<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
MERIDIAN POINT REALTY TRUST VIII CO.
(NAME OF SUBJECT COMPANY)
MERIDIAN POINT REALTY TRUST VIII CO.
(NAME OF PERSON(S) FILING STATEMENT)
----------------
COMMON STOCK, PAR VALUE $0.001
PREFERRED STOCK, PAR VALUE $0.001
(TITLE OF CLASS OF SECURITIES)
589954-10-6
589954-20-5
(CUSIP NUMBER OF CLASSES OF SECURITIES)
----------------
ROBERT H. GIDEL
CHIEF EXECUTIVE OFFICER
MERIDIAN POINT REALTY TRUST VIII CO.
655 MONTGOMERY STREET, 8TH FLOOR
SAN FRANCISCO, CA 94111
(415) 274-1808
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
----------------
WITH A COPY TO:
DENIS F. SHANAGHER, ESQ.
PREUSS WALKER & SHANAGHER LLP
595 MARKET STREET, 16TH FLOOR
SAN FRANCISCO, CA 94104
(415) 978-2600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Meridian Point Realty Trust VIII Co., a
Missouri corporation (the "Company"), and the address of its principal
executive office is 655 Montgomery Street, 8th Floor, San Francisco, CA,
94111. The titles of the class of equity securities to which this Statement
relates is the Common Stock, par value $0.001 ("Common Shares") and the
Preferred Stock, par value $0.001 ("Preferred Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer by EastGroup Properties, Inc., a
Maryland corporation ("EastGroup"), and EastGroup-Meridian Inc., a Missouri
corporation (the "Purchaser"), a wholly-owned subsidiary of EastGroup,
disclosed in a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-1")
dated February 23, 1998, to purchase all outstanding shares of the Company at
a price of $8.50 per Common Share, net to the seller in cash (the "Common
Share Offer Price"), and $10.00 per Preferred Share, net to the seller in cash
(the "Preferred Share Offer Price"), upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer") and pursuant to the
Agreement and Plan of Merger dated as of February 18, 1998 (the "Merger
Agreement"), among EastGroup, Purchaser, and the Company.
The bidders in the Offer are EastGroup and Purchaser (the "Bidders"). The
principal executive offices of the Bidders are located at 300 One Jackson
Place, 188 East Capitol Street, Jackson, Mississippi 39201-2195.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except for the Merger Agreement and the Stock Appreciation Rights
Agreement described below, which information to the extent it relates to this
Item 3(b) is incorporated by reference, there are no material contracts,
agreements, arrangements or understandings or actual or potential conflicts of
interest between the Company or its affiliates and its executive officers,
directors, consultants and affiliates or the Bidders, their executive
officers, directors or affiliates.
Merger Agreement
The Merger. The Merger Agreement provides that, following the consummation
of the Offer and subject to the terms and conditions thereof, at the effective
time of the Merger (as hereinafter defined the "Effective Time") the Purchaser
shall be merged with and into the Company (the "Merger") and, as a result of
the Merger, the separate corporate existence of the Purchaser shall cease, and
the Company shall continue as the surviving corporation (the "Surviving
Corporation") and a wholly-owned subsidiary of EastGroup.
The respective obligations of EastGroup and the Purchaser, on the one hand,
and the Company, on the other hand, to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions: (i) the Merger Agreement shall have been approved by the requisite
vote of the shareholders, if required by applicable law, in order to
consummate the Merger, (ii) no temporary restraining order, preliminary or
permanent injunction or other order by any United States federal or state
court or governmental body which prohibits the consummation of the
transactions contemplated by the Merger Agreement shall have been issued;
provided, however, that the Purchaser, EastGroup and the Company shall have
used all reasonable efforts to have such order or injunction vacated or
reversed; and (iii) if applicable, the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall
have expired or shall have been terminated.
At the Effective Time of the Merger, each Preferred Share issued and
outstanding (other than Dissenting Shares (as defined in the Merger Agreement)
representing Preferred Shares and those Preferred Shares held by
1
<PAGE>
the Company, any subsidiary of the Company, EastGroup or the Purchaser which
are to be canceled pursuant to the Merger Agreement) shall be converted into
the right to receive in cash, without interest, the price per Preferred Share
paid pursuant to the Offer (the "Preferred Merger Price").
At the Effective Time of the Merger, each Common Share issued and
outstanding (other than Dissenting Shares representing Common Shares and those
Common Shares held by the Company, any subsidiary of the Company, EastGroup or
the Purchaser which are to be canceled pursuant to the Merger Agreement) shall
be converted into the right to receive in cash, without interest, the price
per Common Share paid pursuant to the Offer (the "Common Merger Price").
Also as of the Effective Time, each issued and outstanding share of the
capital stock of the Purchaser shall be converted into and become one fully
paid and nonassessable common share, $0.001 par value per share, of the
Surviving Corporation.
The Company's Board of Trustees. The Merger Agreement provides that promptly
upon the purchase by the Purchaser or EastGroup of Preferred Shares and Common
Shares pursuant to the Offer, EastGroup shall be entitled to designate three
persons to serve as trustees on the Company's Board of Trustees, subject to
compliance with Section 14(f) of the Exchange Act of 1934, as amended, if
applicable. At such time, if requested by EastGroup, the Company will also
cause each committee of the Board of Trustees of the Company to include
persons designated by EastGroup constituting the same percentage of each such
committee as EastGroup's designees are of the Board of Trustees of the
Company. The Company shall, upon request by EastGroup, promptly exercise
reasonable best efforts to secure the resignations of such number of trustees
as is necessary to enable EastGroup's designees to be elected to the Board of
Trustees of the Company in accordance with the terms of the Merger Agreement
and to cause EastGroup's designees so to be elected. In no event shall the
Company expand the Board of Trustees so that the total number of trustees
shall exceed seven persons. The Company shall promptly take all action
necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under the Merger
Agreement and shall include in the Schedule 14D-9 mailed to shareholders
promptly after the commencement of the Offer (or in an amendment thereof or
the information statement to be filed by the Company in connection with the
Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") if EastGroup has not theretofore designated trustees)
such information with respect to the Company and its officers and trustees as
is required under Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under the Merger Agreement.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company will,
at EastGroup's request, duly call, give notice of, convene and hold a meeting
of its shareholders if such meeting is required by applicable law for the
purpose of approving the Merger Agreement and the transactions contemplated
thereby. The Merger Agreement provides that the Company will, at EastGroup's
request, prepare and file with the Securities and Exchange Commission (the
"Commission") and, when cleared by the Commission, will mail to shareholders,
a proxy statement with respect to the Company's shareholders' meeting to vote
upon the Merger Agreement and Merger transactions, or the Information
Statement, as appropriate, satisfying all requirements of the Exchange Act.
If the Purchaser acquires at least 3,186,354 Shares as a result of the
Offer, EastGroup will beneficially own two-thirds of the outstanding Shares.
In such event, EastGroup would have sufficient voting power to approve the
Merger, even if no other shareholder votes in favor of the Merger.
The Merger Agreement provides that in the event that EastGroup or the
Purchaser acquires at least 90% of the Common Shares outstanding and 90% of
the Preferred Shares outstanding, pursuant to the Offer or otherwise,
EastGroup, the Purchaser and the Company will take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such acquisition, without a meeting of shareholders of the
Company, in accordance with the Missouri General and Business Corporate Law
("GBCL"). For a discussion of certain terms of the Merger Agreement that
increase the likelihood that the Purchaser could acquire at least 90% of the
outstanding Common Shares and 90% of the outstanding Preferred Shares, see the
discussion of the Contingent Options in the immediately following paragraph.
2
<PAGE>
Contingent Options of the Purchaser. Pursuant to the Merger Agreement, the
Company has granted the Purchaser irrevocable options (the "Contingent
Options") to (i) purchase for a price of $8.50 per Common Share (the "Per
Common Share Price") in cash a number of Common Shares (the "Optioned Common
Shares") equal to the Applicable Common Share Amount (as defined below) and
(ii) purchase for a price of $10.00 per Preferred Share (the "Per Preferred
Share Price") in cash a number of Preferred Shares (the "Optioned Preferred
Shares") equal to the Applicable Preferred Share Amount (as defined below).
The "Applicable Common Share Amount" is the number of Common Shares which,
when added to the number of Common Shares owned by EastGroup and the Purchaser
immediately prior to the exercise of the option, would result in the Purchaser
owning immediately after the exercise of the option 90% of the then
outstanding Common Shares. The "Applicable Preferred Share Amount" is the
number of Preferred Shares owned by EastGroup and the Purchaser which, when
added to the number of Preferred Shares owned by EastGroup and the Purchaser
immediately prior to the exercise of the option, would result in the Purchaser
owning immediately after the exercise of the option 90% of the then
outstanding Preferred Shares. The Purchaser may exercise the Contingent
Options only if at the time of exercise, it (i) shall have accepted Common
Shares or Preferred Shares, as appropriate, for payment pursuant to the Offer,
and (ii) the Minimum Condition (as defined herein) has been satisfied.
Interim Operations; Covenants. Prior to the Effective Time, except as
specifically permitted by the Merger Agreement, unless the other party has
consented in writing thereto, EastGroup and the Company: (i) shall use their
reasonable best efforts, and shall cause each of their respective subsidiaries
to use their reasonable best efforts, to preserve intact their business
organizations and goodwill and keep available the services of their respective
officers and employees; (ii) shall confer on a regular basis with one or more
representatives of the other to report operational matters of materiality and,
subject to the Merger Agreement, any proposals to engage in material
transactions; (iii) shall promptly notify the other of any material emergency
or other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or in the normal course of their
businesses or in the operation of their properties, any material governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the breach in any material respect of any
representation or warranty contained herein; and (iv) shall promptly deliver
to the other true and correct copies of any report, statement or schedule
filed with the Commission subsequent to the date of the Merger Agreement.
Pursuant to the Merger Agreement, the Company has agreed that, unless agreed
to by EastGroup, after the date of the Merger Agreement and prior to the
Effective Time, the Company (i) shall conduct, and it shall cause the Company
subsidiaries to conduct, its or their operations according to their usual,
regular and ordinary course in substantially the same manner as conducted
prior to the date of the Merger Agreement; (ii) shall not, and shall cause
each Company subsidiary not to, acquire, enter into an option to acquire or
exercise an option or contract to acquire additional real property, incur
additional indebtedness, encumber assets or commence construction of, or enter
into any agreement or commitment to develop or construct, any other type of
real estate projects except for the transactions contemplated in the
Disclosure Schedule; (iii) shall not amend the Certificate of Incorporation or
the Bylaws of the Company, and shall cause each Company subsidiary not to
amend its charter, bylaws, joint venture documents, partnership agreements or
equivalent documents except as contemplated by the Merger Agreement; (iv)
shall not (A) issue any shares of its capital stock, effect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, (B) grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any shares of its
capital stock, (C) increase any compensation or enter into or amend any
employment agreement with any of its present or future officers or trustees,
or (D) adopt any new employee benefit plan (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee benefit plan in
any material respect, except for changes which are less favorable to
participants in such plans; (v) shall not, and shall not permit any of the
Company subsidiaries to, except in accordance with and as permitted under the
Merger Agreement, sell, lease or otherwise dispose of (A) any of the Company
Properties (as defined in the Merger Agreement) or any portion thereof or any
of the capital stock of or partnership or other interests in any of the
Company subsidiaries or (B) except in the ordinary course of business, any of
its other assets which are material, individually or in the aggregate; (vi)
shall not, and shall not permit any of the Company subsidiaries to, make any
loans, advances or capital contributions to, or
3
<PAGE>
investments in, any other person; (vii) shall not and shall not permit any of
the Company subsidiaries to, pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by,
the most recent consolidated financial statements (or the notes thereto) of
the Company included in the Company Public Reports (as defined in the Merger
Agreement) or incurred in the ordinary course of business consistent with past
practice; (viii) shall not, and shall not permit any of the Company
subsidiaries to, enter into any material commitment, contractual obligation,
borrowing, capital expenditure or transaction (each, a "Commitment") which may
result in total payments or liability by or to it in excess of $50,000 other
than Commitments for expenses of attorneys, accountants and investment bankers
incurred in connection with the Merger, and (ix) shall not, and shall not
permit any of the Company subsidiaries to, enter into any Commitment with any
officer, trustee, director, consultant or affiliate of the Company or any of
the Company subsidiaries.
In addition, the Company shall not, without the written consent of
EastGroup, which consent may not be unreasonably withheld, (i) effect any
material change in any lease or occupancy agreement currently in effect which
affects the Company Properties (together with such additional leases approved
or permitted pursuant to the Merger Agreement, the "Leases" (ii) renew or
extend the term of any Lease, unless the same is an extension or expansion
permitted pursuant to the terms of an existing Lease; or (iii) enter into any
new Lease or cancel or terminate any Lease. Notwithstanding anything in the
Merger Agreement to the contrary, the Company may cancel or terminate any
Lease or commence collection, unlawful detainer or other remedial action
against any tenant without EastGroup's consent upon the occurrence of a
default by the tenant under said Lease.
No Solicitation. The Merger Agreement provides that unless and until the
Merger Agreement shall have been terminated in accordance with its terms, the
Company agrees and covenants that (i) neither it nor any Company subsidiary
shall, and each of them shall direct and use its best efforts to cause its
respective officers, trustees, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of the Company subsidiaries) not
to, directly or indirectly, initiate, solicit or knowingly encourage any
inquiries or the making or implementation of any proposal or offer (including,
without limitation, any proposal or offer to its shareholders) with respect to
a merger, acquisition, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase, sale, lease, issuance or other
disposition (except as permitted under the Merger Agreement) of (a) 10% or
more of the assets; (b) any equity securities (or options, rights or warrants
to purchase, or securities convertible into, such securities) representing 10%
or more of the voting power; (c) partnership interests; or (d) any transaction
in which any person shall acquire beneficial ownership (as such term is
defined in Rule 13d-3 under the Exchange Act), or the right to acquire
beneficial ownership, of 10% or more of the equity securities, of the Company
or of the Company's subsidiary, other than the transactions contemplated by
this Agreement (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; (ii) the Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing and will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in the
Merger Agreement; and (iii) the Company will notify EastGroup immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, the Company and such notification will include
the specific details with respect to any such inquiries, proposals, requests,
negotiations or discussions.
Notwithstanding anything set forth in the Merger Agreement to the contrary
(i) the Board of Trustees of the Company may furnish information to or enter
into discussions or negotiations with any person or entity that makes an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that,
the Board of Trustees of the Company, after consultation with and based upon
the advice of Preuss Walker & Shanagher LLP or another nationally recognized
law firm selected by the Board of Trustees of the Company, determines in good
faith that
4
<PAGE>
such action is required for the Board of Trustees to comply with its fiduciary
duties to shareholders under applicable law, provided that prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, the Company provides written notice to EastGroup to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and the Company keeps EastGroup
regularly informed of the status of any such discussions or negotiations; and
(ii) the Board of Trustees of the Company may, to the extent applicable,
comply with Rules 14d-9 and 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal.
Indemnification and Insurance. The Merger Agreement provides that in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any such claim, action, suit, proceeding or investigation in which
any person who is now, or has been at any time prior to the date hereof, or
who becomes prior to the Effective Time, a director, trustee, officer,
employee, fiduciary or agent of the Company or any of its subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he, she or it is or was a director, trustee, officer, employee or
agent of the Company or any of its subsidiaries, or is or was serving at the
request of the Company or any of its subsidiaries as a director, trustee,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise; or (ii) the Merger Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the Effective Time, the parties hereto agree to cooperate and
use their reasonable best efforts to defend against and respond thereto. The
Company shall indemnify and hold harmless, and after the Effective Time
EastGroup shall indemnify and hold harmless, as and to the full extent
permitted by applicable law, each Indemnified Party against any losses,
claims, damages, liabilities, costs, expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection with
any such threatened or actual claim, action, suit, proceeding or
investigation, and in the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted or arising before
or after the Effective Time), (i) the Company, and EastGroup after the
Effective Time, shall promptly pay expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to each
Indemnified Party to the full extent permitted by law; (ii) the Indemnified
Parties may retain counsel satisfactory to them, and the Company, and
EastGroup after the Effective Time, shall pay all fees and expenses of such
counsel for the Indemnified Parties within thirty days after statements
therefor are received; and (iii) the Company and EastGroup will use their
respective reasonable best efforts to assist in the vigorous defense of any
such matter, provided, that neither the Company nor EastGroup shall be liable
for any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld); and provided further that EastGroup shall
have no obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law. Any Indemnified Party wishing to claim indemnification under
the Merger Agreement, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify the Company and, after the Effective
Time, EastGroup, thereof, provided that the failure to so notify shall not
affect the obligations of the Company or EastGroup except to the extent such
failure to notify materially prejudices such party.
EastGroup agreed that all rights to indemnification existing in favor, and
all limitations on the personal liability, of the Indemnified Parties provided
for in the Company's Charter or the Company's Bylaws or the charter or bylaws
or similar organizational documents of any of its subsidiaries as in effect as
of the date hereof with respect to matters occurring prior to the Effective
Time shall survive the Merger and shall continue in full force and effect for
a period of not less than three years from the Effective Time; provided,
however, that all rights to indemnification in respect of any claim (a
"Claim") asserted or made within such period shall continue until the
disposition of such Claim. At or prior to the Effective Time, EastGroup shall
purchase directors' and officers' liability insurance coverage for the
Company's trustees and officers in a form acceptable to the Company which
shall provide such trustees and officers with $10,000,000 of aggregate
coverage for three years following the Effective Date and which shall have a
retention of no more than $250,000. EastGroup may satisfy these obligations
under the Merger Agreement by maintaining in force the Company's present
directors' and officers' liability insurance coverage.
5
<PAGE>
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made representations and warranties to EastGroup and the Purchaser
with respect to, among other things, its organization, capitalization,
authority relative to the Merger, financial statements, public filings,
conduct of business, employee benefit plans, employment matters, compliance
with laws, tax matters, litigation, environmental matters, material contracts,
brokers' fees and other matters.
Termination; Fees. The Merger Agreement provides that it may be terminated
at any time prior to the Effective Time, whether before or after approval of
the shareholders of the Company:
(i) by mutual consent of the Board of Directors of EastGroup and the
Board of Trustees of the Company;
(ii) by either EastGroup or the Company if the Merger shall not have been
consummated on or before August 31, 1998 (provided the terminating party is
not otherwise in material breach of its representations, warranties or
obligations under the Merger Agreement);
(iii) by the Company if any of the conditions precedent specified in the
Merger Agreement have not been met or waived by the Company at such time as
such condition is no longer capable of satisfaction as long as the Company
is not in breach of the Merger Agreement;
(iv) by EastGroup or the Purchaser if (a) any of the conditions precedent
specified in the Merger Agreement have not been met or waived by EastGroup
at such time as such condition is no longer capable of satisfaction or (b)
there shall not have been a sufficient number of Common Shares and
Preferred Shares tendered pursuant to the Offer in order to satisfy the
Minimum Condition on or before April 30, 1998, as long as EastGroup is not
in breach of the Merger Agreement;
(v) by EastGroup or the Purchaser if either EastGroup or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of (a) the
Board of Trustees of the Company or any committee thereof shall have
withdrawn or modified in a manner adverse to EastGroup or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal or (b) the
Company shall have entered into any agreement with respect to any
Acquisition Proposal in accordance with the Merger Agreement;
(vi) by the Company, if the Board of Trustees of the Company recommends
to the Company's shareholders approval or acceptance of an Acquisition
Proposal in accordance with the Merger Agreement; and
(vii) by the Company, if either EastGroup or the Purchaser is in material
breach of its obligations under the Merger Agreement and such material
breach shall not have been cured by EastGroup or the Purchaser within five
days after EastGroup or the Purchaser receives notice thereof.
If (A) EastGroup terminates the Merger Agreement pursuant to section
(v) above, or pursuant to (ii) above as a result of a willful breach by
the Company; or
(B) the Company terminates the Merger Agreement pursuant to section
(vi) above; or
(C) during the pendency of the Offer a third party announces or
proposes an Acquisition Proposal and EastGroup terminates the Merger
Agreement under (iv)(b) above and the Company thereafter consummates or
enters into an agreement to consummate an Acquisition Proposal (with
such third party or otherwise) within the one year period after such
termination of the Merger Agreement;
then the Company shall pay to EastGroup an amount (the "Termination
Amount") in cash equal to the sum of (i) $2,500,000, plus (ii) EastGroup's
reasonable out-of-pocket costs and expenses in connection with the Merger
Agreement and the transactions contemplated hereby, evidenced by
documentation reasonably acceptable to the Company, in accordance with the
provisions of the Merger Agreement.
6
<PAGE>
In the event that (i) EastGroup or the Purchaser are in material breach of
the Merger Agreement and the Offer or the Merger are not consummated; or (ii)
the Company terminates the Merger Agreement under (vii) above, EastGroup shall
pay to the Company an amount in cash equal to $2,500,000 (the "Damage
Amount"). The parties to the Merger Agreement agreed that in the event
EastGroup or the Purchaser breaches the Merger Agreement, actual damages would
be difficult to determine and that the Damage Amount is a liquidated damage
payment in lieu of such actual damages. Payment of the Damage Amount shall be
the Company's sole and exclusive remedy for any material breach of the Merger
Agreement by EastGroup or the Purchaser; provided, however, that the Company
may elect to seek the remedies described in the next paragraph in which case
the Company's sole and exclusive remedy for any material breach of the Merger
Agreement will be as described below and the Company will waive any and all
rights to collection of the Damage Amount.
The parties to the Merger Agreement agreed that irreparable damage could
occur to the Company in the event that any of the provisions of the Merger
Agreement were not performed in accordance with their specific terms or were
otherwise breached. The parties therefore agreed that the Company shall be
entitled to an injunction or injunctions to prevent breaches of the Merger
Agreement and to enforce specifically the terms and provisions of the Merger
Agreement in any court of the United States or any state having jurisdiction;
provided, however, that in the event the Company elects to collect or attempts
to collect the Damage Amount from EastGroup or the Purchaser, payment of the
Damage Amount shall be the Company's sole and exclusive remedy for any
material breach of the Merger Agreement by EastGroup or the Purchaser.
Funding. EastGroup has agreed, subject to the terms and conditions of the
Offer, to provide or cause to be provided to the Purchaser on a timely basis
the funds necessary to accept for payment, and pay for, Common Shares and
Preferred Shares that the Purchaser becomes obligated to accept for payment,
and pay for, pursuant to the Offer.
Dividends and Distributions. The Merger Agreement provides that without the
prior written consent of EastGroup, which consent may be withheld for any
reason, between the date of the Merger Agreement and the Effective Time, the
Company shall not declare, set aside or pay any dividends or distributions
whether in cash or property. Notwithstanding anything to the contrary set
forth in the Merger Agreement, nothing in the Merger Agreement shall prohibit
the Company or any Company subsidiary from taking any action at any time or
from time to time that in the reasonable judgment of the Company is necessary
for the Company to maintain its qualification as a REIT (as defined herein)
within the meaning of Sections 856-860 of the Internal Revenue Code for any
period or portion thereof ending on or prior to the Effective Time including
making dividend or distribution payments to shareholders; provided, however,
that no dividends or distributions required to avoid the excise tax on
undistributed REIT income under Section 4981 of the Code shall be deemed to be
necessary for the Company to maintain its qualification as a REIT within the
meaning of Sections 856-860 of the Code. In addition, the Company may declare,
set aside and pay distributions to its shareholders (i) in an amount not to
exceed $0.08 per Common Share and $0.08 per Preferred Share per calendar
quarter which distributions will have record dates and payment dates
substantially similar to such dates in 1997; or (ii) as required by the
Company's Charter. To the extent any dividends or distributions in excess of
$0.08 per Common Share and $0.08 per Preferred Share per quarter are paid, the
Common Share Offer Price, the Preferred Share Offer Price, the Common Merger
Price and the Preferred Merger Price shall be reduced by the cumulative per
share amount of such excess.
Prior to the Effective Time, unless EastGroup has consented to the contrary,
the Company shall take any such actions as may be necessary to maintain the
Company's status as a REIT for any period or portions thereof ending on or
prior to the Effective Time. Following the Effective Time, EastGroup shall use
its best efforts to take any such actions as may be necessary to maintain the
Company's status as a REIT for any period or portion thereof ending on or
prior to the Effective Time.
In addition, prior to the Effective Time, unless EastGroup has consented,
the Company shall not (i) issue any shares of its capital stock, effect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction or (ii) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof to acquire any
shares of its capital stock.
7
<PAGE>
In the event of any change in the number of outstanding Common Shares or
Preferred Shares by reason of any stock dividend, stock split,
recapitalization, combination, exchange of shares, merger, consolidation,
reorganization or the like or any other change in the corporate or capital
structure of the Company that would have the effect of diluting EastGroup's
rights hereunder, the number of Optioned Common Shares or the number of
Optioned Preferred Shares and the Per Common Share Price or the Per Preferred
Share Price, respectively, shall be adjusted appropriately so as to restore
EastGroup to its rights hereunder with respect to such option; provided,
however, that nothing in this paragraph shall be construed as permitting the
Company to take any action or enter into any transaction prohibited by this
Merger Agreement.
Certain Conditions of the Offer. Notwithstanding any other term of the Offer
or the Merger Agreement, the Purchaser shall not be required to accept for
payment or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-l(c) under the Exchange Act (relating to the Purchaser's
obligation to pay for or return tendered Common Shares or Preferred Shares
after the termination or withdrawal of the Offer), to pay for any Common
Shares or Preferred Shares tendered pursuant to the Offer unless, (i) there
shall have been validly tendered and not withdrawn prior to the expiration of
the Offer such number of Common Shares and Preferred Shares that, when added
to Preferred Shares beneficially owned by EastGroup on the date of the Merger
Agreement, will constitute two-thirds of the total number of shares of the
capital stock of the Company entitled to vote on a merger under the Company's
Certificate of Incorporation, as amended, and the GBCL (the "Minimum
Condition"); and (ii) any waiting period under the HSR Act applicable to the
purchase of Common Shares and Preferred Shares pursuant to the Offer shall
have expired or been terminated (the "HSR Condition"). Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject as
aforesaid, to pay for any Common Shares and Preferred Shares not theretofore
accepted for payment or paid for, and may terminate the Offer if, at any time
on or after the date of the Merger Agreement and before the acceptance of such
shares for payment or the payment therefor, any of the following conditions
exist (other than as a result of any action or inaction of EastGroup or any of
its subsidiaries which constitutes a breach of the Merger Agreement):
(i) there shall be threatened or pending by any governmental entity any
suit, action or proceeding, (a) challenging the acquisition by EastGroup or
the Purchaser of any Common Shares or Preferred Shares under the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or the performance of any of the other transactions contemplated
by the Merger Agreement, or seeking to obtain from the Company, EastGroup
or the Purchaser any damages that are material in relation to the Company
and its subsidiaries taken as a whole; (b) seeking to prohibit or limit the
ownership or operation by the Company, EastGroup or any of their respective
subsidiaries of a material portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or EastGroup and its subsidiaries,
taken as a whole, or to compel the Company or EastGroup to dispose of or
hold separate any material portion of the business or assets of the Company
and its subsidiaries, taken as a whole, or EastGroup and its subsidiaries,
taken as a whole, as a result of the Offer or any of the other transactions
contemplated by the Merger Agreement; (c) seeking to impose material
limitations on the ability of EastGroup or the Purchaser to acquire or
hold, or exercise full rights of ownership of, any Common Shares or
Preferred Shares accepted for payment pursuant to the Offer including,
without limitation, the right to vote such Common Shares and Preferred
Shares on all matters properly presented to the shareholders of the
Company; (d) seeking to prohibit EastGroup or any of its subsidiaries from
effectively controlling in any material respect the business or operations
of the Company and its subsidiaries, taken as a whole; or (e) which
otherwise is reasonably likely to have a material adverse effect on the
business. financial condition or results of operations of the Company and
its subsidiaries, taken as a whole;
(ii) there shall be any statute, rules, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
governmental entity or court, other than the application to the Offer or
the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (a) through (e) of paragraph (i) above;
8
<PAGE>
(iii) (a) the Board of Trustees of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to EastGroup or the
Purchaser its approval or recommendation of the Offer, the Merger or the
Merger Agreement, or approved or recommended any takeover proposal or (b)
the Company shall have entered into any agreement with respect to any
Acquisition Proposal in accordance with the Merger Agreement;
(iv) there shall have occurred (a) any general suspension of trading in,
or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified
decrease in a market index); (b) any extraordinary or material adverse
change in the financial market or major stock exchange indices in the
United States; (c) any material adverse change in United States currency
exchange rates or a suspension of, or limitation on, the markets therefor;
(d) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States; (e) any limitation (whether or not
mandatory) by any governmental entity on, or other event that might
materially affect, the extension of credit by banks or other lending
institutions; or (f) in the case of any of the foregoing existing on the
date of the Merger Agreement, a material acceleration or worsening thereof;
(v) any of the representations and warranties of the Company set forth in
the Merger Agreement that are qualified as to materiality shall not be true
and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement and as of the scheduled
Expiration Date of the Offer;
(vi) the Company shall have failed to perform in any material respect any
material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement;
(vii) the Merger Agreement shall have been terminated in accordance with
its terms.
Stock Appreciation Rights Agreement
On September 21, 1997, the Company entered into a Stock Appreciation Rights
Agreement (the "SAR Agreement") with Robert H. Gidel, Chief Executive Officer
of the Company. Under the terms of the SAR Agreement, Mr. Gidel was granted
stock appreciation rights ("SARs") of 150,000 common stock SARs at a price of
$5.50 per common share, and 75,000 preferred stock SARs at a price of $8.50
per preferred share.
Under the SAR Agreement, the SARs vest on the first anniversary of the date
of grant, or immediately upon a change in control, whichever occurs first. A
change in control under the SAR Agreement shall be deemed to occur if any
person, as defined therein, becomes the "beneficial owner," as defined in Rule
13d-3 under the Exchange Act, of securities of the Company representing fifty
percent (50%) or more of the then combined voting power of the Company's then
outstanding securities.
Upon vesting of the SARs, the SAR Agreement provides that Mr. Gidel shall
receive from the Company in cash an amount equal to the difference between the
fair market value of the shares of stock on the exercise date and the Exercise
Price, as defined therein, multiplied by the number of SARs being exercised.
In the event Purchaser consummates the offer described above, the Company
anticipates Mr. Gidel will exercise all of his SARs, in which event he will be
entitled to a cash payment from the Company of up to $562,500.00.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) At a special meeting held on February 17, 1998, the Board of Trustees of
the Company (the "Board of Trustees") unanimously determined that each of the
Offer and the Merger is fair to, and in the best interests of, the Company's
stockholders and approved the Merger Agreement and the transactions
contemplated thereby. The Board hereby recommends that the Company's
stockholders accept the Offer and tender all their Common Shares and Preferred
Shares pursuant to the Offer. Copies of a letter to stockholders is attached
hereto as Exhibit 4 and is incorporated herein by reference.
9
<PAGE>
(b) The reasons for the position stated in paragraph (a) of this Item 4 are
presented in the information furnished below in this Item 4(b).
Background of the Offer
The Company was incorporated in December 1987 and commenced operations in
early 1988 as a REIT, with the anticipated intention to begin to liquidate
within five to eight years from inception, although not required by the
Articles of Incorporation or By-Laws. However, a precipitous decline in real
estate values beginning in 1991 created a situation in which liquidation
within this time frame would not provide sufficient proceeds for the holders
of Common Shares to receive any liquidation proceeds, as a result of the
Company's $10 per Preferred Share liquidation preference. Further, a
liquidation in that time frame was believed to be inadequate to meet the $10
per share preference of the holders of Preferred Shares.
In March, 1995, the Company engaged CS First Boston as its financial advisor
to review various strategic alternatives and opportunities available to the
Company. The review included the possibility of liquidation or the sale of the
Company's assets. The liquidation alternative did not appear feasible at the
time for the reasons discussed above. In late 1995 and early 1996, the Company
received several preliminary proposals for the sale or merger of all or a
portion of the Company's assets. Included in the proposals received and
reviewed by the Company were three proposals from EastGroup, under the last of
which the Company would have received approximately $41 million in cash and
EastGroup stock. As part of the process resulting in the EastGroup proposals,
the Company had requested, and EastGroup executed, a Confidentiality and
Standstill Agreement which included provisions restricting EastGroup's ability
for a period of two years to acquire securities of the Company, make or
participate in the solicitation of proxies with respect to the Company, make
any offer or proposal with respect to the Company's securities or join with
others to accomplish any of the above (the "Standstill Agreement").
In December of 1995, the Company retained TIS Financial Services Inc. as
manager of the Company's assets. The Board of Trustees of the Company then
requested that the new management team perform a review of the Company's
assets to develop a strategic plan to increase the value of the Company so
that any future transaction would accurately reflect the value of the Company
and result in a reasonable and fair return for all shareholders.
In April, 1996, the Company determined that the preliminary proposals,
including the proposals from EastGroup, were not sufficiently in a range to
adequately reflect the current or future value of the Company, and if
consummated, would not result in an acceptable return for either the preferred
or common shareholders.
As a result, in April, 1996, the Company terminated its engagement of CS
First Boston and adopted a new business plan whereby the Company would
stabilize its property portfolio to reflect its status as a "Sun Belt" REIT
through selected expansions, dispositions and refinancing of its portfolio
over the course of the following three years. This would include the expansion
of several properties owned by the Company, the sale of certain properties
outside the Company's target geographical market area, the purchase of
properties within the Company's target area, and the refinancing of the
Company's debt, all while attempting to maintain or improve the Company's
dividend payments. Under this plan, management believed the Company could
improve its value over the course of the next three years so as to result in a
significantly greater return to all shareholders than could be achieved by a
transaction at that time.
In order to allow for the implementation of its business plan, at the annual
meeting held on June 16, 1996, the Company's shareholders approved an
amendment to the Company's By-Laws relating to investment policy which allowed
the Company to reinvest proceeds from the sale of property into the purchase
of new property, providing the Company with the flexibility to achieve the
goals of its business plan described above.
In accordance with the business plan, in 1997 the Company proceeded with the
sales of its Richland, Mississippi and Bedford, Illinois properties. (The
Richland, Mississippi, property was sold to EastGroup in an
10
<PAGE>
arms-length transaction.) The Company constructed a 187,500 square foot
addition to its Waldenbooks distribution facility in Nashville, Tennessee, and
purchased three buildings, totaling approximately 71,000 square feet, in Palm
Beach, Florida. In addition, on July 30, 1997, the Company retired and paid in
full its principal debt facility, and subsequently entered into new loans
totaling $25.5 million secured by certain of its properties in Arizona,
California and Tennessee.
On or about March 21, 1997, Meredith Partners, Inc. ("Meredith") filed a
Schedule 13D and disclosed its letter agreement with the Massachusetts Bay
Transportation Authority Retirement Fund ("MBTA") to purchase 1,183,556
Preferred Shares. Meredith further disclosed that upon the purchase, it
intended to try to influence the management of the Company.
In late April, 1997, the Company released EastGroup from the Standstill
Agreement for the sole purpose of contacting and negotiating with MBTA
regarding the purchase of the Preferred Shares held by MBTA.
On May 21, 1997, Meredith entered into an Assignment Agreement with Turkey
Vulture Fund XIII, whereby Meredith assigned all its rights, title and
interest in the MBTA agreement to Turkey Vulture, which similarly indicated
its intention to influence management of the Company.
On May 30, 1997, the Company similarly released EastGroup from the
Standstill Agreement for the sole purpose of contacting and negotiating with
the Massachusetts State Teachers & Employee Retirement Systems Trust
("MASTERS") regarding the purchase of 1,560,754 Preferred Shares owned by
MASTERS. On June 2, 1997, the Company also released EastGroup from the
Standstill Agreement for the purpose of contacting and negotiating with the
Chicago Truck Drivers, Helpers and Warehouse Workers Union (independent)
Pension Fund ("Chicago") regarding the purchase of the 521,164 Preferred
Shares owned by Chicago.
On June 3, 1997, Turkey Vulture purchased the Preferred Shares held by MBTA
and thereafter instituted a proxy solicitation to elect five of their nominees
to the Company's Board of Trustees.
At the June 13, 1997 Annual Meeting of Shareholders, the Company invoked the
excess share provisions contained in Section 6.5 of the Company's By-Laws
(which prohibit any person from owning, directly or indirectly, more than 9.8%
of the outstanding shares) to deny Turkey Vulture voting rights with respect
to Preferred Shares owned in excess of the 9.8% limit. As a result of this
limitation on voting rights, only one of Turkey Vulture's nominees was elected
to the Board of Trustees. (In the absence of the limitation, two of the Turkey
Vulture nominees would have been elected.) On the same date, the Company
instituted litigation against Turkey Vulture and related parties seeking to
confirm its application of the voting limitation.
On July 1, 1997, the Company appointed Robert H. Gidel as Chief Executive
Officer and entered into a Personal Services Agreement in that regard.
The Company's Standstill Agreement with EastGroup expired by its terms on
August 15, 1997.
On August 27, 1997, Turkey Vulture and related parties sold 1,411,756
Preferred Shares to EastGroup in a privately negotiated transaction, resulting
in Turkey Vulture and related parties reducing the number of shares held in
the Company to less than the 9.8% restriction. Subsequently, the Company and
Turkey Vulture settled and dismissed the litigation.
In its statement on Schedule 13D filed on August 27, 1997 with respect to
the purchase of the Preferred Shares (the "Schedule 13D"), EastGroup indicated
that it anticipated proposing to the Board of Trustees of the Company a
negotiated business combination transaction between the Company and EastGroup
in which EastGroup would be the surviving entity. EastGroup also indicated
that it might pursue a tender offer or similar transaction involving the
Company and that it had not yet formulated a definitive proposal with respect
to any possible business combination or offer. Shortly after the filing of the
Schedule 13D, representatives of EastGroup contacted representatives of the
Company and counsel to EastGroup contacted counsel to the Company to inform
11
<PAGE>
them that EastGroup was in the process of making a number of large real estate
acquisitions and planning financing for such acquisitions and that it would be
several weeks before it would be possible for EastGroup to focus on its plans
with respect to the Company.
On or about October 30, 1997, the Company engaged Prudential Securities
Incorporated ("Prudential Securities") as the Company's exclusive financial
advisor with respect to the Company's implementing a strategic plan for
enhancing shareholder value.
On November 14, 1997, with the advice of Prudential Securities, the Company
adopted a Shareholder Rights Plan, which was intended to protect the Company's
shareholders in the event of coercive or unfair takeover tactics, or an
unsolicited attempt to acquire control of the Company in a transaction the
Board of Trustees believed was not in the best interests of the shareholders.
On December 2, 1997, representatives of the Company met with representatives
of EastGroup. At that meeting, the EastGroup representatives stated
EastGroup's desire to promptly enter into negotiations with the Company with
respect to a business combination transaction between EastGroup and the
Company. The representatives of the Company advised EastGroup that the Company
was in the process of evaluating the Company's strategic alternatives and that
the Company had retained Prudential Securities to help the Company in such
evaluation. Representatives of the Company requested that EastGroup sign a
confidentiality agreement containing a limited standstill provision with
respect to receiving updated non-public information of the Company so that
EastGroup could participate in the process to be implemented by Prudential
Securities. The EastGroup representatives informed the Company representatives
that EastGroup believed that a merger between EastGroup and the Company was in
the best interest of all parties, and that it was EastGroup's present
intention to oppose and vote its Preferred Shares against any strategic
alternative of the Company that would delay or frustrate such a transaction.
Further, in light of EastGroup's position and EastGroup's significant holdings
in the Company, the EastGroup representatives indicated their view that it was
impractical and unnecessary for the Company to explore such strategic
alternatives. Representatives of the Company at the meeting indicated that
they would discuss EastGroup's proposal with the Board of Trustees of the
Company at a regularly scheduled meeting later in December.
In mid-December, following a meeting of the Company's Board of Trustees,
counsel to the Company informed counsel to EastGroup that the Company would be
interested in holding discussions with EastGroup with respect to a negotiated
business combination transaction which might include an offer of EastGroup
stock to the Company's shareholders. EastGroup then offered the Company the
opportunity to perform a due diligence investigation with respect to EastGroup
prior to the beginning of discussions with respect to such a business
combination transaction. On January 8, 1998 representatives of the Company
visited EastGroup's offices in Jackson, Mississippi to perform a preliminary
due diligence investigation with respect to EastGroup's business, assets and
prospects. In connection with this investigation, the Company executed a
confidentiality agreement with respect to the receipt of non-public
information from EastGroup.
On January 16, 1998, the Company received an unsolicited offer to merge from
EastGroup. In the offer to merge, each Preferred Share would be converted into
EastGroup shares with a value of $9.75, and each Common Share would be
converted into EastGroup shares with a value of $6.75. Company shareholders
would have the option to exchange their Preferred Shares or Common Shares for
$9.75 and $6.75 in cash, respectively, provided that the total number of
Preferred Shares and Common Shares surrendered for cash, including shares
surrendered pursuant to the exercise of dissenter's rights, would not exceed
30 percent of all issued and outstanding Preferred Shares (excluding Preferred
Shares currently held by EastGroup) and 30 percent of all issued and
outstanding Common Shares.
After receipt of the offer to merge, conversations occurred between
representatives of EastGroup and representatives of the Company,
representatives of PaineWebber Incorporated ("PaineWebber"), financial advisor
to EastGroup, and representatives of Prudential Securities, and counsel to
EastGroup and counsel to the Company. Counsel to EastGroup sent counsel to the
Company a draft of a proposed Agreement and Plan of Merger pursuant to which
the proposed offer to merge would be effected.
12
<PAGE>
Following receipt of the offer to merge from EastGroup, the Company, in
conjunction with Prudential Securities, continued to explore its strategic
alternatives with other potential merger partners, purchasers or companies
interested in an equity infusion.
On January 29, 1998, the Company's Board of Trustees met to consider the
pending EastGroup offer to merge. Prudential Securities advised at that time
of several preliminary indications of interest from other parties at values
and terms in excess of and more favorable than the EastGroup offer.
As a result, on January 29, 1998, the Company advised EastGroup by letter
and telephone that the Company was not prepared to accept the offer at that
time. The Company advised EastGroup of its belief that the value of the
Company was in excess of the offer. In addition, the cash component of the
offer was expressed to be problematic for the Company's shareholders,
particularly in view of the absence of proposed board representation. In
addition, the price protection mechanism was believed to be inadequate.
Finally, there were certain due diligence contingencies in the proposed
agreement that were not acceptable.
During the period from January 30, 1998 through February 18, 1998,
discussions continued between and among representatives of EastGroup and
PaineWebber and counsel to EastGroup and representatives of the Company and
Prudential Securities and counsel to the Company. These discussions included
the amount and kind of consideration to be paid to holders of Common Shares
and Preferred Shares, the conditions of a proposed Agreement and Plan of
Merger, and whether EastGroup would execute a confidentiality agreement with
respect to the receipt of non-public information. On February 10, 1998,
EastGroup did execute a limited confidentiality agreement with no standstill
provision and was given access to certain of the Company's non-public
information (relating primarily to the structural and environmental conditions
of the Company's properties) on February 10 and 11, 1998.
During this period, counsel to EastGroup and counsel to the Company
continued to discuss and negotiate the non-economic terms of a potential
merger agreement.
On February 17, 1998, EastGroup presented the Company with a new offer to
merge, containing the terms now set forth in the Merger Agreement. The
Company's Board of Trustees met on the same date to consider the offer. The
Company's trustees were advised that several interested parties had determined
to drop out of the process. The Trustees were also advised that certain other
interested parties were continuing negotiations, and one party had expressed
an interest at a potential value slightly higher than the EastGroup offer.
However, it was noted that this party had a variety of contingencies in its
indication of interest, and was several weeks away from being able to present
a definitive proposal. Moreover, EastGroup's position as a stockholder in the
Company, and its stated intention to oppose and vote Preferred Shares against
any alternative strategic transaction, created a significant execution risk
with respect to any alternative proposal. After extensive discussion, the
Trustees then approved the EastGroup proposal. The Trustees also voted to
render the Shareholder Rights Plan inapplicable to the EastGroup offer. The
factors taken into account by the Board of Trustees in making its decision are
described below under "Recommendation of the Board of Trustees; Fairness of
the Offer and the Merger."
On the morning of February 18, 1998, the Company, Purchaser and EastGroup
entered into the Merger Agreement, and the terms of the Agreement and the
Merger were publicly announced.
Recommendation of the Board of Trustees; Fairness of the Offer and the Merger
In approving the Merger Agreement and recommending acceptance of the Offer
and adoption of the Merger Agreement, the Board of Trustees considered a
number of factors, including, but not limited to, the following:
(i) The opinion of Prudential Securities that, based upon certain
considerations and assumptions, as of February 17, 1998, the $8.50 per
Common Share in cash to be received by the holders of Common Shares and the
$10.00 per Preferred Share in cash to be received by holders of Preferred
Shares in the Offer and the Merger was fair to such holders. A copy of the
written opinion dated February 17, 1998 of Prudential
13
<PAGE>
Securities delivered to the Board of Trustees, which sets forth the
assumptions made, procedures followed, matters considered and limits of
their review is filed as Exhibit 3 to this Schedule 14D-9 and is
incorporated herein by reference. THE FULL TEXT OF SUCH OPINION SHOULD BE
READ IN CONJUNCTION WITH THIS STATEMENT;
(ii) The process conducted by the Company and Prudential Securities that
involved, among other things, contacting entities that the Company and
Prudential Securities reasonably believed would be interested in entering
into a business combination transaction with the Company and providing
certain entities with information and access to Company officials and
representatives and inviting proposals and the bid of the Purchaser was the
highest non-contingent bid received;
(iii) a review of the possible alternatives to the Offer and the Merger,
including the possibility of continuing to operate the Company as an
independent entity or of the Company engaging in a strategic alliance with
another REIT and the timing and feasibility of those alternatives, and the
possible values to the Company's stockholders of such alternatives;
(iv) the terms and conditions of the Merger Agreement, including the fact
that the Offer is subject to a minimum tender condition;
(v) the fact that the Offer was not subject to a financing condition;
(vi) the historical and present market prices for the Preferred Shares
and Common Shares;
(vii) the provisions of the Merger Agreement described above which
restrict the Company's ability to withdraw their recommendation of the
Offer in the event of a superior proposal;
(viii) the capital structure of the Company;
(ix) EastGroup's position as a holder of approximately 21% of the
outstanding Shares of the Company;
(x) the provisions of the Merger Agreement that require either the
Company or EastGroup to pay the other a termination fee of $2.5 million in
the event the Merger Agreement is terminated as described above under
"Merger Agreement"; and
(xi) the recognition by the Board of Trustees that, if the Offer and the
Merger were consummated, current stockholders of the Company would no
longer be able to participate in any future growth prospects of the
combined companies; however, the Board of Trustees determined that the
premium being effected in the Offer and the Merger fairly compensated such
holders for that loss of opportunity.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board of Trustees found it
impracticable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination, except that the Board of Trustees placed special emphasis on
the Offer price and on the matters set forth in Items (i) and (ii) above. The
Board of Trustees discussed in detail the matters referenced in Items (viii)-
(x), and the fact that they constitute impediments to third parties interested
in making alternative proposals regarding the Company. On balance, however,
and in light of the matters described in Item (ii), the Board of Trustees
determined that these factors were more than outweighed by the other factors
indicating fairness.
It is expected that, if Shares are not accepted for payment by the Purchaser
in the Offer and if the Merger is not consummated, the Company's current
management, under the general direction of the Board of Trustees, will
continue to manage the Company as an ongoing business. However, the Board of
Trustees may, under such circumstances, explore other possible methods of
maximizing stockholder values.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Prudential Securities has been retained by the Company to act as exclusive
financial advisor to the Company for a two-year period and as exclusive
financial advisor in connection with, among other matters, the potential sale
of all or a portion of the stock or assets of the Company. Pursuant to a
letter agreement dated October 30, 1997, between the Company and Prudential
Securities, the Company is required to pay Prudential Securities (a) a fee of
$300,000 upon delivery of a Fairness Opinion to the Company and (b) an
additional fee of one percent
14
<PAGE>
(1%) of the consideration paid (defined as the total value of all cash,
securities, the repurchase or buy-out of any options or warrants, any
agreements or other property and any other consideration, including, without
limitation, any contingent, earned or other consideration paid or payable,
directly or indirectly), in connection with a Transaction as defined therein,
subject to a minimum fee of $800,000 in connection with the sale of the
Company, subject further to a credit for fees paid pursuant to clause (a).
Assuming a consummation of the Offer and the Merger on the terms contemplated
by the Merger Agreement, the Company currently estimates that the amount of
such additional fee due to Prudential Securities (after credits) would be
approximately $710,000.
In addition, the Company has agreed to reimburse Prudential Securities for
reasonable out-of-pocket and incidental expenses, including the fees and
disbursements of its legal counsel and those of any advisor retained by
Prudential Securities, whether or not any transaction is consummated, such
reimbursable expenses not to exceed $50,000 without the prior written approval
of the Company, and to indemnify Prudential Securities and certain related
persons against certain liabilities in connection with their engagement,
including certain liabilities under the federal securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty days, no transaction in the Shares has been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company, except
for the purchase by Christopher J. Doherty, Chairman of the Board of Trustees,
as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE
DATE OF TRANSACTION SHARES PER SHARE
------------------- --------- ---------
<S> <C> <C>
January 5, 1998 Preferred............................. 1,000 8 1/2
January 5, 1998 Common................................ 500 5
</TABLE>
(b) Pursuant to the Merger Agreement, the Company believes that all
Directors and Officers of the Company who own Common or Preferred Shares will
tender their Shares pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Other than the Offer and the Merger, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (1)
an extra ordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (2) a purchase, sale or transfer
of a material amount of assets of the Company or any subsidiary of the
Company; (3) a tender offer for or other acquisition of securities by or of
the Company; or (4) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth or as incorporated by reference in this Item 7 or in
Item 4 hereof, there are no transaction, Board of Trustees resolutions,
agreements in principle or signed contracts in response to the Offer which
relate to or would result in one or more of the matters referred to in this
Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
15
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
1. Agreement and Plan of Merger dated as of February 18, 1998, among
the Company, the Purchaser and EastGroup.
2. Joint press release of the Company and EastGroup dated February 18,
1998.
3. Opinion of Prudential Securities Incorporated dated February 17,
1998.
4. Letter to stockholders of the Company dated February 23, 1998.
</TABLE>
16
<PAGE>
AGREEMENT AND PLAN OF MERGER
by and among
EASTGROUP PROPERTIES, INC.,
EASTGROUP-MERIDIAN, INC.
and
MERIDIAN POINT REALTY TRUST VIII CO.
Dated: February 18, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I The Offer............................................. 1
Section 1.1 The Offer............................................. 1
Section 1.2 Company Actions....................................... 3
ARTICLE II The Merger............................................ 4
Section 2.1 The Merger............................................ 4
Section 2.2 Effective Date of the Merger.......................... 4
ARTICLE III The Surviving Corporation............................. 5
Section 3.1 Certificate of Incorporation.......................... 5
Section 3.2 Bylaws................................................ 5
Section 3.3 Board of Directors; Officers.......................... 5
Section 3.4 Effects of Merger..................................... 5
ARTICLE IV Conversion of Shares.................................. 5
Section 4.1 Merger Consideration.................................. 5
Section 4.2 Exchange of Certificates Representing Company
Preferred Shares and Company Common Shares............ 6
Section 4.3 Return of Exchange Fund............................... 7
Section 4.4 Shareholders Meeting; Preparation of Proxy 7
Statement.............................................
Section 4.5 Dissenting Shares..................................... 8
Section 4.6 Closing of the Company's Transfer Books............... 8
Section 4.7 Assistance in Consummation of the Merger.............. 9
Section 4.8 Closing............................................... 9
ARTICLE V Representations and Warranties of Purchaser........... 9
Section 5.1 Representations and Warranties of Purchaser........... 9
Section 5.2 Organization.......................................... 9
Section 5.3 Authorization of Transaction.......................... 9
Section 5.4 Noncontravention...................................... 10
Section 5.5 Brokers' Fees......................................... 10
Section 5.6 Disclosure............................................ 10
Section 5.7 Financing............................................. 10
ARTICLE VI Representations and Warranties of Sub................. 11
Section 6.1 Representations and Warranties of Sub................. 11
Section 6.2 Organization.......................................... 11
Section 6.3 Authorization of Transaction.......................... 11
Section 6.4 Noncontravention...................................... 11
i
<PAGE>
Page
----
ARTICLE VII Representations and Warranties of the Company......... 11
Section 7.1 Representations and Warranties of the Company......... 11
Section 7.2 Organization, Qualification and Corporate Power....... 12
Section 7.3 Capitalization........................................ 12
Section 7.4 Authorization of Transaction.......................... 13
Section 7.5 Noncontravention...................................... 13
Section 7.6 Filings with the Securities and Exchange Commission... 13
Section 7.7 Financial Statements.................................. 13
Section 7.8 Absence of Certain Changes............................ 14
Section 7.9 Tax Returns and Audits................................ 14
Section 7.10 Properties............................................ 15
Section 7.11 Employee Benefit Plans................................ 15
Section 7.12 Environmental Matters................................. 16
Section 7.13 Related Party Transactions............................ 16
Section 7.14 Contracts and Commitments............................. 17
Section 7.15 Disclosure............................................ 17
Section 7.16 Broker's Fees......................................... 17
Section 7.17 Shareholder Rights Plan Inapplicable.................. 17
Section 7.18 Takeover Provisions Inapplicable...................... 18
Section 7.19 Voting Requirements................................... 18
ARTICLE VIII Contingent Options of Purchaser....................... 18
Section 8.1 Grant of Common Share Option.......................... 18
Section 8.2 Grant of Preferred Share Option....................... 18
Section 8.3 Exercise of Options................................... 19
Section 8.4 Payment of Purchase Price and Delivery of
Certificates.......................................... 19
Section 8.5 Securities Act........................................ 19
Section 8.6 Adjustment upon Changes in Capitalization............. 19
ARTICLE IX Conduct of Business Pending the Merger................ 20
Section 9.1 Conduct of Business by the Company Pending the Merger. 20
Section 9.2 No Distributions...................................... 22
Section 9.3 Maintenance of REIT Status............................ 22
ARTICLE X Additional Agreements................................. 23
Section 10.1 Access and Information................................ 23
Section 10.2 Filings............................................... 23
Section 10.3 Indemnification and Insurance......................... 23
Section 10.4 HSR Act; Other Action................................. 24
Section 10.5 Additional Agreements................................. 25
ii
<PAGE>
Page
----
Section 10.6 Acquisition Proposals................................. 25
Section 10.7 Trustees.............................................. 26
Section 10.8 Payment of Fees by the Company........................ 27
ARTICLE XI Conditions Precedent.................................. 27
Section 11.1 Conditions Precedent to the Obligations of
Each Party............................................ 27
Section 11.2 Additional Conditions Precedent to the
Obligations of Purchaser and Sub If the Offer
is not Consummated.................................... 27
ARTICLE XII Termination, Amendment and Waiver..................... 29
Section 12.1 Termination........................................... 29
Section 12.2 Effect of Termination................................. 30
Section 12.3 Payment of Termination Amount......................... 30
Section 12.4 Payment to Company on Certain Termination............. 32
Section 12.5 Amendment............................................. 33
Section 12.6 Waiver................................................ 33
ARTICLE XIII General Provisions.................................... 33
Section 13.1 Non-Survival of Representations, Warranties 33
and Agreements........................................
Section 13.2 Notices............................................... 33
Section 13.3 Fees and Expenses..................................... 34
Section 13.4 Publicity............................................. 35
Section 13.5 Interpretation........................................ 35
Section 13.6 Miscellaneous......................................... 35
Section 13.7 Specific Performance.................................. 35
EXHIBIT A Conditions of the Offer
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement"), dated as of
February 18, 1998 is by and among EASTGROUP PROPERTIES, INC., a Maryland
corporation ("Purchaser"), EASTGROUP-MERIDIAN, INC., a Missouri corporation and
a wholly-owned subsidiary of Purchaser ("Sub"), and MERIDIAN POINT REALTY TRUST
VIII CO., a Missouri corporation (the "Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Board of Directors of Purchaser and the Board of Trustees of
the Company have approved the acquisition of the Company by Purchaser;
WHEREAS, in furtherance of such acquisition, Purchaser proposes to cause
Sub to make a tender offer (as it may be amended from time to time as permitted
under this Merger Agreement, the "Offer"), to purchase all the issued and
outstanding Company Common Shares and Company Preferred Shares (both as defined
in this Merger Agreement) not owned by Sub or Purchaser at a price per Company
Common Share of $8.50 net to the seller in cash (such price, the "Common Share
Offer Price"), and at a price per Company Preferred Share of $10.00 net to the
seller in cash (such price, the "Preferred Share Offer Price"), upon the terms
and subject to the conditions set forth in this Merger Agreement; and the Board
of Trustees of the Company has approved the Offer and is recommending that the
Company's shareholders accept the Offer;
WHEREAS, the Board of Directors of Purchaser and the Board of Trustees of
the Company have approved the Offer and the merger of Sub into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in the Offer
and herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein the parties hereto
agree as follows:
ARTICLE I
The Offer
Section 1.1 The Offer.
---------
(a) Subject to the provisions of this Merger Agreement, as
promptly as practicable, but in no event later than February 23, 1998, Sub
shall, and Purchaser shall cause Sub to, commence the Offer. The obligation of
Sub to, and of Purchaser to cause Sub to, commence the Offer and accept for
payment, and pay for, any Company Common Shares
1
<PAGE>
and Company Preferred Shares tendered pursuant to the Offer shall be subject to
the conditions set forth in Exhibit A (any of which, including the Minimum
Condition (as defined in Exhibit A) may be waived by Sub in its sole discretion)
and to the terms and conditions of this Merger Agreement. Sub expressly
reserves the right to modify the terms of the Offer, except that, without the
consent of the Company, Sub shall not (i) reduce the number of Company Common
Shares and Company Preferred Shares to be purchased in the Offer; (ii) reduce
the Common Share Offer Price or the Preferred Share Offer Price, except as
otherwise provided in this Merger Agreement; (iii) modify or add to the
conditions set forth in Exhibit A in any manner that the Board of Trustees of
the Company, in the exercise of its fiduciary obligations, determines to be
adverse to the holders of Company Common Shares or Company Preferred Shares;
(iv) except as provided in the next sentence, extend the Offer; (v) change the
form of consideration payable in the Offer; or (vi) amend any other term of the
Offer in a manner that the Board of Trustees of the Company, in the exercise of
its fiduciary obligations, determines to be adverse to the holders of Company
Common Shares and Company Preferred Shares. Notwithstanding the foregoing, Sub
may, without the consent of the Company, (i) extend the Offer beyond the
scheduled expiration date (the initial scheduled expiration date being 20
business days following commencement of the Offer) for a period not to exceed 20
business days, if at the scheduled expiration date of the Offer any of the
conditions to Sub's obligation to accept for payment, and pay for, Company
Common Shares and Company Preferred Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived; or (ii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission (the "SEC") or the staff
thereof applicable to the Offer. Subject to the terms and conditions of the
Offer and this Merger Agreement, Sub shall, and Purchaser shall cause Sub to,
accept for payment, and pay for, all Company Common Shares and Company Preferred
Shares validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to accept for payment, and pay for, pursuant to the Offer as soon as
practicable after the expiration of the Offer.
(b) On the date of commencement of the Offer, Purchaser and
Sub shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer, which shall contain an offer to purchase and a related
letter of transmittal and summary advertisement (such Schedule 14D-1 and the
documents included therein pursuant to which the Offer will be made, together
with any supplements or amendments thereto, the "Offer Documents"). Purchaser
and Sub agree that the Offer Documents shall comply as to form in all material
respects with the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder (the "Exchange Act"), and the Offer Documents
on the date first published, sent or given to the Company's shareholders, shall
not 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 Purchaser or Sub with
respect to information supplied by the Company specifically for inclusion in the
Offer Documents. Each of Purchaser, Sub and the Company agrees promptly to
correct any information provided by it for use in the Offer Documents if and to
the extent that such information shall have become false or misleading in any
material respect, and each of Purchaser and Sub further agrees to take all steps
necessary to amend or supplement the Offer Documents and to cause the Offer
Documents as so amended or
2
<PAGE>
supplemented to be filed with the SEC and to be disseminated to the Company's
shareholders, in each case as and to the extent required by applicable Federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment upon the Offer Documents and all amendments
and supplements thereto prior to their filing with the SEC or dissemination to
shareholders of the Company. Purchaser and Sub agree to provide the Company and
its counsel any comments Purchaser, Sub or their counsel may receive from the
SEC or its staff with respect to the Offer Documents promptly after the receipt
of such comments.
(c) Subject to the terms and conditions of the Offer,
Purchaser shall provide or cause to be provided to Sub on a timely basis the
funds necessary to accept for payment, and pay for, any Company Common Shares
and Company Preferred Shares that Sub becomes obligated to accept for payment,
and pay for, pursuant to the Offer.
Section 1.2 Company Actions.
---------------
(a) The Company hereby approves of and consents to the Offer
and represents that the Board of Trustees of the Company, at a meeting duly
called and held, duly and unanimously adopted resolutions approving the Offer
determining that the terms of the Offer are fair to, and in the best interests
of, the Company's shareholders and recommending that the Company's shareholders
accept the Offer and tender their shares pursuant to the Offer and approve and
adopt this Merger Agreement. The Company has been advised by each of its
trustees and by each executive officer who as of the date hereof is aware of the
transactions contemplated hereby, that each such person (i) intends to tender
pursuant to the Offer all Company Common Shares and Company Preferred Shares
owned by such person; or (ii) intends to vote all Company Common Shares or
Company Preferred Shares owned by such person in favor of the Merger to the
extent a shareholders' meeting is held in accordance with Section 4.4.
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended from
time to time, the "Schedule 14D-9"), containing the recommendation described in
paragraph (a) and shall mail the Schedule 14D-9 to the shareholders of the
Company. The Company agrees that the Schedule 14D-9 shall comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations promulgated thereunder. Each of the Company, Purchaser and Sub
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect, and the Company further agrees to
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the Company's shareholders, in each case as and to the extent
required by applicable Federal securities laws. Purchaser and its counsel shall
be given a reasonable opportunity to review and comment upon the Schedule 14D-9
and all amendments and supplements thereto prior to their filing with the SEC or
dissemination to shareholders of the Company. The Company agrees to provide
Purchaser and its counsel in writing with any comments the Company or its
counsel
3
<PAGE>
may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Company Common Shares and Company
Preferred Shares as of a recent date and of those persons becoming record
holders subsequent to such date, together with copies of all lists of
shareholders, security position listings and computer files and all other
information in the Company's possession or control regarding the beneficial
owners of Company Common Shares and Company Preferred Shares, and shall furnish
to Sub such information and assistance (including updated lists of shareholders,
security position listings and computer files) as Purchaser may reasonably
request in communicating the Offer to the Company's shareholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Purchaser and Sub and their agents shall hold in confidence the
information contained in any such labels, listings and files, will use such
information only in connection with the Offer and the Merger and, if this Merger
Agreement shall be terminated, will, upon request, deliver, and will use their
best efforts to cause their agents to deliver, to the Company all copies of such
information then in their possession or control.
ARTICLE II
The Merger
Section 2.1 The Merger. Upon the terms and subject to the conditions
----------
hereof, on the Effective Date (as defined in Section 2.2), Sub shall be merged
into the Company and the separate existence of Sub shall thereupon cease, and
the name of the Company, as the surviving corporation in the Merger (the
"Surviving Corporation"), shall by virtue of the Merger remain Meridian Point
Realty Trust VIII Co.
Section 2.2 Effective Date of the Merger. The Merger shall become
----------------------------
effective when a properly executed Certificate of Merger is duly filed with the
Secretary of State of the State of Missouri, which filing shall be made as soon
as practicable after the closing of the transactions contemplated by this Merger
Agreement in accordance with Section 4.8. When used in this Merger Agreement,
the term "Effective Date" shall mean the date and time at which such Certificate
is so filed or at such time thereafter as is provided in such Certificate.
4
<PAGE>
ARTICLE III
The Surviving Corporation
Section 3.1 Certificate of Incorporation. The Certificate of
----------------------------
Incorporation, as amended, of the Company shall be the Certificate of
Incorporation of the Surviving Corporation after the Effective Date, and
thereafter may be amended in accordance with its terms and as provided by law
and this Merger Agreement.
Section 3.2 Bylaws. The Bylaws of the Company as in effect on the
------
Effective Date shall be the Bylaws of the Surviving Corporation.
Section 3.3 Board of Directors; Officers. The directors and officers of
----------------------------
Sub immediately prior to the Effective Date shall be the directors and officers
of the Surviving Corporation in each case until their respective successors are
duly elected and qualified.
Section 3.4 Effects of Merger. The Merger shall have the effects set
-----------------
forth in Section 351.450 of the Missouri General and Business Corporation Law
(the "GBCL").
ARTICLE IV
Conversion of Shares
Section 4.1 Merger Consideration. As of the Effective Date, by virtue of
--------------------
the Merger and without any action on the part of any holder of any common stock,
$0.001 par value per share, of the Company ("Company Common Shares"), or any
holder of any preferred stock, $0.001 par value per share, of the Company
("Company Preferred Shares"):
(a) All Company Common Shares or Company Preferred Shares
which are held by the Company or any subsidiary of the Company, and any Company
Common Shares or Company Preferred Shares owned by Purchaser and Sub, shall be
cancelled.
(b) Each Company Preferred Share issued and outstanding
immediately prior to the Effective Date, (other than Dissenting Shares (as
hereinafter defined) representing Company Preferred Shares and those Company
Preferred Shares to be canceled pursuant to Section 4.1(a)) shall, by virtue of
the Merger and without any action on the part of the Company, Purchaser, Sub or
the holders of any of the securities of any of these companies, be converted
into the right to receive from Sub in cash, without interest, the price per
Company Preferred Share paid pursuant to the Offer (the "Preferred Merger
Price").
(c) At the Effective Date, each Company Common Share issued
and outstanding immediately prior to the Effective Date (other than Dissenting
Shares representing Company Common Shares and those Company Common Shares to be
canceled pursuant to Section 4.1(a)) shall, by virtue of the Merger and without
any action on the part
5
<PAGE>
of the Company, Purchaser, Sub or the holders of any of the securities of any of
these companies, be converted into the right to receive from Sub in cash,
without interest, the price per Company Common Share paid pursuant to the Offer
(the "Common Merger Price").
(d) Each issued and outstanding share of the capital stock of
Sub shall be converted into and become one fully paid and nonassessable common
share, $0.001 par value per share, of the Surviving Corporation.
(e) As a result of the Merger and without any action on the
part of the holders thereof, all Company Preferred Shares and Company Common
Shares shall cease to be outstanding, shall be canceled and retired and shall
cease to exist and each holder of a certificate (a "Certificate") representing
any Company Preferred Shares and Company Common Shares shall thereafter cease to
have any rights with respect to such Company Preferred Shares and Company Common
Shares, except the right to receive, without interest, the Preferred Merger
Price or the Common Merger Price.
Section 4.2 Exchange of Certificates Representing Company Preferred Shares
--------------------------------------------------------------
and Company Common Shares.
- -------------------------
(a) As of the Effective Date, Purchaser shall deposit, or
shall cause to be deposited, with an exchange agent selected by Purchaser on or
prior to the Effective Date (the "Exchange Agent"), for the benefit of the
holders of Company Preferred Shares and Company Common Shares, for exchange in
accordance with this Article 4, the cash representing the aggregate of the
Preferred Merger Price and the Common Merger Price (the "Exchange Fund") to be
issued pursuant to Section 4.1 and paid pursuant to this Section 4.2,
respectively, in exchange for outstanding Company Preferred Shares and Company
Common Shares.
(b) Promptly after the Effective Date, Purchaser shall cause
the Exchange Agent to mail to each holder of record of a Certificate or
Certificates (i) a letter of transmittal which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as Purchaser may reasonably specify and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Preferred Merger Price and the Common Merger Price. Upon surrender of a
Certificate representing Company Preferred Shares or Company Common Shares for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such Certificate representing Company Preferred Shares or Company
Common Shares shall be entitled to receive in exchange therefor a check
representing cash in the amount of the Preferred Merger Price or Common Merger
Price, as appropriate, times the number of Company Preferred Shares or Company
Common Shares, respectively, represented by such Certificate(s) less any amount
required to be withheld under applicable Federal income tax laws and
regulations, and the Certificate(s) so surrendered shall forthwith be canceled.
No interest will be paid or accrued on the cash representing the Preferred
Merger Price and the Common Merger Price. In the event of a transfer of
ownership of Company Preferred Shares or Company Common Shares which is
6
<PAGE>
not registered in the transfer records of the Company, a check representing cash
in the amount of the Preferred Merger Price or Common Merger Price, as
appropriate, times the number of Company Preferred Shares or Company Common
Shares, respectively, represented by such Certificate(s) less any amount
required to be withheld under applicable Federal income tax regulations, may be
issued to such a transferee if the Certificate representing such Company
Preferred Shares or Company Common Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) At and after the Effective Date, there shall be no
transfers on the stock transfer books of the Company of Company Preferred Shares
or Company Common Shares which were outstanding immediately prior to the
Effective Date. If, after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for certificates for
the amount of cash, without interest, into which the Company Preferred Shares or
the Company Common Shares theretofore represented by such Certificates shall
have been converted pursuant to this Article IV. No interest shall accrue or be
paid on any portion of the Preferred Merger Price or the Common Merger Price.
Section 4.3 Return of Exchange Fund. Any portion of the Exchange Fund
-----------------------
(including the proceeds of any investments thereof) that remains unclaimed by
the former shareholders of the Company one year after the Effective Date shall
be delivered to the Surviving Corporation. Any former shareholders of the
Company who have not theretofore complied with this Article IV shall thereafter
look only to the Surviving Corporation for payment of the cash amount, without
interest, as determined pursuant to this Article IV. None of Purchaser, Sub,
the Company, the Exchange Agent or any other person shall be liable to any
former holder of Company Preferred Shares or Company Common Shares for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent or the Surviving Corporation will issue in exchange for such
lost, stolen or destroyed Certificate the cash amount, without interest, as
determined pursuant to Section 4.1.
Section 4.4 Shareholders Meeting; Preparation of Proxy Statement.
----------------------------------------------------
(a) The Company will, at Purchaser's request, duly call, give
notice of, convene and hold a meeting of the holders of Company Common Shares
and Company Preferred Shares if such meeting is required by applicable law for
the purpose of approving this Merger Agreement and the transactions contemplated
by this Merger Agreement. The Company will, through its Board of Trustees,
recommend to its shareholders approval of this Merger Agreement, the Merger and
the transactions contemplated by this Merger Agreement. At the meeting,
Purchaser shall cause all of Company Common Shares and Company Preferred Shares
then actually or beneficially owned by Purchaser, Sub or any of their
7
<PAGE>
subsidiaries to be voted in favor of the Merger. Notwithstanding the foregoing,
if Sub or any other subsidiary of Purchaser shall acquire (i) at least 90% of
the outstanding Company Common Shares and (ii) at least 90% of the outstanding
Company Preferred Shares, the parties shall, at the request of Purchaser, take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable after the expiration of the Offer without a meeting in
accordance with Section 351.447 of the GBCL.
(b) The Company will, at Purchaser's request, prepare and file
a preliminary Proxy Statement (the "Proxy Statement") with the SEC and will use
its best efforts to respond to any comments of the SEC or its staff and to cause
the Proxy Statement to be mailed to the Company's shareholders as promptly as
practicable after responding to all such comments to the satisfaction of the
staff. The Company will notify Purchaser promptly of the receipt of any comments
from the SEC or its staff and of any requests by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply Purchaser with copies of all correspondence between the Company
or any of its representatives, on the one hand, and the SEC or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the meeting there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company will promptly
prepare and mail to its shareholders such an amendment or supplement. The
Company will not mail any Proxy Statement, or any amendment or supplement
thereto, to which Purchaser reasonably objects.
Section 4.5 Dissenting Shares. Section 351.455 of the GBCL provides
-----------------
dissenter's rights in connection with the Merger to the shareholders of the
Company. Notwithstanding anything in this Merger Agreement to the contrary, any
issued and outstanding Company Common Shares or Company Preferred Shares held by
a person (a "Dissenting Shareholder") who objects to the Merger and complies
with all the provisions of the GBCL concerning the right of holders of Company
Common Shares and Company Preferred Shares to dissent from the Merger and
require appraisal of their Company Common Shares or Company Preferred Shares
("Dissenting Shares") shall not be converted as described in Section 4.1 but
shall become the right to receive such consideration as may be determined to be
due to such Dissenting Shareholder pursuant to the laws of the State of
Missouri; provided, however, that Company Common Shares or Company Preferred
Shares outstanding immediately prior to the Effective Date and held by a
Dissenting Shareholder who shall, after the Effective Date, withdraw his demand
for appraisal or lose his right of appraisal, in either case pursuant to the
GBCL, shall be deemed to be converted as of the Effective Date, into the right
to receive the cash amount, without interest, as provided in Section 4.1(b) or
(c), as appropriate. The Company shall give Purchaser (i) prompt notice of any
demands for appraisal of Company Common Shares or Company Preferred Shares
received by the Company and (ii) the opportunity to participate in and direct
all negotiations and proceedings with respect to any such demands. The Company
shall not, without the prior written consent of Purchaser make any payment with
respect to, or settle, offer to settle or otherwise negotiate, any such demands.
Section 4.6 Closing of the Company's Transfer Books. At the Effective
---------------------------------------
Date, each holder of a Certificate(s) theretofore representing Company Common
Shares or Company Preferred Shares shall cease to have any rights as a
shareholder of the Company and shall
8
<PAGE>
not be deemed to be a shareholder of, or be entitled to any rights of a
shareholder with respect to the Surviving Corporation but thereafter shall have
only the rights set forth in Sections 4.1, 4.2, 4.3 and 4.5. At the Effective
Date, the stock transfer books of the Company shall be closed and no transfer of
Company Common Shares or Company Preferred Shares shall be made thereafter. In
the event that, after the Effective Date, Certificates are presented to the
Surviving Corporation, they shall be cancelled and exchanged for the cash
amount, without interest, as provided in Section 4.1(b) or (c), as appropriate.
Section 4.7 Assistance in Consummation of the Merger. Purchaser, Sub and
----------------------------------------
the Company shall provide all reasonable assistance to, and shall cooperate
with, each other to bring about the consummation of the Merger as soon possible
in accordance with the terms and conditions of this Merger Agreement.
Section 4.8 Closing. The closing of the transactions contemplated by this
-------
Merger Agreement shall take place at the offices of Pruess Walker & Shanagher,
LLP, San Francisco, California at 10:00 a.m. local time on the date specified by
the parties which shall be no later than the third business day after the day on
which the last of the conditions set forth in Article XI is fulfilled or waived
or at such other time and place as Purchaser and the Company shall agree in
writing.
ARTICLE V
Representations and Warranties of Purchaser
Section 5.1 Representations and Warranties of Purchaser. The Purchaser
-------------------------------------------
represents and warrants to the Company that the statements contained in this
Merger Agreement are correct and complete as of the date of this Merger
Agreement.
Section 5.2 Organization. The Purchaser is a corporation duly organized,
------------
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
Section 5.3 Authorization of Transaction. Purchaser has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Merger Agreement and to perform its obligations hereunder. This Merger
Agreement constitutes the valid and legally binding obligation of Purchaser,
enforceable in accordance with its terms and conditions. Other than in
connection with the provisions of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the GBCL, the Exchange Act, the
Securities Act, and the state securities laws, Purchaser does not need to give
any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Merger Agreement, except to the
extent such failure to give notice to file or to obtain any authorization,
consent or approval would not have a material adverse effect on the financial
condition, properties, results of operations or business of the Purchaser or its
subsidiaries taken as a whole or except such things that would not have a
material adverse
9
<PAGE>
effect on the ability of the Purchaser to consummate the transaction
contemplated by this Merger Agreement (a "Purchaser Material Adverse Effect").
Section 5.4 Noncontravention. Neither the execution and the delivery of
----------------
this Merger Agreement, nor the consummation of the transactions contemplated
hereby, will (a) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which Purchaser is subject or any provision of
the charter or bylaws of Purchaser or (b) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any contract, lease, sublease, license, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest, or other obligation to which Purchaser is a party or by which it is
bound or to which any of its assets is subject, except to the extent such
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or security interest would not have a
Purchaser Material Adverse Effect.
Section 5.5 Brokers' Fees. Other than its obligations to PaineWebber
-------------
Incorporated, Purchaser does not have any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Merger Agreement for which any of the Company
and its subsidiaries could become liable or obligated prior to the consummation
of the Merger.
Section 5.6 Disclosure. None of the information supplied or to be
----------
supplied by Purchaser for inclusion or incorporation by reference in the Offer
Documents, the Schedule 14D-9, the Information Statement (as defined in Section
7.15) or the Proxy Statement will, in the case of the Offer Documents, the
Schedule 14D-9 and the Information Statement, at the respective times the Offer
Documents, the Schedule 14D-9 and the Information Statement are filed with the
SEC or first published, sent or given to the Company's shareholders, or, in the
case of the Proxy Statement, at the date the Proxy Statement is first mailed to
the Company's shareholders or at the time of the meeting of the Company's
shareholders held to vote on approval and adoption of this Merger Agreement,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Offer Documents will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation or warranty is made by
Purchaser with respect to statements made or incorporated by reference therein
based on information supplied by the Company for inclusion or incorporation by
reference therein.
Section 5.7 Financing. The Purchaser has, and at the date of consummation
---------
of the Offer will have, cash, cash equivalent assets and/or financing in an
amount sufficient to consummate the Offer.
10
<PAGE>
ARTICLE VI
Representations and Warranties of Sub
Section 6.1 Representations and Warranties of Sub. Sub represents and
-------------------------------------
warrants to the Company that the statements contained in this Merger Agreement
are correct and complete as of the date of this Merger Agreement.
Section 6.2 Organization. Sub is a corporation duly organized, validly
------------
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
Section 6.3 Authorization of Transaction. Sub has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Merger Agreement and to perform its obligations hereunder. This Merger
Agreement constitutes the valid and legally binding obligation of Sub,
enforceable in accordance with its terms and conditions. Other than in
connection with the provisions of the HSR Act, the GBCL, the Exchange Act, the
Securities Act, and the state securities laws, Sub does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Merger Agreement.
Section 6.4 Noncontravention. Neither the execution and the delivery of
----------------
this Merger Agreement, nor the consummation of the transactions contemplated
hereby, will (a) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which Sub is subject or any provision of the
charter or bylaws of Sub or (b) conflict with, result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
contract, lease, sublease, license, franchise, permit, indenture, agreement or
mortgage for borrowed money, instrument of indebtedness, security interest, or
other obligation to which Sub is a party or by which it is bound or to which any
of its assets is subject, except to the extent such violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or security interest would not have a material adverse effect on the
financial condition, properties, results of operations or business of Sub or
except such things that would not have a material adverse effect on the ability
of Sub to consummate the transaction contemplated by this Merger Agreement (a
"Sub Material Adverse Effect").
ARTICLE VII
Representations and Warranties of the Company
Section 7.1 Representations and Warranties of the Company. The Company
---------------------------------------------
represents and warrants to Purchaser and Sub that the statements contained in
this Merger Agreement are correct and complete. The disclosure schedule
delivered by the Company to Purchaser and Sub concurrent with the execution of
this Merger Agreement and which constitutes a part of this Merger Agreement (the
"Disclosure Schedule") will be arranged in
11
<PAGE>
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article VII. Any item disclosed in a particular section of the Disclosure
Schedule shall not be deemed disclosed for any purpose other than the
representation in this Merger Agreement corresponding to such section. For
purposes of this Merger Agreement, the term "Material Adverse Effect" means any
change, effect or circumstance (or any development that, insofar as can
reasonably be foreseen, is likely to result in any change, effect or
circumstance) that (i) is materially adverse to the business, properties,
assets, condition (financial or otherwise), results of operations or prospects
of the Company and its subsidiaries taken as a whole; (ii) would materially
impair the ability of the Company to perform its obligations under this Merger
Agreement; or (iii) would prevent or inhibit the timely consummation of the
Offer, the Merger or the transactions contemplated by this Merger Agreement.
Any qualification to any representation or warranty of the Company herein to the
effect that any exception to such representation or warranty has not, does not,
or would not have a Material Adverse Effect shall be deemed to mean that such
exception, together with similar exceptions to all other representations and
warranties of the Company that are so qualified, has not, does not, or would not
have a Material Adverse Effect.
Section 7.2 Organization, Qualification and Corporate Power.
-----------------------------------------------
(a) Each of the Company and its subsidiaries is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation. To the Company's knowledge, each of the
Company and its subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction in which the Company and its
subsidiaries own properties. Each of the Company and its subsidiaries has full
corporate power and authority to carry on the business in which it is engaged
and to own and use the properties owned and used by it.
(b) To the Company's knowledge, all the outstanding shares of
capital stock of each such subsidiary have been validly issued and are fully
paid and nonassessable and are owned by the Company, by another subsidiary of
the Company or by the Company and another subsidiary, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever. Except for the capital stock of its subsidiaries and
except for the other ownership interests set forth in the Disclosure Schedule,
the Company does not own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership, joint venture or other
entity.
Section 7.3 Capitalization. The entire authorized capital stock of the
--------------
Company consists of 25,000,000 Company Common Shares and 25,000,000 Company
Preferred Shares. As of the date of this Merger Agreement, 1,709,937 Company
Common Shares are issued and outstanding and none are held in treasury, and
5,273,927 Company Preferred Shares are issued and outstanding and none are held
in treasury. All of the issued and outstanding Company Common Shares and
Company Preferred Shares have been duly authorized and are validly issued, fully
paid, and nonassessable. There are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe, conversion
rights, or other agreements or commitments to which the Company is a party or
which are binding upon the Company providing for the issuance, disposition, or
acquisition of any of its capital stock. Except for the Stock Appreciation
Rights Agreement between the Company
12
<PAGE>
and Robert H. Gidel dated September 21, 1997 (the "SAR Agreement"), there are no
outstanding or authorized stock appreciation, phantom stock, or similar rights
with respect to the Company.
Section 7.4 Authorization of Transaction. The Company has full corporate
----------------------------
power and authority to execute and deliver this Merger Agreement and to perform
its obligations hereunder; provided, however, that the Company cannot consummate
the Merger unless and until it receives the requisite Company shareholder
approval under the GBCL and the Company's Certificate of Incorporation, as
amended (the "Company's Certificate"), if such approval is required under the
GBCL. This Merger Agreement has been duly executed and delivered by the Company
and constitutes the valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms and conditions.
Other than in connection with the provisions of the HSR Act, the GBCL, the
Exchange Act, the Securities Act, and the state securities laws, none of the
Company and its subsidiaries needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the parties hereto to consummate the
transactions contemplated by this Merger Agreement, except to the extent the
failure to give notice, to file, or to obtain any authorization, consent, or
approval would not have a Material Adverse Effect.
Section 7.5 Noncontravention. Neither the execution and the delivery of
----------------
this Merger Agreement, nor the consummation of the transactions contemplated
hereby, will (a) violate any statute, regulation, rule, judgment, order, decree,
stipulation, injunction, charge, or other restriction of any government,
governmental agency, or court to which any of the Company and its subsidiaries
is subject except to the extent such violation would not have a Material Adverse
Effect; (b) violate any provision of the charter or bylaws of any of the Company
and its subsidiaries; or (c) except as set forth in the Disclosure Schedule,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any contract, lease, sublease, license,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest, or other obligation to which any
of the Company and its subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any security
interest upon any of its assets) except to the extent the violation, conflict,
breach, default, acceleration, termination, modification, cancellation, failure
to give notice, or security interest would not have a Material Adverse Effect.
Section 7.6 Filings with the Securities and Exchange Commission. The
---------------------------------------------------
Company has made all filings with the SEC that it has been required to make
within the past three years under the Securities Act and the Exchange Act
(collectively the "Public Reports"). Each of the Public Reports has complied
with the Securities Act and the Exchange Act in all material respects.
Section 7.7 Financial Statements. The Company has filed a Quarterly
--------------------
Report on Form 10-Q for the fiscal quarter ended September 30, 1997 (the "Most
Recent Fiscal Quarter End"), and an Annual Report on Form 10-K for the fiscal
year ended December 31, 1996. To the Company's knowledge, the financial
statements included in or incorporated by
13
<PAGE>
reference into these Public Reports (including the related notes and schedules)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered thereby and present
fairly in all material respects the financial condition of the Company and its
subsidiaries as of the indicated dates and the results of operations of the
Company and its subsidiaries for the indicated periods.
Section 7.8 Absence of Certain Changes. Except as disclosed in the Public
--------------------------
Reports, since December 31, 1996 through the date of this Merger Agreement, the
Company and its subsidiaries have conducted their respective businesses in the
ordinary and usual course of such businesses and there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution with
respect to its capital stock; (ii) any split, combination or reclassification of
any of Company Common Shares or Company Preferred Shares or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for Company Common Shares or Company Preferred Shares; (iii)
any granting by the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business consistent with prior
practice; or (iv) to the Company's knowledge, any change which individually or
in the aggregate has had or is reasonably likely to have a Material Adverse
Effect.
Section 7.9 Tax Returns and Audits.
----------------------
(a) To the Company's knowledge, the Company and its
subsidiaries have timely filed or timely requested an extension for filing all
material returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed or sent by them in respect of any
Taxes (as hereinafter defined).
(b) To the Company's knowledge, all taxes required to be
shown on Returns filed by the Company or any subsidiary as of the date hereof
(without regard to extensions) have been paid in full or adequate provision has
been made for any such Taxes on the Company's balance sheet dated as of the Most
Recent Fiscal Quarter End (in accordance with generally accepted accounting
principles), except for such Taxes that, alone or in the aggregate, do not
constitute a material amount.
(c) To the Company's knowledge, as of the date of this Merger
Agreement, there are no outstanding audit examinations, deficiencies or refund
litigation with respect to any Taxes of the Company or any subsidiary that are
reasonably likely to result in determinations that in the aggregate would have a
Material Adverse Effect. All Taxes due with respect to completed and settled
examinations or concluded litigation examinations or concluded litigation
relating to the Company have been paid in full or adequate provision has been
made for any such Taxes on the Company's balance sheet (in accordance with
generally accepted accounting principles).
(d) For its taxable year ended December 31, 1989 and at all
times thereafter up to and including the date hereof except for the taxable
years ended December 31, 1992 and 1993, the Company has qualified to be treated
as a REIT within the meaning of Sections 856-860 of the Code, including, without
limitation, the requirements of Sections 856 and 857 of the Code. To the
Company's knowledge, the Company has at all
14
<PAGE>
times except for the taxable years ended December 31, 1987, 1988, 1992 and 1993
met all requirements necessary to be treated as a REIT for purposes of the
income tax provisions of those states in which the Company is subject to income
tax and which provide for the taxation of a REIT in a manner similar to the
treatment of REITs under Sections 856-860 of the Code.
(e) To the Company's knowledge, each of the Company's
subsidiaries of which all the outstanding capital stock is owned solely by the
Company is a "Qualified REIT Subsidiary" as defined in Section 856(i) of the
Code. The Company's subsidiaries which are partnerships are, and have been at
all times, properly classified as partnerships for federal income tax purposes
and have not been classified as publicly-traded partnerships for federal income
tax purposes.
For purposes of this Merger Agreement, "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including without limitation
all net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding payroll, employment, excise, severance,
stamp, occupation, property or other taxes, customs, duties, fees, assessments
or charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing authority (domestic
or foreign) upon the Company or any subsidiary.
Section 7.10 Properties. To the Company's knowledge, the Company has
----------
obtained all material certificates, permits and licenses from any governmental
authority having jurisdiction over any of the real estate properties owned by
the Company or any Company subsidiary (the "Company Properties") which are not
the responsibility of tenants. The Company has previously furnished to
Purchaser complete and correct copies of reports of structural engineers with
respect to each Company Property. To the Company's knowledge, other than as set
forth in such reports, there are no material structural defects or physical
damage in any Company Property or building system contained therein. Neither
the Company nor any of the subsidiaries of the Company has received any notice
to the effect that (A) any condemnation or rezoning proceedings are pending or
threatened with respect to any of the Company Properties or (B) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the Company Properties or by the continued
maintenance, operation or use of the parking areas.
Section 7.11 Employee Benefit Plans.
----------------------
(a) Definitions. For purposes of this Section 7.11:
(i) Arrangements. The term "Arrangement" means any
------------
material written personnel policy (including, but not limited to, vacation time,
holiday pay, bonus programs, moving expense reimbursement programs and sick
leave), salary reduction agreement, change-in-control agreement, employment
agreement, stock option plan, consulting agreement or any other material written
benefit program, agreement or contract, other than a Plan.
15
<PAGE>
(ii) Plan. The term "Plan" means any employee benefit
----
plan as defined in Section 3(3) of ERISA (other than a Multiemployer Plan).
(iii) Multiemployer Plan. The term "Multiemployer
------------------
Plan" means any employee benefit plan that is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA.
(iv) Control Group. The term "Control Group" means a
-------------
controlled group of corporations of which the Company is a member within the
meaning of Section 414(b) of the Code, any group of corporations or entities
under common control with the Company within the meaning of Section 414(c) of
the Code or any affiliated service group of which the Company is a member within
the meaning of Section 414(m) of the Code.
(v) ERISA. The term "ERISA" means the Employee
-----
Retirement Income Security Act of 1974, as amended.
(b) No Arrangements, Plans, or Multiemployer Plans. Neither
the Company nor any Control Group member: (i) maintains an Arrangement or Plan;
(ii) is or is expected to be liable to the Pension Benefit Guaranty Corporation
with respect to any Plan; (iii) is or has been obligated to contribute to a
Multiemployer Plan; or (iv) is or could become subject to any withdrawal
liability within the meaning of Section 4201 of ERISA with respect to a
Multiemployer Plan.
Section 7.12 Environmental Matters. The Company has previously furnished
---------------------
to Purchaser and its counsel complete and correct copies of the most recent
environmental audits, assessments and studies within the possession of the
Company or any subsidiary with respect to the Company Properties. To the
Company's knowledge, other than as set forth in such audits, assessments and
studies, there are no conditions which would violate or cause the Company to be
subject to any liability under any Environmental Laws nor has there been any
release, as defined in Environmental Laws, of Hazardous Materials (as
hereinafter defined) at, under or adjacent to any Company Property.
Environmental Laws include, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Resource Conservation
and Recovery Act ("RCRA"), the Clean Air Act, the Clean Water Act, the Toxic
Substances Control Act, the Emergency Planning and Community Right-to-Know Act
of 1986, the Safe Drinking Water Act and any similar or local laws and
regulations. For purposes of this Section 7.12, "Hazardous Materials" are any
materials containing any (i) "hazardous substances" as defined by CERCLA or any
similar applicable state law; (ii) petroleum, including crude oil or any
fraction thereof; (iii) natural gas, natural gas liquids or synthetic gas usable
fuel; and (iv) asbestos, polychlorinated biphenyls ("PCBs") or isomers of
dioxin.
Section 7.13 Related Party Transactions. Except for the SAR Agreement,
--------------------------
the management agreement between the Company and TIS Financial Services Inc. and
the agreement with Prudential Securities Incorporated referred to in Section
7.16, neither the Company nor any Company subsidiary has any arrangements,
agreements and contracts (which are or will be in effect as of or after the date
of this Merger Agreement) with (i) any
16
<PAGE>
consultant (excluding legal counsel, accountants and financial advisors); (ii)
any person who is an officer, trustee, director or affiliate of the Company or
any of the Company's subsidiaries, any relative of any of the foregoing or any
entity of which any of the foregoing is an affiliate; or (iii) any person who
acquired any capital stock of the Company in a private placement.
Section 7.14 Contracts and Commitments. The Disclosure Schedule sets
-------------------------
forth (i) all notes, debentures, bonds and other evidence of indebtedness which
are secured or collateralized by mortgages, deeds of trust or other security
interests in the Company Properties or personal property of the Company and each
of the Company's subsidiaries and (ii) each commitment entered into by the
Company or any of the Company's subsidiaries which may result in total payments
by or liability of the Company or any of the Company's subsidiaries in excess of
$500,000 and which may not be terminated within 90 days by the Company or the
subsidiary of the Company which is a party thereto. None of the Company or any
of the Company's subsidiaries has received any written notice of a default that
has not been cured under any of the documents described in clause (i) above or
is in default respecting any payment obligations thereunder beyond any
applicable grace periods except where such default would not have a Material
Adverse Effect. To the Company's knowledge, neither the Company nor any of the
Company's subsidiaries is in default with respect to any obligations, which
individually or in the aggregate are material, under any joint venture
agreements to which the Company or any of the Company's subsidiaries is a party.
Section 7.15 Disclosure. The Schedule 14D-9, the information statement to
----------
be filed by the Company in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the "Information Statement") and the Proxy
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Purchaser or Sub for inclusion or incorporation by reference therein.
Section 7.16 Broker's Fees. None of the Company and its subsidiaries has
-------------
any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Merger
Agreement except for the fees of Prudential Securities Incorporated provided for
in an agreement between the Company and Prudential Securities Incorporated dated
October 30, 1997, a complete and correct copy of which has been delivered to
Purchaser.
Section 7.17 Shareholder Rights Plan Inapplicable. As of the date hereof
------------------------------------
and at all times on or prior to the Effective Date, the Company's Shareholder
Rights Plan is, and shall be, inapplicable to the Offer, Merger and the
transactions contemplated by this Merger Agreement. The Board of Trustees of
the Company, at a meeting duly called and held, has by the vote required by
applicable law taken any necessary steps to redeem the rights issued under the
Shareholder Rights Plan or to otherwise render the Company's Shareholder Rights
Plan inapplicable to the Offer, the Merger and the transactions contemplated by
this Merger Agreement.
17
<PAGE>
Section 7.18 Takeover Provisions Inapplicable. As of the date hereof and
--------------------------------
at all times on or prior to the Effective Date, Sections 351.407 and 351.459 of
the GBCL are, and shall be, inapplicable to the Offer, Merger and the
transactions contemplated by this Merger Agreement.
Section 7.19 Voting Requirements. The affirmative vote of the holders of
-------------------
two-thirds of the outstanding Company Common Shares and Company Preferred Shares
approving this Merger Agreement is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve this Merger
Agreement, and the transactions contemplated by this Merger Agreement.
ARTICLE VIII
Contingent Options of Purchaser
Section 8.1 Grant of Common Share Option. The Company hereby grants to
----------------------------
Purchaser an irrevocable option (the "Common Share Option") to purchase for a
price of $8.50 per share (the "Per Common Share Price") in cash a number of
Company Common Shares (the "Optioned Common Shares") equal to the Applicable
Common Share Amount. The "Applicable Common Share Amount" shall be the number
of Company Common Shares which, when added to the number of Company Common
Shares owned by Purchaser and Sub immediately prior to the exercise of the
Common Share Option, would result in Purchaser owning immediately after the
exercise of the Common Share Option 90% of the then outstanding Company Common
Shares. Purchaser may exercise the Common Share Option only if at the time of
exercise, it (a) shall have accepted Company Common Shares for payment pursuant
to the Offer and (b) the Minimum Condition shall have been satisfied. The
Common Share Option shall expire if not exercised prior to the earlier of the
Effective Date and 12:00 midnight, Eastern time, on the date 15 business days
after termination of the Offer.
Section 8.2 Grant of Preferred Share Option. The Company hereby grants to
-------------------------------
Purchaser an irrevocable option (the "Preferred Share Option") to purchase for a
price of $10.00 per share (the "Per Preferred Share Price") in cash a number of
Company Preferred Shares (the "Optioned Preferred Shares") equal to the
Applicable Preferred Share Amount. The "Applicable Preferred Share Amount"
shall be the number of Company Preferred Shares which, when added to the number
of Company Preferred Shares owned by Purchaser and Sub immediately prior to the
exercise of the Preferred Share Option, would result in Purchaser owning
immediately after its exercise of the Preferred Share Option 90% of the then
outstanding Company Preferred Shares. Purchaser may exercise the Preferred
Share Option only if at the time of exercise, it (a) shall have accepted Company
Preferred Shares for payment pursuant to the Offer and (b) the Minimum Condition
shall have been satisfied. The Preferred Share Option shall expire if not
exercised prior to the earlier of the Effective Date and 12:00 midnight, Eastern
time, on the date 15 business days after termination of the Offer.
18
<PAGE>
Section 8.3 Exercise of Options. Provided that the conditions to exercise
-------------------
the Common Share Option set forth in Section 8.1 are satisfied, or that the
conditions to exercise the Preferred Share Option set forth in Section 8.2 are
satisfied, Purchaser may exercise either the Common Share Option or the
Preferred Share Option, respectively, only in whole at any time prior to such
expiration of such options. In the event that Purchaser wishes to exercise the
Common Share Option or the Preferred Share Option, Purchaser shall give written
notice (the date of such notice being herein called the "Notice Date") to the
Company specifying the number of Optioned Common Shares or Optioned Preferred
Shares it will purchase pursuant to such exercise and a place and date (not
later than ten business days from the Notice Date) for the closing of such
purchase.
Section 8.4 Payment of Purchase Price and Delivery of Certificates for
----------------------------------------------------------
Optioned Shares. At any closing hereunder, (a) Purchaser will make payment to
- ---------------
the Company of the full purchase price for the Optioned Common Shares or
Optioned Preferred Shares in New York Clearing House funds by certified or
official bank check payable to the order of the Company, in an amount equal to
the product of the Per Common Share Price or Per Preferred Share Price,
multiplied by the number of Optioned Common Shares or Optioned Preferred Shares,
respectively, being purchased at such closing and (b) the Company will deliver
to Purchaser a duly executed certificate or certificates representing the number
of Optioned Common Shares or Optioned Preferred Shares so purchased, registered
in the name of Purchaser or its nominee in the denomination designated by
Purchaser or its notice of exercise.
Section 8.5 Securities Act. Purchaser represents that any Optioned Common
--------------
Shares or Optioned Preferred Shares purchased by Purchaser will be acquired for
investment only and not with a view to any public distribution thereof and
Purchaser will not offer to sell or otherwise dispose of any Optioned Common
Shares or Optioned Preferred Shares so acquired by it in violation of the
registration requirements of the Securities Act.
Section 8.6 Adjustment upon Changes in Capitalization. In the event of
-----------------------------------------
any change in the number of outstanding Company Common Shares or Company
Preferred Shares by reason of any stock dividend, stock split, recapitalization,
combination, exchange of shares, merger, consolidation, reorganization or the
like or any other change in the corporate or capital structure of the Company
that would have the effect of diluting Purchaser's rights hereunder, the number
of Optioned Common Shares or the number of Optioned Preferred Shares and the Per
Common Share Price or the Per Preferred Share Price, respectively, shall be
adjusted appropriately so as to restore Purchaser to its rights hereunder with
respect to such option; provided, however, that nothing in this Section 8.6
shall be construed as permitting the Company to take any action or enter into
any transaction prohibited by this Merger Agreement.
19
<PAGE>
ARTICLE IX
Conduct of Business Pending the Merger
Section 9.1 Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
(a) Prior to the Effective Date, except as specifically
permitted by this Merger Agreement, unless the other party has consented in
writing thereto, Purchaser and the Company:
(i) Shall use their reasonable best efforts, and
shall cause each of their respective subsidiaries to use their reasonable best
efforts, to preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;
(ii) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of materiality and,
subject to Section 10.6, any proposals to engage in material transactions;
(iii) Shall promptly notify the other of any material
emergency or other material change in the condition (financial or otherwise),
business, properties, assets, liabilities, prospects or in the normal course of
their businesses or in the operation of their properties, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in any material
respect of any representation or warranty contained herein; and
(iv) Shall promptly deliver to the other true and
correct copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Merger Agreement.
(b) Prior to the Effective Date, unless Purchaser has
consented thereto, the Company:
(i) Shall, and shall cause each Company subsidiary
to, conduct its operations according to their usual, regular and ordinary course
in substantially the same manner as heretofore conducted, subject to clauses
(ii)-(ix) below;
(ii) Shall not, and shall cause each Company
subsidiary not to, acquire, enter into an option to acquire or exercise an
option or contract to acquire additional real property, incur additional
indebtedness, encumber assets or commence construction of, or enter into any
agreement or commitment to develop or construct, any other type of real estate
projects except for the transactions contemplated in the Disclosure Schedule;
(iii) Shall not amend the Articles or the Bylaws of the
Company, and shall cause each Company subsidiary not to amend its charter,
bylaws, joint venture documents, partnership agreements or equivalent documents
except as contemplated by this Merger Agreement;
20
<PAGE>
(iv) Shall not (A) issue any shares of its capital
stock, effect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, (B) grant, confer or award any
option, warrant, conversion right or other right not existing on the date hereof
to acquire any shares of its capital stock, (C) increase any compensation or
enter into or amend any employment agreement with any of its present or future
officers or trustees, or (D) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are less
favorable to participants in such plans;
(v) Shall not, and shall not permit any of the
Company subsidiaries to, except in accordance with and as permitted under
Section 9.1(c) hereof, sell, lease or otherwise dispose of (A) any the Company
Properties or any portion thereof or any of the capital stock of or partnership
or other interests in any of the Company subsidiaries or (B) except in the
ordinary course of business, any of its other assets which are material,
individually or in the aggregate;
(vi) Shall not, and shall not permit any of the
Company subsidiaries to, make any loans, advances or capital contributions to,
or investments in, any other person;
(vii) Shall not, and shall not permit any of the
Company subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company Public Reports or incurred in the ordinary
course of business consistent with past practice;
(viii) Shall not, and shall not permit any of the
Company subsidiaries to, enter into any material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a "Commitment")
which may result in total payments or liability by or to it in excess of $50,000
other than Commitments for expenses of attorneys, accountants and investment
bankers incurred in connection with the Merger;
(ix) Shall not, and shall not permit any of the
Company subsidiaries to, enter into any Commitment with any officer, trustee,
director, consultant or affiliate of the Company or any of the Company
subsidiaries; and
(x) Shall use its best efforts to assist the
Purchaser in making contact with the financial institutions that are lenders to
the Company for the purpose of obtaining any necessary consents.
(c) the Company shall not, without the written consent of
Purchaser, which consent may not be unreasonably withheld, (i) effect any
material change in any lease or occupancy agreement currently in effect which
affects the Company Properties (together with such additional leases approved or
permitted pursuant to this
21
<PAGE>
Merger Agreement, the "Leases"); (ii) renew or extend the term of any Lease,
unless the same is an extension or expansion permitted pursuant to the terms of
an existing Lease; or (iii) enter into any new Lease or cancel or terminate any
Lease. When seeking consent to a new or modified Lease, the Company shall
provide notice of the identity of the tenant, a term sheet, letter of intent or
proposed lease containing material business terms (including, without
limitation, rent, expense base, concessions, tenant improvement allowances,
brokerage commissions, and expansion and extension options) and whatever credit
and background information, if any, the Company then possesses with respect to
such tenant. Purchaser shall be deemed to have consented to any proposed Lease
or Lease modification if it has not responded to the Company within five (5)
business days after receipt of such information. Upon Purchaser's approval or
deemed approval, the Company shall be entitled to enter into a Lease on the
standard lease form for such Company Property, without material change other
than changes customarily made to leases to other comparable tenants of the
Company Property. Purchaser hereby designates David H. Hoster II and Marshall
A. Loeb as individuals who will be available and authorized to grant Lease
approvals. Notwithstanding anything in this Merger Agreement to the contrary,
the Company may cancel or terminate any Lease or commence collection, unlawful
detainer or other remedial action against any tenant without Purchaser's consent
upon the occurrence of a default by the tenant under said Lease.
Section 9.2 No Distributions. Without the prior written consent of
----------------
Purchaser, which consent may be withheld for any reason, between the date hereof
and the Effective Date, the Company shall not declare, set aside or pay any
dividends or distributions whether in cash or property. Notwithstanding
anything to the contrary set forth in this Merger Agreement, nothing in this
Merger Agreement shall prohibit the Company or any subsidiary of the Company
from taking any action at any time or from time to time that in the reasonable
judgment of the Company is necessary for the Company to maintain its
qualification as a REIT within the meaning of Sections 856-860 of the Code for
any period or portion thereof ending on or prior to the Effective Date including
making dividend or distribution payments to shareholders; provided, however,
that no dividends or distributions required to avoid the excise tax on
undistributed REIT income under Section 4981 of the Code shall be deemed to be
necessary for the Company to maintain its qualification as a REIT within the
meaning of Sections 856-860 of the Code. In addition, the Company may declare,
set aside and pay distributions to its shareholders (i) in an amount not to
exceed $0.08 per Company Common Share and $0.08 per Company Preferred Share per
calendar quarter which distributions will have record dates and payment dates
substantially similar to such dates in 1997; or (ii) as required by the
Company's Certificate. To the extent any dividends or distributions in excess
of $0.08 per Company Common Share and $0.08 per Company Preferred Share per
quarter are paid, the Common Share Offer Price, the Preferred Share Offer Price,
the Common Merger Price and the Preferred Merger Price shall be reduced by the
cumulative per share amount of such excess.
Section 9.3 Maintenance of REIT Status. Prior to the Effective Date,
--------------------------
unless Purchaser has consented to the contrary, Company shall take any such
actions as may be necessary to maintain Company's status as a REIT for any
period or portions thereof ending on or prior to the Effective Date. Following
the Effective Date, Purchaser shall use its best
22
<PAGE>
efforts to take any such actions as may be necessary to maintain Company's
status as a REIT for any period or portion thereof ending on or prior to the
Effective Date.
ARTICLE X
Additional Agreements
Section 10.1 Access and Information. The Company and its subsidiaries
----------------------
shall afford to Purchaser and to Purchaser's accountants, counsel and other
representatives full access during normal business hours (and at such other
times as the parties may mutually agree) throughout the period prior to the
Effective Date, to all of its properties, books, contracts, commitments, records
and personnel and, during such period, the Company shall furnish promptly to
Purchaser (a) a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal or state securities laws;
and (b) all other information concerning its business, properties and personnel
as Purchaser may reasonably request. Each of the Company, Purchaser and Sub
shall hold, and shall cause their respective employees and agents to hold, in
confidence all such information.
Section 10.2 Filings. Purchaser, Sub and the Company shall make all
-------
necessary filings with respect to the Offer and the Merger under the Securities
Act and the Exchange Act and the rules and regulations thereunder, under
applicable Blue Sky or similar securities laws and under other applicable state
or foreign securities laws, rules and regulations and shall use all reasonable
efforts to obtain required approvals and clearances with respect thereto.
Section 10.3 Indemnification and Insurance.
-----------------------------
(a) In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any person who is now, or has been at any time prior to
the date hereof, or who becomes prior to the Effective Date, a director,
trustee, officer, employee, fiduciary or agent of the Company or any of its
subsidiaries (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he, she or it is or was a director, trustee,
officer, employee or agent of the Company or any of its subsidiaries, or is or
was serving at the request of the Company or any of its subsidiaries as a
director, trustee, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise; or (ii) this Merger
Agreement or any of the transactions contemplated hereby, whether in any case
asserted or arising before or after the Effective Date, the parties hereto agree
to cooperate and use their reasonable best efforts to defend against and respond
thereto. It is understood and agreed that the Company shall indemnify and hold
harmless, and after the Effective Date Purchaser shall indemnify and hold
harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including attorneys' fees and expenses), judgments, fines and amounts
paid in settlement in connection with any such threatened or actual claim,
action, suit, proceeding or investigation, and in the
23
<PAGE>
event of any such threatened or actual claim, action, suit, proceeding or
investigation (whether asserted or arising before or after the Effective Date),
(i) the Company, and the Purchaser after the Effective Date, shall promptly pay
expenses in advance of the final disposition of any claim, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by law;
(ii) the Indemnified Parties may retain counsel satisfactory to them, and the
Company, and Purchaser after the Effective Date, shall pay all fees and expenses
of such counsel for the Indemnified Parties within thirty days after statements
therefor are received; and (iii) the Company and Purchaser will use their
respective reasonable best efforts to assist in the vigorous defense of any such
matter; provided, that neither the Company nor Purchaser shall be liable for any
settlement effected without its prior written consent (which consent shall not
be unreasonably withheld); and provided further that the Purchaser shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and non-appealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Any
Indemnified Party wishing to claim indemnification under this Section 10.3, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify the Company and, after the Effective Date, Purchaser, thereof, provided
that the failure to so notify shall not affect the obligations of the Company or
Purchaser except to the extent such failure to notify materially prejudices such
party.
(b) Purchaser agrees that all rights to indemnification
existing in favor, and all limitations on the personal liability, of the
Indemnified Parties provided for in the Company's Certificate or the Company's
Bylaws or the charter or bylaws or similar organizational documents of any of
its subsidiaries as in effect as of the date hereof with respect to matters
occurring prior to the Effective Date shall survive the Merger and shall
continue in full force and effect for a period of not less than three years from
the Effective Date; provided, however, that all rights to indemnification in
respect of any claim (a "Claim") asserted or made within such period shall
continue until the disposition of such Claim. At or prior to the Effective Date,
Purchaser shall purchase directors' and officers' liability insurance coverage
for the Company's trustees and officers in a form acceptable to the Company
which shall provide such trustees and officers with $10,000,000 of aggregate
coverage for three years following the Effective Date and which shall have a
retention of no more than $250,000. Purchaser may satisfy its obligations under
this Section 10.3(b) by maintaining in force the Company's present directors'
and officers' liability insurance coverage.
Section 10.4 HSR Act; Other Action. The Company, Sub and Purchaser shall,
---------------------
to the extent required, (a) use their best efforts to file as soon as
practicable notifications under the HSR Act in connection with the Merger and
the transactions contemplated hereby, and to respond as promptly as practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority in connection with antitrust matters and
(b) use their best efforts to promptly take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate under applicable laws and regulations to consummate
24
<PAGE>
and make effective the transactions contemplated by this Merger Agreement as
soon as practicable including, without limitation, if such action should be
necessary to consummate the Merger or to avoid the commencement of a proceeding
to enjoin or delay consummation of the Merger by any governmental authority, the
proffer by Purchaser of its willingness to accept an order with respect to
divestiture of assets and businesses of Purchaser or the Company and/or to hold
separate such assets and businesses pending such divestiture.
Section 10.5 Additional Agreements.
---------------------
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions 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 Merger
Agreement, including using all reasonable efforts to obtain all necessary
waivers, consents and approvals, to effect all necessary registrations and
filings and to lift any injunction or other legal bar to the Merger subject,
however, in the case of the Merger Agreement, to the appropriate vote of the
shareholders of the Company. Notwithstanding the foregoing, there shall be no
action required to be taken and no action will be taken in order to consummate
and make effective the transactions contemplated by this Merger Agreement if
such action, either alone or together with another action, would result in a
Material Adverse Effect.
(b) In case at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of this
Merger Agreement, the proper officers, directors and/or trustees of Purchaser,
Sub and the Company shall take all such necessary action.
(c) The Company shall give prompt notice to Purchaser, and
Purchaser or Sub shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Merger Agreement
becoming untrue or inaccurate in any respect or (ii) the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Merger Agreement; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Merger Agreement.
Section 10.6 Acquisition Proposals.
---------------------
(a) Unless and until this Merger Agreement shall have been
terminated in accordance with its terms, the Company agrees and covenants that
(i) neither it nor any Company subsidiary shall, and each of them shall direct
and use its best efforts to cause its respective officers, trustees, directors,
employees, agents and representatives (including, without limitation, any
investment banker, attorney or accountant retained by it or any of the Company
subsidiaries) not to, directly or indirectly, initiate, solicit or knowingly
encourage any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, tender offer, exchange offer, consolidation or
similar transaction involving, or
25
<PAGE>
any purchase, sale, lease, issuance or other disposition (except as permitted
under Section 9.1 hereof) of (A) 10% or more of the assets; (B) any equity
securities (or options, rights or warrants to purchase, or securities
convertible into, such securities) representing 10% or more of the voting power;
(C) partnership interests; or (D) any transaction in which any person shall
acquire beneficial ownership (as such term is defined in Rule 13d-3 under the
Exchange Act), or the right to acquire beneficial ownership, of 10% or more of
the equity securities, of the Company or any the Company subsidiary, other than
the transactions contemplated by this Merger Agreement (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) the Company will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 10.6; and (iii) the Company will notify Purchaser
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company and such notification will
include the specific details with respect to any such inquiries, proposals,
requests, negotiations or discussions.
(b) Notwithstanding anything set forth in this Merger
Agreement to the contrary (i) the Board of Trustees of the Company may furnish
information to or enter into discussions or negotiations with any person or
entity that makes an unsolicited bona fide Acquisition Proposal, if, and only to
the extent that, the Board of Trustees of the Company, after consultation with
and based upon the advice of Preuss, Walker & Shanagher, LLP or another
nationally recognized law firm selected by the Board of Trustees of the Company,
determines in good faith that such action is required for the Board of Trustees
to comply with its fiduciary duties to shareholders under applicable law,
provided that prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, the Company provides
written notice to Purchaser to the effect that it is furnishing information to,
or entering into discussions or negotiations with, such person or entity, and
the Company keeps Purchaser regularly informed of the status of any such
discussions or negotiations; and (ii) the Board of Trustees of the Company may,
to the extent applicable, comply with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act with regard to an Acquisition Proposal.
Section 10.7 Trustees. Promptly upon the purchase by Purchaser or Sub of
--------
Company Preferred Shares and Company Common Shares pursuant to the Offer,
Purchaser shall be entitled to designate three persons to serve on the Company's
Board of Trustees, subject to compliance with Section 14(f) of the Exchange Act,
if applicable. At such time, if requested by Purchaser, the Company will also
cause each committee of the Board of Trustees of the Company to include persons
designated by Purchaser constituting the same percentage of each such committee
as Purchaser's designees are of the Board of Trustees of the Company. The
Company shall, upon request by Purchaser, promptly exercise reasonable best
efforts to secure the resignations of such number of trustees as is necessary to
enable Purchaser's designees to be elected to the Board of Trustees of the
Company in accordance
26
<PAGE>
with the terms of this Section 10.7 and to cause Purchaser's designees so to be
elected. In no event shall the Company expand the Board of Trustees so that the
total number of trustees shall exceed seven persons. The Company shall promptly
take all action necessary pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in order to fulfill its obligations under this
Section 10.7 and shall include in the Schedule 14D-9 mailed to shareholders
promptly after the commencement of the Offer (or in an amendment thereof or the
Information Statement if Purchaser has not theretofore designated trustees) such
information with respect to the Company and its officers and trustees as is
required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations
under this Section 10.7.
Section 10.8 Payment of Fees by the Company. Promptly upon the purchase
------------------------------
by Purchaser or Sub of Company Preferred Shares and Company Common Shares
pursuant to the Offer, the Company shall pay (a) any amount owing Robert H.
Gidel under the SAR Agreement; (b) any amount owing to Prudential Securities
Incorporated under Section 7.16; and (c) the reasonable fees and disbursements
of Pruess Walker & Shanagher, LLP for services rendered to the Company.
ARTICLE XI
Conditions Precedent
Section 11.1 Conditions Precedent to the Obligations of Each Party. If
-----------------------------------------------------
the Offer is consummated, the obligations of Company, Sub and Purchaser to
effect the Merger shall be subject to the fulfillment at or prior to the
Effective Date of the following conditions:
(a) If approval of this Merger Agreement by Company
shareholders is required by law, the holders of the shares of capital stock of
the Company and the Sub entitled to vote thereon shall have duly approved this
Merger Agreement and the transactions contemplated hereby, all in accordance
with the requirements of the GBCL and the respective Certificate of
Incorporation and Bylaws of the Company and Sub.
(b) No temporary restraining order, preliminary or
permanent injunction or other order by any United States federal or state court
or governmental body which prohibits the consummation of the transaction
contemplated by this Merger Agreement shall have been issued; provided, however,
that the parties shall have used all reasonable efforts to have such order or
injunction vacated or reversed.
(c) If applicable, the waiting period (and any extension
thereof) as prescribed by the regulations promulgated under the HSR Act shall
have expired or shall have been terminated.
Section 11.2 Additional Conditions Precedent to the Obligations of
-----------------------------------------------------
Purchaser and Sub If the Offer is not Consummated. The obligations of Purchaser
- -------------------------------------------------
and Sub to effect the Merger in the event that the Offer is not consummated and
this Merger Agreement shall not have been terminated in accordance with its
terms shall be subject to (a) the conditions specified in Sections 11.1(a) and
11.1(c); and (b) the following further conditions:
27
<PAGE>
(i) there shall not be threatened or pending by any governmental
entity or any other person any suit, action or proceeding (in the case of a
suit, action or proceeding by a person other than a governmental entity, such
suit, action or proceeding having a reasonable likelihood of success), (A)
challenging the acquisition by Purchaser or Sub of any Company Common Shares or
Company Preferred Shares, seeking to restrain or prohibit the consummation of
the Merger or any of the other transactions contemplated by this Merger
Agreement, or seeking to obtain from the Company, Purchaser or Sub any damages
that are material in relation to the Company and its subsidiaries taken as a
whole; (B) seeking to prohibit or limit the ownership or operation by the
Company, Purchaser or any of their respective subsidiaries of a material portion
of the business or assets of the Company and its subsidiaries, taken as a whole,
or Purchaser and its subsidiaries, taken as a whole, or to compel the Company or
Purchaser to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Purchaser and
its subsidiaries, taken as a whole, as a result of the Offer, the Merger or any
of the transactions contemplated by this Merger Agreement; (C) seeking to impose
material limitations on the ability of Purchaser or Sub to acquire or hold, or
exercise full rights of ownership of, any Company Common Shares or Company
Preferred Shares including, without limitation, the right to vote such Company
Common Shares or Company Preferred Shares on all matters properly presented to
the shareholders of the Company; (D) seeking to prohibit Purchaser or any of its
subsidiaries from effectively controlling in any material respect the business
or operations of the Company or any of its subsidiaries; or (E) which otherwise
is reasonably likely to have a Material Adverse Effect;
(ii) there shall not be (A) any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction threatened, proposed,
sought, enacted, entered, enforced, promulgated or deemed applicable to
Purchaser, the Company, or any of their respective subsidiaries or the Merger,
or (B) any other action taken by any governmental entity, other than the
application to the Offer or the Merger of waiting periods under the HSR Act, if
applicable, that is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (A) through (E) of paragraph (i)
above;
(iii) (A) the Board of Trustees of the Company or any committee
thereof shall not have withdrawn or modified in a manner adverse to Purchaser or
Sub its approval or recommendation of the Offer, the Merger or this Merger
Agreement;
(iv) there shall not have occurred (A) any general suspension of
trading in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified decrease in
a market index); (B) any extraordinary or material adverse change in the
financial market or major stock exchange indices in the United States; (C) any
material adverse change in United States currency exchange rates or a suspension
of, or limitation on, the markets therefor; (D) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States; (E) any limitation (whether or not mandatory) by any governmental entity
on, or other event that might materially affect, the extension of credit by
banks or other lending institutions; or (F) in the case of any of the foregoing
existing on the date of this Merger Agreement, a material acceleration or
worsening thereof;
28
<PAGE>
(v) all of the representations and warranties of the Company set
forth in this Merger Agreement shall be true and correct as of the date of the
Merger Agreement and as of the Effective Date in all material respects (except
to the extent such representations and warranties expressly relate to an earlier
date); and
(vi) the Company shall not have failed to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant of the Company to be performed or complied with by it under this
Merger Agreement.
ARTICLE XII
Termination, Amendment and Waiver
Section 12.1 Termination. This Merger Agreement may be terminated at any
-----------
time prior to the Effective Date, whether before or after approval by the
shareholders of the Company:
(a) by mutual consent of the Board of Directors of Purchaser
and the Board of Trustees of the Company;
(b) by either Purchaser or the Company if the Merger shall
not have been consummated on or before August 31, 1998 (provided the terminating
party is not otherwise in material breach of its representations, warranties or
obligations under this Merger Agreement);
(c) by the Company if any of the conditions specified in
Article XI have not been met or waived by the Company at such time as such
condition is no longer capable of satisfaction as long as the Company is not in
breach of the Merger Agreement;
(d) by Purchaser or Sub if (i) any of the conditions
specified in Article XI have not been met or waived by Purchaser at such time as
such condition is no longer capable of satisfaction or (ii) there shall not have
been a sufficient number of Company Common Shares and Company Preferred Shares
tendered pursuant to the Offer in order to satisfy the Minimum Condition on or
before April 30, 1998, as long as the Purchaser is not in breach of the Merger
Agreement;
(e) by Purchaser or Sub if either Purchaser or Sub is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (c) of Exhibit A to this Merger Agreement;
(f) by the Company, if the Board of Trustees of the Company
recommends to the Company's shareholders approval or acceptance of an
Acquisition Proposal in accordance with Section 10.6 hereof; and
29
<PAGE>
(g) by the Company, if either Purchaser or Sub is in material
breach of its obligations under this Merger Agreement and such material breach
shall not have been cured by Purchaser or Sub within five days after Purchaser
or Sub receives notice thereof.
Section 12.2 Effect of Termination.
---------------------
(a) In the event of termination of this Merger Agreement by
either Purchaser or the Company, as provided above, this Merger Agreement shall
forthwith become void and (except for the willful breach of this Merger
Agreement by any party hereto) there shall be no liability on the part of either
the Company, Purchaser or Sub or their respective officers, trustees or
directors; provided that Sections 12.2, 12.3, 12.4, 13.3 and 13.6 and the last
sentence of Section 10.1 shall survive the termination.
(b) If (x) Purchaser terminates this Merger Agreement
pursuant to Section 12.1(e), or pursuant to Section 12.1(b) as a result of a
willful breach by the Company; or
(y) the Company terminates this Merger Agreement pursuant
to Section 12.1(f); or
(z) during the pendency of the Offer a third party
announces or proposes an Acquisition Proposal and Purchaser terminates this
Merger Agreement under Section 12.1(d)(ii) and the Company thereafter
consummates or enters into an agreement to consummate an Acquisition Proposal
(with such third party or otherwise) within the one year period after such
termination of this Merger Agreement;
then the Company shall pay to Purchaser an amount (the
"Termination Amount") in cash equal to the sum of (i) $2,500,000, plus (ii)
Purchaser's reasonable out-of-pocket costs and expenses in connection with this
Merger Agreement and the transactions contemplated hereby, evidenced by
documentation reasonably acceptable to the Company, in accordance with the
provisions of Section 12.3.
(c) The parties acknowledge and agree that the provisions for
payment of the Termination Amount are included herein in order to induce
Purchaser to enter into this Merger Agreement and to reimburse Purchaser for
incurring the costs and expenses related to entering into this Merger Agreement
and consummating the transactions contemplated by this Merger Agreement. The
parties hereto agree that the payment of the Termination Amount by the Company
to Purchaser shall constitute liquidated damages with respect to any claim for
damages which would otherwise be entitled to assert against the Company with
respect to this Merger Agreement and the transactions contemplated hereby and
shall constitute the only remedy to which Purchaser shall be entitled in
connection therewith.
Section 12.3 Payment of Termination Amount.
-----------------------------
(a) In the event that the Company is obligated to pay
Purchaser the Termination Amount pursuant to Section 12.2 (the "Section 12.2
Amount"), the Company
30
<PAGE>
shall pay to Purchaser from the applicable Section 12.2 Amount deposited into
escrow in accordance with the next sentence, an amount equal to the lesser of
(i) the Section 12.2 Amount and (ii) the sum of (A) the maximum amount that can
be paid to Purchaser without causing Purchaser to fail to meet the requirements
of Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) or
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by Purchaser's
certified public accountants, plus (B) in the event Purchaser receives either
(1) a letter from Purchaser's counsel indicating that Purchaser has received a
ruling from the Internal Revenue Service (the "IRS") described in Section
12.3(b)(ii) or (2) an opinion from Purchaser's counsel as described in Section
12.3(b)(ii), an amount equal to the Section 12.2 Amount less the amount payable
under clause (A) above. To secure the Company's obligation to pay these
amounts, the Company shall deposit into escrow an amount in cash equal to the
Section 12.2 Amount with an escrow agent selected by Purchaser and on such terms
(subject to Section 12.3(b)) as shall be agreed upon by Purchaser and the escrow
agent. The payment or deposit into escrow of the Section 12.2 Amount pursuant
to this Section 12.3(a) shall be made within three days of the event which gives
rise to the payment of the Section 12.2 Amount by wire transfer or bank check.
(b) The escrow agreement shall provide that the Section 12.2
Amount in escrow or any portion thereof shall not be released to Purchaser
unless the escrow agent receives any one or combination of the following: (i) a
letter from Purchaser's certified public accountants indicating the maximum
amount that can be paid by the escrow agent to Purchaser without causing
Purchaser to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute Qualifying
Income or a subsequent letter from Purchaser's accountants revising that amount,
in which case the escrow agent shall release such amount to Purchaser; or (ii) a
letter from Purchaser's counsel indicating that Purchaser received a ruling from
the IRS holding that the receipt by Purchaser of the Section 12.2 Amount would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code (or alternatively,
Purchaser's legal counsel has rendered a legal opinion to the effect that the
receipt by Purchaser of the Section 12.2 Amount would either constitute
Qualifying Income or would be excluded from gross income within the meaning of
Sections 856(c)(2) and (3) of the Code), in which case the escrow agent shall
release the remainder of the Section 12.2 Amount to Purchaser. The escrow
agreement shall also provide that any portion of the Section 12.2 Amount held in
escrow for five years shall be released by the escrow agent to the Company. The
Company shall not be a party to such escrow agreement and shall not bear any
cost of or have liability resulting from the escrow agreement.
(c) Notwithstanding anything to the contrary set forth in
this Merger Agreement, in the event Purchaser is required to file suit to seek
all or a portion of the Termination Amount and Purchaser prevails in such
litigation, it shall be entitled to all expenses, including attorneys' fees and
expenses, which it has incurred in enforcing its rights hereunder.
31
<PAGE>
Section 12.4 Payment to Company on Certain Termination.
-----------------------------------------
(a) In the event that (i) Purchaser or Sub are in material
breach of this Merger Agreement and the Offer or the Merger are not consummated;
or (ii) the Company terminates this Merger Agreement under Section 12.1(g),
Purchaser shall pay to the Company an amount in cash equal to $2,500,000 (the
"Damage Amount"). The parties to this Merger Agreement agree that in the event
Purchaser or Sub breaches this Merger Agreement, actual damages would be
difficult to determine and that the Damage Amount is a liquidated damage payment
in lieu of such actual damages. Payment of the Damage Amount shall be the
Company's sole and exclusive remedy for any material breach of this Merger
Agreement by Purchaser or Sub; provided, however, that the Company may elect to
seek remedies provided by Section 13.7 in which case the Company's sole and
exclusive remedy for any material breach of this Merger Agreement shall be as
provided by Section 13.7 and the Company will waive any and all rights to
collection of the Damage Amount.
(b) In the event that Purchaser is obligated to pay the
Company the Damage Amount pursuant to this Section 12.4, Purchaser shall pay to
the Company from the applicable Damage Amount deposited into escrow in
accordance with the next sentence, an amount equal to the lesser of (i) the
Damage Amount and (ii) the sum of (A) the maximum amount that can be paid to the
Company without causing the Company to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such amount did
not constitute Qualifying Income as determined by the Company's certified public
accountants, plus (B) in the event the Company receives either (1) a letter from
the Company's counsel indicating that the Company has received a ruling from the
IRS described in Section 12.4(c)(ii) or (2) an opinion from the Company's
counsel as described in Section 12.4(c)(ii), an amount equal to the Damage
Amount less the amount payable under clause (A) above. To secure Purchaser's
obligation to pay these amounts, Purchaser shall deposit into escrow an amount
in cash equal to the Damage Amount with an escrow agent selected by the Company
and on such terms (subject to Section 12.4(b)) as shall be agreed upon by the
Company and the escrow agent. The payment or deposit into escrow of the Damage
Amount pursuant to this Section 12.4(b) shall be made within three days of the
event which gives rise to the payment of the Damage Amount by wire transfer or
bank check.
(c) The escrow agreement shall provide that the Damage Amount
in escrow or any portion thereof shall not be released to the Company unless the
escrow agent receives any one or combination of the following: (i) a letter from
the Company's certified public accountants indicating the maximum amount that
can be paid by the escrow agent to the Company without causing the Company to
fail to meet the requirements of Section 856(C)(2) and (3) of the Code
determined as if the payment of such amount did not constitute Qualifying Income
or a subsequent letter from the Company's accountants revising that amount, in
which case the escrow agent shall release such amount to the Company; or (ii) a
letter from the Company's counsel indicating that the Company received a ruling
from the IRS holding that the receipt by the Company of the Damage Amount would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code (or alternatively,
the Company's legal counsel has rendered a legal opinion to the effect that the
receipt by the Company of the Damage Amount would either constitute Qualifying
Income or would be excluded from gross income within the
32
<PAGE>
meaning of Sections 856(c)(2) and (3) of the Code), in which case the escrow
agent shall release the remainder of the Damage Amount to Purchaser. The escrow
agreement shall also provide that any portion of the Damage Amount held in
escrow for five years shall be released by the escrow agent to Purchaser.
Purchaser shall not be a party to such escrow agreement and shall not bear any
cost of or have liability resulting from the escrow agreement.
(d) Notwithstanding anything to the contrary set forth in
this Merger Agreement, in the event the Company is required to file suit to seek
all or a portion of the Damage Amount and the Company prevails in such
litigation, it shall be entitled to all expenses, including attorneys' fees and
expenses, which it has incurred in enforcing its rights hereunder.
Section 12.5 Amendment. This Merger Agreement may be amended by the
---------
parties hereto, at any time before or after any required approval of matters
presented in connection with the Merger by the shareholders of the Company;
provided, however, that after any such approval, there shall not be made any
amendment that by law requires further approval by such shareholders without the
further approval of such shareholders. This Merger Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 12.6 Waiver. At any time prior to the Effective Date, 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 documents 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. The failure of any party to the Merger
Agreement to assert any of its rights under the Merger Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE XIII
General Provisions
Section 13.1 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
Only those agreements and covenants of the parties which by their express terms
apply in whole or in part after the Effective Date (including, inter alia, the
agreements and covenants expressed in Article III and Sections 10.1, 10.3 and
10.4 and this Section 13.1) shall survive the Effective Date. All other
representations, warranties, agreements and covenants shall expire at the
Effective Date.
Section 13.2 Notices. All notices or other communications under this
-------
Merger Agreement shall be in writing and shall be given (and shall be deemed to
have been duly given upon receipt) by delivery in person, by cable, telegram,
telex or other standard form of
33
<PAGE>
telecommunications, or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
If to the Company:
Meridian Point Realty Trust VIII Co.
c/o RMB Realty Inc.
5400 LBJ Freeway, Suite 1470
Dallas, Texas 75240
Attention: Robert H. Gidel
Fax No.: (972) 982-8655
With a copy to:
Preuss Walker & Shanagher, LLP
595 Market Street
San Francisco, CA 94105
Attention: Denis F. Shanagher, Esq.
Fax No.: (415) 978-2613
If to Purchaser or Sub:
EastGroup Properties, Inc.
300 One Jackson Place
188 East Capitol Street
Jackson, Mississippi 39201
Attention: David H. Hoster II
President and Chief Executive Officer
Fax No.: (601) 352-1441
With a copy to:
Jaeckle Fleischmann & Mugel, LLP
800 Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202
Attention: Joseph P. Kubarek, Esq.
Fax No.: (716) 856-0432
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
Section 13.3 Fees and Expenses. Whether or not the Merger is consummated,
-----------------
all costs and expenses incurred in connection with this Merger Agreement and the
transactions contemplated by this Merger Agreement shall be paid by the party
incurring such expenses.
34
<PAGE>
Section 13.4 Publicity. So long as this Merger Agreement is in effect,
---------
Purchaser, Sub and the Company agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
Offer, the Merger and the transactions contemplated by this Merger Agreement,
and none of them shall issue any press release or make any public statement
prior to such consultation, except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange. The
commencement of litigation relating to this Merger Agreement or the transactions
contemplated hereby or any proceedings in connection therewith shall not be
deemed a violation of this Section 13.4.
Section 13.5 Interpretation. When a reference is made in this Merger
--------------
Agreement to subsidiaries of Purchaser or the Company, the word "subsidiaries"
means corporations more than 50% of whose outstanding voting securities are
directly or indirectly owned by Purchaser or the Company, as the case may be.
The headings contained in this Merger Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Merger
Agreement.
Section 13.6 Miscellaneous. This Merger 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; (b) except as provided in Sections 10.3 and 10.4, is not intended
to confer upon any other person any rights or remedies hereunder; (c) shall not
be assigned by operation of law or otherwise; and (d) shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Missouri (without giving effect to the provisions thereof relating to
conflicts of law). This Merger Agreement may be executed in two or more
counterparts which together shall constitute a single agreement.
Section 13.7 Specific Performance. The parties hereto agree that
--------------------
irreparable damage could occur to the Company in the event that any of the
provisions of this Merger Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Company shall be entitled to an injunction or injunctions to prevent breaches of
this Merger Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction;
provided, however, that in the event the Company elects to collect or attempt to
collect the Damage Amount from Purchaser or Sub, payment of the Damage Amount
shall be the Company's sole and exclusive remedy for any material breach of this
Merger Agreement by Purchaser or Sub.
35
<PAGE>
IN WITNESS WHEREOF, Purchaser, Sub and the Company have caused this Merger
Agreement to be signed by their respective officers thereunder duly authorized
all as of the date first written above.
EASTGROUP PROPERTIES, INC.
By: /s/ David H. Hoster II
--------------------------------
Name: David H. Hoster II
Title: President
EASTGROUP-MERIDIAN, INC.
By: /s/ David H. Hoster II
--------------------------------
Name: David H. Hoster II
Title: President
MERIDIAN POINT REALTY TRUST VIII CO.
By: /s/ Robert H. Gidel
--------------------------------
Name: Robert H. Gidel
Title: Chief Executive Officer
36
<PAGE>
EXHIBIT A
CONDITIONS OF THE OFFER
-----------------------
Notwithstanding any other term of the Offer or this Merger Agreement,
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Company Common
Shares or Company Preferred Shares after the termination or withdrawal of the
Offer), to pay for any Company Common Shares or Company Preferred Shares
tendered pursuant to the Offer unless, (i) there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer such number of
Company Common Shares and Company Preferred Shares that, when added to Company
Preferred Shares beneficially owned by Purchaser on the date hereof, will
constitute two-thirds of the total number of shares of the capital stock of the
Company entitled to vote on a merger under the Company's Certificate and the
GBCL (the "Minimum Condition"); and (ii) any waiting period under the HSR Act
applicable to the purchase of Company Common Shares and Company Preferred Shares
pursuant to the Offer shall have expired or been terminated (the "HSR
Condition"). Furthermore, notwithstanding any other term of the Offer or this
Merger Agreement, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any Company Common Shares and Company Preferred Shares not
theretofore accepted for payment or paid for, and may terminate the Offer if, at
any time on or after the date of this Merger Agreement and before the acceptance
of such shares for payment or the payment therefor, any of the following
conditions exist (other than as a result of any action or inaction of Purchaser
or any of its subsidiaries which constitutes a breach of this Merger Agreement):
(a) there shall be threatened or pending by any governmental entity
any suit, action or proceeding, (i) challenging the acquisition by Purchaser or
Sub of any Company Common Shares or Company Preferred Shares under the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or the
Merger or the performance of any of the other transactions contemplated by this
Merger Agreement, or seeking to obtain from the Company, Purchaser or Sub any
damages that are material in relation to the Company and its subsidiaries taken
as a whole; (ii) seeking to prohibit or limit the ownership or operation by the
Company, Purchaser or any of their respective subsidiaries of a material portion
of the business or assets of the Company and its subsidiaries, taken as a whole,
or Purchaser and its subsidiaries, taken as a whole, or to compel the Company or
Purchaser to dispose of or hold separate any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or Purchaser and
its subsidiaries, taken as a whole, as a result of the Offer or any of the other
transactions contemplated by this Merger Agreement; (iii) seeking to impose
material limitations on the ability of Purchaser or Sub to acquire or
A-1
<PAGE>
hold, or exercise full rights of ownership of, any Company Common Shares or
Company Preferred Shares accepted for payment pursuant to the Offer including,
without limitation, the right to vote such Company Common Shares and Company
Preferred Shares on all matters properly presented to the shareholders of the
Company; (iv) seeking to prohibit Purchaser or any of its subsidiaries from
effectively controlling in any material respect the business or operations of
the Company and its subsidiaries, taken as a whole; or (v) which otherwise is
reasonably likely to have a material adverse effect on the business, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole;
(b) there shall be any statute, rules, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to the
Offer or the Merger, or any other action shall be taken by any governmental
entity or court, other than the application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) (i) the Board of Trustees of the Company or any committee thereof
shall have withdrawn or modified in a manner adverse to Purchaser or Sub its
approval or recommendation of the Offer, the Merger or this Merger Agreement, or
approved or recommended any takeover proposal or (ii) the Company shall have
entered into any agreement with respect to any Acquisition Proposal in
accordance with Section 10.6 of this Merger Agreement;
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States (excluding any
coordinated trading halt triggered solely as a result of a specified decrease in
a market index); (ii) any extraordinary or material adverse change in the
financial market or major stock exchange indices in the United States; (iii) any
material adverse change in United States currency exchange rates or a suspension
of, or limitation on, the markets therefor; (iv) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States; (v) any limitation (whether or not mandatory) by any governmental entity
on, or other event that might materially affect, the extension of credit by
banks or other lending institutions; or (vi) in the case of any of the foregoing
existing on the date of this Merger Agreement, a material acceleration or
worsening thereof;
(e) any of the representations and warranties of the Company set
forth in this Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each case as
of the date of this Merger Agreement and as of the scheduled expiration of the
Offer;
(f) the Company shall have failed to perform in any material respect
any material obligation or to comply in any material respect with any material
agreement or covenant of the Company to be performed or complied with by it
under this Merger Agreement;
A-2
<PAGE>
(g) the Merger Agreement shall have been terminated in accordance
with its terms.
The foregoing conditions are for the sole benefit of Sub and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Sub and
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Purchaser or Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
A-3
<PAGE>
EASTGROUP PROPERTIES, INC.
MERIDIAN POINT REALTY TRUST VIII CO.
- --------------------------------------------------------------------------------
NEWS RELEASE FOR MORE INFORMATION, CONTACT:
- ------------
EASTGROUP PROPERTIES, INC.
David H. Hoster II, President and
Chief Executive Officer
N. Keith McKey, Chief Financial Officer
(601) 354-3555
MERIDIAN POINT REALTY TRUST VIII CO.
Robert H. Gidel, Chief Executive Officer
John E. Castello, Chief Financial Officer
(972) 982-8651
- --------------------------------------------------------------------------------
EASTGROUP PROPERTIES, INC. AND
MERIDIAN POINT REALTY TRUST VIII CO.
ANNOUNCE MERGER AGREEMENT
- --------------------------------------------------------------------------------
JACKSON, MS and SAN FRANCISCO, CA, February 18, 1998--EastGroup Properties,
Inc. (NYSE-EGP) and Meridian Point Realty Trust VIII Co. (ASE-MPH, MPH-pr)
jointly announced today that they have entered into a definitive merger
agreement providing for EastGroup's acquisition of Meridian VIII for $10.00 per
outstanding Preferred Share and $8.50 per outstanding Common Share, payable in
cash. Pursuant to the terms of the Merger Agreement, EastGroup (through a
wholly-owned subsidiary) will promptly commence a tender offer (the "Offer") for
all issued and outstanding Preferred Shares of Meridian VIII not currently held
by EastGroup for $10.00 per share in cash, and for all issued and outstanding
Common Shares of Meridian VIII for $8.50 per share in cash. Following completion
of the Offer, EastGroup and Meridian VIII will engage in a second-step merger in
which all remaining Preferred Shares of Meridian VIII (excluding those held by
EastGroup) will be converted into $10.00 per share in cash and all remaining
Common Shares of Meridian VIII (excluding those held by EastGroup) will be
converted into $8.50 per share in cash. EastGroup will also assume all of
Meridian VIII's outstanding indebtedness, resulting in a total transaction value
of approximately $100 million.
Meridian VIII's Board of Trustees has unanimously approved the Merger
Agreement and recommends that all Preferred and Common Shareholders of Meridian
VIII tender their Shares into the Offer.
"We are exceptionally pleased to announce our acquisition of Meridian VIII,
which will significantly expand our industrial property portfolio in major
sunbelt markets," said David H. Hoster, President and Chief Executive Officer of
EastGroup. "Following the acquisition, our portfolio will include over 70
industrial properties, aggregating nearly 12 million square feet of leasable
space, and three industrial development properties under construction,
aggregating approximately 234,000 square feet."
Hoster continued, "The acquisition of Meridian VIII reflects EastGroup's
strategy to grow through the acquisition of other real estate companies and
REITs, in addition to more traditional property acquisitions. We have been
interested in Meridian VIII for more than two years and have worked to structure
a transaction which is favorable to the shareholders of both companies."
<PAGE>
Commenting on the Merger Agreement, Meridian VIII's Chairman of the Board,
Christopher J. Doherty, said, "After a lengthy process of review, we believe the
Merger Agreement reflects the most favorable strategic alternative available to
Meridian VIII, and allows our shareholders to liquefy their investment at an
attractive price with a minimum of delay."
EastGroup intends to commence the Offer for both Preferred and Common
Shares of Meridian VIII on or about Monday, February 23, 1998, with the filing
and distribution of necessary disclosure materials. The Offer will remain open
for 20 business days, subject to extension under certain circumstances.
EastGroup's obligation to complete the Offer is subject to certain conditions,
which EastGroup may waive at its discretion, including that there shall have
been validly tendered and not withdrawn prior to expiration of the Offer at
least 3,186,354 Preferred Shares and/or Common Shares of Meridian VIII. This
figure reflects the number of Preferred Shares and/or Common Shares which, when
combined with EastGroup's current ownership of 1,469,556 Preferred Shares, would
result in EastGroup owning at least two-thirds of the voting stock of Meridian
VIII. EastGroup's Offer is fully financed through EastGroup's existing line of
credit and is not subject to any financing contingency.
PaineWebber Incorporated has served as EastGroup's financial advisor in
connection with this transaction, Prudential Securities Incorporated has served
as financial advisor to Meridian VIII. EastGroup has retained Beacon Hill
Partners, Inc. and Harris Trust Company of New York as information agent and
depository, respectively, for the Offer.
EastGroup Properties, Inc. is a self-administered equity real estate
investment trust ("REIT") focused on the acquisition, ownership and selective
development of industrial properties in major sunbelt markets throughout the
United States. EastGroup's industrial portfolio currently includes 48
properties, containing over 9.4 million square feet of industrial space, and
three industrial development properties under construction, containing
approximately 234,000 square feet of space.
Meridian Point Realty Trust VIII Company is an equity REIT which owns 25
light industrial properties totaling approximately 2.6 million square feet, and
located in Arizona, Texas, Tennessee, California, Florida and Michigan.
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES INC. APPEARS HERE]
Prudential Securities Incorporated
One New York Plaza, New York, NY 10292
(212) 778-1000
PRIVATE AND CONFIDENTIAL
- ------------------------
February 17, 1998
The Board of Directors
Meridian Point Realty Trust VIII
5400 LBJ Freeway, Suite 1470
Dallas, TX 75240
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the aggregate consideration to be received by the holders, excluding
EastGroup Properties Inc., a Maryland corporation ("EGP"), of the common stock
and preferred stock of Meridian Point Realty Trust VIII Company, a Missouri
corporation (the "Company" or "MPH"), pursuant to the terms and subject to the
conditions set forth in the draft of the Agreement and Plan of Merger, dated
February 16, 1998, by and among EGP, EastGroup-Meridian, Inc., a Missouri
Corporation and a wholly-owned subsidiary of EGP ("Sub"), and MPH (the
"Agreement"). As more fully described in the Agreement, (i) EGP will cause Sub
to make a tender offer to purchase all outstanding shares of the common stock,
par value $0.001 per share, of MPH (the "MPH Common Stock") at a purchase price
of $8.50 per share and to purchase all outstanding shares of the preferred
stock, par value $0.001 per share, of MPH (the "MPH Preferred Stock") at a
purchase price of $10.00 per, in cash (the "Tender Offer"), and (ii) subsequent
to the Tender Offer, Sub will be merged with and into EGP (the "Merger" and,
together with the Tender Offer, the "Transaction") and each outstanding share of
MPH Common Stock and MPH Preferred Stock not previously tendered will be
converted into the right to receive $8.50 and $10.00 in cash, respectively.
In conducting our analysis and arriving at the opinion expressed
herein, we have reviewed such materials and considered such financial and other
factors as we deemed relevant under the circumstances, including among other
things:
(i) a draft of the Merger Agreement, dated February 16, 1998;
(ii) certain publicly-available historical financial and operating data
concerning the Company, including, but not limited to, (a) the
Annual Report to Shareholders and Annual Reports on Form 10-K for
the fiscal years ended December 31, 1994, December 31, 1995, and
December 31, 1996, (b) the Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997, June 30, 1997, and September 30,
1997, and (c) the Proxy Statement for the Annual Meeting of
Shareholders held on June 13, 1997;
1
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES INC. APPEARS HERE]
Prudential Securities Incorporated
(iii) certain pro-forma financial data prepared by MPH management;
(iv) certain information relating to MPH, including property financial
forecasts for the fiscal years ending December 31, 1998 through
December 31, 2007, prepared by the management of MPH;
(v) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed
comparable to MPH or otherwise relevant to our inquiry;
(vi) the financial terms of certain recent transactions we deemed
relevant to our inquiry;
(vii) the historical stock prices and trading volumes of MPH Common
Stock and MPH Preferred Stock; and
(viii) such other financial studies, analyses and investigations that we
deemed appropriate.
In addition, we contacted 29 parties in regards to the prospective sale
of the Company and/or its individual assets, or in regards to a potential equity
investment in the Company. Of the 29 parties, nine responded with offers for the
entire Company and one responded with an offer for a portion of the real estate
portfolio.
We have assumed that the draft of the Merger Agreement which we
reviewed (as referred to above) conforms in all material respects to the
definitive form of the Merger Agreement.
We have met with members of the senior management of the Company to
discuss (i) the prospects for the Company's business, (ii) their estimates of
the future financial performance of the Company, and (iii) such other matters
that we deemed relevant. We have also visited most of the properties currently
owned and operated by MPH.
In connection with our review and analysis and in arriving at our
opinion, we have relied upon the accuracy and completeness of the financial and
other information provided to us by the Company or otherwise publicly available,
and have not undertaken any independent verification of such information. We
have not made or obtained any independent valuation or appraisal of any of the
assets or liabilities of the Company. With respect to the financial forecasts
provided to us by the Company, we have assumed, with your consent, that such
forecasts (and the assumptions and bases therefor) have been reasonably prepared
and represent management's best currently available estimates and good faith
judgments as to the future financial performance of the Company.
Further, our opinion is necessarily based on economic, financial and
market conditions as they exist and can only be evaluated as of the date hereof.
2
<PAGE>
[LOGO OF PRUDENTIAL SECURITIES INC. APPEARS HERE]
Prudential Securities Incorporated
We are acting as exclusive financial advisor to the Company in
connection with the Transaction and will receive a fee for such services, the
majority of which fee is contingent upon the consummation of the Tender Offer.
We will also receive a fee upon delivery of this opinion. In the ordinary course
of business we may actively trade the shares of MPH Common Stock and MPH
Preferred Stock for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This letter and the opinion expressed herein are for the use of the
Board of Directors of the Company in its consideration of the Transaction. This
opinion does not constitute a recommendation to any shareholder of the Company
as to whether such shareholder should tender shares in the Tender Offer or how
such shareholder should vote on the proposed Merger, if applicable. Further,
this opinion is rendered only with respect to the total consideration being paid
for the Company, and in no way implies an opinion as to the fairness of the
allocation of said consideration to the different classes of shareholders of the
Company. This opinion may not be reproduced, summarized, excerpted from or
otherwise publicly referred to or disclosed in any manner, without our prior
written consent.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the aggregate cash consideration
to be received by the shareholders, excluding EGP, of the Company in the
Transaction is fair, from a financial point of view.
Very truly yours,
/s/ Prudential Securities Incorporated
PRUDENTIAL SECURITIES INCORPORATED
3
<PAGE>
February 23, 1998
Dear Shareholder:
I am pleased to advise you that on February 18, 1998, the Company entered
into an Agreement and Plan of Merger with EastGroup Properties Inc. EastGroup
is an industrial REIT publicly traded on the New York Stock Exchange. Under
the terms of the Agreement, EastGroup Properties has agreed to purchase your
shares at a price of $10 per preferred share, and $8.50 per common share,
pursuant to a formal tender offer.
The Board of Trustees of the Company has determined that the Offer and the
Merger are fair to, and in the best interests of, the Company and its
shareholders. We have approved the Agreement and Plan of Merger, the Offer and
the Merger, and we recommend that the Company's shareholders accept the Offer
and tender their shares pursuant to the Offer.
Enclosed with this letter is additional information with respect to the
Agreement and Plan of Merger. We ask that you read the information carefully.
Thank you for the opportunity to represent your interests in connection with
your investment in the Company.
Sincerely,
/s/ Christopher J. Doherty
-------------------------------------
Christopher J. Doherty
Chairman
