, accidental death and dismemberment and travel accident insurance
plans and programs. In addition, during the Employment Period, Executive shall
be eligible to participate in all pension, retirement, savings and other
employee benefit plans and programs maintained from time to time by the Company
for the benefit of its senior executives, or any annual incentive or long-term
performance plans. With respect to each such employee benefit plan, program,
policy or arrangement, service with New Plan or any of its subsidiaries (as
applicable) shall be included for purposes of determining eligibility to
participate (including waiting periods, and without being subject to any entry
date requirement after the waiting period has been satisfied), vesting (as
applicable) and entitlement to benefits. The medical plan or plans maintained by
the Company after the Effective Time shall waive all limitations as to pre-
existing conditions, exclusions and waiting periods with respect to
participation and coverage requirements. With respect to vacation benefits
provided by the Company, the vacation benefit of Executive shall include all
hours of accrued but unused vacation and sick time hours, respectively, with New
Plan or its affiliates.
(f) During the Employment Period, the Company shall provide Executive
the use of an automobile (including the payment of vehicle insurance)
substantially comparable to the automobile currently provided to Executive by
New Plan; however, at the Company's option, Company may in lieu thereof provide
Executive with an automobile allowance in an amount sufficient for Executive to
have the use of (and pay vehicle insurance on, if not so provided by the
Company) a vehicle substantially comparable to the automobile currently provided
to Executive by New Plan.
6. Termination. Executive's employment hereunder may be terminated during
-----------
the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Executive's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, the Company shall have "Cause" to terminate Executive's employment
upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
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(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason (as defined in Section 6(d)) after demand for
substantial performance is delivered by the Company in writing that
specifically identifies the manner in which the Company believes Executive
has not used reasonable best efforts to substantially perform his duties;
or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or to any entity in control of,
controlled by or under common control with the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by Executive
shall be considered "willful" unless committed in bad faith and without a
reasonable belief that the act or omission was in the best interests of the
Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within thirty (30) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Executive to the Company; provided, however, that with
respect to Section 6(d) the Company shall have the right to challenge in any
court of competent jurisdiction the Executive's determination that he has the
right to terminate his employment for "Good Reason.":
(i) the termination of the Employment Agreement between Arnold
Laubich, the Chief Executive Officer, and the Company dated as of May 14,
1998, pursuant to Section 6(d) thereof by Laubich or by the Company without
Cause;
(ii) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as __________ of the Company
or a material and adverse alteration in the nature of Executive's duties
and/or responsibilities, reporting
4
<PAGE>
obligations, titles or authority;
(iii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iv) the relocation of the Company's executive offices or
Executive's own office location to a location that is more than fifty (50)
miles from New York, New York;
(v) any purported termination of Executive's employment for
Cause which is not effected pursuant to the procedures of Section 6(c) (and
for purposes of this Agreement, no such purported termination shall be
effective);
(vi) the Company's failure to substantially provide any
material employee benefits due to be provided to Executive;
(vii) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement;
(viii) a Change in Control (as defined below) of the Company; or.
(ix) Failure of the Company to provide, by giving appropriate
written notice to Executive, for two automatic one (1) year renewals
following the replacement of Arnold Laubich as Chief Executive Officer of
the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Without Good Reason. Executive shall have the right to terminate
his employment hereunder without Good Reason by providing the Company with a
Notice of Termination, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement.
For purposes of this Agreement, a "Change in Control" of the Company means
the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the Commencement Date whose election or nomination for
election was approved by a vote of a majority of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
5
<PAGE>
director, without objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the Board (the
"Company Voting Securities"); provided, however, that an event described in
this paragraph (2) shall not be deemed to be a Change in Control if any of
following becomes such a beneficial owner: (A) the Company or any majority-
owned subsidiary (provided, that this exclusion applies solely to the
ownership levels of the Company or the majority-owned subsidiary), (B) any
tax-qualified, broad-based employee benefit plan sponsored or maintained by
the Company or any majority-owned subsidiary, (C) any underwriter
temporarily holding securities pursuant to an offering of such securities,
(D) any person pursuant to a Non-Qualifying Transaction (as defined in
paragraph (3)), or (E) Executive or any group of persons including
Executive (or any entity controlled by Executive or any group of persons
including Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring the
Company's assets in such Business Transaction (the "Surviving Corporation")
is beneficially owned, directly or indirectly, by the Company's
shareholders immediately prior to any such Business Transaction, and (ii)
no person (other than the persons set forth in clauses (A), (B), or (C) of
paragraph (2) above or any tax-qualified, broad-based employee benefit plan
of the Surviving Corporation or its Affiliates beneficially owns, directly
or indirectly, 30% or more of the total voting power of the Surviving
Corporation (a "Non-Qualifying Transaction")); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to Executive
under this Agreement and the Stock Option Agreements pursuant to which the
Stock Options were granted.
6
<PAGE>
7. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of Executive's employment
by the Company or by Executive during the Employment Period (other than
termination pursuant to Section 6(a)) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 14. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the event
--------------------------------------------------
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for Good
Reason. If Executive's employment is terminated by the Company without Cause or
by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal to
two times Executive's average total compensation (Base Salary plus bonus)
for the two (2) preceding fiscal years of the Company ending prior to
termination as soon as practicable following the Date of Termination;
provided, however, if the Executive has previously given a notice not to
extend the Employment Period pursuant to Section 2, the payment referred to
in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for
the continued benefit of Executive, his spouse and his dependents for a
period of three (3) years following the Date of Termination the medical,
hospitalization, dental, and life insurance programs in which Executive,
his spouse and his dependents were participating immediately prior to the
Date of Termination at the level in effect and upon substantially the same
terms and conditions (including without limitation contributions required
by Executive for such benefits) as existed immediately prior to the Date of
Termination; provided, that if Executive, his spouse or his dependents
cannot continue to participate in
7
<PAGE>
the Company programs providing such benefits, the Company shall arrange to
provide Executive, his spouse and his dependents with the economic
equivalent of such benefits which they otherwise would have been entitled
to receive under such plans and programs ("Continued Benefits"), provided,
that such Continued Benefits shall terminate on the date or dates Executive
receives substantially equivalent coverage and benefits, without waiting
period or pre-existing condition limitations, under the plans and programs
of a subsequent employer (such coverage and benefits to be determined on a
coverage-by-coverage, or benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment;
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company;
(v) all stock options and other pension or employment benefits
granted to Executive during the Employment Period more than one year prior
to the Date of Termination shall fully vest as of the Date of Termination;
and all stock options granted before the Employment Period shall also fully
vest;
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive during the Employment Period, if any,
and shall take all actions and execute all documents necessary to evidence
the forgiveness and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without limitation,
the restrictions set forth in Section 10(c) of this Agreement but not the
restrictions set forth in Sections 10(a) and (b)), or to make any
investment in competition with the Company, and shall execute all documents
necessary or reasonably requested by Executive to reflect such elimination
of restrictions.
The foregoing notwithstanding, the total of the severance payments
payable under this Section 8(a) shall be reduced to the extent the payment of
such amounts would cause Executive's total termination benefits (as determined
by Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
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(i) the Company shall pay Executive his Base Salary and, to
the extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company.
(c) Disability. During any period that Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up to
a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1) times
Executive's annual rate of Base Salary, and shall provide Executive's
spouse and dependents with Continued Benefits for one (1) year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(c)
for reasonable expenses incurred, but not paid prior to such termination of
employment; and
9
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(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation and
benefits as may be due to any such persons or estate in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
(e) Failure to Extend. Subject to Section 6(d)(ix), a failure to
extend the Agreement pursuant to Section 2 by either party shall not be treated
as a termination of Executive's employment for purposes of this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts
----------
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein. Additionally,
amounts owed to Executive under this Agreement shall not be offset by any claims
the Company may have against Executive, and the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any other circumstances, including, without
limitation, any counterclaim, recoupment, defense or other right which the
Company may have against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
-----------------------------------------------------------------
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the
10
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Company's business developed by him alone or in conjunction with others at any
time while employed by the Company.
(c) Protection of Business. During the Employment Period and until
the first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company or any of its Affiliates (the "Designated Entities")
are conducting their business operations or providing services as of the Date of
Termination, in any business which is being engaged in by the Designated
Entities as of the Date of Termination or pursue or attempt to develop any
project known to Executive and which the Designated Entities are pursuing,
developing or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity which is engaged in any business conducted by the
Designated Entities in the same geographic area as the Designated Entities, any
Project or any customer of any of the Designated Entities, or (iii) solicit any
officer, employee (other than secretarial staff) or consultant of any of the
Designated Entities to leave the employ of any of the Designated Entities.
Notwithstanding the preceding sentence, Executive shall not be prohibited from
owning less than three (3%) percent of any publicly traded corporation, whether
or not such corporation is in competition with the Company, and Executive shall
not be prohibited from owning equity securities of, and acting as an officer and
director of, Legacy. If, at any time, the provisions of this Section 10(c) shall
be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10(c) shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Executive agrees that this Section 10(c) as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
(d) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
11. Indemnification.
---------------
(a) General. The Company agrees that if Executive is made a party or
a threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that Executive is or was a trustee, director or officer of the Company
or any subsidiary of the Company or is or was serving
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at the request of the Company or any subsidiary as a trustee, director, officer,
member, employee or agent of another corporation or a partnership, joint
venture, trust or other enterprise, including, without limitation, service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is alleged action in an official capacity as a trustee, director, officer,
member, employee or agent while serving as a trustee, director, officer, member,
employee or agent, Executive shall be indemnified and held harmless by the
Company to the fullest extent authorized by Maryland law, as the same exists or
may hereafter be amended, against all Expenses incurred or suffered by Executive
in connection therewith, and such indemnification shall continue as to Executive
even if Executive has ceased to be an officer, director, trustee or agent, or is
no longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.
(b) Expenses. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive
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notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Executive, which in the Company's sole
discretion may be regular counsel to the Company and may be counsel to
other officers and directors of the Company or any subsidiary. Executive
also shall have the right to employ his own counsel in such action, suit or
proceeding if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and Executive, and under such
circumstances the fees and expenses of such counsel shall be at the expense
of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent to
any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in this Section 11 shall not be exclusive of any other right which
Executive may have or hereafter may acquire under any statute, provision of the
declaration of trust or certificate of incorporation or by-laws of the Company
or any subsidiary, agreement, vote of shareholders or disinterested directors or
trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise between
-----------------------
the Company and Executive regarding any provision of this Agreement, the Company
shall reimburse Executive for all legal fees and expenses reasonably incurred by
Executive in connection with such contest or dispute, but only if Executive is
successful in respect of substantially all of Executive's claims brought and
pursued in connection with such contest or dispute. Such reimbursement shall be
made as soon as practicable following the final resolution of such contest or
dispute to the extent the Company receives reasonable written evidence of such
fees and expenses.
13. Successors; Binding Agreement.
-----------------------------
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
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"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive:
_________________
c/o Excel Realty Trust, Inc.
1120 Ave of the Americas
New York, NY 10036
If to the Company:
Excel Realty Trust, Inc.
1120 Ave of the Americas
New York, NY 10036
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Miscellaneous. No provisions of this Agreement may be amended,
-------------
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and
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by a duly authorized officer of the Company, and such waiver is set forth in
writing and signed by the party to be charged. No waiver by either party hereto
at any time of any breach by the other party hereto of any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The respective
rights and obligations of the parties hereunder of this Agreement shall survive
Executive's termination of employment and the termination of this Agreement to
the extent necessary for the intended preservation of such rights and
obligations. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of New York without regard
to its conflicts of law principles.
16. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
----------------
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to Executive
--------------------
that no shareholder approval is required for the Company to enter into this
Agreement and provide the benefits hereunder and to enter into the agreements
described in Section 5.
20. Withholding. All payments hereunder shall be subject to any required
-----------
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
21. Noncontravention. The Company represents that the Company is not
----------------
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. Section Headings. The section headings in this Employment Agreement
----------------
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EXCEL REALTY TRUST, INC.,
a Maryland corporation
By:
---------------------------
Name:
-------------------------
Title:
------------------------
---------------------------------
---------------------------------
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EXHIBIT 10.4
[FORM OF EMPLOYMENT AGREEMENT]
AGREEMENT, dated as of __________, 1998, by and between Excel Realty Trust,
Inc., a Maryland corporation, with its principal offices at __________, (the
"Company") and __________("Executive").
RECITALS
A. Executive is currently the __________ of the Company.
B. The Company, a wholly owned subsidiary of the Company ("Sub"), and New
Plan Realty Trust, a Massachusetts business trust ("New Plan"), have entered
into an Agreement and Plan of Merger ("Merger Agreement"), pursuant to which Sub
shall merge with and into New Plan (the "Merger").
C. The Company desires to employ Employee, effective as of the time the
Merger is consummated (the "Effective Time"), on the terms and conditions set
forth in this Agreement, and Executive desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth below,
the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive as
----------
__________, and Executive hereby accepts such employment, on the terms and
conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company hereunder
----
(the "Employment Period") shall commence on the Effective Time of the Merger
(the "Commencement Date") and shall continue through December 31, 2001;
provided, that, commencing on January 1, 2002, and on each anniversary date
thereafter, the Employment Period shall automatically be extended for one (1)
additional year unless either party gives written notice not to extend this
Agreement prior to six (6) months before such automatic extension would be
effectuated. The Employment Period may be sooner terminated by either party in
accordance with Section 6 of this Agreement.
3. Position and Duties. During the Employment Period, Executive shall
-------------------
serve as __________ of the Company. Executive shall have those powers and duties
normally associated with the position of __________ and such other powers and
duties as may be prescribed by the Board of Directors of the Company (the
"Board"). Executive shall devote such time, attention and energies to Company
affairs as are necessary to fully perform his duties (other than absences due to
illness or vacation) for the Company. Notwithstanding the above, Executive shall
be
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permitted, to the extent such activities do not materially and adversely affect
the ability of Executive to fully perform his duties and responsibilities
hereunder, to (i) serve as an officer and director of Excel Legacy Corporation,
a Delaware corporation ("Legacy"), (ii) manage Executive's personal, financial
and legal affairs, and (iii) serve on civic or charitable boards or committees.
4. Place of Performance. The principal place of employment of Executive
--------------------
shall be at the Company's operating offices in San Diego, California.
5. Compensation and Related Matters.
--------------------------------
(a) Salary. During the Employment Period, the Company shall pay
Executive an annual base salary of $__________ ("Base Salary"). With respect to
the services to be performed by Executive for Legacy from time to time,
agreements between the Company and Legacy provide for reimbursement to Company
by Legacy of a portion of the salary, bonus, and other compensation benefits
payable hereunder, none of which reimbursement shall accrue to Executive.
Executive's Base Salary shall be paid in approximately equal installments in
accordance with the Company's customary payroll practices. If Executive's Base
Salary is increased by the Company, such increased Base Salary shall then
constitute the Base Salary for all purposes of this Agreement.
(b) Bonus. The Board's compensation committee (the "Compensation
Committee") shall review Executive's performance at least annually during each
year of the Employment Period and cause the Company to award Executive a cash
bonus of up to 50% of his Base Salary which the Compensation Committee shall
reasonably determine as fairly compensating and rewarding Executive for services
rendered to the Company and/or as an incentive for continued service to the
Company, but in no event shall Executive's combined bonus and Base Salary for
the first full calendar year after the Effective Time be less than the aggregate
of Executive's salary immediately prior to the Effective Time and bonus received
in 1997. The amount of Executive's cash bonus shall be determined in the
reasonable discretion of the Compensation Committee and shall be dependent upon,
among other things, the achievement of certain performance levels by the
Company, including, without limitation, growth in funds from operations, and
Executive's performance and contribution to increasing the funds from
operations.
(c) Expenses. The Company shall promptly reimburse Executive for all
reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(d) Vacation. Executive shall be entitled to the number of weeks of
vacation per year provided to the Company's Senior Executive Officers, but in no
event less than four (4) weeks annually.
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(e) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs. In addition, during the
Employment Period, Executive shall be eligible to participate in all pension,
retirement, savings and other employee benefit plans and programs maintained
from time to time by the Company for the benefit of its senior executives, or
any annual incentive or long-term performance plans.
(f) During the Employment Period, the Company shall provide Executive
with an automobile allowance of at least $__________ per year.
6. Termination. Executive's employment hereunder may be terminated during
-----------
the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon his
death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as defined in
Section 7(a)) is given after such six (6) month period, Executive shall not have
returned to the substantial performance of his duties on a full-time basis, the
Company shall have the right to terminate Executive's employment hereunder for
"Disability", and such termination in and of itself shall not be, nor shall it
be deemed to be, a breach of this Agreement.
(c) Cause. The Company shall have the right to terminate Executive's
employment for Cause, and such termination in and of itself shall not be, nor
shall it be deemed to be, a breach of this Agreement. For purposes of this
Agreement, the Company shall have "Cause" to terminate Executive's employment
upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to, a
felony; or
(ii) willful and continued failure to use reasonable best efforts
to substantially perform his duties hereunder (other than such failure
resulting from Executive's incapacity due to physical or mental illness or
subsequent to the issuance of a Notice of Termination by Executive for Good
Reason (as defined in Section 6(d)) after demand for substantial
performance is delivered by the Company in writing that specifically
identifies the manner in which the Company believes Executive has not used
reasonable best efforts to substantially perform his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company
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or to any entity in control of, controlled by or under common control with
the Company ("Affiliate").
For purposes of this Section 6(c), no act, or failure to act, by Executive
shall be considered "willful" unless committed in bad faith and without a
reasonable belief that the act or omission was in the best interests of the
Company or any Affiliates thereof; provided, however, that the willful
requirement outlined in paragraphs (ii) or (iii) above shall be deemed to have
occurred if the Executive's action or non-action continues for more than ten
(10) days after Executive has received written notice of the inappropriate
action or non-action. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within thirty (30) days after Executive has actual knowledge of the
occurrence, without the written consent of Executive, of one of the following
events that has not been cured within thirty (30) days after written notice
thereof has been given by Executive to the Company; provided, however, that with
respect to Section 6(d) the Company shall have the right to challenge in any
court of competent jurisdiction the Executive's determination that he has the
right to terminate his employment for "Good Reason.":
(i) the termination of the Employment Agreement between Gary B.
Sabin, the President, and the Company dated as of May 14, 1998, pursuant to
Section 6(d) thereof or by the Company without Cause;
(ii) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as __________ of the Company
or a material and adverse alteration in the nature of Executive's duties
and/or responsibilities, reporting obligations, titles or authority;
(iii) a reduction by the Company in Executive's Base Salary or a
failure by the Company to pay any such amounts when due;
(iv) the relocation of the Company's operating offices or
Executive's own office location to a location more than thirty (30) miles
from San Diego, California;
(v) any purported termination of Executive's employment for Cause
4
<PAGE>
which is not effected pursuant to the procedures of Section 6(c) (and for
purposes of this Agreement, no such purported termination shall be
effective);
(vi) the Company's failure to substantially provide any material
employee benefits due to be provided to Executive;
(vii) the Company's failure to provide in all material respects
the indemnification set forth in Section 11 of this Agreement; or
(viii) a Change in Control (as defined below) of the Company.
Executive's right to terminate his employment hereunder for Good Reason
shall not be affected by his incapacity due to physical or mental illness.
Executive's continued employment during the thirty (30) day period referred to
above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Without Good Reason. Executive shall have the right to terminate
his employment hereunder without Good Reason by providing the Company with a
Notice of Termination, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement.
For purposes of this Agreement, a "Change in Control" of the Company means
the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Directors") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to the Commencement Date whose election or nomination for
election was approved by a vote of a majority of the Incumbent Directors
then on the Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director, without objection to such nomination) shall be an Incumbent
Director; provided, however, that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a result of any
other actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be an Incumbent Director;
(2) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes, after
the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election of the Board (the
"Company Voting Securities"); provided, however, that an event described in
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this paragraph (2) shall not be deemed to be a Change in Control if any of
following becomes such a beneficial owner: (A) the Company or any majority-
owned subsidiary (provided, that this exclusion applies solely to the
ownership levels of the Company or the majority-owned subsidiary), (B) any
tax-qualified, broad-based employee benefit plan sponsored or maintained by
the Company or any majority-owned subsidiary, (C) any underwriter
temporarily holding securities pursuant to an offering of such securities,
(D) any person pursuant to a Non-Qualifying Transaction (as defined in
paragraph (3)), or (E) Executive or any group of persons including
Executive (or any entity controlled by Executive or any group of persons
including Executive);
(3) the consummation of a merger, consolidation, share exchange
or similar form of transaction involving the Company or any of its
subsidiaries, or the sale of all or substantially all of the Company's
assets (a "Business Transaction"), unless immediately following such
Business Transaction (i) more than 50% of the total voting power of the
entity resulting from such Business Transaction or the entity acquiring the
Company's assets in such Business Transaction (the "Surviving Corporation")
is beneficially owned, directly or indirectly, by the Company's
shareholders immediately prior to any such Business Transaction, and (ii)
no person (other than the persons set forth in clauses (A), (B), or (C) of
paragraph (2) above or any tax-qualified, broad-based employee benefit plan
of the Surviving Corporation or its Affiliates beneficially owns, directly
or indirectly, 30% or more of the total voting power of the Surviving
Corporation (a "Non-Qualifying Transaction")); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to Executive
under this Agreement and the Stock Option Agreements pursuant to which the
Stock Options were granted.
7. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of Executive's employment
by the Company or by Executive during the Employment Period (other than
termination pursuant to Section 6(a)) shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 14. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is
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terminated pursuant to Section 6(b), thirty (30) days after Notice of
Termination (provided that Executive shall not have returned to the substantial
performance of his duties on a full-time basis during such thirty (30) day
period), and (iii) if Executive's employment is terminated for any other reason,
the date on which a Notice of Termination is given or any later date (within
thirty (30) days after the giving of such notice) set forth in such Notice of
Termination.
8. Compensation Upon Termination or During Disability. In the event
--------------------------------------------------
Executive is disabled or his employment terminates during the Employment Period,
the Company shall provide Executive with the payments and benefits set forth
below. Executive acknowledges and agrees that the payments set forth in this
Section 8 constitute liquidated damages for termination of his employment during
the Employment Period.
(a) Termination By Company Without Cause or By Executive for Good
Reason. If Executive's employment is terminated by the Company without Cause or
by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) a payment equal to
two times Executive's average total compensation (Base Salary plus bonus)
for the two (2) preceding fiscal years of the Company ending prior to
termination as soon as practicable following the Date of Termination;
provided, however, if the Executive has previously given a notice not to
extend the Employment Period pursuant to Section 2, the payment referred to
in this subsection (i) shall not be made;
(ii) the Company shall maintain in full force and effect, for the
continued benefit of Executive, his spouse and his dependents for a period
of three (3) years following the Date of Termination the medical,
hospitalization, dental, and life insurance programs in which Executive,
his spouse and his dependents were participating immediately prior to the
Date of Termination at the level in effect and upon substantially the same
terms and conditions (including without limitation contributions required
by Executive for such benefits) as existed immediately prior to the Date of
Termination; provided, that if Executive, his spouse or his dependents
cannot continue to participate in the Company programs providing such
benefits, the Company shall arrange to provide Executive, his spouse and
his dependents with the economic equivalent of such benefits which they
otherwise would have been entitled to receive under such plans and programs
("Continued Benefits"), provided, that such Continued Benefits shall
terminate on the date or dates Executive receives substantially equivalent
coverage and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer (such
coverage and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis); and
(iii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment;
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(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company;
(v) all stock options and other pension or employment benefits
granted to Executive during the Employment Period more than one year prior
to the Date of Termination shall fully vest as of the Date of Termination;
and all stock options granted before the Employment Period shall also fully
vest;
(vi) the Company shall forgive and cancel all loans made by the
Company or any Affiliate to Executive during the Employment Period, if any,
and shall take all actions and execute all documents necessary to evidence
the forgiveness and cancellation of such loans; and
(vii) the Company shall eliminate any and all restrictions on
Executive's ability either to engage in any activities, directly or
indirectly, in competition with the Company (including, without limitation,
the restrictions set forth in Section 10(c) of this Agreement but not the
restrictions set forth in Sections 10(a) and (b)), or to make any
investment in competition with the Company, and shall execute all documents
necessary or reasonably requested by Executive to reflect such elimination
of restrictions.
The foregoing notwithstanding, the total of the severance payments payable
under this Section 8(a) shall be reduced to the extent the payment of such
amounts would cause Executive's total termination benefits (as determined by
Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code") and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to the
extent required by law or the Company's vacation policy, his accrued
vacation pay through the Date of Termination, as soon as practicable
following the Date of Termination; and
(ii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
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(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company.
(c) Disability. During any period that Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary and
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 5(h), up to
a maximum of three (3) years of Base Salary continuation; and
(ii) the Company shall reimburse Executive pursuant to Section
5(c) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance with
the terms and provisions of any agreements, plans or programs of the
Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1) times
Executive's annual rate of Base Salary, and shall provide Executive's
spouse and dependents with Continued Benefits for one (1) year;
(ii) the Company shall reimburse Executive's beneficiary, legal
representatives, or estate, as the case may be, pursuant to Section 5(c)
for reasonable expenses incurred, but not paid prior to such termination of
employment; and
(iii) Executive's beneficiary, legal representatives or estate,
as the case may be, shall be entitled to any other rights, compensation and
benefits as may be due to any such persons or estate in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
(e) Failure to Extend. A failure to extend the Agreement pursuant to
Section 2 by either party shall not be treated as a termination of Executive's
employment for purposes of
9
<PAGE>
this Agreement.
9. Mitigation. Executive shall not be required to mitigate amounts payable
----------
under this Agreement by seeking other employment or otherwise, and there shall
be no offset against amounts due Executive under this Agreement on account of
subsequent employment except as specifically provided herein. Additionally,
amounts owed to Executive under this Agreement shall not be offset by any claims
the Company may have against Executive, and the Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any other circumstances, including, without
limitation, any counterclaim, recoupment, defense or other right which the
Company may have against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
-----------------------------------------------------------------
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until the
first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company or any of its Affiliates (the "Designated Entities")
10
<PAGE>
are conducting their business operations or providing services as of the Date of
Termination, in any business which is being engaged in by the Designated
Entities as of the Date of Termination or pursue or attempt to develop any
project known to Executive and which the Designated Entities are pursuing,
developing or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity which is engaged in any business conducted by the
Designated Entities in the same geographic area as the Designated Entities, any
Project or any customer of any of the Designated Entities, or (iii) solicit any
officer, employee (other than secretarial staff) or consultant of any of the
Designated Entities to leave the employ of any of the Designated Entities.
Notwithstanding the preceding sentence, Executive shall not be prohibited from
owning less than three (3%) percent of any publicly traded corporation, whether
or not such corporation is in competition with the Company, and Executive shall
not be prohibited from owning equity securities of, and acting as an officer and
director of, Legacy. If, at any time, the provisions of this Section 10(c) shall
be determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10(c) shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Executive agrees that this Section 10(c) as so amended shall be valid and
binding as though any invalid or unenforceable provision had not been included
herein.
(d) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
11. Indemnification.
---------------
(a) General. The Company agrees that if Executive is made a party or a
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that Executive is or was a trustee, director or officer of the Company or
any subsidiary of the Company or is or was serving at the request of the Company
or any subsidiary as a trustee, director, officer, member, employee or agent of
another corporation or a partnership, joint venture, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a trustee, director, officer, member, employee or agent while
serving as a trustee, director, officer, member, employee or agent, Executive
shall be indemnified and held harmless by the Company to the fullest extent
authorized by Maryland law, as the same exists or may hereafter be amended,
against all
11
<PAGE>
Expenses incurred or suffered by Executive in connection therewith, and such
indemnification shall continue as to Executive even if Executive has ceased to
be an officer, director, trustee or agent, or is no longer employed by the
Company and shall inure to the benefit of his heirs, executors and
administrators.
(b) Expenses. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish,
12
<PAGE>
the Company will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Executive, which in the Company's sole
discretion may be regular counsel to the Company and may be counsel to
other officers and directors of the Company or any subsidiary. Executive
also shall have the right to employ his own counsel in such action, suit or
proceeding if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and Executive, and under such
circumstances the fees and expenses of such counsel shall be at the expense
of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Executive without Executive's written consent. Neither the
Company nor Executive will unreasonably withhold or delay their consent to
any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final disposition
conferred in this Section 11 shall not be exclusive of any other right which
Executive may have or hereafter may acquire under any statute, provision of the
declaration of trust or certificate of incorporation or by-laws of the Company
or any subsidiary, agreement, vote of shareholders or disinterested directors or
trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
-----------------------
between the Company and Executive regarding any provision of this Agreement, the
Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the final
resolution of such contest or dispute to the extent the Company receives
reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
-----------------------------
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
13
<PAGE>
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than his
rights to payments or benefits hereunder, which may be transferred only by will
or the laws of descent and distribution. Upon Executive's death, this Agreement
and all rights of Executive hereunder shall inure to the benefit of and be
enforceable by Executive's beneficiary or beneficiaries, personal or legal
representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts unless otherwise provided herein shall be
paid in accordance with the terms of this Agreement to such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. For the purposes of this Agreement, notices, demands and all
------
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive:
----------------------------
c/o Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, CA 92127
If to the Company:
Excel Realty Trust, Inc.
1120 Ave of the Americas
New York, NY 10036
Attn: CEO
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Miscellaneous. No provisions of this Agreement may be amended,
-------------
modified, or waived unless such amendment or modification is agreed to in
writing signed by Executive and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other
14
<PAGE>
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
--------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
----------------
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to
--------------------
Executive that no shareholder approval is required for the Company to enter into
this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5.
20. Withholding. All payments hereunder shall be subject to any required
-----------
withholding of Federal, state and local taxes pursuant to any applicable law or
regulation.
21. Noncontravention. The Company represents that the Company is not
----------------
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. Section Headings. The section headings in this Employment Agreement
----------------
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
15
<PAGE>
23. Resignation and Termination. As of the Effective Time, (i) Executive
---------------------------
shall resign as __________ of the Company and (ii) Executive's Employment
Agreement with the Company dated __________ shall be deemed terminated without
any termination or other severance benefits or payments being owed to him;
provided, however, that for purposes of vesting any existing stock options,
401(k) or other employee benefits, his employment shall not be deemed terminated
and his employment after the relevant grant date (whether before or after the
Effective Time) shall be counted.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EXCEL REALTY TRUST, INC.,
a Maryland corporation
By: _______________________________
Name: _____________________________
Title: ____________________________
----------------------------
----------------------------
16
<PAGE>
EXHIBIT 10.5
May 14, 1998
Board of Directors
Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, CA 92127
Attention: Chief Executive Officer
Gentlemen:
As an inducement to Excel Realty Trust, Inc., a Maryland corporation (the
"Company"), to enter into the Agreement and Plan of Merger (the "Merger
Agreement") dated May 14, 1998 among the Company, New Plan Realty Trust, a
Massachusetts business trust, and ERT Merger Sub, Inc., a Maryland corporation,
and consummate the transactions comtemplated thereby, I hereby agree as follows:
During the period and after the Effective Time (as defined in the Merger
Agreement) and continuing until (x) I either do not Beneficially Own (as defined
herein) any Voting Securities (as defined herein) or (y) my employment with the
Company terminates as a result of a termination by the Company without Cause
(as defined in the Employment Agreement to be effective as of the Effective Time
between the Company and me) or (z) my termination for Good Reason (as
defined in my Employment Agreement) I:
(a) will not, without the prior approval of the Company's Board of
Directors:
(i) submit any proposal for the vote of stockholders of the Company;
<PAGE>
(ii) become a member of a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with respect to any Voting Securities;
(iii) induce or attempt to induce or give encouragement to any other
person to initiate any proposal or tender or exchange offer for Voting
Securities or a change of control of the Company, or make or in any way
participate in any solicitation of proxies with respect to Voting
Securities;
(iv) publicly propose or make any public statement with respect to
the foregoing;
(b) will, as a stockholder, be present in person or be represented by
proxy at all shareholder meetings of the Company so that all Voting Securities
of which I am the Beneficial Owner may be counted for the purpose of determining
the presence of a quorum at such meetings;
(c) will, as a stockholder, vote or cause to be voted all Voting
Securities of which I am the Beneficial Owner (i) for the Board of Directors'
nominees for election to the Board of Directors of the Company and (ii) in
accordance with the recommendation of the Board of Directors on all other
matters submitted to a vote of stockholders of the Company; and will not take
any position contrary to the position of the Board of Directors of the Company
on any matter.
I acknowledge that you would not have an adequate remedy at law for any
breach by me of this letter and agree that in addition to any other remedy you
may have, the Company shall be entitled to seek injunctive relief.
As used herein: I will be deemed to "Beneficially Own" or be the
"Beneficial Owner" of any Voting Securities (i) in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act as in
effect on the date hereof and (ii) which I have the right to acquire or vote
pursuant to any agreement, arrangement or understanding or upon exercise of
conversion rights, warrants, options or otherwise; and "Voting Securities" means
any shares of capital stock of the Company, and any securities or rights
convertible into or which represent the right to acquire such shares and
includes, without limitation, shares of common stock, par value $.01 per share
of the Company, in any case now or hereinafter outstanding.
It is a condition precedent to the effectiveness of this letter that the
Effective Time shall have occurred.
Very truly yours,
<PAGE>
/s/ Arnold Laubich
------------------
Arnold Laubich
<PAGE>
EXHIBIT 10.6
May 14, 1998
Board of Directors
New Plan Realty Trust
1120 Avenue of the Americas
New York, NY 10036
Attention: Chief Executive Officer
Gentlemen:
As an inducement to New Plan Realty Trust, a Massachusetts business trust
("New Plan"), to enter into the Agreement and Plan of Merger (the "Merger
Agreement") dated May 14, 1998 among New Plan, Excel Realty Trust, Inc., a
Maryland corporation (the "Company"), and ERT Merger Sub, Inc., a Maryland
corporation, and consummate the transactions contemplated thereby, I hereby
agree as follows:
During the period from and after the Effective Time (as defined in the
Merger Agreement) and continuing until (x) I either do not Beneficially Own (as
defined herein) any Voting Securities (as defined herein) or (y) my employment
with the Company terminates as a result of a termination by the Company without
Cause (as defined in the Employment Agreement to be effective as of the
Effective Time between the Company and me) or (z) my termination for Good Reason
(as defined in my Employment Agreement), I:
(a) will not, without the prior approval of the Company's Board of
Directors:
(i) submit any proposal for the vote of stockholders of the Company;
(ii) become a member of a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") with respect to any Voting Securities;
(iii) induce or attempt to induce or give encouragement to any other
person to initiate any
<PAGE>
proposal or tender or exchange offer for Voting Securities or a change of
control of the Company, or make or in any way participate in any solicitation
of proxies with respect to Voting Securities;
(iv) publicly propose or make any public statement with respect to the
foregoing;
(b) will, as a stockholder, be present in person or be represented by proxy
at all shareholder meetings of the Company so that all Voting Securities of
which I am the Beneficial Owner may be counted for the purpose of determining
the presence of a quorum at such meetings;
(c) will, as a stockholder, vote or cause to be voted all Voting Securities
of which I am the Beneficial Owner (i) for the Board of Directors' nominees for
election to the Board of Directors of the Company and (ii) in accordance with
the recommendation of the Board of Directors on all other matters submitted to a
vote of stockholders of the Company; and will not take any position contrary to
the position of the Board of Directors of the Company on any matter.
I acknowledge that you would not have an adequate remedy at law. For any
breach by me of this letter and agree that in addition to any other you may
have, the Company shall be entitled to seek injunctive relief.
As used herein: I will be deemed to "Beneficially Own" or be the
"Beneficial Owner" of any Voting Securities (i) in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act as in
effect on the date hereof and (ii) which I have the right to acquire or vote
pursuant to any agreement, arrangement or understanding or upon exercise of
conversion rights, warrants, options or otherwise; and "Voting Securities" means
any shares of capital stock of the Company entitled to vote for the election of
directors of the Company, and any securities or rights convertible into or which
represent the right to acquire such shares and includes, without limitation,
shares of common stock, par value $.01 per share of the Company, in any case now
or hereinafter outstanding.
It is a condition precedent to the effectiveness of this letter that the
Effective Time shall have occurred.
Very truly yours,
/s/ Gary B. Sabin
--------------------
Gary B. Sabin
<PAGE>
EXHIBIT 10.7
May 14, 1998
Board of Directors
Excel Realty Trust, Inc.
16955 Via Del Campo
San Diego, CA 92127
Attention: Chief Executive Officer
Gentlemen:
As an inducement to Excel Realty Trust, Inc., a Maryland corporation (the
"Company"), to enter into the Agreement and Plan of Merger (the "Merger
Agreement") dated May 14, 1998 among the Company, New Plan Realty Trust, a
Massachusetts business trust, and ERT Merger Sub, Inc., a Maryland corporation,
and consummate the transactions contemplated thereby, I hereby agree as follows:
During the period from and after the Effective Time (as defined in the
Merger Agreement) and continuing until (x) I either do not Beneficially Own (as
defined herein) any Voting Securities (as defined herein) or (y) I am no longer
an officer or director of the Company, I:
(a) will not, without the prior approval of the Company's Board of
Directors:
(i) submit any proposal for the vote of stockholders of the
Company;
(ii) become a member of a "group" within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") with respect to any Voting Securities;
(iii) induce or attempt to induce or give encouragement to any other
person to initiate any proposal or tender or exchange offer for Voting
Securities or a change of control of the Company, or make or in any way
participate in any solicitation of proxies with respect to Voting
Securities;
<PAGE>
(iv) publicly propose or make any public statement with respect to the
foregoing;
(b) will, as a stockholder, be present in person or be represented by
proxy at all shareholder meetings of the Company so that all Voting Securities
of which I am the Beneficial Owner may be counted for the purpose of determining
the presence of a quorum at such meetings;
(c) will, as a stockholder, vote or cause to be voted all Voting
Securities of which I am the Beneficial Owner (i) for the Board of Directors'
nominees for election to the Board of Directors of the Company and (ii) in
accordance with the recommendation of the Board of Directors on all other
matters submitted to a vote of stockholders of the Company; and will not take
any position contrary to the position of the Board of Directors of the Company
on any matter.
I acknowledge that you would not have an adequate remedy at law for any
breach by me of this letter and agree that in addition to any other remedy you
may have, the Company shall be entitled to seek injunctive relief.
As used herein: I will be deemed to "Beneficially Own" or be the
"Beneficial Owner" of any Voting Securities (i) in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act as in
effect on the date hereof and (ii) which I have the right to acquire or vote
pursuant to any agreement, arrangement or understanding or upon exercise of
conversion rights, warrants, options or otherwise; and "Voting Securities" means
any shares of capital stock of the Company entitled to vote for the election of
directors of the Company, and any securities or rights convertible into or which
represent the right to acquire such shares and includes, without limitation,
shares of common stock, par value $.01 per share of the Company, in any case now
or hereinafter outstanding.
It is a condition precedent to the effectiveness of this letter that the
Effective Time shall have occurred.
Very truly yours,
/s/ William Newman
------------------------
William Newman
<PAGE>
Exhibit 10.8
[FORM OF EMPLOYMENT AGREEMENT]
AGREEMENT, dated as of ______ __, 1998 ("Agreement Date"), by and between
Excel Realty Trust, Inc., a Maryland corporation ("Company"), and William Newman
("Newman").
RECITALS
A. Newman is currently Chief Executive Officer and Chairman of the Board
of Directors of New Plan Realty Trust, a Massachusetts business trust ("New
Plan").
B. The Company, ERT Merger Sub, Inc., a wholly owned subsidiary of the
Company ("Sub"), and New Plan entered into an Agreement and Plan of Merger
("Merger Agreement"), pursuant to which Sub shall merge with and into New Plan
("Merger").
C. The Company desires to employ Newman, effective as of the time the
Merger is consummated ("Effective Time"), on the terms and conditions set forth
in this Agreement, and Newman desires to be so employed.
AGREEMENT
IN CONSIDERATION of the premises and the mutual covenants set forth below,
the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Newman and Newman
hereby accepts such employment, on the terms and conditions hereinafter set
forth. Notwithstanding the employment of Newman by the Company, the Company
shall be entitled to pay Newman from the payroll of New Plan.
2. Term. The period of employment of Newman by the Company ("Employment
Period") shall commence at the Effective Time of the Merger ("Commencement
Date") and shall continue through the fifth anniversary of the Effective Time;
provided, that, commencing on the day following the fifth anniversary of the
Effective Time and on the first day following each anniversary of the Effective
Date thereafter, the Employment Period shall automatically be extended for one
(1) additional year unless either party gives written notice not to extend this
Agreement prior to six (6) months before such extension would be effectuated.
The Employment Period may be sooner terminated in accordance with Section 5 of
this Agreement.
3. Position and Duties.
-------------------
(a) Employment. During the Employment Period, Newman will at such
times as may be convenient to the Company and Newman, render to the Company such
services of an executive advisory or consultative nature as the Company may
reasonably request, to enable the Company to continue to have the benefit of his
experience and knowledge of the affairs of the
<PAGE>
Company and of his reputation, experience and contacts in the industry. Newman
will, during the Employment Period, be available for advice and counsel to the
officers and directors of the Company at mutually convenient times by telephone,
letter, or in person in New York City, provided, however, that his failure to
render such services or to give such advice and counsel by reason of his illness
or other incapacity shall not affect his right to receive his compensation
during the Employment Period. It is understood that Newman's duties during the
Employment Period shall not require his full-time attention and subject to
Section 10, Newman can engage in any other activities, including membership on
other boards of directors, as he desires. Newman shall not be required to
provide services in person in New York City more than one (1) day per calendar
month.
(b) Director. During the Employment Period, Newman shall be nominated
by the Board of Directors of the Company ("Board") to serve as a director of the
Company and the Company shall use its best efforts to cause Newman to be elected
as a director of the Company throughout the Employment Period. For the period
Newman is a director of the Company during the Employment Period, Newman shall
serve as Chairman of the Board. Subject to the first sentence of this Section
3(b), for any period Newman is not elected as a director of the Company during
the Employment Period, Newman shall serve as Chairman Emeritus of the Board and
shall be entitled to attend all Board meetings in such status.
4. Compensation and Related Matters.
--------------------------------
(a) Compensation. During the Employment Period, the Company shall pay
Newman, at least semi-monthly, at an annual rate equal to three hundred fifty
thousand dollars ($350,000) ("Employment Payment").
(b) Perquisites and Benefits. During the Employment Period, Newman
shall be entitled to all perquisites and benefits he had or was entitled to from
East prior to the Effective Time except the use of a New York City apartment.
The foregoing sentence shall not prevent the Company from changing benefit
programs provided Newman (and to the extent applicable, his spouse and
dependents) are treated at least as well under the benefit program as the
Company's senior executives (and to the extent applicable, their spouses and
dependents) and Newman (and to the extent applicable, his spouse and dependents)
are provided with equivalent benefits or the economic equivalent of such
benefits he (and to the extent applicable, his spouse and dependents) had or was
entitled to immediately prior to the Effective Time. Without limitation on the
foregoing Newman (and his spouse and dependents to the extent provided therein)
shall be entitled during the Employment Period to participate in and be covered
under all the welfare benefit plans or programs maintained by the Company from
time to time for the benefit of its senior executives including, without
limitation, all medical, hospitalization, dental, disability, accidental death
and dismemberment and travel accident insurance plans and programs. The Company
shall at all times during the Employment Period provide to Newman (and his
spouse and dependents to the extent provided under the applicable plans or
programs) (subject to modifications affecting all senior executive officers) the
same type and levels of participation and
2
<PAGE>
benefits as are being provided to the Company's senior executives (and their
spouses and dependents to the extent provided under the applicable plans or
programs) during the Employment Period. In addition, during the Employment
Period, Newman shall be eligible to participate in all pension, retirement,
savings and other employee benefit plans and programs maintained from time to
time by the Company for the benefit of its senior executives. With respect to
each such employee benefit plan, program, policy or arrangement, service with
East or any of its subsidiaries (as applicable) shall be included for purposes
of determining eligibility to participate (including waiting periods, and
without being subject to any entry date requirement after the waiting period has
been satisfied), vesting (as applicable) and entitlement to benefits. The
medical plan or plans maintained by the Company after the Effective Time shall
waive all limitations as to pre-existing conditions, exclusions and waiting
periods with respect to participation and coverage requirements. Notwithstanding
anything to the contrary herein, Newman's participation in any annual incentive,
long-term performance or other incentive plan or stock option, restricted stock
or other equity incentive plan shall be in the sole discretion of the Board
except for entitlement to any options, restricted stock or equity incentives
provided solely because of director status. Notwithstanding anything to the
contrary herein, if Newman, his spouse or his dependents cannot continue to
participate in the Company programs providing such benefits, the Company shall
arrange to provide Newman, his spouse and his dependents with equivalent
benefits or the economic equivalent of such benefits which they otherwise would
have been entitled to receive under such programs. Furthermore, notwithstanding
anything to the contrary herein, the Split Dollar Agreement made as of October
4, 1993 between the Company and Debra Bernstein and Melvin Newman, as trustees
under the William Newman Trust shall remain in effect even after the Employment
Period.
(c) Services Furnished. During the Employment Period, the Company
shall furnish Newman with office space, stenographic and secretarial assistance
substantially the same as provided on the Agreement Date. Notwithstanding the
foregoing, Newman shall be furnished with the same office space provided to
Newman on the Agreement Date if the Company has such office space and Newman
shall be entitled to the same secretarial assistance from Newman's secretary on
the Agreement Date for so long as she is employed by the Company.
(d) Expenses. The Company shall promptly reimburse Newman for all
business expenses incurred in accordance with the Company's past practice with
respect to Newman, including, without limitation, expenses for Newman and his
spouse in connection with conferences, seminars and meetings Newman believes are
beneficial for the Company whether directly or by virtue of maintaining his
reputation and contacts in the industry and business community.
5. Termination. Newman's employment hereunder may be terminated during
the Employment Period under the following circumstances:
(a) Death. Newman's employment hereunder shall terminate upon his
death.
3
<PAGE>
(b) Disability. If, as a result of Newman's incapacity due to a
physical or mental illness, Newman shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination (as set forth in
Section 6(a)) is given after such six (6) month period, Newman shall not have
returned to the performance of his duties, the Company shall have the right to
terminate Newman's employment hereunder for "Disability", and such termination
in and of itself shall not be, nor shall it be deemed to be, a breach of this
Agreement.
(c) By Newman. Newman shall have the right to terminate his
employment hereunder by providing the Company with a Notice of Termination, and
such termination shall not in and of itself be, nor shall it be deemed to be, a
breach of this Agreement.
6. Termination Procedure.
---------------------
(a) Notice of Termination. Any termination of Newman's employment by
the Company under Section 5(b) or by Newman under Section 5(c) during the
Employment Period shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 14.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Newman's employment is terminated by his death, the date of his death, (ii) if
Newman's employment is terminated pursuant to Section 5(b), thirty (30) days
after Notice of Termination (provided that Newman shall not have returned to the
performance of his duties hereunder during such thirty (30) day period), and
(iii) if Newman's employment is terminated by Newman pursuant to Section 5(c),
the date on which a Notice of Termination is given by Newman or any later date
(within thirty (30) days after the giving of such notice) set forth in such
Notice of Termination.
7. Compensation Upon Termination or During Disability. In the event
Newman is disabled or his employment terminates as provided under this Agreement
during the Employment Period, the Company shall provide Newman with the payments
and benefits set forth below. Newman acknowledges and agrees that, subject to
Section 8, the payments set forth in this Section 7 constitute liquidated
damages for termination of his employment during the Employment Period.
(a) By Newman. If Newman's employment is terminated by Newman:
(i) the Company shall pay Newman his Employment Payment through
the Date of Termination, as soon as practicable following the Date of
Termination;
(ii) the Company shall reimburse Newman pursuant to Section 4(d)
for reasonable expenses incurred, but not paid prior to such termination of
employment; and
4
<PAGE>
(iii) Newman shall be entitled to any other rights, compensation
and/or benefits as may be due to Newman in accordance with the terms and
provisions of any agreements, plans or programs of the Company.
(b) Disability. During any period that Newman fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Newman shall continue to receive his full Employment
Payment set forth in Section 4(a) until his employment is terminated pursuant to
Section 5(b). In the event Newman's employment is terminated for Disability
pursuant to Section 5(b):
(i) the Company shall pay to Newman (A) his Employment Payment
through the Date of Termination, as soon as practicable following the Date
of Termination, and (B) continued Employment Payment (as provided for in
Section 4(a)) and prerequisites and benefits pursuant to Section 4(b) for
the longer of (i) six (6) months or (ii) the date on which Newman becomes
entitled to long-term disability benefits under the applicable plan or
program of the Company paying the benefits described in Section 4(b), up to
a maximum of three (3) years of Employment Payment continuation;
(ii) the Company shall reimburse Newman pursuant to Section
4(d) for reasonable expenses incurred, but not paid prior to such
termination of employment; and
(iii) Newman shall be entitled to any other rights, compensation
and/or benefits as may be due to Newman in accordance with the terms and
provisions of any agreements, plans or programs of the Company.
(c) Death. If Newman's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Newman's
beneficiary, legal representatives or estate, as the case may be, Newman's
Employment Payment through the Date of Termination and one (1) times
Newman's annual rate of Employment Payment, and shall provide Newman's
spouse and dependents with benefits pursuant to Section 4(b) for one (1)
year;
(ii) the Company shall reimburse Newman's beneficiary, legal
representatives or estate, as the case may be, pursuant to Section 4(d) for
reasonable expenses incurred, but not paid prior to such termination of
employment; and
(iii) Newman's beneficiary, legal representatives or estate, as
the case may be, shall be entitled to any other rights, compensation and
benefits as may be due to any such persons or estate in accordance with the
terms and provisions of any agreements, plans or programs of the Company.
5
<PAGE>
8. Breach by Company. If there is any material breach of this Agreement
by the Company which is not corrected to Newman's reasonable satisfaction within
ten (10) days after written notice by Newman to the Company, the Company shall
pay the Employment Payment for the remainder of the Employment Period in one
lump sum cash payment (without regard to any discount for early payment) as soon
as practicable after such material breach but in no event later than twenty (20)
days after such material breach. This lump sum payment shall not affect the
Company's obligation hereunder other than the obligation to provide compensation
pursuant to Section 4(a). The Company has no right to terminate this Agreement.
9. Mitigation. Newman shall not be required to mitigate amounts payable
under this Agreement by seeking other employment or otherwise, and there shall
be no offset against amounts due Newman under this Agreement on account of
subsequent employment. Additionally, amounts owed to Newman under this
Agreement shall not be offset by any claims the Company may have against Newman,
and the Company's obligation to make the payments provided for in this Agreement
and otherwise to perform its obligations hereunder shall not be affected by any
other circumstances, including, without limitation, any counterclaim,
recoupment, defense or other right which the Company may have against Newman or
others.
10. Confidential Information, Ownership of Documents; Non-Competition.
-----------------------------------------------------------------
(a) Confidential Information. Newman shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Newman during Newman's employment
by the Company and which is not generally available public knowledge (other than
by acts by Newman in violation of this Agreement). Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
Newman shall not, without the prior written consent of the Company or as may
otherwise be required by law or any legal process, or as is necessary in
connection with any adversarial proceeding against the Company (in which case
Newman shall use his reasonable best efforts in cooperating with the Company in
obtaining a protective order against disclosure by a court of competent
jurisdiction), communicate or divulge any such trade secrets, information,
knowledge or data to anyone other than the Company and those designated by the
Company or on behalf of the Company in the furtherance of its business or to
perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Newman has control over shall not be removed from the Company's
premises without its written consent, unless such removal is in the furtherance
of the Company's business or is in connection with Newman's carrying out his
duties under this Agreement and, if so removed, shall be returned to the Company
promptly after termination of Newman's employment hereunder, or otherwise
promptly after removal if such removal occurs following termination of
employment. Notwithstanding anything to the contrary herein, Newman has the
right to remove his personal art work, sculptures, awards and memorabilia.
Newman shall assign to the Company all rights to
6
<PAGE>
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until
the first anniversary of Newman's Date of Termination, Newman will not (i)
develop, pursue or attempt to develop any project known to Newman and which the
Company or any of its Affiliates (the "Designated Entities") are developing,
pursuing, or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity, any Project of any of the Designated Entities, or
(iii) solicit any officer, employee (other than secretarial staff) or consultant
of any of the Designated Entities to leave the employ of any of the Designated
Entities. If, at any time, the provisions of this Section 10(c) shall be
determined to be invalid or unenforceable, by reason of being vague or
unreasonable as to area, duration or scope of activity, this Section 10(c) shall
be considered divisible and shall become and be immediately amended to only such
area, duration and scope of activity as shall be determined to be reasonable and
enforceable by the court or other body having jurisdiction over the matter; and
Newman agrees that this Section 10(c) as so amended shall be valid and binding
as though any invalid or unenforceable provision had not been included herein.
(d) Injunctive Relief. In the event of a breach or threatened breach
of this Section 10, Newman agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Newman acknowledging that damages would be
inadequate and insufficient.
(e) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Newman's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
11. Indemnification.
---------------
(a) General. The Company agrees that if Newman is made a party or a
threatened to be made a party to any action, suits or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that Newman is or was a trustee, director or officer of the Company or any
subsidiary of the Company or is or was serving at the request of the Company or
any subsidiary as a trustee, director, officer, member, employee or agent of
another corporation or a partnership, joint venture, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a trustee, director, officer, member, employee or agent while
serving as a trustee, director, officer, member, employee or agent, Newman shall
be indemnified and held harmless by the Company to the fullest extent authorized
by Maryland law, as the same exits or may hereafter be amended, against all
Expenses incurred or suffered by Newman in connection therewith, and such
indemnification shall continue as to
7
<PAGE>
Newman even if Newman has ceased to be an officer, director, trustee or agent,
or is no longer employed by the Company and shall inure to the benefit of this
heirs, executors and administrators.
(b) Expenses. As used in his Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Newman may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Newman shall be entitled
to be paid also the expenses of prosecuting such suit. All obligations for
indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Newman is entitled under any
provision of this Agreement of indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Newman for the portion of such Expenses to
which Newman is entitled.
(e) Advances of Expenses. Expenses incurred by Newman in connection
with any Proceeding shall be paid by the Company in advance upon request of
Newman that the Company pay such Expenses; but, only in the event that Newman
shall have delivered in writing to the Company (i) an undertaking to reimburse
the Company for Expenses with respect to which Newman is not entitled to
indemnification and (ii) an affirmation of his good faith belief that the
standard of conduct necessary for indemnification by the Company has been met.
(f) Notice of Claim. Newman shall give to the Company notice of any
claim made against him for which indemnification will or could be sought under
this Agreement. In addition, Newman shall give the Company such information and
cooperation as it may reasonably required and as shall be within Newman's power
and at such times and places as are convenient for Newman.
(g) Defense of Claim. With respect to any Proceeding as to which
Newman notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its
own expense;
8
<PAGE>
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Newman which in the Company's sole
discretion may be regular counsel to the Company and may be counsel to
other officers and directors of the Company or any subsidiary. Newman also
shall have the right to employ his own counsel in such action, suit or
proceeding if he reasonably concludes that failure to do so would involve a
conflict of interest between the Company and Newman, and under such
circumstances the fees and expenses of such counsel shall be at the expense
of the Company; and
(iii) The Company shall not be liable to indemnify Newman under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Newman without Newman's written consent. Neither the Company nor Newman
will unreasonably withhold or delay their consent to any proposed
settlement.
(h) Non-exclusivity. The right to indemnification and the payment of
expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any
other right which Newman may have or hereafter may acquire under any
statute, provision of the declaration of trust or certificate of
incorporation or by-laws of the Company or any subsidiary, agreement, vote
of shareholders or disinterested directors or trustees or otherwise.
12. Legal Fees and Expenses. If any contest or dispute shall arise
between the Company and Newman regarding any provision of this Agreement, the
Company shall reimburse Newman for all legal fees and expenses reasonably
incurred by Newman in connection with such contest or dispute, but only if
Newman is successful in respect of substantially all of Newman's claims brought
and pursued in connection with such contest or dispute. Such reimbursement
shall be made as soon as practicable following the final resolution of such
contest or dispute to the extent the Company receives reasonable written
evidence of such fees and expenses.
13. Successors; Binding Agreement.
-----------------------------
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as herein before defined and any successor to
its business and/or assets (by merger, purchase or otherwise) which executes and
delivers the agreement provided for in this Section 13 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law.
9
<PAGE>
(b) Newman's Successors. No rights or obligations of Newman under the
Agreement may be assigned or transferred by Newman other than his rights to
payments or benefits hereunder, which may be transferred only by will or the
laws of descent and distribution. Upon Newman's death, this Agreement and all
rights of Newman hereunder shall inure to the benefit of and be enforceable by
Newman's beneficiary or beneficiaries, personal or legal representatives, or
estate, to the event any such person succeeds to Newman's interests under this
Agreement. Newman shall be entitled to select and change a beneficiary or
beneficiaries to receive any benefit or compensation payable hereunder following
Newman's death by giving the Company written notice thereof. In the event of
Newman's death or a judicial determination of his incompetence, reference in
this Agreement to Newman shall be deemed, where appropriate, to refer to his
beneficiary(ies), estate or other legal representative(s). If Newman should die
following his Date of Termination while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts unless otherwise
provided herein shall be paid in accordance with the terms of this Agreement to
such person or persons so appointed in writing by Newman, or otherwise to his
legal representatives or estate.
14. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Newman:
William Newman
101 Morris Lane
Scarsdale, New York 10583
If to the Company:
Excel Realty Trust
1120 Avenue of the Americas, 12th Floor
New York, New York 10036
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. Miscellaneous. No provisions of this Agreement may be amended,
modified, or waived unless such amendment or modification is agreed to in
writing signed by Newman and by a duly authorized officer of the Company, and
such waiver is set forth in writing and signed by the party to be charged. No
waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with
10
<PAGE>
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The respective rights and obligations
of the parties hereunder of this Agreement shall survive Newman's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of the Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersede all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any prior agreement of the parties hereto in respect of the
subject matter contained herein is hereby terminated and canceled.
19. Shareholder Approval. The Company represents and warrants to Newman
that no shareholder approval is required for the Company to enter into this
Agreement and provide the benefits hereunder and to enter into the agreements
described in Section 4.
20. Withholding. All payments under this Agreement shall be subject to
any required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.
21. Noncontravention. The Company represents that the Company is not
prevented from entering into, or performing this Agreement by the terms of any
law, order, rule or regulation, its by-laws or certificate of incorporation, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. Section Heading. The section headings in this Employment Agreement
are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.
23. Resignation and Termination. As of the Effective Date, Newman shall
resign as Chief Executive Officer of East.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
EXCEL REALTY TRUST, INC.
a Maryland corporation
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
----------------------------------
William Newman
12
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
We consent to the inclusion or incorporation by reference in this registration
statement on Form S-4 of (i) our report dated March 13, 1998 on our audits of
the consolidated financial statements and financial statement schedules of Excel
Realty Trust, Inc. and subsidiaries and (ii) our report dated September 11,
1997, on our audits of the consolidated financial statements and financial
statement schedules of New Plan Realty Trust (the "Trust") as of July 31, 1997
and 1996 and for each of the three years in the period ended July 31, 1997,
which are included in the Annual Report on Form 10-K of the Trust for the year
ended July 31, 1997. We also consent to the reference to our firm under the
caption "Experts".
/s/ PRICEWATERHOUSECOOPERS LLP
San Diego, California
August 10, 1998
<PAGE>
EXHIBIT 23.2
August 6, 1998
Excel Realty Trust, Inc.
16955 Via Del Campo, Suite 110
San Diego, CA 92127
Dear Sirs:
We hereby consent to the use of our opinion letter to the Board of
Directors of Excel Realty Trust, Inc. included as Annex VI to the Joint Proxy
Statement/Prospectus which forms a part of the Registration Statement on Form
S-4 relating to the proposed merger of ERT Merger Sub, Inc., a wholly-owned
subsidiary of Excel Realty Trust, Inc., with and into New Plan Realty Trust with
New Plan Realty Trust surviving as a wholly-owned subsidiary of Excel Realty
Trust, Inc., and to the references to such opinion in such Joint Proxy
Statement/Prospectus under the captions "Summary - Reasons for the Merger;
Recommendations of the Boards - Opinion of Excel's Financial Advisor," "The
Merger - Background of the Merger," "The Merger - Excel's Reasons for the
Merger; Positive and Negative Factors Considered" and "The Merger - Opinion of
Financial Advisor to Excel Board." In giving such consent, we do not admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Prudential Securities Incorporated
---------------------------------------
Managing Director
August 10, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated May 13, 1998 to
the Board of Directors of New Plan Realty Trust included as Annex II to the
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of ERT Merger Sub, Inc., a wholly-owned
subsidiary of Excel Realty Trust, Inc., with and into New Plan Realty Trust with
New Plan Realty Trust surviving as a wholly-owned subsidiary of Excel Realty
Trust, Inc., and to the references to such opinion in such Proxy Statement/
Prospectus. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder, nor do we thereby admit that we are experts with
respect to any part of such Registration Statement within the meaning of the
term "experts" as used in the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Merrill Lynch, Pierce, Fenner & Smith
------------------------------------------
Incorporated
------------------------------------------
August 10, 1998
<PAGE>
EXHIBIT 99.1
EXCEL REALTY TRUST, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 25, 1998
The undersigned stockholder(s) of EXCEL REALTY TRUST, INC., a Maryland
corporation ("Excel"), hereby constitutes and appoints Gary B. Sabin and
Richard B. Muir, and each of them, attorneys and proxies of the undersigned,
each with power of substitution, to attend, vote and act for the undersigned at
the Special Meeting of Stockholders of Excel to be held on September 25, 1998,
and at any adjournment or postponement thereof, as indicated upon all matters
referred to on this proxy card and described in the accompanying Joint Proxy
Statement/Prospectus.
THE BOARD OF DIRECTORS OF EXCEL UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF
THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF DIRECTORS.
EACH OF THE SHARE ISSUANCE, THE CHARTER AMENDMENTS AND THE ELECTION OF
DIRECTORS MUST BE APPROVED BY THE EXCEL STOCKHOLDERS FOR THE MERGER TO OCCUR.
THE FAILURE OF THE EXCEL STOCKHOLDERS TO APPROVE ANY ONE OF THE SHARE ISSUANCE,
THE CHARTER AMENDMENTS OR THE ELECTION OF DIRECTORS WILL RESULT IN THE MERGER
NOT OCCURRING.
1. Approval and adoption of the Share Issuance as described in the
accompanying Joint Proxy Statement/Prospectus.
FOR [_]AGAINST [_]ABSTAIN [_]
2. Approval and adoption of the Charter Amendments as described in the
accompanying Joint Proxy Statement/Prospectus.
FOR [_]AGAINST [_]ABSTAIN [_]
3. Approval and adoption of the Election of Directors as described in the
accompanying Joint Proxy Statement/Prospectus.
FOR [_]WITHHOLD AUTHORITY [_]
to vote for all nominees listed below
all nominees listed below
for their respective classes
Dean Bernstein, Raymond A. Bottorf, Norman Gold, Arnold Laubich, Melvin Newman,
William Newman, Gary B. Sabin, James M. Steuterman, John Wetzler and Gregory
White
(continued on reverse side)
[reverse of proxy card]
THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE SHARE ISSUANCE, THE CHARTER
AMENDMENTS AND THE ELECTION OF DIRECTORS, EACH AS DESCRIBED IN THE NOTICE OF
SPECIAL MEETING AND JOINT PROXY STATEMENT/PROSPECTUS, UNLESS THE CONTRARY IS
INDICATED IN THE APPROPRIATE PLACE.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting, including any proposal to
adjourn or postpone such meeting.
The undersigned revokes any prior proxy at such meeting and ratifies all that
said attorneys and proxies, or either of them, may lawfully do by virtue
hereof. Receipt of the Notice of Special Meeting of Stockholders and Joint
Proxy Statement/Prospectus is hereby acknowledged.
Dated: ________, 1998
---------------------
---------------------
---------------------
(Signature(s) of
stockholders)
Please sign exactly
as name appears
herein. When shares
are held by joint
tenants, both should
sign; when signing
as an attorney,
executor,
administrator,
trustee or guardian,
give full title as
such. If a
corporation, sign in
full corporate name
by President or
other authorized
officer. If a
partnership, sign in
partnership name by
authorized partner.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EXCEL REALTY
TRUST, INC. PLEASE COMPLETE, SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED OR SEND THE PROXY CARD VIA FACSIMILE TO (619) 485-8530,
ATTENTION: GRAHAM R. BULLICK.
<PAGE>
EXHIBIT 99.2
NEW PLAN REALTY TRUST
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON SEPTEMBER 25, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints Steven F. Siegel and Joel F. Crystal, and each
of them, as attorney-in-fact and proxy with full power of substitution to
represent the undersigned and to vote all of the undersigned's Shares of
Beneficial Interest in the Trust at the Special Meeting of Shareholders to be
held at Baruch College Conference Center, Room 750, 151 East 25th Street, New
York, New York at 11:00 in the morning on September 25, 1998 and at any
adjournment or postponement thereof. Said attorney-in-fact and proxy is
instructed to vote as designated on the reverse side.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Shareholders and the accompanying proxy statement.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
P R O X Y
SEE REVERSE
SIDE
0444
----
Please mark your votes as in this example.
X
The attorney-in-fact and proxy shall vote the undersigned's shares as specified
hereon or, where no choice is indicated, the undersigned's vote will be cast
FOR each of the matters hereon.
1. Approving the New Plan Trust Amendments as described in the accompanying
proxy statement.
FOR
AGAINST
ABSTAIN
3. In their judgment upon such other matters as may properly come before the
meeting, including any proposal to adjourn or postpone such meeting.
2. Approving the Merger as described in the accompanying proxy statement.
NOTE: PLEASE COMPLETE, SIGN AND DATE THIS PROXY AND MAIL TO US PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE OR SEND THE PROXY CARD VIA FACSIMILE TO
(212) 869-9585, ATTENTION: STEVEN F. SIEGEL.
BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER MUST BE APPROVED BY THE NEW
PLAN SHAREHOLDERS FOR THE MERGER TO OCCUR. THE FAILURE OF THE NEW PLAN SHARE-
HOLDERS TO APPROVE BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER WILL RE-
SULT IN THE MERGER NOT OCCURRING.
THE NEW PLAN BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF NEW PLAN
VOTE "FOR" BOTH THE NEW PLAN TRUST AMENDMENTS AND THE MERGER AT THE SPECIAL
MEETING.
SIGNATURE(S) ____________________________________ DATE: ______________________
Please sign exactly as name appears hereon and date. Where shares are held
jointly, both holders should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
<PAGE>
Exhibit 99.3
Here's why
you should vote
[BRACKET LOGO] for
the New Plan Excel
merger
<PAGE>
Dear Fellow New Plan Shareholder,
[PHOTOGRAPH OMITTED]
You have just received in the mail a "Joint Proxy Statement/Prospectus" about
our proposed merger with Excel Realty Trust-- to create one of the nation's
largest owner/managers of shopping centers and other properties: New Plan Excel
Realty Trust.
For our investors, this means:
. INCREASED DIVIDENDS - The merger will result in an immediate 7% jump in the
dividend rate, an increase that would have taken almost three years to achieve
at our current rate of dividend increases. We plan to continue to increase our
dividend every quarter as New Plan has done for the past 19 years.
. CONTINUITY - Headed by the two top executives of your company, and with all
nine present New Plan board members on the new company's 15-person board,
management will provide the same conservative direction for the combined
company that it has followed over the decades.
. COMPETITIVENESS - The size of the combined companies will put New Plan Excel
in the top ranks of the industry. It will operate in 31 states (vs. our
present 23) and have a new strong foothold in the West.
. GROWTH WITH SAFETY - We plan to continue growing earnings at a rate that beats
inflation. Widespread diversification of our properties will make for a safer
portfolio. New Plan will also have greater ability to acquire choice
properties.
<PAGE>
Vote For:
. Increased Dividends
. Continuity
. Competitiveness
. Growth with Safety
After you read the Joint Proxy Statement/Prospectus and this booklet, I think
you will agree that the merger is in the best interests of all New Plan Realty
shareholders. I write this as a fellow shareholder--one who has dedicated more
than 50 years of his life to furthering shareholders' interests and who has most
of his family's net worth in the company.
In asking you to vote FOR the merger and FOR the Trust Amendments that go with
it, I want to emphasize that every vote is important. Please check the FOR boxes
on the enclosed white proxy card, sign it, and mail it promptly so your votes
will count at the special meeting of shareholders on September 25, 1998.
/s/ William Newman
- ------------------
William Newman
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PS: Please vote. Not voting counts just the same as a "NO" vote when ballots are
totaled. If you have any questions, please call 1-800-322-2885.
<PAGE>
Let's talk about Dividends...
. The combination of the two companies will allow us to raise our dividend
immediately--initially to an annualized rate of $1.60 per share from the
present annualized rate of $1.49 per share. That is an increase of 7%.
. New Plan Realty is the only REIT in the nation that has increased its
dividend every quarter over a period of 19 years and New Plan Excel Realty
Trust intends to extend that record.
. New Plan Excel Realty Trust plans to offer shareholders a dividend
reinvestment plan that is similar to New Plan Realty's current dividend
reinvestment plan.
<PAGE>
Let's talk about Continuity...
. MANAGEMENT - Following principles laid down by New Plan Realty's founder
Morris B. Newman more than seven decades ago, the combined company, New Plan
Excel Realty, will be headed by:
- -- Chairman William Newman, the same chief executive who has served New Plan
Realty as chairman of the board of trustees since its inception.
- -- Chief Executive Officer Arnold Laubich, currently president of New Plan.
- -- President Gary Sabin, currently chief executive officer of Excel Realty.
. BOARD - All nine members of the current board of trustees of New Plan will
serve on the 15-member board of New Plan Excel Realty.
. HEADQUARTERS - The executive offices of New Plan Excel Realty will remain at
the present address of New Plan Realty in New York City.
. STRATEGY - We will continue to focus on investing in community shopping
centers and, to a lesser extent, garden apartments.
<PAGE>
Let's talk about Competitiveness
. In an era when consolidation is taking place in so many fields--banking,
transportation, communications, and, yes, real estate investment trusts--
having the size and strength to compete is not just an objective. It's a
necessity.
. Just six short years ago, New Plan Realty Trust achieved prominence as the
first real estate investment trust (REIT) to reach the $1-billion mark based
on market capitalization. Today, there are about 40 companies at that level
and some 30 that are larger than New Plan. New Plan Excel, the combined
company, will have an equity market capitalization that will rank it among
the leaders in the industry.
. Currently, New Plan Realty owns approximately 200 properties, mostly in the
eastern half of the United States. The combined company, New Plan Excel, will
own 340 properties in 31 states across the country with a new strong presence
in the West.
<PAGE>
Let's talk about Growth with Safety
As a larger company, New Plan Excel Realty will have the potential to reap
benefits by:
. Having greater resources to acquire choice properties.
. Attracting and motivating the best-qualified managers.
. Possessing the ability to reduce costs through economies of scale.
. Offering tenants--our customers--greater opportunities for expansion.
. Having a low ratio of debt to total capitalization--a ratio well below the
industry average. It is anticipated that after the merger, the combined
company will likely retain at the outset New Plan Realty's credit rating of
A+/A2--the best among all publicly held REITs.
. Increasing the liquidity of our stock by having a greater number of shares
outstanding.
<PAGE>
[Map of United States indicating property locations intentionally omitted]
<PAGE>
Let's answer some of your questions
Q. Why a merger with Excel Realty?
A. It's a "natural fit." Excel has a real estate portfolio similar in quality to
New Plan's, a low debt ratio like New Plan's, and its management thinks the way
we do. Consider the rewards that the merger will provide--diversification,
increased capitalization, energetic and experienced management, and more. It all
fits with New Plan's long-term goals: to grow at a rate that beats inflation and
provide shareholders with an increasing dividend that is both predictable and
safe. The merged company will rank among the industry leaders, possessing the
ability to effect economies of scale, and the resources to capitalize on
acquisition opportunities.
Q. Why a merger now?
A. Having the size and strength to compete is not just an objective--it's a
necessity. As in many other fields--banking, communications, transportation, and
more--our industry is going through rapid consolidation, where weaker players
fall aside. Only six years ago, New Plan Realty was the industry giant--the
first and only $1-billion REIT, based on equity market capitalization. Today,
there are some 30 REITs larger than New Plan. The combined company, New Plan
Excel Realty, will have an equity market capitalization that will rank it among
the industry leaders.
Q. What should I know about Excel?
A. Last year Excel Realty led the industry with a 32.9% total return to
shareholders, highest among all REITs that focus on community shopping centers
(as we do). Excel is led by Gary Sabin, 44, who will become president of New
Plan Excel Realty.
Q. What happens to my New Plan stock? What do I get?
A. You will get one share of stock in New Plan Excel Realty Trust for each share
of New Plan Realty Trust held at the time of the merger.
<PAGE>
Need more information?
Have a question?
Call 1-800-322-2885
Q. Is New Plan "taking over" Excel? Or Excel "taking over" New Plan?
A. Neither! The new company, New Plan Excel Realty Trust, will represent a
merger of equals. As noted in the Joint Proxy Statement/Prospectus, for
accounting purposes, however, the merger is viewed as "an acquisition of Excel
by New Plan." The present shareholders of New Plan Realty will own 65% of New
Plan Excel and all nine present members of the New Plan board will serve on New
Plan Excel's 15-member board.
Q. Why does the plan call for New Plan to merge into the Excel structure?
A. The original strategy was for Excel to merge into New Plan. However, by using
Excel's existing legal corporate structure, we are able to reduce transaction
costs by millions of dollars and operate the merged company under the laws of
the state of Maryland where Excel and many other REITs are incorporated. The
board determined that this structure, a "reverse merger," would be most
advantageous to New Plan shareholders.
Q. What will the merger do to the dividend?
A. New Plan's current annualized dividend to shareholders is $1.49 per share.
The combined company's first dividend will represent an immediate 7% increase to
an initial annualized rate of $1.60. New Plan Excel Realty plans to continue New
Plan's tradition of raising its dividend each quarter, as it has done for the
past 19 years.
Q. What happens to the dividend reinvestment plan?
A. New Plan Excel intends to offer shareholders a dividend reinvestment plan
similar to the one that New Plan has at the present time.
Q. Will the merger trigger any "golden parachutes" or change-of-control benefits
for senior management?
A. No.
Q. Will the merger have any federal income tax consequences for me as a
shareholder?
A. No. The merger should be treated as a tax-free exchange of stock.
<PAGE>
Need more information?
Have a question?
1-800-322-2885
Please check BOTH boxes on your white proxy card:
[X] FOR the merger and
[X] FOR the Trust Amendments that go with it.
Then sign, date, and mail the card today.
Please do not fail to vote. Not voting counts just the same as a "No" vote when
ballots are counted.
