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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) May 21, 1996
--------------------------------
SECURITY CAPITAL PACIFIC TRUST
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(Exact Name of Registrant as Specified in its Charter)
Maryland
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(State or Other Jurisdiction of Incorporation)
1-10272 74-6056896
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(Commission File Number) (I.R.S. Employer Identification No.)
7777 Market Center Drive, El Paso, Texas 79912
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(Address of Principal Executive Offices) (Zip Code)
(915) 877-3900
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On May 21, 1996, Security Capital Pacific Trust, a Maryland real estate
investment trust ("PTR"), announced that it had entered into a definitive
agreement relating to the proposed spinoff of its Homestead Village(R)
properties. A copy of the press release announcing the agreement and describing
the transaction is included as an exhibit to this report and is incorporated
herein by reference. A copy of the Merger and Distribution Agreement, dated as
of May 21, 1996, among PTR, Security Capital Atlantic Incorporated, Security
Capital Group Incorporated and Homestead Village Properties Incorporated is
included as an exhibit to this report and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Sequential
Exhibit No. Document Description Page No.
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2.1 Merger and Distribution Agreement, dated as
of May 21, 1996, among Security Capital
Pacific Trust, Security Capital Atlantic
Incorporated, Security Capital Group
Incorporated and Homestead Village Properties
Incorporated
99.1 Press Release dated May 21, 1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PROPERTY TRUST OF AMERICA
By: /s/ Jeffrey A. Klopf
-------------------------------------
Jeffrey A. Klopf
Secretary
Dated: May 21, 1996
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MERGER AND DISTRIBUTION AGREEMENT
DATED AS OF MAY 21, 1996
BY AND AMONG
SECURITY CAPITAL PACIFIC TRUST,
SECURITY CAPITAL ATLANTIC INCORPORATED,
SECURITY CAPITAL GROUP INCORPORATED
AND
HOMESTEAD VILLAGE PROPERTIES INCORPORATED
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.......... 1
SECTION 1.1 DEFINITIONS.... 1
ARTICLE II THE MERGERS AND
DISTRIBUTION.................. 4
SECTION 2.1 THE MERGERS.... 4
SECTION 2.2 THE
DISTRIBUTION... 5
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF PTR............. 6
SECTION 3.1 ORGANIZATION
AND
QUALIFICATION.. 6
SECTION 3.2 CAPITALIZATION. 6
SECTION 3.3 AUTHORITY; NON-
CONTRAVENTION;
APPROVALS...... 6
SECTION 3.4 REPORTS AND
FINANCIAL
STATEMENTS..... 7
SECTION 3.5 ABSENCE OF
CERTAIN CHANGES
OR EVENTS...... 8
SECTION 3.6 REGISTRATION
STATEMENT AND
PROXY STATEMENT
AND PROSPECTUS. 8
SECTION 3.7 TAXES.......... 8
SECTION 3.8 ABSENCE OF
UNDISCLOSED
LIABILITIES.... 9
SECTION 3.9 LITIGATION..... 9
SECTION 3.10 NO VIOLATION OF
LAW............ 9
SECTION 3.11 PTR ACQUISITION
PROPERTY
CONTRACTS...... 9
SECTION 3.12 ZONING......... 10
SECTION 3.13 TITLE
INSURANCE...... 10
SECTION 3.14 ENVIRONMENTAL
MATTERS........ 10
SECTION 3.15 DEFECTS........ 11
SECTION 3.16 INSURANCE...... 11
SECTION 3.17 UTILITIES AND
ACCESS......... 11
SECTION 3.18 CONDEMNATION... 11
SECTION 3.19 TAXES AND
ASSESSMENTS ON
PTR PROPERTIES. 11
SECTION 3.20 MORTGAGES...... 12
SECTION 3.21 BROKERS AND
FINDERS........ 12
SECTION 3.22 INVESTMENT
COMPANY ACT.... 12
SECTION 3.23 ADEQUACY OF PTR
CONSIDERATION.. 12
ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF ATLANTIC........ 12
SECTION 4.1 ORGANIZATION
AND
QUALIFICATION.. 12
SECTION 4.2 CAPITALIZATION. 13
SECTION 4.3 AUTHORITY; NON-
CONTRAVENTION;
APPROVALS...... 13
SECTION 4.4 FINANCIAL
STATEMENTS..... 14
SECTION 4.5 ABSENCE OF
CERTAIN CHANGES
OR EVENTS...... 15
SECTION 4.6 REGISTRATION
STATEMENT AND
PROXY STATEMENT
AND PROSPECTUS. 15
SECTION 4.7 TAXES.......... 15
SECTION 4.8 ABSENCE OF
UNDISCLOSED
LIABILITIES.... 15
SECTION 4.9 LITIGATION..... 16
SECTION 4.10 NO VIOLATION OF
LAW............ 16
SECTION 4.11 ATLANTIC
ACQUISITION
PROPERTY
CONTRACTS...... 16
SECTION 4.12 ZONING......... 16
SECTION 4.13 TITLE
INSURANCE...... 17
SECTION 4.14 ENVIRONMENTAL
MATTERS........ 17
SECTION 4.15 DEFECTS........ 17
SECTION 4.16 INSURANCE...... 18
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SECTION 4.17 UTILITIES AND
ACCESS......... 18
SECTION 4.18 CONDEMNATION... 18
SECTION 4.19 TAXES AND
ASSESSMENTS ON
ATLANTIC
PROPERTIES..... 18
SECTION 4.20 MORTGAGES...... 19
SECTION 4.21 BROKERS AND
FINDERS........ 19
SECTION 4.22 INVESTMENT
COMPANY ACT.... 19
SECTION 4.23 ADEQUACY OF
ATLANTIC
CONSIDERATION.. 19
ARTICLE V REPRESENTATIONS AND
WARRANTIES OF SCG............. 19
SECTION 5.1 ORGANIZATION
AND
QUALIFICATION.. 19
SECTION 5.2 CAPITALIZATION. 19
SECTION 5.3 AUTHORITY; NON-
CONTRAVENTION;
APPROVALS...... 20
SECTION 5.4 FINANCIAL
STATEMENTS..... 21
SECTION 5.5 ABSENCE OF
CERTAIN CHANGES
OR EVENTS...... 21
SECTION 5.6 REGISTRATION
STATEMENT AND
PROXY STATEMENT
AND PROSPECTUS. 21
SECTION 5.7 TAXES.......... 21
SECTION 5.8 ABSENCE OF
UNDISCLOSED
LIABILITIES.... 22
SECTION 5.9 LITIGATION..... 22
SECTION 5.10 NO VIOLATION OF
LAW............ 22
SECTION 5.11 SCG ACQUISITION
PROPERTY
CONTRACTS...... 22
SECTION 5.12 ZONING......... 23
SECTION 5.13 TITLE
INSURANCE...... 23
SECTION 5.14 ENVIRONMENTAL
MATTERS........ 23
SECTION 5.15 DEFECTS........ 24
SECTION 5.16 INSURANCE...... 24
SECTION 5.17 CONDEMNATION... 24
SECTION 5.18 TAXES AND
ASSESSMENTS ON
SCG PROPERTIES. 24
SECTION 5.19 EMPLOYEE
BENEFIT PLANS.. 24
SECTION 5.20 MORTGAGES...... 25
SECTION 5.21 INTELLECTUAL
PROPERTY....... 25
SECTION 5.22 BROKERS AND
FINDERS........ 25
SECTION 5.23 INVESTMENT
COMPANY ACT.... 25
SECTION 5.24 ADEQUACY OF SCG
CONSIDERATION.. 25
ARTICLE VI REPRESENTATIONS AND
WARRANTIES OF HOMESTEAD....... 25
SECTION 6.1 ORGANIZATION
AND
QUALIFICATION.. 25
SECTION 6.2 CAPITALIZATION. 25
SECTION 6.3 ISSUANCE OF
SECURITIES..... 26
SECTION 6.4 AUTHORITY; NON-
CONTRAVENTION;
APPROVALS...... 26
SECTION 6.5 REGISTRATION
STATEMENT AND
PROXY STATEMENT
AND PROSPECTUS. 27
SECTION 6.6 ABSENCE OF
UNDISCLOSED
LIABILITIES.... 27
SECTION 6.7 LITIGATION..... 27
SECTION 6.8 NO VIOLATION OF
LAW............ 27
SECTION 6.9 BROKERS AND
FINDERS........ 28
SECTION 6.10 INVESTMENT
COMPANY ACT.... 28
ARTICLE VII CONDUCT OF
BUSINESSES PENDING THE MERGER
CLOSING....................... 28
SECTION 7.1 CONDUCT OF
BUSINESS BY
ATLANTIC, PTR
AND SCG........ 28
SECTION 7.2 CONDUCT OF
BUSINESS BY
HOMESTEAD...... 29
ARTICLE VIII ADDITIONAL
AGREEMENTS.................... 29
SECTION 8.1 ACCESS TO
INFORMATION.... 29
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SECTION 8.2 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. 30
SECTION 8.3 SHAREHOLDERS' APPROVAL.................................... 30
SECTION 8.4 AFFILIATE AGREEMENTS...................................... 30
SECTION 8.5 EXCHANGE.................................................. 30
SECTION 8.6 EXPENSES.................................................. 30
SECTION 8.7 AGREEMENT TO COOPERATE.................................... 31
SECTION 8.8 PUBLIC STATEMENTS......................................... 31
SECTION 8.9 CORRECTIONS TO THE PROXY STATEMENT AND PROSPECTUS AND
REGISTRATION STATEMENT.................................... 31
SECTION 8.10 VOTING OF SHARES.......................................... 31
SECTION 8.11 ATLANTIC IPO REGISTRATION STATEMENT....................... 31
SECTION 8.12 CONFIDENTIALITY........................................... 32
SECTION 8.13 PERSONNEL................................................. 33
SECTION 8.14 EXHIBITS AND SCHEDULES.................................... 33
SECTION 8.15 REIMBURSEMENT OF PURSUIT COSTS............................ 33
SECTION 8.16 PRORATIONS................................................ 33
ARTICLE IX CONDITIONS..................................................... 34
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.................... 34
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF ATLANTIC..................... 35
SECTION 9.3 CONDITIONS TO OBLIGATIONS OF PTR.......................... 35
SECTION 9.4 CONDITIONS TO OBLIGATIONS OF SCG.......................... 36
SECTION 9.5 CONDITIONS TO OBLIGATIONS OF HOMESTEAD.................... 37
ARTICLE X TERMINATION, AMENDMENT AND WAIVER............................... 38
SECTION 10.1 TERMINATION............................................... 38
SECTION 10.2 EFFECT OF TERMINATION..................................... 38
SECTION 10.3 AMENDMENT................................................. 38
SECTION 10.4 WAIVER.................................................... 39
ARTICLE XI SURVIVAL AND REMEDY; INDEMNIFICATION........................... 39
SECTION 11.1 INDEMNIFICATION........................................... 39
SECTION 11.2 LIMITATION OF INDEMNIFICATION............................. 39
SECTION 11.3 NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE................... 39
SECTION 11.4 SETTLEMENT OR COMPROMISE.................................. 40
SECTION 11.5 FAILURE OF INDEMNIFYING PARTY TO ACT...................... 40
SECTION 11.6 SURVIVAL.................................................. 40
ARTICLE XII GENERAL PROVISIONS............................................ 40
SECTION 12.1 NOTICES................................................... 40
SECTION 12.2 INTERPRETATION............................................ 41
SECTION 12.3 MISCELLANEOUS............................................. 41
SECTION 12.4 COUNTERPARTS.............................................. 41
SECTION 12.5 PARTIES IN INTEREST....................................... 41
SECTION 12.6 LIMITATION OF LIABILITY................................... 42
SECTION 12.7 NO PRESUMPTION AGAINST DRAFTER............................ 42
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EXHIBITS
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EXHIBIT IARTICLES OF MERGER
EXHIBIT IIATLANTIC PROPERTIES
EXHIBIT IIIPTR PROPERTIES
EXHIBIT IVSCG PROPERTIES
EXHIBIT VOPINION OF MUNGER, TOLLES & OLSON
EXHIBIT VIOPINION OF MAYER, BROWN & PLATT
EXHIBIT VIIFUNDING COMMITMENT AGREEMENT
EXHIBIT VIIIINVESTOR AGREEMENT
EXHIBIT IXOPINION OF KING & SPALDING
EXHIBIT XSCG INVESTOR AGREEMENT
EXHIBIT XIPROTECTION OF BUSINESS AGREEMENT
EXHIBIT XIIESCROW AGREEMENT
EXHIBIT XIIIASSIGNMENT OF REGISTRATION
SCHEDULES
SCHEDULE 3.3(b)PTR REQUIRED CONSENTS
SCHEDULE 3.9PTR LITIGATION
SCHEDULE 4.3(b)ATLANTIC REQUIRED CONSENTS
SCHEDULE 4.9ATLANTIC LITIGATION
SCHEDULE 5.3(b)SCG REQUIRED CONSENTS
SCHEDULE 5.9SCG LITIGATION
SCHEDULE 5.21INTELLECTUAL PROPERTY
SCHEDULE 8.15PURSUIT COSTS
SCHEDULE 9.1(j)ADJUSTMENT OF CAPITAL CONTRIBUTION
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MERGER AND DISTRIBUTION AGREEMENT
THIS MERGER AND DISTRIBUTION AGREEMENT (this "Agreement"), is entered into
as of May 21, 1996 by and among Security Capital Pacific Trust, a Maryland
real estate investment trust ("PTR"), Security Capital Atlantic Incorporated,
a Maryland corporation ("Atlantic"), Security Capital Group Incorporated, a
Maryland corporation ("SCG"), and Homestead Village Properties Incorporated, a
Maryland corporation ("Homestead").
WHEREAS, the Board of Directors of Atlantic, SCG and Homestead and the Board
of Trustees of PTR have each approved this Agreement and the transactions
contemplated hereby upon the terms and subject to the conditions set forth
herein; and
WHEREAS, it is intended that pursuant to this Agreement each of PTR,
Atlantic and SCG will cause certain of their respective subsidiaries engaged
in the conduct of the extended-stay lodging businesses (the "Business") to be
merged with and into Homestead in exchange for certain securities of
Homestead.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Acquisition Properties" shall mean those PTR Properties, Atlantic
Properties or SCG Properties, as applicable, as to which PTR or a PTR
Subsidiary, Atlantic or an Atlantic Subsidiary or SCG or an SCG Subsidiary,
as applicable, has commenced due diligence, has executed a letter of intent
or acquisition agreement to acquire or has rights to acquire pursuant to an
option or right of first refusal. Such properties are identified as
"Acquisition Properties" on the applicable Exhibits II, III and IV.
Homestead may, with respect to any PTR Acquisition Property, Atlantic
Acquisition Property or SCG Acquisition Property, substitute any property
identified in Schedule 8.15 for any Acquisition Property identified in
Exhibits II, III or IV, respectively, upon prior notice to PTR, Atlantic or
SCG, as the case may be. In addition, Homestead may substitute another
property for an Acquisition Property identified in Exhibits II, III or IV
upon the written approval of PTR, Atlantic or SCG, as the case may be.
"Atlantic Board" shall mean the Board of Directors of Atlantic.
"Atlantic Common Stock" shall mean the shares of common stock, $0.01 par
value per share, of Atlantic.
"Atlantic Distribution Agent" shall mean the distribution agent for the
stockholders of Atlantic, as appointed by Atlantic to distribute shares of
Homestead Stock and Homestead Warrants pursuant to the Distribution.
"Atlantic Distribution Date" shall mean the close of business on the date
determined by the Atlantic Board (or a duly authorized committee thereof)
to be the date as of which the Distribution shall be effected by Atlantic.
"Atlantic Distribution Record Date" shall mean the close of business on
the date determined by the Atlantic Board (or a duly authorized committee
thereof) as the record date for the Distribution by Atlantic, but in no
event shall such date be prior to the later of (i) the date on which the
underwriters' over-allotment option in connection with the Atlantic IPO
shall have been fully exercised or expired or (ii) if a registration
statement relating to the Atlantic IPO has been filed and not withdrawn and
the Atlantic IPO is not
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consummated by November 30, 1996, such date or (iii) if the registration
statement relating to the Atlantic IPO has been filed and subsequently
withdrawn, the date of such withdrawal or (iv) if the registration relating
to the Atlantic IPO has not been filed pursuant to Section 8.11, the date
of the notice required by that Section or (v) the Atlantic Distribution
Date.
"Atlantic IPO" shall mean the initial public offering by Atlantic of
Atlantic Common Stock.
"Atlantic Mortgage" and "Atlantic Mortgages" shall have the meaning set
forth in Section 4.22.
"Atlantic Permitted Encumbrances" shall have the meaning set forth in
Section 4.13.
"Atlantic Properties" shall mean the real properties described in Exhibit
II hereto.
"Atlantic Required Statutory Approvals" shall have the meaning set forth
in Section 4.3(c).
"Atlantic Shareholders' Approval" shall have the meaning set forth in
Section 8.3.
"Atlantic Special Committee" shall have the meaning set forth in Section
9.2(c).
"Atlantic Subsidiaries" shall mean Alabama Homestead Incorporated, an
Alabama corporation, Atlantic Homestead Village Incorporated, a Maryland
corporation, Atlantic Homestead Village (1) Incorporated, a Maryland
corporation, Atlantic Homestead Village (2) Incorporated, a Maryland
corporation, and Atlantic Homestead Village Limited Partnership, a Delaware
limited partnership.
"Business" shall have the meaning set forth in the preamble to this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Development Properties" shall mean those PTR Properties, Atlantic
Properties or SCG Properties, as applicable, which are owned by a PTR
Subsidiary, Atlantic Subsidiary or SCG Subsidiary, as applicable, and which
are in development or under construction or on which development or
construction is planned. Such properties are identified as "Development
Properties" on the applicable Exhibits II, III and IV.
"Distribution" shall mean the distribution by PTR to holders of PTR
Common Shares of the Homestead Stock and Homestead Warrants owned by PTR on
the PTR Distribution Date and the distribution by Atlantic to holders of
Atlantic Common Stock of Homestead Stock and Homestead Warrants owned by
Atlantic on the Atlantic Distribution Date.
"Distribution Agent" shall mean, as applicable, the Atlantic Distribution
Agent or the PTR Distribution Agent.
"Distribution Date" shall mean, as applicable, the Atlantic Distribution
Date or the PTR Distribution Date.
"Distribution Record Date" shall mean, as applicable, the Atlantic
Distribution Record Date or the PTR Distribution Record Date.
"Environmental Laws" means the Resource Conservation and Recovery Act and
the Comprehensive Environmental Response Compensation and Liability Act and
other federal laws governing the environment as in effect on the date of
this Agreement together with their implementing regulations as of the date
of this Agreement, and all state, regional, county, municipal and other
local laws, regulations and ordinances as in effect on the date hereof that
are equivalent or similar to the federal laws recited above or that purport
to regulate Hazardous Materials.
"Environmental Reports" shall mean the Phase I and Phase II environmental
assessments conducted on or with respect to the PTR Properties, Atlantic
Properties or SCG Properties, as applicable, previously delivered or made
available to each of the parties hereto.
"Escrow Agreement" shall mean the Escrow Agreement in substantially the
form set forth in Exhibit XII hereto.
"Exchange" shall mean either the New York Stock Exchange, Inc. or The
Nasdaq Stock Market, Inc.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Hazardous Materials" shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become
friable, polychlorinated biphenyls and, only to the extent it exists at
levels which are considered hazardous to human health, radon gas and (b)
any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "toxic substances," "toxic
pollutants," "contaminants" or "pollutants" or words of similar import,
under any applicable Environmental Laws.
"Homestead Board" shall mean the Board of Directors of Homestead.
"Homestead Required Statutory Approvals" shall have the meaning set forth
in Section 6.4(c).
"Homestead Stock" shall mean the shares of common stock, $0.01 par value
per share, of Homestead.
"Homestead Warrants" shall mean the warrants to acquire shares of
Homestead Stock to be issued pursuant to the terms of the Warrant Purchase
Agreement.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Parties" shall have the meaning set forth in Section 11.1.
"Indemnifying Parties" shall have the meaning set forth in Section 11.1.
"Intellectual Property" shall mean all United States and foreign patents,
patent applications, patent licenses, trade names, trademarks, trade name
and trademark registrations (and applications therefor), copyrights and
copyright registrations (and applications therefor), trade secrets,
inventions, processes, designs, know-how and formulae which are in any way
connected to the Business, other than names which include the name
"Security Capital."
"Losses" shall have the meaning set forth in Section 11.1.
"Merger Closing" shall have the meaning set forth in Section 2.1.
"Operating Properties" shall mean those PTR Properties or Atlantic
Properties, as applicable, as to which a PTR Subsidiary or an Atlantic
Subsidiary has commenced commercial operations. Such properties are
identified as "Operating Properties" on the applicable Exhibits II and III.
"Proxy Statement and Prospectus" shall mean the definitive
proxy/information statement and prospectus to be filed with the Commission
as a part of the Registration Statement.
"PTR Board" shall mean the Board of Trustees of PTR.
"PTR Common Shares" shall mean the common shares of beneficial interest,
$1.00 par value per share, of PTR.
"PTR Distribution Agent" shall mean the distribution agent for the
shareholders of PTR, as appointed by PTR to distribute shares of Homestead
Stock and Homestead Warrants pursuant to the Distribution.
"PTR Distribution Date" shall mean the close of business on the date
determined by the PTR Board (or a duly authorized committee thereof) to be
the date as of which the Distribution shall be effected by PTR.
"PTR Distribution Record Date" shall mean the close of business on the
date determined by the PTR Board (or a duly authorized committee thereof)
as the record date for the Distribution by PTR, but in no event shall such
date be prior to the later of (i) the date on which the underwriters' over-
allotment option in connection with the Atlantic IPO shall have been fully
exercised or expired or (ii) if a registration statement relating to the
Atlantic IPO has been filed and not withdrawn and the Atlantic IPO is not
consummated by November 30, 1996, such date or (iii) if the registration
statement relating to the Atlantic IPO has been filed and subsequently
withdrawn, the date of such withdrawal or (iv) if the registration
statement relating to the Atlantic IPO has not been filed pursuant to
Section 8.11, the date of the notice required by that Section or (v) the
PTR Distribution Date.
"PTR Mortgage" and "PTR Mortgages" shall have the meaning as set forth in
Section 3.21.
"PTR Permitted Encumbrances" shall have the meaning set forth in Section
3.13.
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"PTR Properties" shall mean the real properties described in Exhibit III
hereto.
"PTR Required Statutory Approvals" shall have the meaning set forth in
Section 3.3(c).
"PTR Shareholders' Approval" shall have the meaning set forth in Section
8.3.
"PTR Special Committee" shall have the meaning set forth in Section
9.3(c).
"PTR Subsidiaries" shall mean PTR Homestead Village Incorporated, a
Maryland corporation, PTR Homestead Village (1) Incorporated, a Maryland
corporation, and PTR Homestead Village Limited Partnership, a Delaware
limited partnership.
"Registration Statement" shall mean the registration statement on Form S-
4 of Homestead, of which the Proxy Statement and Prospectus will form a
part, to be filed with the Commission in connection with the transactions
contemplated hereby.
"Related Agreements" shall mean each of the agreements, instruments and
documents contemplated to be entered into in connection with this
Agreement, including, without limitation, the Articles of Merger, the
Warrant Purchase Agreement, the Funding Commitment Agreements, the PTR
Investor Agreement, the Atlantic Investor Agreement, the SCG Investor
Agreement, the Administrative Services Agreement, the Escrow Agreement and
the Protection of Business Agreement.
"Representatives" shall have the meaning set forth in Section 8.1.
"SCG Board" shall mean the Board of Directors of SCG.
"SCG Permitted Encumbrances" shall have the meaning set forth in Section
5.13.
"SCG Properties" shall mean the real properties and assets described in
Exhibit IV hereto.
"SCG Required Statutory Approvals" shall have the meaning set forth in
Section 5.3(c).
"SCG Subsidiaries" shall mean Homestead Village Incorporated, a Maryland
corporation, Homestead Realty Services Incorporated, a Maryland
corporation, and SCG Homestead Village Incorporated, a Maryland
corporation.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service, service use,
license, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall
include any interest, fines, penalties or additional amounts attributable
or imposed on or with respect to any such taxes, charges, fees, levies or
other assessments.
"Tax Returns" shall mean any return, report or other document or
information required to be supplied to a taxing authority in connection
with Taxes.
"Termination Date" shall have the meaning set forth in Section 10.1(b).
"Warrant Purchase Agreement" shall mean that certain Warrant Purchase
Agreement of even date herewith among PTR, Atlantic, SCG and Homestead.
ARTICLE II
THE MERGERS AND DISTRIBUTION
SECTION 2.1 THE MERGERS. The events set forth in this Section 2.1 shall be
effected, upon the terms and subject to the conditions of this Agreement,
immediately prior to the Distribution (the "Merger Closing"). Except as
otherwise specifically set forth herein, it is the intention of the parties
that each of the events set forth in this Section 2.1 shall occur
simultaneously.
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(a) PTR and PTR Subsidiaries. PTR and Homestead shall each take all actions
necessary to cause PTR Homestead Village Incorporated to be merged with and
into Homestead on the terms and conditions described in the Articles of Merger
substantially in the form of Exhibit I hereto (the "Articles of Merger"). All
shares of Homestead Stock issuable in connection with such merger shall be
issued by Homestead directly to the PTR Distribution Agent for the benefit of
the holders of PTR Common Shares on the PTR Distribution Record Date.
(b) Atlantic and Atlantic Subsidiaries. Atlantic and Homestead shall each
take all actions necessary to cause Alabama Homestead Incorporated and
Atlantic Homestead Village Incorporated to be merged with and into Homestead
on the terms and conditions described in the Articles of Merger. All shares of
Homestead Stock issuable in connection with such mergers shall be issued by
Homestead directly to the Atlantic Distribution Agent for the benefit of the
holders of Atlantic Common Stock on the Atlantic Distribution Record Date.
(c) SCG and SCG Subsidiaries. SCG and Homestead shall each take all actions
necessary to cause the SCG Subsidiaries to be merged with and into Homestead
on the terms and conditions described in the Articles of Merger. A portion of
the shares of Homestead Stock issuable in connection with such mergers shall
be issued directly to SCG and a portion of such shares shall be issued to the
escrow agent as provided in the Escrow Agreement.
SECTION 2.2 THE DISTRIBUTION.
(a) The PTR Board (or a duly authorized committee thereof) shall, in its
discretion, establish the PTR Distribution Record Date and the PTR
Distribution Date and any appropriate procedures in connection with the
Distribution by PTR, and the Atlantic Board (or a duly authorized committee
thereof) shall, in its discretion, establish the Atlantic Distribution Record
Date and the Atlantic Distribution Date and any appropriate procedures in
connection with the Distribution by Atlantic, but in no event shall the
Distribution occur prior to such time as all of the conditions set forth in
this Agreement have been satisfied or waived. Each of PTR and Atlantic will
cooperate with one another to make their respective Distribution Record Dates
and Distribution Dates the same.
(b) On the PTR Distribution Date, subject to the conditions and rights of
termination set forth in this Agreement, PTR shall deliver to the PTR
Distribution Agent written instructions to distribute as soon as practicable
following the PTR Distribution Record Date a pro rata number of shares of
Homestead Stock issuable to PTR in connection with the merger contemplated by
Section 2.1(a) and a pro rata number of Homestead Warrants issuable to PTR
pursuant to the Warrant Purchase Agreement to each holder of record of PTR
Common Shares on the PTR Distribution Record Date or designated transferee or
transferees of such holder (and, if applicable, cash in lieu of fractional
shares and fractional warrants pursuant to Section 2.2(d)). PTR shall provide
all certificates and other instruments that the PTR Distribution Agent shall
reasonably require in order to effect the Distribution.
(c) On the Atlantic Distribution Date, subject to the conditions and rights
of termination set forth in this Agreement, Atlantic shall deliver to the
Atlantic Distribution Agent written instructions to distribute as soon as
practicable following the Atlantic Distribution Record Date a pro rata number
of shares of Homestead Stock issuable to Atlantic in connection with the
mergers contemplated by Section 2.1(b) and a pro rata number of Homestead
Warrants issuable to Atlantic in connection with the Warrant Purchase
Agreement to each holder of record of Atlantic Common Stock on the Atlantic
Distribution Record Date or designated transferee or transferees of such
holder (and, if applicable, cash in lieu of fractional shares and fractional
warrants pursuant to Section 2.2(d)). Atlantic shall provide all certificates
and other instruments that the Atlantic Distribution Agent shall reasonably
require in order to effect the Distribution.
(d) No certificates or scrip representing fractional shares of Homestead
Stock or Homestead Warrants shall be issued in connection with the
Distribution. With respect to each of the Homestead Stock and the Homestead
Warrants, the Distribution Agent shall be directed to determine the number of
whole shares and warrants allocable to each holder of record of PTR or
Atlantic, as applicable, to aggregate all remaining fractional shares and
warrants, to sell the whole shares and warrants obtained through such
aggregation on an Exchange or, if the
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Homestead Stock and Homestead Warrants are not listed or quoted on an
Exchange, in such method and for such price as the Distribution Agent shall
deem reasonable, and to cause to be distributed to each such holder to which a
fractional share or warrant shall be allocable, such holder's ratable share of
the net proceeds of such sale. Any fractional shares of Homestead Stock or any
fractional Homestead Warrants remaining after the application of the
provisions of this Section shall be returned to Homestead for cancellation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PTR
PTR represents and warrants to each of the other parties as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. PTR and each of the PTR
Subsidiaries is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and each has the requisite power,
corporate or otherwise, and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and as it
is proposed by it to be conducted. Each PTR Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing would not reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of any such
PTR Subsidiaries. True, accurate and complete copies of each of the
Declaration of Trust and Bylaws of PTR and the charter and bylaws, partnership
agreement or other organizational documents of each PTR Subsidiary as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to each of the other parties hereto.
SECTION 3.2 CAPITALIZATION.
(a) The authorized stock of PTR Homestead Village Incorporated consists of
1,000 shares of common stock, $1.00 par value per share, all of which is owned
by PTR, and is validly issued, fully paid and nonassessable. The authorized
stock of PTR Homestead Village (1) Incorporated consists of 1,000 shares of
common stock, $1.00 par value per share, all of which is owned by PTR
Homestead Village Incorporated, and is validly issued, fully paid and
nonassessable. The sole general partner of PTR Homestead Village Limited
Partnership is PTR Homestead Village (1) Incorporated and the sole limited
partner is PTR Homestead Village Incorporated, and all such partnership
interests are validly issued and fully paid.
(b) PTR owns good and marketable title to the stock of the PTR Subsidiaries
owned by it and each PTR Subsidiary owns good and marketable title to the
securities of each other PTR Subsidiary owned by it, in each case, free and
clear of all liens, encumbrances, claims, security interests and defects.
(c) There are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement that is presently exercisable obligating PTR or
any PTR Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of any PTR Subsidiary or obligating PTR or any PTR
Subsidiary to grant, extend or enter into any such agreement or commitment.
There are no voting trusts, proxies or other agreements or understandings to
which PTR or a PTR Subsidiary is a party or is bound with respect to the
voting of any shares of any PTR Subsidiary.
SECTION 3.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) PTR and each of the PTR Subsidiaries have full power, corporate or
otherwise, and authority to enter into this Agreement and the Related
Agreements to which it is a party and, subject to PTR Shareholders' Approval
and PTR Required Statutory Approvals, to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements, and the consummation by
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PTR and the PTR Subsidiaries of the transactions contemplated hereby and
thereby, have been duly authorized by the PTR Board or the board or other
governing body of each PTR Subsidiary and no other proceedings on the part of
PTR or a PTR Subsidiary are necessary to authorize the execution and delivery
of this Agreement or the Related Agreements and the consummation by PTR and
the PTR Subsidiaries of the transactions contemplated hereby and thereby,
except for PTR Shareholders' Approval and the obtaining of PTR Required
Statutory Approvals. This Agreement has been duly and validly executed and
delivered by PTR, and, assuming the due authorization, execution and delivery
hereof by each other party hereto, constitutes a valid and binding agreement
of PTR enforceable against PTR in accordance with its terms, except that such
enforcement may be subject to (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting or relating to enforcement of
creditors' rights generally, (ii) general equitable principles and (iii) to
the extent this Agreement or any of the Related Agreements contains
indemnification provisions for violations of federal or state securities laws,
as enforceability of such provisions may be limited under federal and state
securities laws.
(b) The execution and delivery of this Agreement and the Related Agreements
by PTR and each PTR Subsidiary to the extent it is a party thereto do not, and
the consummation by PTR and the PTR Subsidiaries of the transactions
contemplated hereby and thereby will not, violate, 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 of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the PTR Properties
under any of the terms, conditions or provisions of (i) subject to obtaining
PTR Shareholders' Approval, PTR's Declaration of Trust or Bylaws, (ii) subject
to obtaining PTR Required Statutory Approvals and PTR Shareholders' Approval,
any statute, law, ordinance, rule, regulation, judgment, decree, order,
injunction, writ, permit or license of any court or governmental authority
applicable to PTR or any PTR Subsidiary or, to PTR's best knowledge, any of
the PTR Properties, (iii) subject to receiving the approvals of the
shareholders and board or other governing body of the PTR Subsidiaries, the
charter or bylaws or other organizational documents of a PTR Subsidiary or
(iv) except as set forth on Schedule 3.3(b) hereto, any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which PTR or
any PTR Subsidiary is now a party or by which PTR or any PTR Subsidiary or, to
PTR's best knowledge, any of the PTR Properties may be bound, excluding from
the foregoing clauses (ii) and (iv) such violations, conflicts, breaches,
defaults, terminations, accelerations or creations of liens, security
interests, charges or encumbrances that would not, in the aggregate, be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of PTR or, taken as a whole, the PTR Subsidiaries.
(c) Except for (i) any filings by the parties hereto that may be required by
the HSR Act, (ii) the filing of the Registration Statement, including the
Proxy Statement and Prospectus, with the Commission pursuant to the Securities
Act and the Exchange Act, and the declaration of the effectiveness thereof by
the Commission and filings with various state blue sky authorities, (iii) any
required filings by PTR or a PTR Subsidiary pursuant to Section 2.1(a), (iv)
any required filings with or approvals from applicable federal or state
environmental authorities and (v) any required filings with or approvals from
applicable federal or state housing authorities (the filings and approvals
referred to in clauses (i) through (v) are collectively referred to as the
"PTR Required Statutory Approvals"), to PTR's best knowledge, no declaration,
filing or registration with, or notice to, or authorization, consent or
approval of, any governmental or regulatory body or authority is necessary for
the execution and delivery of this Agreement and the Related Agreements by PTR
or a PTR Subsidiary or the consummation by PTR or a PTR Subsidiary of the
transactions contemplated hereby or thereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not, in the aggregate, be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of PTR or, taken as a whole, the PTR Subsidiaries.
SECTION 3.4 REPORTS AND FINANCIAL STATEMENTS.
(a) PTR has previously delivered or made available to each of the other
parties hereto copies of its audited consolidated financial statements (the
"PTR Financial Statements") for the fiscal year ended December 31,
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1995. The PTR Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial position of PTR and PTR Subsidiaries on a
consolidated basis as of the dates thereof and the results of their operations
and cash flows for the periods then ended.
(b) All of the accounts receivable of the PTR Subsidiaries included in the
PTR Financial Statements or otherwise, including any transactions with related
parties, reflect actual transactions and will not be subject to offset or
deduction and have arisen in the ordinary course of business.
(c) The combined financial statements prepared by PTR with respect to the
Business for the years ended December 31, 1993, 1994 and 1995 have been
prepared in accordance with generally accepted accounting principles applied
on a consistent basis and fairly present the financial position of the PTR
Subsidiaries as of the dates presented and the results of their operations and
cash flows for the periods presented.
SECTION 3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
there has not been any material adverse change or any event (other than
general economic or market conditions) which would reasonably be expected to
result in a material adverse change, individually or in the aggregate, in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of the PTR Subsidiaries, taken as a
whole.
SECTION 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. None
of the information to be supplied by PTR for inclusion or incorporation by
reference in (a) the Registration Statement or (b) the Proxy Statement and
Prospectus will, in the case of the Proxy Statement and Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of shareholders of Atlantic and PTR
to be held in connection with the transactions contemplated by this Agreement
or, in the case of the Registration Statement, as amended or supplemented, at
the time it becomes effective and at the time of such meeting of the
shareholders of Atlantic and PTR, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy Statement
and Prospectus will comply as to form in all material respects with all
applicable laws, including the provisions of the Exchange Act and the rules
and regulations promulgated thereunder, except that no representation is made
by PTR with respect to information supplied by Atlantic, SCG or Homestead or
derived therefrom for inclusion therein.
SECTION 3.7 TAXES.
(a) Each PTR Subsidiary has duly filed with the appropriate governmental
authorities all Tax Returns required to be filed by it for all periods ending
on or prior to the Merger Closing, except to the extent of any Tax Returns for
which an extension of time for filing has been properly filed. Each such
return and filing is true and correct in all material respects. All Taxes
shown as due on all such returns and other filings have been paid. No material
issues have been raised in any examination by any taxing authority with
respect to the businesses and operations of PTR which, by application of
similar principles, reasonably could be expected to result in a proposed
adjustment to the liability for Taxes for any other period not so examined.
All Taxes which each PTR Subsidiary is required by law to withhold or collect,
including without limitation, sales and use taxes, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
governmental authorities or are held in separate bank accounts for such
purpose. There are no liens for Taxes upon the PTR Properties which are
Operating Properties or Development Properties except for statutory liens for
current Taxes not yet due.
(b) PTR has not filed for an extension of a statute of limitations with
respect to any Tax and no governmental authorities have requested an extension
of the statute of limitations with respect to any Tax.
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SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither PTR nor any PTR
Subsidiary had, at December 31, 1995, and neither has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature (other than ordinary and recurring operating
expenses), with respect to the PTR Properties (a) except liabilities,
obligations or contingencies which are accrued or reserved against in the PTR
Business Financial Statements or reflected in the notes thereto and (b) except
for any liabilities, obligations or contingencies which (i) would not, in the
aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the PTR Subsidiaries, taken as a whole
or (ii) have been discharged or paid in full prior to the date hereof.
SECTION 3.9 LITIGATION. Except as set forth on Schedule 3.9, there are no
claims, suits, actions or proceedings pending or, to the best of PTR's
knowledge without any independent investigation, threatened, against, relating
to or affecting any PTR Subsidiary or any of the PTR Properties which are
Operating Properties or Development Properties before or by any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to affect materially
and adversely the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the PTR
Subsidiaries, taken as a whole. No PTR Subsidiary is subject to any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator which
prohibits or restricts the consummation of the transactions contemplated
hereby or would have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the PTR Subsidiaries, taken as a whole.
SECTION 3.10 NO VIOLATION OF LAW. To the knowledge of PTR, none of the PTR
Subsidiaries is in violation of or has been given notice or been charged with
any violation of any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which, in the aggregate, would not reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the PTR Subsidiaries, taken as a whole. To the knowledge of PTR,
none of the PTR Subsidiaries is in violation or has been given notice or been
charged with any violation of any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority with respect to the PTR Properties which are Operating
Properties or Development Properties, except for violations which, in the
aggregate, would not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the PTR Subsidiaries, taken as a
whole. No investigation or review of the PTR Subsidiaries by any governmental
or regulatory body or authority is pending or, to the best knowledge of PTR
without any independent investigation, threatened, nor has any governmental or
regulatory body or authority indicated to PTR or any PTR Subsidiary an
intention to conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, would not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
the PTR Subsidiaries, taken as a whole. Each of the PTR Subsidiaries has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted and as proposed by such PTR Subsidiary to be
conducted, except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or
in the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of the PTR Subsidiaries, taken
as a whole.
SECTION 3.11 PTR ACQUISITION PROPERTY CONTRACTS. Copies of all contracts,
arrangements and understandings to which PTR or a PTR Subsidiary is a party
relating to the acquisition of each PTR Property which is an Acquisition
Property have previously been delivered or made available to each of the other
parties
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hereto. To PTR's knowledge, all such contracts, arrangements and
understandings are, to the extent provided therein, valid and binding
agreements of the parties thereto and enforceable against the parties thereto
in accordance with their respective terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and (ii) general equitable principles. The execution and delivery of
this Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby will not result in a breach of
any provision of, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, any of such contract, arrangement or understanding.
SECTION 3.12 ZONING. No application filed by PTR or any PTR Subsidiary for
variance or change in zoning or in use or occupancy with respect to any PTR
Property which is an Operating Property or a Development Property is pending
before any governmental agency or authority except for those consistent with
the intended use of such properties in the Business and except for those the
failure of which to obtain would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the PTR Subsidiaries, taken as a whole. Neither PTR
nor any PTR Subsidiary has received written notice from any federal, state,
municipal, or other governmental instrumentality (a) requiring the correction
of any condition with respect to any PTR Property which is an Operating
Property or a Development Property, or any part thereof, by reason of a
violation of current applicable laws, regulations, ordinances, building codes
and rules of all applicable municipal, local, state and federal jurisdictions,
including, without limitation, the Americans with Disabilities Act, zoning
ordinances and building codes or (b) that any PTR Property which is an
Operating Property or a Development Property or its current use or operation
violates any restriction, condition or agreement contained in any easement,
restrictive covenant, or similar instrument or agreement affecting any PTR
Property which is an Operating Property or a Development Property. PTR or a
PTR Subsidiary (i) has obtained or holds all certificates of occupancy,
licenses, and permits which, to PTR's knowledge, are required for operating
the PTR Properties which are Operating Properties for their current or
intended use and (ii) has not received any written notice of violation from
any federal, state, municipal, or other governmental instrumentality, or
written notice of an intention by any of the foregoing to revoke any
certificate of occupancy, license, or permit issued by it in connection with
the current or intended use of any PTR Property which is an Operating Property
or a Development Property.
SECTION 3.13 TITLE INSURANCE. An owner's policy of title insurance, or a
commitment to issue such a policy, issued by a nationally recognized title
insurance company has been obtained for each PTR Property which is an
Operating Property or a Development Property. Each owner's policy of title
insurance or commitment (a) insures or will insure the fee simple ownership
interest of the appropriate PTR Subsidiary in each such PTR Property subject
only to those liens, encumbrances, claims, security interests and defects, (i)
disclosed in such title insurance policies and commitments, (ii) created by
the PTR Mortgages and (iii) those which would not, either individually or in
the aggregate, have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the PTR Subsidiaries, taken as a whole (collectively, the "PTR
Permitted Encumbrances") and (b) is in an amount at least equal to the sum of
(x) the cost of the acquisition of such PTR Property and (y) the estimated
costs of any subsequent construction and installation of the improvements made
by such PTR Subsidiary located on such PTR Property (measured at the time of
such construction).
SECTION 3.14 ENVIRONMENTAL MATTERS. Except as set forth in the Environmental
Reports (copies of which have previously been provided or made available to
each of the other parties hereto), PTR has no knowledge of (a) any violation
of Environmental Laws relating to any PTR Property which is an Operating
Property or a Development Property, (b) the release or potential release of
Hazardous Materials on or from any PTR Property which is an Operating Property
or a Development Property in violation of any Environmental Laws, (c)
underground storage tanks located on any PTR Property which is an Operating
Property or a Development Property, or (d) asbestos in or on any PTR Property
which is an Operating Property or a Development Property. Except as set forth
in the Environmental Reports, neither PTR nor any PTR Subsidiary
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has manufactured, introduced, released or discharged from or onto any PTR
Property which is an Operating Property or a Development Property any
Hazardous Materials or any toxic wastes, substances or materials (including,
without limitation, asbestos) in violation of any Environmental Laws, and
neither PTR nor any PTR Subsidiary has used any PTR Property which is an
Operating Property or a Development Property or any part thereof for the
generation, treatment, storage, handling or disposal of any Hazardous
Materials, in violation of any Environmental Laws.
SECTION 3.15 DEFECTS. To the best of PTR's knowledge without any independent
investigation, there are no material defects in the improvements located on a
PTR Property which is an Operating Property or a Development Property
including, without limitation, any defect in the foundation, structural
systems or roof or the electrical, plumbing, heating, ventilating or air
conditioning systems included within the improvements located on such PTR
Property and there are no material repairs or deferred maintenance required to
be made thereto.
SECTION 3.16 INSURANCE. PTR or the PTR Subsidiaries maintain insurance
coverage for the PTR Subsidiaries and the PTR Properties which are Operating
Properties or Development Properties of a type, and in amounts, typical of
similar companies engaged in the extended-stay lodging business. All such
insurance policies are in full force and effect, and with respect to all
policies none of PTR or any PTR Subsidiary is delinquent in the payment of any
premiums thereon, and no notice of cancellation or termination has been
received with respect to any such policy. All such policies are sufficient for
compliance with all requirements of law and of all agreements to which PTR or
the PTR Subsidiaries are a party or otherwise bound and are valid,
outstanding, collectable, and enforceable policies and will remain in full
force and effect through the Merger Closing. Neither PTR nor any PTR
Subsidiary has received written notice within the last 12 months from any
insurance company or board of fire underwriters of any defects or inadequacies
in, on or about any PTR Property which is an Operating Property or a
Development Property or any part or component thereof that would materially
adversely affect the insurability of such PTR Property or cause any material
increase in the premiums for such PTR Property that have not been cured or
repaired to the satisfaction of the party issuing the notice.
SECTION 3.17 UTILITIES AND ACCESS. The improvements located on each PTR
Property which is an Operating Property are connected and serviced by water,
solid waste, sewage disposal, storm drainage, telephone, gas (if applicable)
and electricity which, to PTR's knowledge, meet all requirements imposed by
applicable law. Neither PTR nor any PTR Subsidiary has received notice of any
fact or condition which would result or could result in the termination of the
current access from any PTR Property which is an Operating Property to
existing roads and highways, or to sewer or other utility services currently
serving any such PTR Property.
SECTION 3.18 CONDEMNATION. Neither PTR nor any PTR Subsidiary has been
served with a complaint in a public or private condemnation or similar
proceeding relating to the taking by eminent domain of a PTR Property which is
an Operating Property or a Development Property or any part thereof which
would reasonably be expected to have a material adverse effect upon the
present maintenance, operation, occupancy or use of such PTR Property nor, to
the best of PTR's knowledge without any independent investigation, has any
such proceeding been threatened in writing against PTR or any PTR Subsidiary.
SECTION 3.19 TAXES AND ASSESSMENTS ON PTR PROPERTIES. All real estate taxes
and assessments imposed by governmental authority and any assessments assessed
by governmental authority or by private covenant due and payable for the
current year or other applicable period and all prior years or periods for any
PTR Property which is an Operating Property or a Development Property have
been paid, except for installments due and not yet delinquent, and no such
taxes or assessments are delinquent. All impact fees or other assessments,
fees or charges, however denominated, which may constitute a lien or charge on
any PTR Property which is an Operating Property or a Development Property as a
result of existing improvements or developments or which have been assessed or
charged as a result of any permit, license or approval obtained for any such
PTR Property have been paid when due. To PTR's knowledge, there is not
presently pending any such assessments, fees or charges of any nature with
respect to any such PTR Property or any part thereof, nor has
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PTR received notice of any such assessments, fees or charges being
contemplated. Neither PTR nor any PTR Subsidiary has received notice of, nor
has other knowledge or information of, any proposed change in the valuation of
any PTR Property which is an Operating Property or a Development Property for
real estate taxes from that assessed for the current assessment period, nor
does PTR have any other knowledge or information of any action or proceeding
designed to levy any special assessment against any such PTR Property other
than such as would not, in the aggregate, be reasonably expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the PTR
Subsidiaries, taken as a whole. Neither PTR nor any PTR Subsidiary has
received written notice of any possible future improvements by a governmental
instrumentality, any part of the cost of which would or might be assessed
against any PTR Property which is an Operating Property or a Development
Property, or of any contemplated future assessments of any kind other than
such as would not, in the aggregate, be reasonably expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the PTR
Subsidiaries, taken as a whole.
SECTION 3.20 MORTGAGES. Other than any mortgages that will secure the
payment of notes issuable by Homestead to PTR pursuant to the Funding
Commitment Agreement and other than any mortgages that secure payment of notes
issued by a PTR Subsidiary to PTR or another PTR Subsidiary (individually, a
"PTR Mortgage" and collectively, the "PTR Mortgages"), the PTR Properties
which are Operating Properties and Development Properties are not encumbered
by any mortgage, deed of trust, deed to secure debt or other similar security
interest. Each PTR Mortgage is valid and enforceable, is in full force and
effect, and has not been amended, modified or supplemented. All payments,
installments and charges due and payable under a PTR Mortgage have been paid
in full. To the best of PTR's knowledge, no condition or event exists which
with the giving of notice or the passage of time, or both, would constitute a
default by any PTR Subsidiary under a PTR Mortgage. The occurrence of any of
the transactions contemplated by this Agreement will not require the consent
or approval of the holder of a PTR Mortgage and will not violate, conflict
with or constitute a default by any PTR Subsidiary under a PTR Mortgage or
result in a condition or event which with the giving of notice or the passage
of time, or both, would constitute a default by any PTR Subsidiary under a PTR
Mortgage.
SECTION 3.21 BROKERS AND FINDERS. PTR has not employed any broker, finder or
other intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any brokerage, finder's or similar fee or
commission in connection with this Agreement or the transactions contemplated
hereby.
SECTION 3.22 INVESTMENT COMPANY ACT. PTR is not, and as of the Distribution
Date will not be, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 3.23 ADEQUACY OF PTR CONSIDERATION. No part of the Business as
conducted by PTR is conducted by PTR through any entity other than a PTR
Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ATLANTIC
Atlantic represents and warrants to each of the other parties as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Atlantic and each of the
Atlantic Subsidiaries is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and each has the requisite
power, corporate or otherwise, and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being
conducted and as it is proposed by it to be conducted. Each Atlantic
Subsidiary is qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not
reasonably be expected to
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have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
any such Atlantic Subsidiaries. True, accurate and complete copies of each of
the charter and Bylaws of Atlantic and the charter and bylaws, partnership
agreement or other organizational documents of each Atlantic Subsidiary as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to each of the other parties hereto.
SECTION 4.2 CAPITALIZATION.
(a) The authorized capital stock of Alabama Homestead Incorporated consists
of 1,000 common shares, $0.01 par value per share, all of which is owned by
Atlantic, and is validly issued, fully paid and nonassessable. The authorized
stock of Atlantic Homestead Village Incorporated consists of 1,000 shares of
common stock, $1.00 par value per share, all of which is owned by Atlantic,
and is validly issued, fully paid and nonassessable. The authorized stock of
Atlantic Homestead Village (1) Incorporated consists of 1,000 shares of common
stock, $1.00 par value per share, all of which is owned by Atlantic Homestead
Village Incorporated, and is validly issued, fully paid and nonassessable. The
authorized stock of Atlantic Homestead Village (2) Incorporated consists of
1,000 shares of common stock, $1.00 par value per share, all of which is owned
by Atlantic Homestead Village Incorporated, and is validly issued, fully paid
and nonassessable. The sole general partner of Atlantic Homestead Village
Limited Partnership is Atlantic Homestead Village (1) Incorporated and the
sole limited partner is Atlantic Homestead Village (2) Incorporated, and all
such partnership interests are validly issued and fully paid.
(b) Atlantic owns good and marketable title to the stock of the Atlantic
Subsidiaries owned by it and each Atlantic Subsidiary owns good and marketable
title to the securities of each other Atlantic Subsidiary owned by it, in each
case, free and clear of all liens, encumbrances, claims, security interests
and defects.
(c) There are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement that is presently exercisable obligating
Atlantic or any Atlantic Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of Atlantic or any Atlantic
Subsidiary or obligating Atlantic or any Atlantic Subsidiary to grant, extend
or enter into any such agreement or commitment. There are no voting trusts,
proxies or other agreements or understandings to which Atlantic is a party or
is bound with respect to the voting of any shares of Atlantic or any Atlantic
Subsidiary.
SECTION 4.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Atlantic and each of the Atlantic Subsidiaries have full power,
corporate or otherwise, and authority to enter into this Agreement and the
Related Agreements to which it is a party and, subject to Atlantic
Shareholders' Approval and Atlantic Required Statutory Approvals, to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Related Agreements, and the consummation by
Atlantic and the Atlantic Subsidiaries of the transactions contemplated hereby
and thereby, have been duly authorized by the Atlantic Board or the board or
other governing body of each Atlantic Subsidiary and no other proceedings on
the part of Atlantic or an Atlantic Subsidiary are necessary to authorize the
execution and delivery of this Agreement or the Related Agreements and the
consummation by Atlantic and the Atlantic Subsidiaries of the transactions
contemplated hereby and thereby, except for the obtaining of Atlantic Required
Statutory Approvals. This Agreement has been duly and validly executed and
delivered by Atlantic, and, assuming the due authorization, execution and
delivery hereof by each other party hereto, constitutes a valid and binding
agreement of Atlantic enforceable against Atlantic in accordance with its
terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally, (ii) general equitable
principles and (iii) to the extent this Agreement or any of the Related
Agreements contains indemnification provisions for violations of federal or
state securities laws, as enforceability of such provisions may be limited
under federal and state securities laws.
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(b) The execution and delivery of this Agreement and the Related Agreements
by Atlantic and each Atlantic Subsidiary to the extent it is a party thereto
do not, and the consummation by Atlantic and the Atlantic Subsidiaries of the
transactions contemplated hereby and thereby will not, violate, 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 of, or accelerate the performance required
by, or result in a right of termination or acceleration under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the Atlantic Properties under any of the terms, conditions or provisions of
(i) Atlantic's Articles of Incorporation or Bylaws, (ii) subject to obtaining
Atlantic Required Statutory Approvals, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of
any court or governmental authority applicable to Atlantic or any Atlantic
Subsidiary or, to Atlantic's best knowledge, any of the Atlantic Properties,
(iii) subject to receiving the approvals of the shareholders and board or
other governing body of the Atlantic Subsidiaries, the charter or bylaws or
other organizational documents of an Atlantic Subsidiary or (iv) except as set
forth on Schedule 4.3(b) hereto, any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Atlantic or any
Atlantic Subsidiary is now a party or by which Atlantic or any Atlantic
Subsidiary or, to Atlantic's best knowledge, any of the Atlantic Properties
may be bound, excluding from the foregoing clauses (ii) and (iv) such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would
not, in the aggregate, be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of Atlantic or, taken as a
whole, the Atlantic Subsidiaries.
(c) Except for (i) any filings by the parties hereto that may be required by
the HSR Act, (ii) the filing by Atlantic of a registration statement in
connection with the Atlantic IPO and the filing of the Registration Statement,
including the Proxy Statement and Prospectus, with the Commission pursuant to
the Securities Act and the Exchange Act, and the declaration of the
effectiveness thereof by the Commission and filings with various state blue
sky authorities, (iii) any required filings by Atlantic or an Atlantic
Subsidiary pursuant to Section 2.1(b), (iv) any required filings with or
approvals from applicable federal or state environmental authorities and (v)
any required filings with or approvals from applicable federal or state
housing authorities (the filings and approvals referred to in clauses (i)
through (v) are collectively referred to as the "Atlantic Required Statutory
Approvals"), to Atlantic's best knowledge, no declaration, filing or
registration with, or notice to, or authorization, consent or approval of, any
governmental or regulatory body or authority is necessary for the execution
and delivery of this Agreement and the Related Agreements by Atlantic or an
Atlantic Subsidiary or the consummation by Atlantic or an Atlantic Subsidiary
of the transactions contemplated hereby or thereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in
the aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Atlantic or, taken as a whole, the
Atlantic Subsidiaries.
SECTION 4.4 FINANCIAL STATEMENTS.
(a) Atlantic has previously delivered or made available to each of the other
parties hereto copies of its audited consolidated financial statements (the
"Atlantic Financial Statements") for the fiscal year ended December 31, 1995.
The Atlantic Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial position of Atlantic and the Atlantic
Subsidiaries on a consolidated basis as of the dates thereof and the results
of their operations and cash flows for the periods then ended.
(b) All of the accounts receivable of the Atlantic Subsidiaries included in
the Atlantic Financial Statements or otherwise, including any transactions
with related parties, reflect actual transactions, are collectible consistent
with Atlantic's past history and will not be subject to offset or deduction
and have arisen in the ordinary course of business.
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(c) The combined financial statements prepared by Atlantic with respect to
the Business for the years ended December 31, 1993, 1994 and 1995 (the
"Atlantic Business Financial Statements") have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
and fairly present the financial position of the Atlantic Subsidiaries as of
the dates presented and the results of their operations and cash flows for the
periods presented.
SECTION 4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
there has not been any material adverse change or any event (other than
general economic or market conditions) which would reasonably be expected to
result in a material adverse change, individually or in the aggregate, in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of the Atlantic Subsidiaries, taken
as a whole.
SECTION 4.6 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. None
of the information to be supplied by Atlantic for inclusion or incorporation
by reference in (a) the Registration Statement or (b) the Proxy Statement and
Prospectus will, in the case of the Proxy Statement and Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of shareholders of Atlantic and PTR
to be held in connection with the transactions contemplated by this Agreement
or, in the case of the Registration Statement, as amended or supplemented, at
the time it becomes effective and at the time of such meeting of the
shareholders of Atlantic and PTR, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Atlantic with respect to information supplied by
PTR, SCG or Homestead or derived therefrom for inclusion therein.
SECTION 4.7 TAXES.
(a) Each Atlantic Subsidiary has duly filed with the appropriate
governmental authorities all Tax Returns required to be filed by it for all
periods ending on or prior to the Merger Closing, except to the extent of any
Tax Returns for which an extension of time for filing has been properly filed.
Each such return and filing is true and correct in all material respects. All
Taxes shown as due on all such returns and other filings have been paid. No
material issues have been raised in any examination by any taxing authority
with respect to the businesses and operations of Atlantic which, by
application of similar principles, reasonably could be expected to result in a
proposed adjustment to the liability for Taxes for any other period not so
examined. All Taxes which each Atlantic Subsidiary is required by law to
withhold or collect, including without limitation, sales and use taxes, have
been duly withheld or collected and, to the extent required, have been paid
over to the proper governmental authorities or are held in separate bank
accounts for such purpose. There are no liens for Taxes upon the Atlantic
Properties which are Operating Properties or Development Properties except for
statutory liens for Taxes not yet due.
(b) Atlantic has not filed for an extension of a statute of limitations with
respect to any Tax and no governmental authorities have requested an extension
of the statute of limitations with respect to any Tax.
SECTION 4.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Atlantic nor any
Atlantic Subsidiary had, at December 31, 1995, and neither has incurred since
that date, any liabilities or obligations (whether absolute, accrued,
contingent or otherwise) of any nature (other than ordinary and recurring
operating expenses), with respect to the Atlantic Properties (a) except
liabilities, obligations or contingencies which are accrued or reserved
against in the Atlantic Business Financial Statements or reflected in the
notes thereto and (b) except for any liabilities, obligations or contingencies
which (i) would not, in the aggregate, be reasonably expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
Atlantic Subsidiaries, taken as a whole or (ii) have been discharged or paid
in full prior to the date hereof.
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SECTION 4.9 LITIGATION. Except as set forth on Schedule 4.9, there are no
claims, suits, actions or proceedings pending or, to the best of Atlantic's
knowledge without any independent investigation, threatened, against, relating
to or affecting any Atlantic Subsidiary or any of the Atlantic Properties
which are Operating Properties or Development Properties before or by any
court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator that could reasonably be expected, either alone
or in the aggregate with all such claims, actions or proceedings, to affect
materially and adversely the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
Atlantic Subsidiaries, taken as a whole. No Atlantic Subsidiary is subject to
any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any
arbitrator which prohibits or restricts the consummation of the transactions
contemplated hereby or would have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Atlantic Subsidiaries, taken as a whole.
SECTION 4.10 NO VIOLATION OF LAW. To the knowledge of Atlantic, none of the
Atlantic Subsidiaries is in violation of or has been given notice or been
charged with any violation of any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the Atlantic Subsidiaries, taken as a whole. To the
knowledge of Atlantic, none of the Atlantic Subsidiaries is in violation or
has been given notice or been charged with any violation of any law, statute,
order, rule, regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority with respect to the Atlantic Properties which
are Operating Properties or Development Properties, except for violations
which, in the aggregate, would not reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Atlantic
Subsidiaries, taken as a whole. No investigation or review of the Atlantic
Subsidiaries by any governmental or regulatory body or authority is pending
or, to the best knowledge of Atlantic without any independent investigation,
threatened, nor has any governmental or regulatory body or authority indicated
to Atlantic or any Atlantic Subsidiary an intention to conduct the same, other
than, in each case, those the outcome of which, as far as reasonably can be
foreseen, would not reasonably be expected to have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the Atlantic Subsidiaries, taken
as a whole. Each of the Atlantic Subsidiaries has all permits, licenses,
franchises, variances, exemptions, orders and other governmental
authorizations, consents and approvals necessary to conduct its business as
presently conducted and as proposed by such Atlantic Subsidiary to be
conducted, except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or
in the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of the Atlantic Subsidiaries,
taken as a whole.
SECTION 4.11 ATLANTIC ACQUISITION PROPERTY CONTRACTS. Copies of all
contracts, arrangements and understandings to which Atlantic or an Atlantic
Subsidiary is a party relating to the acquisition of each Atlantic Property
which is an Acquisition Property have previously been delivered or made
available to each of the other parties hereto. To Atlantic's knowledge, all
such contracts, arrangements and understandings are, to the extent provided
therein, valid and binding agreements of the parties thereto and enforceable
against the parties thereto in accordance with their respective terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not result in a breach of any provision of, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, any of such contract, arrangement
or understanding.
SECTION 4.12 ZONING. No application filed by Atlantic or any Atlantic
Subsidiary for variance or change in zoning or in use or occupancy with
respect to any Atlantic Property which is an Operating Property or a
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Development Property is pending before any governmental agency or authority
except for those consistent with the intended use of such properties in the
Business and except for those the failure of which to obtain would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of the Atlantic
Subsidiaries, taken as a whole. Neither Atlantic nor any Atlantic Subsidiary
has received written notice from any federal, state, municipal, or other
governmental instrumentality (a) requiring the correction of any condition
with respect to any Atlantic Property which is an Operating Property or a
Development Property, or any part thereof, by reason of a violation of current
applicable laws, regulations, ordinances, building codes and rules of all
applicable municipal, local, state and federal jurisdictions, including,
without limitation, the Americans with Disabilities Act, zoning ordinances and
building codes or (b) that any Atlantic Property which is an Operating
Property or a Development Property or its current use or operation violates
any restriction, condition or agreement contained in any easement, restrictive
covenant, or similar instrument or agreement affecting any Atlantic Property
which is an Operating Property or a Development Property. Atlantic or an
Atlantic Subsidiary (i) has obtained or holds all certificates of occupancy,
licenses, and permits which, to Atlantic's knowledge, are required for
operating the Atlantic Properties which are Operating Properties for their
current or intended use and (ii) has not received any written notice of
violation from any federal, state, municipal, or other governmental
instrumentality, or written notice of an intention by any of the foregoing to
revoke any certificate of occupancy, license, or permit issued by it in
connection with the current or intended use of any Atlantic Property which is
an Operating Property or a Development Property.
SECTION 4.13 TITLE INSURANCE. An owner's policy of title insurance, or a
commitment to issue such a policy, issued by a nationally recognized title
insurance company has been obtained for each Atlantic Property which is an
Operating Property or a Development Property. Each owner's policy of title
insurance or commitment (a) insures or will insure the fee simple ownership
interest of the appropriate Atlantic Subsidiary in each such Atlantic Property
subject only to those liens, encumbrances, claims, security interests and
defects, (i) disclosed in the title insurance policies and commitments, (ii)
created by the Atlantic Mortgages and (iii) those which would not, either
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the Atlantic Subsidiaries, taken as a
whole (collectively, the "Atlantic Permitted Encumbrances") and (b) is in an
amount at least equal to the sum of (x) the cost of the acquisition of such
Atlantic Property and (y) the estimated costs of any subsequent construction
and installation of the improvements made by such Atlantic Subsidiary located
on such Atlantic Property (measured at the time of such construction).
SECTION 4.14 ENVIRONMENTAL MATTERS. Except as set forth in the Environmental
Reports (copies of which have previously been provided or made available to
each of the other parties hereto), Atlantic has no knowledge of (a) any
violation of Environmental Laws relating to any Atlantic Property which is an
Operating Property or a Development Property, (b) the release or potential
release of Hazardous Materials on or from any Atlantic Property which is an
Operating Property or a Development Property in violation of any Environmental
Laws, (c) underground storage tanks located on any Atlantic Property which is
an Operating Property or a Development Property, or (d) asbestos in or on any
Atlantic Property which is an Operating Property or a Development Property.
Except as set forth in the Environmental Reports, neither Atlantic nor any
Atlantic Subsidiary has manufactured, introduced, released or discharged from
or onto any Atlantic Property which is an Operating Property or a Development
Property any Hazardous Materials or any toxic wastes, substances or materials
(including, without limitation, asbestos) in violation of any Environmental
Laws, and neither Atlantic nor any Atlantic Subsidiary has used any Atlantic
Property which is an Operating Property or a Development Property or any part
thereof for the generation, treatment, storage, handling or disposal of any
Hazardous Materials, in violation of any Environmental Laws.
SECTION 4.15 DEFECTS. To the best of Atlantic's knowledge without any
independent investigation, there are no material defects in the improvements
located on an Atlantic Property which is an Operating Property or a
Development Property including, without limitation, any defect in the
foundation, structural systems or roof or the electrical, plumbing, heating,
ventilating or air conditioning systems included within the improvements
located on such Atlantic Property and there are no material repairs or
deferred maintenance required to be made thereto.
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SECTION 4.16 INSURANCE. Atlantic or the Atlantic Subsidiaries maintain
insurance coverage for the Atlantic Subsidiaries and the Atlantic Properties
which are Operating Properties or Development Properties of a type, and in
amounts, typical of similar companies engaged in the extended-stay lodging
business. All such insurance policies are in full force and effect, and with
respect to all policies, none of Atlantic nor any Atlantic Subsidiary is
delinquent in the payment of any premiums thereon, and no notice of
cancellation or termination has been received with respect to any such policy.
All such policies are sufficient for compliance with all requirements of law
and of all agreements to which Atlantic or the Atlantic Subsidiaries are a
party or otherwise bound and are valid, outstanding, collectable, and
enforceable policies and will remain in full force and effect through the
Merger Closing. Neither Atlantic nor any Atlantic Subsidiary has received
written notice within the last 12 months from any insurance company or board
of fire underwriters of any defects or inadequacies in, on or about any
Atlantic Property which is an Operating Property or a Development Property or
any part or component thereof that would materially adversely affect the
insurability of such Atlantic Property or cause any material increase in the
premiums for such Atlantic Property that have not been cured or repaired to
the satisfaction of the party issuing the notice.
SECTION 4.17 UTILITIES AND ACCESS. The improvements located on each Atlantic
Property which is an Operating Property are connected and serviced by water,
solid waste, sewage disposal, storm drainage, telephone, gas (if applicable)
and electricity which, to Atlantic's knowledge, meet all requirements imposed
by applicable law. Neither Atlantic nor any Atlantic Subsidiary has received
notice of any fact or condition which would result or could result in the
termination of the current access from any Atlantic Property which is an
Operating Property to existing roads and highways, or to sewer or other
utility services currently serving any such Atlantic Property.
SECTION 4.18 CONDEMNATION. Neither Atlantic nor any Atlantic Subsidiary has
been served with a complaint in a public or private condemnation or similar
proceeding relating to the taking by eminent domain of an Atlantic Property
which is an Operating Property or a Development Property or any part thereof
which would reasonably be expected to have a material adverse effect upon the
present maintenance, operation, occupancy or use of such Atlantic Property
nor, to the best of Atlantic's knowledge without independent investigation,
has any such proceeding been threatened in writing against Atlantic or any
Atlantic Subsidiary.
SECTION 4.19 TAXES AND ASSESSMENTS ON ATLANTIC PROPERTIES. All real estate
taxes and assessments imposed by governmental authority and any assessments
assessed by governmental authority or by private covenant due and payable for
the current year or other applicable period and all prior years or periods for
any Atlantic Property which is an Operating Property or a Development Property
have been paid, except for installments due and not yet delinquent, and no
such taxes or assessments are delinquent. All impact fees or other
assessments, fees or charges, however denominated, which may constitute a lien
or charge on any Atlantic Property which is an Operating Property or a
Development Property as a result of existing improvements or developments or
which have been assessed or charged as a result of any permit, license or
approval obtained for any such Atlantic Property have been paid when due. To
Atlantic's knowledge, there is not presently pending any such assessments,
fees or charges of any nature with respect to any such Atlantic Property or
any part thereof, nor has Atlantic received notice of any such assessments,
fees or charges being contemplated. Neither Atlantic nor any Atlantic
Subsidiary has received notice of, nor has other knowledge or information of,
any proposed change in the valuation of any Atlantic Property which is an
Operating Property or a Development Property for real estate taxes from that
assessed for the current assessment period, nor does Atlantic have any other
knowledge or information of any action or proceeding designed to levy any
special assessment against any such Atlantic Property other than such as would
not, in the aggregate, be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of the Atlantic Subsidiaries,
taken as a whole. Neither Atlantic nor any Atlantic Subsidiary has received
written notice of any possible future improvements by a governmental
instrumentality, any part of the cost of which would or might be assessed
against any Atlantic Property, or of any contemplated future assessments of
any kind other than such as would not, in the aggregate, be reasonably
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the Atlantic Subsidiaries, taken as a whole.
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SECTION 4.20 MORTGAGES. Other than any mortgages that will secure the
payment of notes issuable by Homestead to Atlantic pursuant to the Funding
Commitment Agreement and other than any mortgages that secure payment of notes
issued by an Atlantic Subsidiary to Atlantic or another Atlantic Subsidiary
(individually, an "Atlantic Mortgage" and collectively, the "Atlantic
Mortgages"), the Atlantic Properties which are Operating Properties and
Development Properties are not encumbered by any mortgage, deed of trust, deed
to secure debt or other similar security interest. Each Atlantic Mortgage is
valid and enforceable, is in full force and effect, and has not been amended,
modified or supplemented. All payments, installments and charges due and
payable under an Atlantic Mortgage have been paid in full. To the best of
Atlantic's knowledge, no condition or event exists which with the giving of
notice or the passage of time, or both, would constitute a default by any
Atlantic Subsidiary under an Atlantic Mortgage. The occurrence of any of the
transactions contemplated by this Agreement will not require the consent or
approval of the holder of an Atlantic Mortgage and will not violate, conflict
with or constitute a default by any Atlantic Subsidiary under an Atlantic
Mortgage or result in a condition or event which with the giving of notice or
the passage of time, or both, would constitute a default by any Atlantic
Subsidiary under an Atlantic Mortgage.
SECTION 4.21 BROKERS AND FINDERS. Atlantic has not employed any broker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to any brokerage, finder's or
similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
SECTION 4.22 INVESTMENT COMPANY ACT. Atlantic is not, and as of the
Distribution Date will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
SECTION 4.23 ADEQUACY OF ATLANTIC CONSIDERATION. No part of the Business as
conducted by Atlantic is conducted by Atlantic through any entity other than
an Atlantic Subsidiary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SCG
SCG represents and warrants to each of the other parties as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. SCG and each of the SCG
Subsidiaries is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and each has the requisite power,
corporate or otherwise, and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and as it
is proposed by it to be conducted. Each SCG Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so
qualified and in good standing would not reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of any such
SCG Subsidiaries. True, accurate and complete copies of each of the charter
and Bylaws of SCG and the charter and bylaws, partnership agreement or other
organizational documents of each SCG Subsidiary as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
each of the other parties hereto.
SECTION 5.2 CAPITALIZATION.
(a) The authorized stock of each SCG Subsidiary (other than SCG Homestead
Village Incorporated) consists of 1,000 shares of common stock, $1.00 par
value per share, all of which is owned by SCG or a wholly owned subsidiary of
SCG. The authorized stock of SCG Homestead Village Incorporated consists of
1,000 shares of common stock, $0.01 par value per share, 100 shares of which
is outstanding and owned by SCG or a wholly owned subsidiary of SCG. All such
shares of stock are validly issued, fully paid and nonassessable. SCG or one
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of its wholly owned subsidiaries owns good and marketable title to the capital
stock of the SCG Subsidiaries, in each case, free and clear of all liens,
encumbrances, claims, security interests and defects, except such liens,
encumbrances, claims, security interests and defects disclosed on Schedule
5.3(b) hereto.
(b) There are no outstanding subscriptions, options, call, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement that is presently exercisable obligating SCG or
any subsidiary of SCG to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of any SCG Subsidiary or obligating SCG
or any subsidiary of SCG to grant, extend or enter into any such agreement or
commitment. There are no voting trusts, proxies or other agreements or
understandings to which SCG or any subsidiary of SCG is a party or is bound
with respect to the voting of any shares of any SCG Subsidiary.
SECTION 5.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) SCG and each of the SCG Subsidiaries have full power, corporate or
otherwise, and authority to enter into this Agreement and the Related
Agreements to which it is party and, subject to SCG Required Statutory
Approvals, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Related Agreements, and the
consummation by SCG and the SCG Subsidiaries of the transactions contemplated
hereby and thereby, have been duly authorized by the SCG Board and the board
of each SCG Subsidiary and no other corporate proceedings on the part of SCG
or any SCG Subsidiary are necessary to authorize the execution and delivery of
this Agreement or the Related Agreements and the consummation by SCG and the
SCG Subsidiaries of the transactions contemplated hereby and thereby, except
for the obtaining of SCG Required Statutory Approvals. This Agreement has been
duly and validly executed and delivered by SCG, and, assuming the due
authorization, execution and delivery hereof by each other party hereto,
constitutes a valid and binding agreement of SCG enforceable against SCG in
accordance with its terms, except that such enforcement may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally, (ii)
general equitable principles and (iii) to the extent this Agreement or any of
the Related Agreements contains indemnification provisions for violations of
federal or state securities laws, as enforceability of such provisions may be
limited under federal and state securities laws.
(b) The execution and delivery of this Agreement and the Related Agreements
by SCG and each SCG Subsidiary to the extent it is a party thereto do not, and
the consummation by SCG and the SCG Subsidiaries of the transactions
contemplated hereby and thereby will not, violate, 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 of, or accelerate the performance required by, or result in
a right of termination or acceleration under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the SCG Properties
under any of the terms, conditions or provisions of (i) SCG's Articles of
Incorporation or Bylaws, (ii) subject to obtaining SCG Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to SCG or any SCG Subsidiary or, to SCG's best knowledge,
any of the SCG Properties, (iii) subject to receiving the approvals of the
shareholders and board of the SCG Subsidiaries, the charter or bylaws of an
SCG Subsidiary or (iv) except as set forth on Schedule 5.3(b) hereto, any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of
any kind to which SCG or any SCG Subsidiary is now a party or by which SCG or
any SCG Subsidiary or, to SCG's best knowledge, any of the SCG Properties may
be bound, excluding from the foregoing clauses (ii) and (iv) such violations,
conflicts, breaches, defaults, terminations, accelerations or creations of
liens, security interests, charges or encumbrances that would not, in the
aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of SCG or, taken as a whole, the SCG
Subsidiaries.
(c) Except for (i) any filings by the parties hereto that may be required by
the HSR Act, (ii) the filing of the Registration Statement, including the
Proxy Statement and Prospectus, with the Commission pursuant to the
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Securities Act and the Exchange Act, and the declaration of the effectiveness
thereof by the Commission and filings with various state blue sky authorities,
(iii) any required filings by SCG or an SCG Subsidiary pursuant to Section
2.1(c), (iv) any required filings with or approvals from applicable federal or
state environmental authorities and (v) any required filings with or approvals
from applicable federal or state housing authorities (the filings and
approvals referred to in clauses (i) through (v) are collectively referred to
as the "SCG Required Statutory Approvals"), to SCG's best knowledge, no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement and the Related
Agreements by SCG or any SCG Subsidiary or the consummation by SCG or any SCG
Subsidiary of the transactions contemplated hereby or thereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in
the aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of SCG or, taken as a whole, the SCG
Subsidiaries.
SECTION 5.4 FINANCIAL STATEMENTS. The combined financial statements prepared
by SCG with respect to the Business for the years ended December 31, 1993,
1994 and 1995 (the "SCG Business Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis and fairly present the financial position of the SCG
Subsidiaries as of the dates presented and the results of their operations and
cash flows for the periods presented.
SECTION 5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1995,
there has not been any material adverse change or any event (other than
general economic or market conditions) which would reasonably be expected to
result in a material adverse change, individually or in the aggregate, in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of the SCG Subsidiaries, taken as a
whole.
SECTION 5.6 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. None
of the information to be supplied by SCG for inclusion or incorporation by
reference in (a) the Registration Statement or (b) the Proxy Statement and
Prospectus will, in the case of the Proxy Statement and Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of shareholders of Atlantic and PTR
to be held in connection with the transactions contemplated by this Agreement
or, in the case of the Registration Statement, as amended or supplemented, at
the time it becomes effective and at the time of such meeting of the
shareholders of Atlantic and PTR, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by SCG with respect to information supplied by PTR,
Atlantic or Homestead or derived therefrom for inclusion therein.
SECTION 5.7 TAXES.
(a) Each SCG Subsidiary has duly filed with the appropriate governmental
authorities all Tax Returns required to be filed by it for all periods ending
on or prior to the Merger Closing, except to the extent of any Tax Returns for
which an extension of time for filing has been properly filed. Each such
return and filing is true and correct in all material respects. Each such
return and filing is true and correct in all material respects. All Taxes
shown as due on all such returns and other filings have been paid. No material
issues have been raised in any examination by any taxing authority with
respect to the businesses and operations of SCG which, by application of
similar principles, reasonably could be expected to result in a proposed
adjustment to the liability for Taxes for any other period not so examined.
All Taxes which each SCG Subsidiary is required by law to withhold or collect,
including without limitation, sales and use taxes, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
governmental authorities or are held in separate bank accounts for such
purpose. There are no liens for Taxes upon the SCG Properties which are
Development Properties except for statutory liens for Taxes not yet due.
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(b) SCG has not filed for an extension of a statute of limitations with
respect to any Tax and no governmental authorities have requested an extension
of the statute of limitations with respect to any Tax.
SECTION 5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither SCG nor any SCG
Subsidiary had, at December 31, 1995, and neither has incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature (other than ordinary and recurring operating
expenses), with respect to the SCG Properties (a) except liabilities,
obligations or contingencies which are accrued or reserved against in the SCG
Business Financial Statements or reflected in the notes thereto and (b) except
for any liabilities, obligations or contingencies which (i) would not, in the
aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of the SCG Subsidiaries, taken as a whole
or (ii) have been discharged or paid in full prior to the date hereof.
SECTION 5.9 LITIGATION. Except as set forth on Schedule 5.9, there are no
claims, suits, actions or proceedings pending or, to the best of SCG's
knowledge without any independent investigation, threatened, against, relating
to or affecting any SCG Subsidiary or any of the SCG Properties which are
Development Properties before or by any court, governmental department,
commission, agency, instrumentality or authority, or any arbitrator that could
reasonably be expected, either alone or in the aggregate with all such claims,
actions or proceedings, to affect materially and adversely the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the SCG Subsidiaries, taken as a whole. No SCG
Subsidiary is subject to any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator which prohibits or restricts the consummation of
the transactions contemplated hereby or would have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of the SCG Subsidiaries, taken as a
whole.
SECTION 5.10 NO VIOLATION OF LAW. To the knowledge of SCG, none of the SCG
Subsidiaries is in violation of or has been given notice or been charged with
any violation of any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable environmental law,
ordinance or regulation) of any governmental or regulatory body or authority,
except for violations which, in the aggregate, would not reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of the SCG Subsidiaries, taken as a whole. To the knowledge of SCG,
none of the SCG Subsidiaries is in violation or has been given notice or been
charged with any violation of any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority with respect to the SCG Properties which are Development
Properties, except for violations which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the SCG Subsidiaries, taken as a whole. No
investigation or review of the SCG Subsidiaries by any governmental or
regulatory body or authority is pending or, to the best knowledge of SCG
without any independent investigation, threatened, nor has any governmental or
regulatory body or authority indicated to SCG or any SCG Subsidiary an
intention to conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, would not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
the SCG Subsidiaries, taken as a whole. Each of the SCG Subsidiaries has all
permits, licenses, franchises, variances, exemptions, orders and other
governmental authorizations, consents and approvals necessary to conduct its
business as presently conducted and as proposed by such SCG Subsidiary to be
conducted, except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or
in the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of the SCG Subsidiaries, taken
as a whole.
SECTION 5.11 SCG ACQUISITION PROPERTY CONTRACTS. Copies of all contracts,
arrangements and understandings to which SCG or an SCG Subsidiary is a party
relating to the acquisition of each SCG
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Property which is an Acquisition Property have previously been delivered or
made available to each of the other parties hereto. To SCG's knowledge, all
such contracts, arrangements and understandings are, to the extent provided
therein, valid and binding agreements of the parties thereto and enforceable
against the parties thereto in accordance with their respective terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and (ii) general equitable
principles. The execution and delivery of this Agreement and the Related
Agreements and the consummation of the transactions contemplated hereby and
thereby will not result in a breach of any provision of, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, any of such contract, arrangement
or understanding.
SECTION 5.12 ZONING. No application filed by SCG or any SCG Subsidiary for
variance or change in zoning or in use or occupancy with respect to any SCG
Property which is a Development Property is pending before any governmental
agency or authority except for those consistent with the intended use of such
properties in the Business and except for those the failure of which to obtain
would not, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the SCG
Subsidiaries, taken as a whole. Neither SCG nor any SCG Subsidiary has
received written notice from any federal, state, municipal, or other
governmental instrumentality requiring (a) the correction of any condition
with respect to any SCG Property which is a Development Property, or any part
thereof, by reason of a violation of current applicable laws, regulations,
ordinances, building codes and rules of all applicable municipal, local, state
and federal jurisdictions, including, without limitation, the Americans with
Disabilities Act, zoning ordinances and building codes or (b) that any SCG
Property which is a Development Property or its current use or operation
violates any restriction, condition or agreement contained in any easement,
restrictive covenant, or similar instrument or agreement affecting any SCG
Property which is a Development Property. SCG or an SCG Subsidiary has not
received any written notice of violation from any federal, state, municipal,
or other governmental instrumentality, or written notice of an intention by
any of the foregoing to revoke any certificate of occupancy, license, or
permit issued by it in connection with the current or intended use of any SCG
Property which is a Development Property.
SECTION 5.13 TITLE INSURANCE. An owner's policy of title insurance, or a
commitment to issue such a policy, issued by a nationally recognized title
insurance company has been obtained for each SCG Property which is a
Development Property. Each owner's policy of title insurance or commitment (a)
insures or will insure the fee simple ownership interest of the appropriate
SCG Subsidiary in each SCG Property subject only to those liens, encumbrances,
claims, security interests and defects, (i) disclosed in the title insurance
policies and commitments, and (ii) those which would not, either individually
or in the aggregate, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of the SCG Subsidiaries, taken as a whole
(collectively, the "SCG Permitted Encumbrances") and (b) is in an amount at
least equal to the sum of (x) the cost of the acquisition of such SCG Property
and (y) the estimated costs of any subsequent construction and installation of
the improvements made by such SCG Subsidiary located on such SCG Property
(measured at the time of such construction).
SECTION 5.14 ENVIRONMENTAL MATTERS. Except as set forth in the Environmental
Reports (copies of which have previously been provided or made available to
each of the other parties hereto), SCG has no knowledge of (a) any violation
of Environmental Laws relating to any SCG Property which is a Development
Property, (b) the release or potential release of Hazardous Materials on or
from any SCG Property which is a Development Property in violation of any
Environmental Laws, (c) underground storage tanks located on any SCG Property
which is a Development Property, or (d) asbestos in or on any SCG Property
which is a Development Property. Except as set forth in the Environmental
Reports, neither SCG nor any SCG Subsidiary has manufactured, introduced,
released or discharged from or onto any SCG Property any Hazardous Materials
or any toxic wastes, substances or materials (including, without limitation,
asbestos) in violation of any Environmental Laws, and neither SCG nor any SCG
Subsidiary has used any SCG Property which is a Development Property or any
part thereof for the generation, treatment, storage, handling or disposal of
any Hazardous Materials, in violation of any Environmental Laws.
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SECTION 5.15 DEFECTS. To the best of SCG's knowledge without any independent
investigation, there are no material defects in the improvements located on an
SCG Property which is a Development Property including, without limitation,
any defect in the foundation, structural systems or roof or the electrical,
plumbing, heating, ventilating or air conditioning systems included within the
improvements located on such SCG Property and there are no material repairs or
deferred maintenance required to be made thereto.
SECTION 5.16 INSURANCE. SCG or the SCG Subsidiaries maintain insurance
coverage for the SCG Subsidiaries and the SCG Properties which are Development
Properties of a type, and in amounts, typical of similar companies engaged in
the extended-stay lodging business. All such insurance policies are in full
force and effect, and with respect to all policies, none of SCG nor any SCG
Subsidiary is delinquent in the payment of any premiums thereon, and no notice
of cancellation or termination has been received with respect to any such
policy. All such policies are sufficient for compliance with all requirements
of law and of all agreements to which SCG or the SCG Subsidiaries are a party
or otherwise bound and are valid, outstanding, collectable, and enforceable
policies and will remain in full force and effect through the Merger Closing.
Neither SCG nor any SCG Subsidiary has received written notice within the last
12 months from any insurance company or board of fire underwriters of any
defects or inadequacies in, on or about any SCG Property which is a
Development Property or any part or component thereof that would materially
adversely affect the insurability of such SCG Property or cause any material
increase in the premiums for such SCG Property that have not been cured or
repaired to the satisfaction of the party issuing the notice.
SECTION 5.17 CONDEMNATION. Neither SCG nor any SCG Subsidiary has been
served with a complaint in a public or private condemnation or similar
proceeding affecting an SCG Property which is an Operating Property or a
Development Property or any part thereof which would reasonably be expected to
have a material adverse effect upon the present maintenance, operation,
occupancy or use of such SCG Property nor, to the best of SCG's knowledge
without independent investigation, has any such proceeding been threatened in
writing against SCG or any SCG Subsidiary.
SECTION 5.18 TAXES AND ASSESSMENTS ON SCG PROPERTIES. All real estate taxes
and assessments imposed by governmental authority and any assessments assessed
by governmental authority or by private covenant due and payable for the
current year or other applicable period and all prior years or periods for any
SCG Property which is a Development Property have been paid, except for
installments due and not yet delinquent, and no such taxes or assessments are
delinquent. All impact fees or other assessments, fees or charges, however
denominated, which may constitute a lien or charge on any SCG Property which
is a Development Property as a result of existing improvements or developments
or which have been assessed or charged as a result of any permit, license or
approval obtained for any such SCG Property have been paid when due. To SCG's
knowledge, there is not presently pending any such assessments, fees or
charges of any nature with respect to any such SCG Property or any part
thereof, nor has SCG received notice of any such assessments, fees or charges
being contemplated. Neither SCG nor any SCG Subsidiary has received notice of,
nor has other knowledge or information of, any proposed change in the
valuation of any SCG Property which is an Operating Property or a Development
Property for real estate taxes from that assessed for the current assessment
period, nor does SCG have any other knowledge or information of any action or
proceeding designed to levy any special assessment against any such SCG
Property. Neither SCG nor any SCG Subsidiary has received written notice of
any possible future improvements by a governmental instrumentality, any part
of the cost of which would or might be assessed against any SCG Property, or
of any contemplated future assessments of any kind other than such as would
not, in the aggregate, be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of the SCG Subsidiaries, taken
as a whole.
SECTION 5.19 EMPLOYEE BENEFIT PLANS. SCG has previously provided or made
available to each of the other parties hereto a copy of each written employee
benefit plan maintained by SCG and/or their affiliates ("Employee Benefit
Plans") that provides retirement, pension, health care, long term disability
income, life insurance and any other post-retirement benefits that as of the
date hereof covers any employee of an SCG
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Subsidiary who will become an employee of Homestead or one of its subsidiaries
after the Merger Closing ("Employees"). Each Employee Benefit Plan complies
and has been administered in form and in operation in all material respects
with all applicable requirements of law and no notice has been issued by any
governmental authority questioning or challenging such compliance.
SECTION 5.20 MORTGAGES. The SCG Properties are not subject to any mortgages,
deeds of trust, deeds to secure debt and other similar security interests
encumbering the SCG Properties or any part thereof.
SECTION 5.21 INTELLECTUAL PROPERTY. Schedule 5.21 is a true and complete
list of all of the Intellectual Property used in the conduct of the Business.
SCG owns all right, title and interest in the Intellectual Property, free and
clear of all liens, encumbrances, claims, security interests and defects,
except for licenses granted by SCG to the PTR Subsidiaries, PTR, and the
Atlantic Subsidiaries. None of the Intellectual Property has been or is the
subject of any pending adverse claim, or to the best knowledge of SCG, any
threatened litigation or claim of infringement. SCG has not received any
notice contesting its right to use any Intellectual Property.
SECTION 5.22 BROKERS AND FINDERS. SCG has not employed any broker, finder or
other intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any brokerage, finder's or similar fee or
commission in connection with this Agreement or the transactions contemplated
hereby.
SECTION 5.23 INVESTMENT COMPANY ACT. SCG is not, and as of the Distribution
Date will not be, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
SECTION 5.24 ADEQUACY OF SCG CONSIDERATION. Except for the Intellectual
Property described on Schedule 5.21, no part of the Business as conducted by
SCG is conducted by SCG through any entity other than an SCG Subsidiary.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF HOMESTEAD
SECTION 6.1 ORGANIZATION AND QUALIFICATION. Homestead is duly organized,
validly existing and in good standing under the laws of the State of Maryland
and has the requisite power, corporate or otherwise, and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted and as it is proposed by it to be conducted. As of the
Merger Closing, Homestead will be qualified to do business and in good
standing in each jurisdiction in which the properties owned, leased or
operated by it or proposed to be owned, leased or operated or the nature of
the business conducted by it or proposed to be conducted by it makes such
qualification necessary, except where the failure to be so qualified and in
good standing would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of Homestead. True, accurate and
complete copies of each of the charter and Bylaws of Homestead, including all
amendments thereto, have heretofore been delivered to each of the other
parties.
SECTION 6.2 CAPITALIZATION.
(a) The authorized stock of Homestead consists of 250,000,000 shares of
Homestead Stock, of which 1,000 shares of Homestead Stock are issued and
outstanding as of the date hereof. All of the issued and outstanding shares of
Homestead Stock are validly issued, fully paid and nonassessable and free of
preemptive rights. As of the date hereof, Homestead has no subsidiaries.
(b) Except as contemplated by this Agreement and the Related Agreements, as
of the date hereof, there are no outstanding subscriptions, options, calls,
contracts, commitments, understandings, restrictions, arrangements,
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rights or warrants, including any right of conversion or exchange under any
outstanding security, instrument or other agreement that is presently
exercisable obligating Homestead to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of Homestead Stock or obligating
Homestead to grant, extend or enter into any such agreement or commitment;
provided, however, that the foregoing shall not apply to the adoption by
Homestead of any stock option plan providing for grants of options to
directors and employees nor to any grant of options thereunder nor shall the
foregoing apply to the adoption by Homestead of a shareholder rights plan and
any dividend of rights to acquire securities thereunder. There are no voting
trusts, proxies or other agreements or understandings to which Homestead is a
party or is bound with respect to the voting of any shares of Homestead Stock.
SECTION 6.3 ISSUANCE OF SECURITIES. The shares of Homestead Stock issuable
to PTR, Atlantic and SCG hereunder, when issued in accordance with the
provisions of this Agreement and the Related Agreements, will be duly and
validly authorized and issued and will be fully paid and nonassessable.
SECTION 6.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Homestead has full power, corporate or otherwise, and authority to enter
into this Agreement and the Related Agreements and, subject to the Homestead
Required Statutory Approvals, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the Related
Agreements, and the consummation by Homestead of the transactions contemplated
hereby and thereby, have been duly authorized by the Homestead Board and no
other corporate proceedings on the part of Homestead are necessary to
authorize the execution and delivery of this Agreement and the Related
Agreements and the consummation by Homestead of the transactions contemplated
hereby and thereby, except for the obtaining of Homestead Required Statutory
Approvals. This Agreement has been duly and validly executed and delivered by
Homestead, and, assuming the due authorization, execution and delivery hereof
by each other party hereto, constitutes a valid and binding agreement of
Homestead enforceable against Homestead in accordance with its terms, except
that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally, (ii) general equitable principles
and (iii) to the extent this Agreement or any of the Related Agreements
contains indemnification provisions for violations of federal or state
securities laws, as enforceability of such provisions may be limited under
federal and state securities laws.
(b) The execution and delivery of this Agreement and the Related Agreements
by Homestead to the extent it is a party thereto do not, and the consummation
by Homestead of the transactions contemplated hereby and thereby will not,
violate, 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 of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of its properties under any of the terms,
conditions or provisions of (i) Homestead's charter or Bylaws, (ii) subject to
obtaining Homestead Required Statutory Approvals, any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court or governmental authority applicable to Homestead or, to
Homestead's best knowledge, any of its properties, or (iii) any note, bond,
mortgage, indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind to
which Homestead is now a party or by which Homestead or any of its properties
may be bound, excluding from the foregoing clauses (ii) and (iii) such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would
not, in the aggregate, be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial
or other), results of operations or prospects of Homestead.
(c) Except for (i) any filings by the parties hereto that may be required by
the HSR Act, (ii) the filing of the Registration Statement, including the
Proxy Statement and Prospectus with the Commission pursuant to the Securities
Act and the Exchange Act, and the declaration of the effectiveness thereof by
the Commission and
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filings with various state blue sky authorities, (iii) any required filings by
Homestead pursuant to Section 2.1, (iv) any required filings with or approvals
from applicable federal or state environmental authorities and (v) any
required filings with or approvals from applicable federal or state housing
authorities (the filings and approvals referred to in clauses (i) through (v)
are collectively referred to as the "Homestead Required Statutory Approvals"),
to Homestead's best knowledge, no declaration, filing or registration with, or
notice to, or authorization, consent or approval of, any governmental or
regulatory body or authority is necessary for the execution and delivery of
this Agreement and the Related Agreements by Homestead or the consummation by
Homestead of the transactions contemplated hereby or thereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in
the aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of Homestead.
SECTION 6.5 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. None
of the information to be supplied by Homestead for inclusion or incorporation
by reference in (a) the Registration Statement or Atlantic's registration
statement in connection with the Atlantic IPO or (b) the Proxy Statement and
Prospectus will, in the case of the Proxy Statement and Prospectus or any
amendments thereof or supplements thereto, at the time of the mailing of the
Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of shareholders of Atlantic and PTR
to be held in connection with the transactions contemplated by this Agreement
or, in the case of the Registration Statement or Atlantic's registration
statement in connection with the Atlantic IPO, as amended or supplemented, at
the time it becomes effective and in the case of the Registration Statement at
the time of such meeting of the shareholders of Atlantic and PTR, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Proxy Statement and Prospectus will comply as to form in all
material respects with all applicable laws, including the provisions of the
Securities Act and the Exchange Act (as applicable thereto) and the rules and
regulations promulgated thereunder, except that no representation is made by
Homestead with respect to information supplied by Atlantic or PTR or derived
therefrom for inclusion therein.
SECTION 6.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except in connection with
the negotiation, execution and delivery of this Agreement and the Related
Agreements, Homestead has not incurred any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature (other than ordinary
and recurring operating expenses) except for any liabilities, obligations or
contingencies which (i) would not, in the aggregate, be reasonably expected to
have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
Homestead or (ii) have been discharged or paid in full prior to the date
hereof.
SECTION 6.7 LITIGATION. Except as set forth on Schedule 6.7, there are no
claims, suits, actions or proceedings pending or, to the best of Homestead's
knowledge without any independent investigation, threatened, against, relating
to or affecting Homestead or any of its properties before or by any court,
governmental department, commission, agency, instrumentality or authority, or
any arbitrator that could reasonably be expected, either alone or in the
aggregate with all such claims, actions or proceedings, to affect materially
and adversely the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of Homestead.
Homestead is not subject to any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
authority, or any arbitrator which prohibits or restricts the consummation of
the transactions contemplated hereby or would have a material adverse effect
on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of Homestead.
SECTION 6.8 NO VIOLATION OF LAW. To the knowledge of Homestead, Homestead is
not in violation of or has been given notice or been charged with any
violation of any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable environmental law, ordinance or
regulation) of any governmental or regulatory body or authority, except for
violations which, in the aggregate, would not
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reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Homestead. To the knowledge of Homestead, none of
Homestead's properties is in violation or has been given notice or been
charged with any violation of any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any governmental or regulatory
body or authority, except for violations which, in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Homestead. No investigation or review of Homestead
by any governmental or regulatory body or authority is pending or, to the best
knowledge of Homestead without any independent investigation, threatened, nor
has any governmental or regulatory body or authority indicated to Homestead an
intention to conduct the same, other than, in each case, those the outcome of
which, as far as reasonably can be foreseen, would not reasonably be expected
to have a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
Homestead. Homestead has all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and
approvals necessary to conduct its business as presently conducted and as
proposed by Homestead to be conducted, except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not
reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of Homestead.
SECTION 6.9 BROKERS AND FINDERS. Homestead has not employed any broker,
finder or other intermediary in connection with the transactions contemplated
by this Agreement which would be entitled to any brokerage, finder's or
similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
SECTION 6.10 INVESTMENT COMPANY ACT. Homestead is not, and as of the
Distribution Date will not be, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
ARTICLE VII
CONDUCT OF BUSINESSES PENDING THE MERGER CLOSING
SECTION 7.1 CONDUCT OF BUSINESS BY ATLANTIC, PTR AND SCG. After the date
hereof and prior to the Merger Closing or earlier termination of this
Agreement, except as each other party shall otherwise agree in writing or as
may be otherwise specifically contemplated by this Agreement and the Related
Agreements, each of PTR, Atlantic and SCG shall, with respect to the Business
as conducted by it:
(a) conduct its Business in the ordinary and usual course of business and
consistent with past practice (subject to clause (c) below);
(b) use its respective best efforts to take, or cause to be taken, all
actions reasonably necessary to continue, in the ordinary and normal course
of business and consistent with past practice, with the development of, or
construction on, any of its properties which is a Development Property;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of capital stock of a PTR
Subsidiary, Atlantic Subsidiary or SCG Subsidiary of any class or any debt
or equity securities convertible into or exchangeable for such stock or
amend or modify the terms and conditions of any of the foregoing;
(d) not (i) incur or become contingently liable with respect to any
additional indebtedness for borrowed money in respect of the PTR
Properties, Atlantic Properties or SCG Properties, (ii) take any action
which would jeopardize PTR's or Atlantic's status as a real estate
investment trust under the Code, (iii) sell any PTR Properties, Atlantic
Properties or SCG Properties, (iv) prepay or cause to be prepaid any
principal amount outstanding under any notes secured by any of the PTR
Mortgages or the Atlantic Mortgages (other than a prepayment by a PTR
Subsidiary to the extent that all costs to acquire or develop the PTR
Properties
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is less than the amount outstanding under any such notes immediately prior
to the Merger Closing), (v) purchase or acquire any properties for use as
extended-stay lodging facilities other than pursuant to any contract,
agreement with respect to an Acquisition Property or (vi) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(e) use reasonable efforts to preserve intact its Business organization
and goodwill, keep available the services of its present officers, and
preserve the goodwill and business relationships with all lessees,
operators, suppliers, distributors, customers, and others having business
relationships with it and not engage in any action, directly or indirectly,
with the intent to adversely impact the transactions contemplated by this
Agreement;
(f) confer with one or more representatives of each other party when
requested to report on material operational matters and the general status
of ongoing operations of its respective business to be contributed to
Homestead pursuant to this Agreement; and
(g) maintain, in full force and effect, with all premiums due thereon
paid, policies of insurance covering all of the insurable tangible assets
and businesses of the Atlantic Subsidiaries and Atlantic Properties, the
PTR Subsidiaries and PTR Properties and the SCG Subsidiaries and SCG
Properties in amounts and as to foreseeable risks usually insured against
by persons operating similar businesses under valid and enforceable
policies of insurance issued by nationally recognized insurers.
SECTION 7.2 CONDUCT OF BUSINESS BY HOMESTEAD. After the date hereof and
prior to the Merger Closing or earlier termination of this Agreement, except
as each other party shall otherwise agree in writing or as may be otherwise
specifically contemplated by this Agreement or the Related Agreements,
Homestead shall:
(a) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or any options, warrants or
rights of any kind to acquire any shares of stock of Homestead of any class
or any debt or equity securities convertible into or exchangeable for such
stock or amend or modify the terms and conditions of any of the foregoing
(provided that the foregoing shall not apply to the adoption by Homestead
of any stock option plan providing for grants of options to directors and
employees nor to any grant of options thereunder nor shall the foregoing
apply to the adoption by Homestead of a shareholders rights agreement and
any dividend of rights to acquire securities thereunder);
(b) except as described in clause (c) below, not incur or become
contingently liable with respect to any indebtedness for borrowed money or
enter into any contract or arrangement with respect thereto; and
(c) not enter into any contract, arrangement or understanding relating to
the purchase or acquisition of any property or any contract, arrangement or
understanding relating to the disposition of any PTR Property, Atlantic
Property or SCG Property; provided, however, that Homestead may purchase or
acquire properties for use as extended-stay lodging facilities with the
consent of each of the other parties hereto provided that the funds
therefor are loaned from SCG to Homestead at a rate of interest no greater
than the prime rate of interest as announced from time to time by Wells
Fargo Realty Advisors Funding, Incorporated at its Atlanta, Georgia office,
plus one-half of one percent.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1 ACCESS TO INFORMATION. Each of the parties shall afford to each
of the other parties hereto and their respective accountants, counsel,
financial advisors and other representatives (the "Representatives") full
access during normal business hours throughout the period prior to the Merger
Closing to all properties, books, contracts, commitments and records
(including, but not limited to, Tax Returns) of such party, as appropriate,
and, during such period, each shall furnish promptly to the other (a) a copy
of each report, schedule and other document filed or received pursuant to the
requirements of federal or state securities laws or filed with the Commission
in connection with the transactions contemplated by this Agreement, and (b)
such
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other information concerning their respective businesses, properties and
personnel which are the subject of this Agreement or the Related Agreements as
shall be reasonably requested; provided that no investigation pursuant to this
Section 8.1 shall affect any representation or warranty made herein or the
conditions to the obligations of the respective parties hereto to consummate
the transactions contemplated hereby or thereby. Each party shall promptly
advise each other party in writing of any change or the occurrence of any
event after the date of this Agreement or the Related Agreements having, or
which, insofar as can reasonably be foreseen, in the future may have, any
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of the
properties which are the subject of this Agreement or the Related Agreements.
SECTION 8.2 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS. PTR,
Atlantic and Homestead shall file with the Commission as soon as is reasonably
practicable after the date hereof the Proxy Statement and Prospectus and shall
use all reasonable efforts to have the Registration Statement declared
effective by the Commission as promptly as practicable. PTR, Atlantic and
Homestead shall also take any action required to be taken under applicable
state blue sky or securities laws in connection with the Distribution. PTR,
Atlantic and Homestead shall promptly furnish to each other all information,
and take such other actions as may reasonably be requested in connection with
any action by any of them in connection with this Section and shall cooperate
with one another and use their respective best efforts to facilitate the
expeditious consummation of the transactions contemplated by this Agreement
and the Related Agreements.
SECTION 8.3 SHAREHOLDERS' APPROVAL. PTR shall promptly take such action as
may be required by its Declaration of Trust and applicable law, and Atlantic
shall promptly seek to obtain the requisite shareholder approval of this
Agreement and the transactions contemplated hereby, including, in the case of
PTR, amendments to PTR's Declaration of Trust necessary to consummate the
transactions contemplated hereby (the "PTR Shareholders' Approval" and
"Atlantic Shareholders' Approval," as appropriate), and PTR and Atlantic shall
each use their respective best efforts to obtain shareholder approval and
adoption of this Agreement and the transactions contemplated hereby as soon as
practicable following the date upon which the Registration Statement is
declared effective by the Commission. The PTR Board and the Atlantic Board
shall recommend to their respective shareholders the approval of this
Agreement and of the transactions contemplated by this Agreement; provided,
however, that prior to the meeting of shareholders of PTR or Atlantic, the PTR
Board or the Atlantic Board, as the case may be, may withdraw, modify or amend
such recommendation to the extent that the PTR Board or the Atlantic Board, as
the case may be, deems it necessary to do so in the exercise of its fiduciary
obligations to PTR or Atlantic, as the case may be, after being so advised by,
in the case of PTR, Munger, Tolles & Olson, and, in the case of Atlantic, King
& Spalding, or in either case, other nationally recognized counsel not having
an interest in the transactions contemplated by this Agreement or the Related
Agreements.
SECTION 8.4 AFFILIATE AGREEMENTS. PTR and Atlantic shall use their
respective best efforts to cause each principal executive officer, each
director, trustee and each other person who is an "affiliate," as that term is
used in paragraphs (c) and (d) of Rule 145 under the Securities Act, of PTR or
Atlantic to deliver to Homestead on or prior to the Distribution Date a
written agreement (an "Affiliate Agreement") to the effect that such person
will not offer to sell, sell or otherwise dispose of any Homestead Stock or
Homestead Warrants issued in the Distribution, except, in each case, pursuant
to an effective registration statement or in compliance with Rule 145, as
amended from time to time, or in a transaction which, in the opinion of legal
counsel satisfactory to Homestead, is exempt from the registration
requirements of the Securities Act.
SECTION 8.5 EXCHANGE. Homestead shall use its best efforts to effect, at or
before the Distribution Date, authorization for listing or quotation on an
Exchange upon official notice of issuance of the Homestead Stock and Homestead
Warrants to be issued in connection with the Distribution.
SECTION 8.6 EXPENSES. All costs and expenses incurred in connection with
this Agreement, the Related Agreements and the transactions contemplated
hereby and thereby shall be paid by the party incurring such expenses, except
that (a) those expenses incurred in connection with filing, printing and
distributing the Proxy
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Statement and Prospectus shall be paid 63.64%, 28.18% and 8.18% by PTR,
Atlantic and SCG, respectively, (b) and all costs relating to the Atlantic IPO
shall be paid by Atlantic, (c) all transfer, excise or other taxes payable by
reason of the transactions contemplated pursuant to Section 2.1 shall be borne
63.64%, 28.18% and 8.18% by PTR, Atlantic and SCG, respectively, and (d) the
filing fees payable in connection with any required filing under the HSR Act
shall be borne by SCG.
SECTION 8.7 AGREEMENT TO COOPERATE. Subject to the terms and conditions
herein provided, each of the parties hereto shall cooperate and use its
respective best efforts to take, or cause to be taken, all action and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement and the Related Agreements,
including using its best efforts to identify and obtain all necessary or
appropriate waivers, consents and approvals to effect all necessary
registrations, filings and submissions (including, but not limited to,
Atlantic Required Statutory Approvals, PTR Required Statutory Approvals, SCG
Required Statutory Approvals, Homestead Required Statutory Approvals, any
filings under federal and state securities laws and the HSR Act and any
submissions requested by the Federal Trade Commission or Department of Justice
in connection therewith) and to lift any injunction or other legal bar to the
transactions contemplated hereby and thereby (and, in such case, to proceed
with such transactions as expeditiously as possible), subject, however, to
obtaining Atlantic Shareholders' Approval and PTR Shareholders' Approval.
SECTION 8.8 PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with
respect to this Agreement and the Related Agreements or the transactions
contemplated hereby and thereby and shall not issue any such press release or
written public statement prior to review and approval by the other parties,
except that prior review and approval shall not be required if, in the
reasonable judgment of the party seeking to issue such release or public
statement, prior review and approval would prevent the timely dissemination of
such release or announcement in violation of any applicable law, rule,
regulation or policy of an Exchange.
SECTION 8.9 CORRECTIONS TO THE PROXY STATEMENT AND PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of Atlantic Shareholders' Approval
and PTR Shareholders' Approval, each of PTR, Atlantic, SCG and Homestead shall
correct promptly any information provided by it to be used specifically in the
Proxy Statement and Prospectus and Registration Statement or relating to it
and incorporated by reference into the Proxy Statement and Prospectus and
Registration Statement that shall have become false or misleading in any
material respect and shall take all steps necessary to file with the
Commission and have declared effective or cleared by the Commission any
amendment or supplement to the Proxy Statement and Prospectus or the
Registration Statement so as to correct the same and to cause the Proxy
Statement and Prospectus as so corrected to be disseminated to the
shareholders of Atlantic and PTR, in each case to the extent required by
applicable law.
SECTION 8.10 VOTING OF SHARES. SCG will vote all PTR Common Shares and all
shares of Atlantic Common Stock owned by it in favor of the approval and
adoption of this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby; provided, however, that SCG shall not be
obligated to vote any PTR Common Shares or shares of Atlantic Common Stock in
favor of such matters in the event that the PTR Board or the Atlantic Board
withdraws, modifies or amends its recommendation pursuant to Section 8.3.
SECTION 8.11 ATLANTIC IPO REGISTRATION STATEMENT. Atlantic shall file with
the Commission as soon as is reasonably practicable after the date hereof a
registration statement relating to the Atlantic IPO and shall use all
reasonable efforts to have such registration statement declared effective by
the Commission as promptly as practicable. Atlantic shall also take any action
required to be taken under applicable state blue sky or securities laws in
connection with the Atlantic IPO. Atlantic shall promptly furnish to each
other party copies of all information filed by Atlantic with any governmental
authority in connection with the Atlantic IPO. In the event the Atlantic Board
determines that it is not reasonably practicable to file a registration
statement relating to the Atlantic IPO during the term of this Agreement, the
Atlantic Board will give written notice of such determination as promptly as
practicable to each of PTR, SCG and Homestead.
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SECTION 8.12 CONFIDENTIALITY
(a) As used herein, "Confidential Material" means, with respect to any party
hereto (the "Providing Party"), all information, whether oral, written or
otherwise, furnished to any other party hereto (the "Receiving Party") or such
Receiving Party's directors, trustees, officers, partners, Affiliates (as
defined in Rule 12b-2 under the Exchange Act), employees, agents or
representatives (collectively, "Representatives"), by the Providing Party and
all reports, analyses, compilations, studies and other material prepared by
the Receiving Party or its Representatives (in whatever form maintained,
whether documentary, computer storage or otherwise) containing, reflecting or
based upon, in whole or in part, any such information. The term "Confidential
Material" does not include information which (i) is or becomes generally
available, to the public other than as a result of a disclosure by the
Receiving Party, its Representatives or anyone to whom the Receiving Party or
any of its Representatives transmit any Confidential Material in violation of
this Agreement, (ii) is or becomes known or available to the Receiving Party
on a non-confidential basis from a source (other than the Providing Party or
one of its Representatives) who is not, to the knowledge of the Receiving
Party after reasonable inquiry, prohibited from transmitting the information
to the Receiving Party or its Representatives by a contractual, legal,
fiduciary or other obligation or (iii) is contained in the Registration
Statement.
(b) Subject to paragraph (c) below or except as required by applicable laws,
regulations or legal process, the Confidential Material will be kept
confidential and will not, without the prior written consent of the Providing
Party, be disclosed by the Receiving Party or its Representatives, in whole or
in part, and will not be used by the Receiving Party or its Representatives,
directly or indirectly, for any purpose other than in connection with this
Agreement, the Related Agreement and the transactions contemplated hereby or
thereby or evaluating, negotiating or advising with respect to such matters.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transactions and are
informed by such Receiving Party of the confidential nature of the
Confidential Material and of the terms of this Section. In any event, each
Receiving Party will be responsible for any actions by its Representatives
which are not in accordance with the provisions hereof.
(c) In the event that any Receiving Party, its Representatives or anyone to
whom such Receiving Party or its Representatives supply the Confidential
Material, are requested (by oral questions, interrogatories, requests for
information or documents, subpoena, civil or criminal investigative demand,
any informal or formal investigation by any government or governmental agency
or authority or otherwise in connection with legal process) to disclose any
Confidential Material, such Receiving Party agrees (i) to immediately notify
the Providing Party of the existence, terms and circumstances surrounding such
a request, (ii) to consult with the Providing Party on the advisability of
taking legal available steps to resist or narrow such request and (iii) if
disclosure of such information is required, to furnish only that portion of
the Confidential Material which, in the opinion of such Receiving Party's
counsel, such Receiving Party is legally compelled to disclose and to
cooperate with any action by the Providing Party to obtain an appropriate
protective order or other reliable assurance that confidential treatment will
be accorded the Confidential Material (it being agreed that the Providing
Party shall reimburse the Receiving Party for all reasonable out-of-pocket
expenses incurred by the Receiving Party in connection with such cooperation).
(d) In the event of the termination of this Agreement in accordance with its
terms, promptly upon request from a Providing Party, the Receiving Party
shall, except to the extent prohibited by applicable laws, regulations or
legal process, redeliver to the Providing Party or destroy all tangible
Confidential Material and will not retain any copies, extracts or other
reproductions thereof in whole or in part. Any such destruction shall be
certified in writing to the Providing Party by an authorized officer of the
Receiving Party supervising the same. Notwithstanding the foregoing, each
Receiving Party and one Representative designated by each Receiving Party
shall be permitted to retain one permanent file copy of each document
constituting Confidential Material to be used only in connection with
litigation arising from the transactions contemplated by this Agreement.
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SECTION 8.13 PERSONNEL.
(a) SCG Liability for Employee Obligations. SCG shall indemnify and hold
harmless Homestead for any and all obligations, debts or liabilities relating
to or arising from any Employee's employment with SCG or an SCG Subsidiary,
which obligation, debt or liability arises prior to the date of the Merger
Closing. SCG shall honor or cause its insurance carriers to honor all claims
for benefits by the Employees under each Employee Benefit Plan with respect to
claims incurred by the Employees or their covered dependents before the
Closing Date.
(b) Homestead Employee Benefit Plans. Homestead shall establish or cause to
be established employee benefit plans for the Employees that are substantially
similar to the SCG Employee Benefit Plans, which plans shall recognize service
of the Employees with Homestead and SCG and its affiliates to the same extent
such service has been recognized under the Employee Benefit Plans.
Notwithstanding the foregoing, (i) the medical plan established by Homestead
shall recognize any deductibles and co-payments Employees have made under the
SCG medical plan in the current plan year and (ii) the 401(k) plan established
by Homestead shall permit investment in Homestead common stock and, to the
extent permitted by applicable law, either accept rollovers of Employees'
accounts under the SCG 401(k) plan or merge the portion of the SCG 401(k) plan
that covers the Employees with and into the new plan.
(c) Homestead's Nonassumption of Liability. Except as provided in paragraph
(b) above, Homestead shall not incur any liability with respect to an Employee
Benefit Plan.
(d) WARN Act. SCG agrees to assume responsibility for giving all notices
required, if any, by the Worker Adjustment and Retraining Notification Act of
1988 (the "WARN Act") or any similar state law or regulation, to assume
liability for any alleged failure to give such notice, and to indemnify and
hold harmless Homestead and its affiliates for any and all claims asserted
under the WARN Act or any similar state law or regulation because of a "plant
closing" or a "mass layoff" occurring on or before the Merger Closing date.
For purposes of this Agreement, the Merger Closing date is the "effective
date" for purposes of the WARN Act.
SECTION 8.14 EXHIBITS AND SCHEDULES.
(a) Immediately prior to the Merger Closing, each of PTR, Atlantic and SCG
shall update Exhibits II, III and IV, as appropriate, to reflect changes in
the status of the properties identified by such parties as Acquisition
Properties, Development Properties and Operating Properties.
(b) Each party hereto shall deliver to each other party hereto at least two
days prior to the Merger Closing date updated schedules to this Agreement
reflecting any changes in such party's scheduled items occurring from the date
hereto to the Merger Closing date.
SECTION 8.15 REIMBURSEMENT OF PURSUIT COSTS. Set forth on Schedule 8.15
hereto is a complete list of all properties identified by PTR, Atlantic or SCG
as to which PTR, Atlantic or SCG, as the case may be, has expended funds in
furtherance of the potential acquisition thereof. Set forth opposite the name
of each such property is the aggregate amount expended by PTR, Atlantic or
SCG, as the case may be, for such purpose as of the date hereof. Upon the
acquisition by Homestead of any of such properties, Homestead shall reimburse
PTR, Atlantic or SCG, as the case may be, all such costs. Homestead further
agrees that any and all additional expenses in furtherance of the acquisition
of such properties shall be borne exclusively by Homestead.
SECTION 8.16 PRORATIONS. Homestead and SCG hereby agree that all of the
items referred to in clauses (i) through (iii) of this Section 8.16 relating
to the operation of the Business as conducted by SCG or an SCG Subsidiary will
be prorated as of the Merger Closing, with SCG liable or entitled to the
benefit of such items to the extent such items relate to any time period up to
and including the date of the Merger Closing, and Homestead liable or entitled
to the benefit of such items to the extent such items relate to periods
subsequent to the date of the Merger Closing: (i) REIT management and property
management fees and expenses relating to
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the operation of the Business; (ii) travel costs and expenses of attorneys,
accountants and other professional related to the operation of the Business;
and (iii) fees and expenses relating to any contract, arrangement or
understanding involving the purchase of goods or the provision of services
relating to the operation of the Business. At the Merger Closing, Homestead
will pay to SCG and SCG will pay to Homestead the amount in cash, if any, due
under this Section 8.16.
ARTICLE IX
CONDITIONS
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligation of each party to effect the transactions contemplated hereby and by
the Related Agreements shall be subject to the fulfillment at or prior to the
Merger Closing of the following conditions:
(a) Each other party shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Merger Closing and the representations and warranties of each such
other party shall be true and correct in all material respects on and as of
(i) the date made and (ii) the Merger Closing with the same effect as if
made on that date; and each other party shall have received a certificate
of an executive officer of such party to that effect;
(b) This Agreement, the Related Agreements and the transactions
contemplated hereby and thereby shall have been approved by the requisite
vote of shareholders of PTR and Atlantic;
(c) The PTR Board and the Atlantic Board shall have each declared the
dividend contemplated by the Distribution;
(d) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending
such effectiveness shall have been issued and remain in effect and no
proceeding for that purpose shall have been initiated or threatened by the
Commission;
(e) Each of PTR and Atlantic shall have received either a favorable
opinion of Mayer, Brown & Platt (in form and substance reasonably
satisfactory to PTR and Atlantic) or a favorable ruling from the Internal
Revenue Service to the effect that the mergers described in Section 2.1
will constitute a transaction subject to Section 351 or the reorganization
provisions of the Code and related provisions;
(f) No preliminary or permanent injunction or other order or decree by
any federal or state court which prevents the consummation of the
transactions contemplated by this Agreement and the Related Agreements
shall have been issued and remain in effect (each party agreeing to use its
best efforts to have any such injunction, order or decree lifted);
(g) The waiting period applicable to the consummation of the Merger
Closing and the Distribution under the HSR Act shall have expired or been
terminated;
(h) All governmental consents, orders and approvals legally required for
the consummation of the transactions contemplated by this Agreement and the
Related Agreements shall have been obtained and be in effect at the Merger
Closing (including Atlantic Required Statutory Approvals, PTR Required
Statutory Approvals, SCG Required Statutory Approvals and Homestead
Required Statutory Approvals), and all consents, orders and approvals
legally required for the consummation of the transactions contemplated by
this Agreement and the Related Agreements shall have become final orders;
(i) The Homestead Warrants shall have been issued pursuant to the Warrant
Purchase Agreement;
(j) Atlantic shall have contributed $18,620,245 (which amount shall be
adjusted in accordance with the formula set forth in Schedule 9.1(j)) in
cash to Atlantic Homestead Village and shall not have encumbered or
otherwise disposed of such funds;
(k) The registration statement relating to the Atlantic IPO, if filed
with the SEC, shall have been declared effective by the SEC or withdrawn by
Atlantic or, if such registration statement has not been filed, Atlantic
shall have given the notice required by Section 8.11;
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(l) Each of PTR, Atlantic and SCG shall have forgiven all indebtedness
owing to it from each PTR Subsidiary, Atlantic Subsidiary and SCG
Subsidiary, respectively, other than any indebtedness secured by a PTR
Mortgage or an Atlantic Mortgage, as the case may be; and
(m) Each of the parties shall have acquired all material consents
required from third parties necessary to consummate the transactions
contemplated by this Agreement.
SECTION 9.2 CONDITIONS TO OBLIGATIONS OF ATLANTIC. Unless waived by
Atlantic, the obligation of Atlantic to effect the transactions contemplated
hereby and by the Related Agreements shall be subject to the fulfillment at or
prior to the Merger Closing of the following additional conditions:
(a) Atlantic shall have received an opinion from Munger, Tolles & Olson,
counsel to the PTR Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit V hereto;
(b) Atlantic shall have received an opinion from Mayer, Brown & Platt,
counsel to SCG and Homestead, dated as of the Merger Closing, substantially
in the form set forth in Exhibit VI hereto;
(c) The Special Committee of the Atlantic Board (the "Atlantic Special
Committee") shall have received from an investment banking firm
satisfactory to the Atlantic Special Committee, a written opinion to the
effect that, as of the date of the Proxy Statement a written Prospectus,
the consideration to be paid to Atlantic in the transactions contemplated
by this Agreement and by the Related Agreements is fair, from a financial
point of view, to Atlantic shareholders (other than SCG), and such opinion
shall not have been withdrawn, revoked or modified;
(d) The Homestead Stock and Homestead Warrants to be issued in connection
with the Distribution shall have been authorized for listing or quotation
on an Exchange upon official notice of issuance;
(e) Homestead shall have executed and delivered to Atlantic the Funding
Commitment Agreement substantially in the form set forth in Exhibit VII
hereto;
(f) Homestead shall have executed and delivered to Atlantic the Atlantic
Investor Agreement substantially in the form set forth in Exhibit VIII
hereto;
(g) Homestead shall have executed and delivered to Atlantic the
Protection of Business Agreement substantially in the form of Exhibit XI
hereto;
(h) Atlantic shall have received "comfort letters" from the independent
public accountants of PTR, SCG and Homestead, dated as of the effective
date of the Registration Statement, with respect to financial information
of PTR, SCG and Homestead included or incorporated by reference in the
Registration Statement in form and substance reasonably satisfactory to
Atlantic and customary in scope and substance for "comfort letters"
delivered by independent public accountants in connection with registration
statements and proxy statements;
(i) No governmental consent, order or approval legally required for the
consummation of the transactions contemplated by this Agreement and by the
Related Agreements shall have any terms which in the reasonable judgment of
Atlantic, when taken together with the terms of all such consents, orders
or approvals, would materially impair the value of the Homestead Stock and
Homestead Warrants to be received by shareholders of Atlantic as a result
of the transactions contemplated hereby and thereby, and no governmental
authority shall have promulgated any statement, rule or regulation which,
when taken together with all such promulgations, would materially impair
the value of the Homestead Stock and Homestead Warrants to be received by
shareholders of Atlantic as a result of the transactions contemplated
hereby and thereby; and
(j) Atlantic shall have received an opinion from Mayer, Brown & Platt
that the performance of this Agreement will not jeopardize the status of
Atlantic as a "real estate investment trust" under the Code.
SECTION 9.3 CONDITIONS TO OBLIGATIONS OF PTR. Unless waived by PTR, the
obligation of PTR to effect the transactions contemplated hereby and by the
Related Agreements shall be subject to the fulfillment at or prior to the
Merger Closing of the additional following conditions:
(a) PTR shall have received an opinion from King & Spalding, counsel to
the Atlantic Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit IX hereto;
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(b) PTR shall have received an opinion of Mayer, Brown & Platt, counsel
to SCG and Homestead, dated as of the Merger Closing, substantially in the
form set forth in Exhibit VI hereto;
(c) The Special Committee of the PTR Board (the "PTR Special Committee")
shall have received from an investment banking firm satisfactory to the PTR
Special Committee, an opinion to the effect that, as of the date of the
Proxy Statement and Prospectus, the aggregate consideration to be received
by PTR in exchange for the contribution by PTR to Homestead of the PTR
Properties and the agreement by PTR to enter into the Funding Commitment
Agreement was fair to PTR, and such opinion shall not have been withdrawn,
revoked or modified;
(d) The Homestead Stock and Homestead Warrants to be issued in connection
with the Distribution shall have been authorized for listing or quotation
on an Exchange upon official notice of issuance;
(e) Homestead shall have executed and delivered to PTR the Funding
Commitment Agreement substantially in the form set forth in Exhibit VII
hereto;
(f) Homestead shall have executed and delivered to PTR the PTR Investor
Agreement substantially in the form set forth in Exhibit VIII hereto;
(g) Homestead shall have executed and delivered to PTR the Protection of
Business Agreement substantially in the form of Exhibit XI hereto;
(h) PTR shall have received "comfort letters" from the independent public
accountants of Atlantic, SCG and Homestead, dated as of the effective date
of the Registration Statement, with respect to financial information of
Atlantic, SCG and Homestead included or incorporated by reference in the
Registration Statement in form and substance reasonably satisfactory to PTR
and customary in scope and substance for "comfort letters" delivered by
independent public accountants in connection with registration statements
and proxy statements;
(i) No governmental consent, order or approval legally required for the
consummation of the transactions contemplated by this Agreement and by the
Related Agreements shall have any terms which in the reasonable judgment of
PTR, when taken together with the terms of all such consents, orders or
approvals, would materially impair the value of the Homestead Stock and
Homestead Warrants to be received by shareholders of PTR as a result of the
transactions contemplated hereby and thereby, and no governmental authority
shall have promulgated any statute, rule or regulation which, when taken
together with all such promulgations, would materially impair the value of
the Homestead Stock and Homestead Warrants to be received by shareholders
of PTR as a result of the transactions contemplated hereby and thereby; and
(j) PTR shall have received an opinion from Mayer, Brown & Platt that the
performance of this Agreement will not jeopardize the status of PTR as a
"real estate investment trust" under the Code.
SECTION 9.4 CONDITIONS TO OBLIGATIONS OF SCG. Unless waived by SCG, the
obligation of SCG to effect the transactions contemplated hereby and by the
Related Agreements shall be subject to the fulfillment at or prior to the
Merger Closing of the additional following conditions:
(a) SCG shall have received an opinion from Munger, Tolles & Olson,
counsel to the PTR Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit V hereto;
(b) SCG shall have received an opinion from King & Spalding, counsel to
the Atlantic Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit IX hereto;
(c) SCG shall have received "comfort letters" from the independent public
accountants of Atlantic, PTR and Homestead, dated as of the effective date
of the Registration Statement, with respect to financial information of
Atlantic, PTR and Homestead included or incorporated by reference in the
Registration Statement in form and substance reasonably satisfactory to SCG
and customary in scope and substance for "comfort letters" delivered by
independent public accountants in connection with registration statements
and proxy statements;
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(d) Homestead shall have executed and delivered to SCG an Investor
Agreement substantially in the form set forth in Exhibit X hereto;
(e) Homestead shall have executed and delivered to SCG an Administrative
Services Agreement in a form to be agreed upon between SCG and Homestead
and not inconsistent with the description thereof as described in the Proxy
Statement and Prospectus;
(f) Homestead shall have executed and delivered to SCG the Protection of
Business Agreement substantially in the form of Exhibit XI hereto; and
(g) No governmental consent, order or approval legally required for the
consummation of the transactions contemplated by this Agreement shall have
any terms which in the reasonable judgment of SCG, when taken together with
the terms of all such consents, orders or approvals, would materially
impair the value of the Homestead Stock and Homestead Warrants to be
received by SCG in connection with the transactions contemplated hereby and
thereby, and no governmental authority shall have promulgated any statute,
rule or regulation which, when taken together with all such promulgations,
would materially impair the value of the Homestead Stock and Homestead
Warrants to be received by SCG in connection with the transactions
contemplated hereby and thereby.
SECTION 9.5 CONDITIONS TO OBLIGATIONS OF HOMESTEAD. Unless waived by
Homestead, the obligation of Homestead to effect the transactions contemplated
hereby and by the Related Agreements shall be subject to the fulfillment at or
prior to the Merger Closing of the additional following conditions:
(a) Homestead shall have received an opinion from Munger, Tolles & Olson,
counsel to the PTR Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit V hereto;
(b) Homestead shall have received an opinion from King & Spalding,
counsel to the Atlantic Special Committee, dated as of the Merger Closing,
substantially in the form set forth in Exhibit IX hereto;
(c) Homestead shall have received an opinion from Mayer, Brown & Platt,
counsel to SCG, dated as of the Merger Closing, substantially in the form
set forth in Exhibit VI hereto;
(d) The Affiliate Agreements required to be delivered by affiliates of
PTR and Atlantic pursuant to Section 8.4 shall have been furnished as
required by Section 8.4;
(e) Each of PTR and Atlantic shall have executed and delivered to
Homestead a Funding Commitment Agreement substantially in the form set
forth in Exhibit VII hereto;
(f) Each of PTR and Atlantic shall have executed and delivered to
Homestead an Investor Agreement substantially in the form set forth in
Exhibit VIII hereto;
(g) Homestead shall have received "comfort letters" from the independent
public accountants of Atlantic, PTR and SCG, dated as of the effective date
of the Registration Statement, with respect to financial information of
Atlantic, PTR and SCG included or incorporated by reference in the
Registration Statement in form and substance reasonably satisfactory to
Homestead and customary in scope and substance for "comfort letters"
delivered by independent public accountants in connection with registration
statements and proxy statements;
(h) SCG shall have executed and delivered to Homestead an Investor
Agreement substantially in the form set forth in Exhibit X hereto;
(i) SCG shall have executed and delivered to Homestead an Administrative
Services Agreement substantially in a form to be agreed upon between SCG
and Homestead and not inconsistent with the description thereof as
described in the Proxy Statement and Prospectus;
(j) Each of Atlantic, PTR and SCG shall have executed and delivered to
Homestead the Protection of Business Agreement substantially in the form
set forth in Exhibit XI hereto;
(k) SCG shall have executed and delivered to Homestead the Escrow
Agreement substantially in the form set forth in Exhibit XII hereto;
(l) SCG shall have executed and delivered to SCG Homestead Village
Incorporated, the Assignment of Registration substantially in the form set
forth in Exhibit XIII hereto; and
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(m) No governmental consent, order or approval legally required for the
consummation of the transactions contemplated by this Agreement and by the
Related Agreements shall have any terms which in the reasonable judgment of
Homestead, when taken together with the terms of all such consents, orders
or approvals, would materially impair the value to Homestead of the
transactions contemplated hereby and thereby, and no governmental authority
shall have promulgated any statute, rule or regulation which, when taken
together with all such promulgations, would materially impair to Homestead
the value of the transactions contemplated hereby and thereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Merger Closing, whether before or after approval by the shareholders of
PTR and Atlantic:
(a) by mutual consent of each of the parties hereto;
(b) by any of the parties hereto, so long as such party has not breached
any of its obligations hereunder (except for such breaches as are
immaterial), if the transactions contemplated hereby shall not have been
consummated on or before December 31, 1996 (the "Termination Date");
(c) unilaterally by any of the parties hereto (i) if any of the other
parties (A) fails to perform any covenant or agreement in this Agreement in
any material respect, and does not cure the failure, in all material
respects within 15 business days after the terminating party delivers
written notice of the alleged failure or (B) fails to fulfill or complete a
condition to the obligations of the terminating party (which condition is
not waived) by reason of a breach by the non-terminating party of its
obligations hereunder or (ii) if any condition to the obligations of the
terminating party is not satisfied (other than by reason of a breach by
that party of its obligations hereunder), and it reasonably appears that
the condition cannot be satisfied prior to the Termination Date;
(d) unilaterally by any of PTR, SCG or Homestead if Atlantic, through the
Atlantic Board or Atlantic Special Committee, either fails to recommend to
Atlantic's shareholders the approval of this Agreement and the transactions
contemplated hereby or withdraws, modifies or amends such recommendation;
and
(e) unilaterally by any of Atlantic, SCG or Homestead if PTR, through the
PTR Board or PTR Special Committee, either fails to recommend to PTR's
shareholders the approval of this Agreement and the transactions
contemplated hereby or withdraws, modifies or amends such recommendation.
SECTION 10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, as provided in Section 10.1, this Agreement shall forthwith become
void and there shall be no further obligation on the part of any party hereto
or their respective officers or directors or trustees (except as set forth in
this Section 10.2 and in Sections 8.6 and 8.12 and Article XI, which shall
survive such termination). Nothing in this Section 10.2 shall relieve any
party from liability for any breach of this Agreement. Upon any termination
pursuant to Section 10.1(d), Atlantic shall pay to each of the other parties
all of the documented, out-of-pocket expenses incurred by such parties after
the date hereof in connection with the transactions contemplated by this
Agreement. Upon any termination pursuant to Section 10.1(e), PTR shall pay to
each of the other parties all of the documented, out-of-pocket expenses
incurred by such parties after the date hereof in connection with the
transactions contemplated by this Agreement.
SECTION 10.3 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto and in
compliance with applicable law; provided, however, this Agreement may not be
amended in any material respect following the PTR Shareholders' Approval or
the Atlantic Shareholders' Approval.
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SECTION 10.4 WAIVER. At any time prior to the Merger Closing, the parties
hereto may (a) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE XI
SURVIVAL AND REMEDY; INDEMNIFICATION
SECTION 11.1 INDEMNIFICATION. Each party hereto agrees to indemnify (each an
"Indemnifying Party") each other party hereto (other than SCG) and each of
their respective affiliates (other than SCG) (each an "Indemnified Party" and
collectively, the "Indemnified Parties") against, and agrees to hold it and
them harmless from, any and all liabilities, losses, costs, damages, penalties
or expenses (including, without limitation, reasonable attorneys' fees and
expenses and costs of investigation and litigation) (collectively, "Losses")
incurred or suffered by an Indemnified Party arising out of or in connection
with any breach of, or inaccuracy in, any of the representations and
warranties or agreements of the Indemnifying Party under this Agreement, as
such representations and warranties may be updated pursuant to Section 8.14.
SECTION 11.2 LIMITATION OF INDEMNIFICATION. An Indemnified Party shall not
be entitled to indemnification under this Article XI until the aggregate of
all Losses with respect to which such Indemnified Party would otherwise be
entitled to indemnification under this Article XI exceed $200,000, in which
event the Indemnified Party shall be entitled to all such Losses including
such $200,000; provided, however, that none of the indemnification obligations
of PTR, Atlantic and SCG hereunder (other than for Losses arising in
connection with a breach of the representations and warranties set forth in
Sections 3.7, 4.7, and 5.7, as applicable) shall exceed the fair market value
of the securities of Homestead received by them pursuant to Section 2.1 of
this Agreement; and provided, further, that the indemnification obligations of
Homestead hereunder shall not exceed in the aggregate the fair market value as
of all Homestead Stock and Homestead Warrants issued in connection herewith or
in connection with any of the Related Agreements. For purposes of this Section
11.2, the fair market value of a share of Homestead Stock and a Homestead
Warrant shall be based upon the first sale price of a share of Homestead Stock
and a Homestead Warrant, respectively, once public trading in such security
commences.
SECTION 11.3 NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE. The Indemnified Party
shall give prompt notice to the Indemnifying Party, in accordance with the
terms of Section 12.1, of the assertion of any claim, or the commencement of
any suit, action or proceeding by any party in respect of which indemnity may
be sought hereunder, specifying with reasonable particularity the basis
therefor and giving the Indemnifying Party such information with respect
thereto as the Indemnifying Party may reasonably request. The Indemnifying
Party may, at its own expense, (a) participate in and, (b) upon notice to the
Indemnified Party and upon the Indemnifying Party's written agreement that the
Indemnified Party is entitled to indemnification pursuant to Section 11.1 for
Losses arising out of such claim, suit, action or proceeding, at any time
during the course of any such claim, suit, action or proceeding, assume the
defense thereof; provided that (x) the Indemnifying Party's counsel is
reasonably satisfactory to the Indemnified Party; and (y) the Indemnifying
Party shall thereafter consult with the Indemnified Party upon its reasonable
request from time to time with respect to such claim, suit, action or
proceeding; provided, however, that the Indemnified Party shall have the right
to retain its own counsel, with the reasonable fees and expenses to be paid by
the Indemnifying Party if the Indemnified Party reasonably believes that
representation of it by the counsel retained by the Indemnifying Party would
be inappropriate due to actual or potential differing interest between the
Indemnified Party and any other party represented by such counsel in such
proceeding. If the Indemnifying Party assumes such defense, the Indemnified
Party shall have the right (but not the duty) to participate in the defense
thereof and to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party. Whether or not the Indemnifying Party
chooses to defend or prosecute any such claim, suit, action or proceeding, all
of the parties hereto shall cooperate in the defense or prosecution thereof.
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SECTION 11.4 SETTLEMENT OR COMPROMISE. Any settlement or compromise made or
caused to be made by the Indemnified Party or the Indemnifying Party, as the
case may be, of any claim, suit, action or proceeding of the kind referred to
in Section 11.3 shall also be binding upon the Indemnifying Party or the
Indemnified Party, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in
the amount of such settlement or compromise. No party shall settle or
compromise any such claim, suit, action or proceeding without the prior
written consent of the other party, which shall not be unreasonably withheld.
SECTION 11.5 FAILURE OF INDEMNIFYING PARTY TO ACT. In the event that the
Indemnifying Party does not elect to assume the defense of any claim, suit,
action or proceeding within a reasonable time of being notified by the
Indemnified Party, then any failure of the Indemnified Party to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Party of its
obligations hereunder.
SECTION 11.6 SURVIVAL. The indemnification provided by this Article XI shall
be a continuing right to indemnification and shall survive the closing of the
transactions contemplated hereby and the expiration or termination of this
Agreement for a period of two years following the Merger Closing, and the
Indemnified Party shall be entitled to bring an action thereon only if the
Indemnified Party has given the Indemnifying Party written notice within such
two-year period.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent via a
recognized overnight courier with delivery confirmed in writing or sent via
facsimile to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a)If to PTR, to:
Security Capital Pacific Trust
7777 Market Center Avenue
El Paso, Texas 79912
Attention: C. Ronald Blankenship
Fax: (915) 877-3301
with a copy to:
Munger, Tolles & Olson
355 South Grand Avenue, 35th Floor
Los Angeles, California 90071
Attention: R. Gregory Morgan
Fax: (213) 687-3702
(b)If to Atlantic, to:
Security Capital Atlantic Incorporated
Six Piedmont Center, Sixth Floor
Atlanta, Georgia 30305
Attention: James C. Potts
Fax: (404) 233-2379
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with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: Alan J. Prince
Fax: (404) 572-5046
(c)If to SCG, to:
Security Capital Group Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: Jeffrey A. Klopf
Fax: (505) 988-8920
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Edward J. Schneidman
Fax: (312) 701-7711
(d)If to Homestead, to:
Homestead Village Properties Incorporated
125 Lincoln Avenue, Suite 300
Santa Fe, New Mexico 87501
Attention: David C. Dressler, Jr.
Fax: (505) 982-2925
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Edward J. Schneidman
Fax: (312) 701-7711
SECTION 12.2 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 12.3 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and thereof; (b) shall not be assigned by operation of law or
otherwise; and (c) shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Maryland (without
giving effect to the provisions thereof relating to conflicts of law).
SECTION 12.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 12.5 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
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SECTION 12.6 LIMITATION OF LIABILITY. Any obligation or liability whatsoever
of PTR which may arise at any time under this Agreement or any obligation or
liability which may be incurred by it pursuant to any other instrument,
transaction or undertaking contemplated hereby shall be satisfied, if at all,
out of PTR's assets only. No such obligation or liability shall be personally
binding upon, nor shall resort for the enforcement thereof be had to, the
property of any of its shareholders, trustees, officers, employees or agents,
regardless of whether such obligation or liability is in the nature of
contract, tort or otherwise.
SECTION 12.7 NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto have
jointly participated in the negotiation and drafting of this Agreement. In the
event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties
hereto and no presumptions or burdens of proof shall arise favoring any party
by virtue of the authorship of any of the provisions of this Agreement.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
SECURITY CAPITAL PACIFIC TRUST
By: ________________________________________
C. Ronald Blankenship
Chairman
SECURITY CAPITAL ATLANTIC INCORPORATED
By: ________________________________________
James C. Potts
Co-Chairman
SECURITY CAPITAL GROUP INCORPORATED
By: ________________________________________
Jeffrey A. Klopf
Senior Vice President
HOMESTEAD VILLAGE PROPERTIES INCORPORATED
By: ________________________________________
David C. Dressler, Jr.
Chairman
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PRESS RELEASE
- -For Immediate Release-
SECURITY CAPITAL PACIFIC TRUST
ANNOUNCES PROPOSED SPIN-OFF OF HOMESTEAD VILLAGE
May 21, 1996 -- The Board of Trustees of Security Capital Pacific Trust
(New York Stock Exchange Symbol: PTR) today approved the spin-off of PTR's
Homestead Village(R) properties to a newly formed company, Homestead Village
Properties Incorporated (Homestead). In return, PTR's common shareholders will
receive Homestead common stock and warrants to acquire additional shares of
Homestead common stock, and PTR will receive convertible mortgage notes.
Homestead common stock and warrants will be publicly traded.
Homestead will be an internally managed corporation focused on maximizing
shareholder value by becoming the preeminent developer, owner and operator of
moderate-priced extended-stay facilities across the United States. Homestead's
management team plans to follow a conservative financial strategy that will
emphasize a strong balance sheet and internal reinvestment of cash flow.
PTR Chairman C. Ronald Blankenship said, "The PTR Board believes that the
spin-off of Homestead will enhance shareholder value. We think the market will
more easily understand the growth potential of a stand-alone company which
should serve to positively impact the market value of the new Homestead
corporation. As a result, we believe this transaction is in the best interest of
our shareholders." Mr. Blankenship said the new company's national scope and
highly consistent product, in conjunction with market opportunity, should result
in significant growth in cash flow for Homestead shareholders.
Under the terms of the agreement, PTR and Security Capital Atlantic
Incorporated (ATLANTIC) will contribute to Homestead a total of 80 Homestead
Village properties of which 27 are operating and 53 are under development. In
exchange for that contribution, PTR and its shareholders will own 63.21% of
Homestead. ATLANTIC and its shareholders will own 28%. Security Capital Group
Incorporated (SCG) will contribute the Homestead Village trademark and operating
systems in exchange for 8.79% of Homestead. In addition, SCG employees who have
been dedicated to Homestead will become employees of the new company. The new
Homestead organization will have 66 professionals focused on research, due
diligence, development, property management and asset management as well as 318
employees on-site at operating Homestead properties. Based on SCG's current
holding in PTR and ATLANTIC, SCG will own a total of 51.39% of Homestead.
(Ownership percentages assume the issuance of Homestead common stock at the
closing of the transaction, full funding of the convertible mortgage notes, and
conversion of all warrants and convertible mortgage notes.)
As part of the transaction, PTR will receive approximately $77 million
principal amount of existing Homestead convertible mortgage notes. In addition,
PTR and ATLANTIC will agree to invest in convertible mortgage notes of up to
approximately $242 million principal amount to fund completion of the 53
Homestead properties currently under development. PTR will receive up to
approximately $144 million of that total. This arrangement will provide an
important funding mechanism for Homestead's development activities. Homestead
will issue convertible mortgage notes as construction on each property
<PAGE>
is commenced. The convertible mortgage notes will have a 10-year maturity, an
interest rate of 9% and a 15% conversion premium and cannot be called by
Homestead for five years.
David C. Dressler Jr. will be Chairman of the new company and a member of
its Board of Directors. Mr. Dressler said, "We feel that Homestead Village has
the potential for tremendous growth. Purpose-built, extended-stay properties
offer significant value to customers relative to other alternatives. Demographic
and business trends, as well as increased consumer awareness of extended-stay
product, are also going to be important factors in generating demand. In
addition, the experience we've gained operating Homestead properties since 1992
will give us a significant competitive advantage."
Since the first Homestead Village property opened in 1992, the development
professionals assigned to Homestead Village have refined the moderate-priced
extended-stay concept to take advantage of strong demand for quality
accomodations at value-driven prices. Designed primarily for professionals on
temporary work assignment, relocating to another city or in job-related
training, Homestead Village provides the extended-stay guest with 260 to 325
square feet of fully furnished living space, kitchen facilities with full-sized
refrigerator, microwave, sink and cooktop, weekly housekeeping service,
individual voice mail and dataport, and coin-operated laundry facilities. Rates
at Homestead range from $189 to $289 a week, compared to $550 a week for
traditional extended-stay hotels.
Initially, Homestead's national development strategy will focus on selected
markets where demographics and demand for extended-stay lodging should result in
high occupancies at increasing rental rates. Mr. Dressler said Homestead will
differentiate itself from its competitors by adhering to a disciplined
investment strategy and a superior operating system. "We research our markets
thoroughly, we acquire zoned land in those markets and we develop our
properties from the ground up for long-term ownership. And once the properties
are open for business, we have the operating system and the people in place to
give our customers an exceptional level of service."
In January 1996, PTR's Board of Trustees asked management to evaluate all
option relating to the operation of Homestead Village assets in order to
maximize shareholder value. A special committee of independent trustees was
appointed to examine a proposed spin-off transaction, and Goldman, Sachs & Co.
was retained to advise the special committee. The special committee received a
fairness opinion from Goldman, Sachs and recommended approval of the spin-off.
Subsequently, the board voted unanimously, with trustees who are directors,
officers or employees of SCG or its affiliates abstaining, to approve the
transaction creating Homestead as a stand-alone corporation. The transaction is
subject to regulatory approval, approval by shareholders of PTR and ATLANTIC and
other customary closing conditions.
Homestead will file a registration statement with the Securities and
Exchange Commission covering the Homestead common stock and warrants to
purchase Homestead common stock to be issued in the proposed spin-off. The
registration statement will also contain a proxy statement to be used in
connection with a special meeting of shareholders of PTR.
FOR MORE INFORMATION, CONTACT: K. Scott Canon or Gerard de Gunzburg
(800) 982-9293 (212) 838-9292
