SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT No. 2
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) DECEMBER 17, 1997
(AMENDING FORM 8-K DATED AUGUST 18, 1997 AS AMENDED OCTOBER 21, 1997)
PUBLIC STORAGE PROPERTIES XI, INC.
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(Exact name of registrant as specified in its charter)
California 1-10709 95-4300881
- ---------------------------- ----------------------- --------------------
(state or other jurisdiction (Commission File Number) I.R.S. Employer
of incorporation (Identification Number)
701 Western Ave., Glendale, California 91201-2397
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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N/A
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. OTHER EVENTS
a. Proposed Merger and Exchange
----------------------------
Public Storage Properties XI, Inc. (PSP11) and American Office Park
Properties, Inc. (AOPP) have agreed, subject to certain conditions, to merge,
pursuant to an Amended and Restated Agreement and Plan of Reorganization by and
among PSP11, AOPP and Public Storage, Inc. (PSI) dated as of December 17, 1997.
AOPP, a subsidiary of PSI, owns and operates commercial properties directly and
through a consolidated partnership. Upon the merger of AOPP into PSP11, each of
the 1,819,937 outstanding shares of PSP11's common stock series A (other than
shares held by holders of PSP11's common stock series A ("Series A
Shareholders") who have properly exercised dissenters' rights under California
law) would continue to be owned by the Series A Shareholders or converted into
the right to receive cash as follows: (i) with respect to up to 20% of the
outstanding common stock series A of PSP11, $20.50 in cash and (ii) the balance
of the outstanding common stock series A of PSP11 would continue to be owned by
the Series A Shareholder. In the merger, (i) each share of PSP11's common stock
series B and each share of PSP11's common stock series C would be converted into
.8641 shares of PSP11's common stock series A (or up to 20% in cash ) and (ii)
each share of AOPP's capital stock will be converted into 1.18 shares of PSP11's
common stock series A ( or up to 20% in cash ). After the merger, PSP11 would
have approximately 11,903,000 outstanding shares of common stock series A
(assuming no cash elections with approximately an additional 7,649,000 shares
reserved for issuance upon conversion of partnership interests of AOPP's
consolidated partnership into PSP11's common stock series A. After the merger,
the ownership of PSP11 by public shareholders will be reduced from approximately
63% to 13% while that of PSI will increase from 37% to 41% (assuming no cash
elections and no conversion of partnership interests). Concurrently with the
merger, PSP11 will exchange 13 mini-warehouses for 11 commercial properties
owned by PSI. The merger is conditioned on, among other requirements, PSP11's
receipt of a fairness opinion from a financial advisor and approval by PSP11's
shareholders. After the merger, PSP11 will be a self-managed and self-advised
REIT which will own and operate directly and through a consolidated partnership
64 commercial properties (including three properties under contract) located in
10 states with approximately 7.4 million net rentable square feet of space and,
in addition, will manage, for a fee, 36 commercial properties. It is expected
that the merger would close in the first or second quarter of 1998.
For further information regarding the merger, see the Amended and
Restated Agreement and Plan of Reorganization which is filed as Exhibit 2 hereto
and is incorporated herein by this reference.
<PAGE>
<TABLE>
<CAPTION>
b. Summary Financial Information
Nine Months Ended September 30, 1997 Year Ended December 31, 1996
--------------------------------------------- ---------------------------------------
PSP11 PSP11 PSP11 PSP11
Post-Merger Post-Merger Post-Merger Post-Merger
(Pro Forma) (Pro Forma) (Pro Forma) (Pro Forma)
PSP11 No Cash Maximum Cash PSP11 No Cash Maximum Cash
Historical Elections(1) Elections(1)(2) Historical Elections(1) Elections(1)(2)
--------------- --------------- --------------- ---------- ------------ ---------------
(amounts in thousands except per share and property data)
OPERATING DATA:
Revenues
<S> <C> <C> <C> <C> <C> <C>
Rental revenues $ 5,644 $ 49,676 $ 49,676 $ 7,220 $ 62,318 $ 62,318
Facility management fees - 293 293 - 375 375
Interest and other income 55 377 377 33 76 76
--------------- --------------- --------------- ---------- ------------ ---------------
5,699 50,346 50,346 7,253 62,769 62,769
--------------- --------------- --------------- ---------- ------------ ---------------
Expenses:
Cost of operations 2,062 17,484 17,484 2,728 23,562 23,562
Cost of managing facilitates - 66 66 - 91 91
Depreciation and amortization 877 8,976 8,976 1,150 11,966 11,966
General and administrative 164 1,156 1,156 217 1,660 1,660
Interest expense - 2,637 2,998 3 3,400 3,881
--------------- --------------- --------------- ---------- ------------ ---------------
3,103 30,319 30,680 4,098 40,679 41,160
--------------- --------------- --------------- ---------- ------------ ---------------
Income before minority interest 2,596 20,027 19,666 3,155 22,090 21,609
Minority interest(3) - (7,835) (7,840) - (8,642) (8,614)
--------------- --------------- --------------- ---------- ------------ ---------------
Net income $ 2,596 $ 12,192 $ 11,826 $ 3,155 $ 13,448 $ 12,995
=============== =============== =============== ========== ============ ===============
BALANCE SHEET DATA(AT END OF PERIOD):
Cash and cash equivalents $ 2,273 $ 5,828 $ 5,000
Total assets 28,809 423,342 422,514
Total debt - 46,900 53,534
Shareholders' equity - 133,206 133,206
27,170 237,153 229,691
PER SHARE OF COMMON STOCK
Net income(4):
Primary $ 1.32 $ 1.02 $ 1.02 $ 1.59 $ 1.13 $ 1.13
Fully-diluted 1.03 1.24
Book value (at end of period) 10.75 19.92 19.91 10.53
Weighted average shares of
common stock (in thousands)(5)
Primary 1,820 11,903 11,539 1,831 11,903 11,539
Fully-diluted 2,527 2,538
PROPERTY DATA:
Business parks:
Net rentable square feet at end of
period (000's) 191 7,423 7,423 191 7,423 7,423
Number of facilities with business
park space at end of period 4 64 64 4 64 64
Weighted average occupancy for the 98% 96% 96% 97% 96% 96%
period
Weighted average monthly realized
rent per occupied square feet for $ 0.63 $ 0.77 $ 0.77 $ 0.60 $ 0.73 $ 0.73
the period
Mini-warehouses:
Net rentable square feet at end of
period (000's) 738 - - 738 - -
Number of facilities with
mini-warehouse space at end of 13 - - 13 - -
period
Weighted average occupancy for the 93% - - 92% - -
period
Weighted average monthly realized
rent per occupied square feet for $ 0.74 - - $ 0.72 - -
the period
OTHER DATA:
Funds from operation (6) $ 3,473 $ 17,656 $ 17,224 $ 4,305 $ 20,733 $ 20,191
</TABLE>
<PAGE>
(1) The unaudited pro forma data was prepared to reflect the proposed merger
(the "Merger") of American Office Park Properties, Inc. ("AOPP") and Public
Storage Properties XI, Inc. ("PSP11"). Under the Merger Agreement:
* AOPP will merge into PSP11.
* Each outstanding share of PSP11 Common Stock will continue to be owned
by current holders or converted into the right to receive $20.50 in
cash. The amount of cash elections (the "Cash Elections") will be
limited to 20% of the total outstanding shares of PSP11. If a PSP11
shareholder does not elect cash, he or she will continue to own PSP11
Common Stock.
* Each share of PSP11 Common Stock Series B and each share of PSP11
Common Stock Series C will be converted into either .8641 share of
PSP11 Common Stock or the right to receive $17.71 in cash (up to 20%
of the outstanding Series B and Series C), at the option of the
shareholders. All of the Series B and Series C shareholders have
indicated that they intend to elect PSP11 Common Stock in the Merger.
* Each share of AOPP Common Stock will be converted into either 1.18
shares of PSP11 Common Stock or the right to receive $24.19 in cash
(up to 20% of the outstanding AOPP Common Stock), at the option of an
AOPP shareholder. All of the AOPP shareholders have indicated that
they intend to elect PSP11 Common Stock in the Merger.
* Concurrent with the Merger, PSP11 will exchange 11 mini-warehouses and
two properties that combine mini-warehouse and commercial space for 11
commercial properties owned by Public Storage, Inc. ("PSI").
The Merger will be treated as a reverse merger whereby AOPP will be treated as
the accounting acquirer using the purchase method. This has been determined
based upon the following:
* The business focus post Merger will continue to be that of AOPP's
which includes the acquisition, ownership and management of commercial
properties. Prior to the Merger, PSP11's business focus has been
primarily on the ownership and operation of its mini-warehouse
properties which represent approximately 88% of its portfolio.
* Following the Merger, the former shareholders and unitholders of AOPP
will own in excess of 80% of the merged companies.
In addition to the proposed Merger, the pro forma data reflects the following
AOPP transactions:
1. On January 2, 1997, AOPP formed a partnership (the "Operating
Partnership"); concurrent with the formation of the Operating
Partnership (i) the Operating Partnership acquired 26 commercial
properties from PSI and affiliated entities in exchange for 4,859,000
units of limited partnership (11 OP Units"), (ii) AOPP acquired nine
commercial properties from PSI in exchange for 1,000,000 shares of
Preferred Stock of AOPP and (iii) AOPP contributed these nine
commercial properties to the Operating Partnership for 1,000,000 OP
Units. In addition, AOPP contributed its property management
operations and other net assets to the Operating Partnership in
exchange for 829,500 OP Units.
2. On April 1, 1997, the Operating Partnership acquired four commercial
properties from PSI in exchange for 1,235,500 OP Units.
3. On July 31, 1997, AOPP acquired two commercial properties from an
unaffiliated third party for cash totaling $33,750,000. AOPP raised
the cash for this acquisition by issuing 1,690,000 shares of AOPP
Common Stock to PSI for cash totaling $33,800,000.
4. On September 24, 1997, AOPP acquired one commercial property from an
unaffiliated third party for an aggregate cost of $10,374,000,
consisting of cash $10,050,000 and the issuance of 12,000 OP Units
having a value of $324,000.
<PAGE>
5. In December 1997, AOPP reached agreements in principle to acquire
three commercial properties form unaffiliated third parties for an
aggregate cost of $54,338,000, consisting of cash totaling
$19,900,000, the issuance of 279,200 OP Units having a value of
$7,538,000 and the assumption of $26,900,000 of mortgage debt.
6. On December 24, 1997, AOPP completed a transaction under which AOPP
issued 4,482,852 shares of AOPP common stock ($118,655,000) to a
subsidiary of a state pension fund, and the subsidiary of the state
pension fund, through a merger and contribution, transferred to AOPP
six commercial properties and $1,000,000 cash. AOPP incurred
approximately $3,300,000 in transaction costs.
(2) Maximum cash elections assumes 20% of the outstanding shares of PSP11
Common Stock Series A elect to take $20.50 in cash in connection with the
Merger.
(3) As a result of the Merger, PSP11 will replace AOPP as the sole general
partner of the Operating Partnership. Minority interests represents
ownership of Operating Partnership Units which are not owned by PSP11. The
Operating Partnership Units, subject to certain conditions of the Operating
Partnership Agreement, are convertible into shares of PSP11 Common Stock
Series A on a one-for-one basis. Pro forma Operating Partnership Units
outstanding during each pro forma period and owned by minority interest
totaled 7,649,193.
(4) Primary earnings per share represents the shareholders' rights to
distribution out of the respective period's net income, which is calculated
by dividing net income after reduction for any distributions made to the
holders of the PSP11 Common Stock Series B (holders of the PSP11 Common
Stock Series C are not entitled to cash distributions) by the weighted
average number of shares of PSP11 Common Stock. Fully diluted earnings per
shares assumes conversion of the PSP11 Common Stock Series B and C into
PSP11 Common Stock Series A. In connection with the Merger, the PSP11
Common Stock Series B and C converted into PSP11 Common Stock Series A -
see note (1).
(5) In connection with the reorganization of a partnership which was the
predecessor to PSP11, PSP11 issued PSP11 Common Stock Series A and PSP11
Common Stock Series B and C. The capital structure of PSP11 was designed to
reflect the economic rights of the limited partners and general partners in
the predecessor partnership and the capital shares were distributed to the
limited and general partners in respect of their interests in the
predecessor partnership.
PSP11Common Stock Series A shares are entitled to 100% of cash
distributions from operations from PSP11 until (a) the sum of (1) all
cumulative dividends and other distributions from all sources to the
holders of PSP11 Common Stock Series A shares of PSP11 and (2) the
cumulative predecessor partnership distributions from all sources with
respect to all units equal (b) the product of $20 multiplied by the number
of the then-outstanding shares of PSP11 Common Stock Series A
("Conversion").
As of September 30, 1997, Conversion will occur with respect to PSP11 when
$5,397,000 in additional distributions are made to holders of PSP11 Common
Stock Series A (assuming no further repurchases of PSP11 Common Stock
Series A).
(6) Funds from operations (FFO) is defined by PSP11 as net income, computed in
accordance with generally accepted accounting principles (GAAP), before
depreciation, amortization and extraordinary or non-recurring items. FFO is
presented because PSP11 considers FFO to be a useful measure of the
operating performance of a REIT which, together with net income and cash
flows, provides investors with a basis to evaluate the operating and cash
flow performances of a REIT. FFO does not take into consideration scheduled
principal payments on debt and capital improvements. Accordingly, FFO is
not necessarily a substitute for cash flow or net income as a measure of
liquidity or operating performance or ability to make acquisitions and
capital improvements or ability to pay distributions or debt principal
payments. Also, FFO as computed and disclosed by PSP11 may not be
comparable to FFO computed and disclosed by other REITs.
<PAGE>
<TABLE>
<CAPTION>
Funds from operations is computed as follows:
Nine Months Ended September 30, 1997 Year Ended December 31, 1996
--------------------------------------------- ---------------------------------------
Pro Forma - Pro Forma - Pro Forma - Pro Forma -
PSP11 No Cash Maximum Cash PSP11 No Cash Maximum Cash
Historical Elections Elections Historical Elections Elections
--------------- --------------- --------------- ---------- ------------ ---------------
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $2,596 $12,192 $11,826 $ 3,155 $ 13,448 $ 12,995
Depreciation and amortization 877 8,976 8,976 1,150 11,966 11,966
Minority interest in income - 7,835 7,840 - 8,642 8,614
--------------- --------------- --------------- ---------- ------------ ---------------
Funds from operations 3,473 29,003 28,642 4,305 34,056 33,575
Funds from operations allocable to
minority interest - (11,347) (11,418) - (13,323) (13,384)
--------------- --------------- --------------- ---------- ------------ ---------------
Funds from operations allocable to
shareholders $3,473 $17,656 $17,224 $ 4,305 $ 20,733 $ 20,191
=============== =============== =============== =========== ============ ===============
</TABLE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
c. Exhibits
2. Amended and Restated Agreement and Plan of Reorganization by and among
PSP11, AOPP and PSI dated as of December 17, 1997 (the "Agreement and Plan of
Reorganization"), and form of Agreement of Merger between PSP11 and AOPP
(Exhibit A to the Agreement and Plan of Reorganization) are filed herewith; the
other exhibits to the Amended and Restated Agreement and Plan of Reorganization
have been omitted and will be furnished to the Securities and Exchange
Commission upon request.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PUBLIC STORAGE PROPERTIES XI, INC.
Date: January 8, 1998 By: /s/ David P. Singelyn
----------------------
David P. Singelyn
Vice President and
Chief Financial Officer
Exhibit 2
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
("Agreement") is entered into as of this 17th day of December, 1997, by and
among PUBLIC STORAGE PROPERTIES XI, INC., a California corporation ("PSP11"),
AMERICAN OFFICE PARK PROPERTIES, INC., a California corporation ("AOPP") and
PUBLIC STORAGE, INC., a California corporation ("PSI").
A. The parties intend that this Agreement shall amend and restate in its
entirety the Agreement and Plan of Reorganization dated as of August 18, 1997
and shall constitute a Plan of Reorganization for purposes of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). The
Plan of Reorganization provides for (i) the merger of AOPP with and into PSP11
in accordance with the applicable provisions of the General Corporation Law of
California (the "GCLC") and an Agreement of Merger substantially in the form
attached hereto as Exhibit A ("Merger Agreement") and (ii) the tax-deferred
like-kind exchange (the "Exchange") in which PSP11 will transfer to PSI the 13
properties listed on Exhibit B hereto (the "PSP11 Exchange Properties") and PSI
will transfer to PSP11 the 11 properties listed on Exhibit C hereto (the "PSI
Exchange Properties").
B. PSP11, AOPP and PSI believe that it is in the best interests of such
corporations and their respective shareholders to enter into and complete this
Agreement and they have approved this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, the parties agree as follows:
1. Adoption of Plan. The parties hereby adopt the Plan of Reorganization
hereinafter set forth.
2. The Merger and the Exchange.
2.1 Completion of the Merger and the Exchange. At the Effective Time
(as defined below), (i) AOPP will be merged with and into PSP11 (the "Merger")
in accordance with the terms, conditions and provisions of this Agreement and
the Merger Agreement and (ii) the Exchange will be consummated in accordance
with the terms, conditions and provisions of this Agreement. The Merger shall
become effective at the time at which the Merger Agreement, together with the
requisite Officers' Certificates of PSP11 and AOPP, are filed with the
California Secretary of State in accordance with the GCLC (the "Effective
Time"). PSP11 and AOPP are sometimes collectively referred to herein as the
"Constituent Corporations" and PSP11, as the surviving corporation of the
Merger, is sometimes referred to herein as the "Surviving Corporation."
2.2 Effect of the Merger and Exchange. At the Effective Time:
2.2.1 Constituent Corporations. The separate corporate existence
of AOPP shall cease and the Surviving Corporation shall thereupon succeed,
without other transfer, to all the rights and property of AOPP and shall be
subject to all the debts and liabilities of AOPP in the same manner as if the
Surviving Corporation had itself incurred them; all rights of creditors and all
liens upon the property of each of the Constituent Corporations shall be
preserved unimpaired, provided that such liens upon property of AOPP shall be
limited to the property affected thereby immediately prior to the Effective
Time; and any action or proceeding pending by or against AOPP may be prosecuted
to judgment, which shall bind the Surviving Corporation, or the Surviving
Corporation may be proceeded against or substituted in its place.
<PAGE>
2.2.2 Articles and Bylaws. Except as amended by the Merger
Agreement, the Articles of Incorporation and the Bylaws of PSP11, as in effect
at the Effective Time, shall continue to be the Articles of Incorporation and
the Bylaws of the Surviving Corporation until changed as provided by law and
their respective provisions; provided that such Articles of Incorporation and
Bylaws may be amended and restated following the Effective Time in forms
reasonably acceptable to the Surviving Corporation.
2.2.3 Directors. The directors of the Surviving Corporation
immediately following the Merger shall be the following:
(i) Ronald L. Havner, Jr.
Harvey Lenkin
Vern O. Curtis
Jack D. Steele
and
(ii) the other persons listed in the Proxy Statement and
Prospectus provided for in Section 7.5 hereof. Such persons shall
continue as directors of the Surviving Corporation until their
successors are elected and qualified as provided by law and in
accordance with the Articles of Incorporation and Bylaws of the
Surviving Corporation. If any of the above named individuals is
unable to serve as a director of the Surviving Corporation at the
Effective Time, a successor will be selected by the remaining
above named individuals.
2.2.4 Officers. The executive officers of the Surviving
Corporation immediately following the Merger shall be the following:
Ronald L. Havner, Jr.
Mary Jayne Howard
Such persons shall continue as officers of the Surviving
Corporation until their successors are elected and qualified as provided by law
and in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.
2.2.5 Name. At the Effective Time, the name of the Surviving
Corporation shall be changed to "PS Business Parks, Inc."
2.3 Common Stock Series A of PSP11. All outstanding shares of Common
Stock Series A ($.01 par value) of PSP11 (the "PSP11 Shares") would continue to
be owned by holders of PSP11 Shares or converted into the right to receive cash
as follows:
2.3.1 Cash Election. At the Effective Time, subject to Section
2.7.1 hereof, each PSP11 Share as to which a cash election has been made in
accordance with the provisions of Section 2.6 hereof and has not been revoked,
relinquished or lost pursuant to Section 2.6 hereof (a "Series A Cash Election
Share") shall be converted into and shall represent the right to receive $20.50
in cash. As soon as practicable after the Effective Time, the registered holders
of Series A Cash Election Shares shall be paid the cash to which they are
entitled hereunder in respect of such Series A Cash Election Shares.
2.3.2 No Cash Election. At the Effective Time, subject to Section
2.12 hereof, each PSP11 Share (other than Series A Cash Election Shares) shall
continue to be owned by the holders of the PSP11 Shares.
2.4 Common Stock Series B and C of PSP11. All outstanding shares of
Common Stock Series B and C ($.01 par value) of PSP11 (the "PSP11 Series B and C
Shares") would be converted into the right to receive cash or PSP11 Shares as
follows:
<PAGE>
2.4.1 Cash Election. At the Effective Time, subject to Section
2.7.2 hereof, each PSP11 Series B and C Share as to which a cash election has
been made in accordance with the provisions of Section 2.6 hereof and has not
been revoked, relinquished or lost pursuant to Section 2.6 hereof (collectively,
the "Series B and C Cash Election Shares") shall be converted into and shall
represent the right to receive $17.71 in cash. As soon as practicable after the
Effective Time, the registered holders of Series B and C Cash Election Shares
shall be paid the cash to which they are entitled hereunder in respect of such
Series B and C Cash Election Shares.
2.4.2 No Cash Election. At the Effective Time, subject to Section
2.12 hereof, each PSP11 Series B and C Share (other than Series B and C Cash
Election Shares) shall be converted into 0.8641 PSP11 Shares. If PSP11 should
split or combine the PSP11 Shares or pay a stock dividend prior to the Effective
Time, such conversion number will be appropriately adjusted to reflect such
action.
2.5 AOPP Shares. All outstanding shares of Common Stock ($.10 par
value) of AOPP (the "AOPP Shares") would be converted into the right to receive
cash or PSP11 Shares as follows:
2.5.1 Cash Election. At the Effective Time, subject to Section
2.7.3 hereof, each AOPP Share as to which a cash election has been made in
accordance with the provisions of Section 2.6 hereof and has not been revoked,
relinquished or lost pursuant to Section 2.6 hereof (collectively, the "AOPP
Cash Election Shares" and with the Series A Cash Election Shares, and the Series
B and C Cash Election Shares, the "Cash Election Shares") shall be converted
into and shall represent the right to receive $24.19 in cash. As soon as
practicable after the Effective Time, the registered holders of AOPP Cash
Election Shares shall be paid the cash to which they are entitled hereunder in
respect of such AOPP Cash Election Shares.
2.5.2 No Cash Election. At the Effective Time, subject to Section
2.12 hereof, each AOPP Share (other than AOPP Cash Election Shares) shall be
converted into 1.18 PSP11 Shares. If PSP11 should split or combine the PSP11
Shares or pay a stock dividend prior to the Effective Time, such conversion
number will be appropriately adjusted to reflect such number.
2.6 Procedure for Cash Election. At the time of the mailing of the
Proxy Statement and Prospectus provided for in Section 7.5 hereof, PSP11 will
send to (i) each holder of record of PSP11 Shares and PSP11 Series B and C
Shares at the record date for the PSP11 meeting of shareholders referred to in
Section 7.2.1 hereof and (ii) each holder of record of AOPP Shares at the record
date for the AOPP meeting of shareholders referred to in Section 7.2.2 hereof a
cash election form (the "Form of Election") providing such holder with the
option to elect to receive the cash election payment contemplated by Section
2.3.1, 2.4.1 or 2.5.1 hereof with respect to such holder's shares. Any such
election to receive such cash payment shall have been properly made only if
American Stock Transfer & Trust Company (the "Exchange Agent") shall have
received at its designated office, by 5:00 p.m., New York time, on the last
business day preceding the day of such meeting of shareholders, a Form of
Election properly completed and accompanied by certificates for the shares to
which such Form of Election relates (or an appropriate guarantee of delivery in
a form and on terms satisfactory to PSP11), as set forth in such Form of
Election. Any Form of Election may be revoked by the person submitting the same
to the Exchange Agent only by written notice received by the Exchange Agent
prior to 5:00 p.m., New York time, on the last business day before the day of
the respective meeting of shareholders referred to in Section 7.2.1 or 7.2.2
hereof. In addition, all Forms of Election shall automatically be revoked if the
<PAGE>
Exchange Agent is notified in writing by the parties hereto that the Merger has
been abandoned. If a Form of Election is revoked pursuant to this Section 2.6,
the certificate or certificates or any guarantee of delivery in respect of the
PSP11 Shares, PSP11 Series B and C Shares or AOPP Shares to which such Form of
Election relates shall be promptly returned to the person submitting the same to
the Exchange Agent. The Exchange Agent may determine whether or not elections to
receive cash have been properly made or revoked pursuant to this Section 2.6,
and any such determination shall be conclusive and binding. If the Exchange
Agent determines that any election to receive cash was not properly or timely
made, the PSP11 Shares, PSP11 Series B and C Shares and AOPP Shares covered
thereby shall not be treated as Cash Election Shares, and shall be treated in
the Merger as provided in Section 2.3.2, 2.4.2 or 2.5.2 hereof. The Exchange
Agent may, with the mutual agreement of PSP11 and AOPP, establish such
procedures, not inconsistent with this Section 2.6, as may be necessary or
desirable to implement this Section 2.6.
2.7 Procedure for Proration.
2.7.1 PSP11 Shares.
2.7.1.1 No Proration. If the aggregate number of Series A
Cash Election Shares is 20% or less than the number of PSP11 Shares outstanding
as of the record date for the meeting of shareholders of PSP11 referred to in
Section 7.2.1, then each such Series A Cash Election Share shall be converted in
the Merger into the right to receive $20.50 in cash.
2.7.1.2 Proration. If the aggregate number of Series A Cash
Election Shares exceeds 20%, then each such Series A Cash Election Share shall
be converted in the Merger into the right to receive cash as follows: the number
of Series A Cash Election Shares that shall be converted into the right to
receive $20.50 in cash shall equal the number obtained by multiplying (i) 20% of
the outstanding PSP11 Shares by (ii) a fraction of which the numerator shall be
the number of Series A Cash Election Shares owned by such holder and the
denominator shall be the aggregate number of Series A Cash Election Shares. The
balance of such Series A Cash Election Shares shall be treated in accordance
with the provisions of Section 2.3.2 hereof. Notwithstanding the foregoing,
PSP11, in its sole discretion, may allow such Series A Cash Election Shares to
receive $20.50 in cash even if the aggregate number of Series A Cash Election
Shares exceeds 20% of the number of PSP11 Shares outstanding as of the record
date for the meeting of shareholders of PSP11 referred to in Section 7.2.1.
2.7.2 PSP11 Series B and C Shares.
2.7.2.1 No Proration. If the aggregate number of Series B
and C Cash Election Shares is 20% or less than the number of PSP11 Series B and
C Shares outstanding as of the record date for the meeting of shareholders of
PSP11 referred to in Section 7.2.1, then each such Series B and C Cash Election
Share shall be converted in the Merger into the right to receive $17.71 in cash.
2.7.2.2 Proration. If the aggregate number of Series B and C
Cash Election Shares exceeds 20%, then each such Series B and C Cash Election
Share shall be converted in the Merger into the right to receive cash as
follows: the number of Series B and C Cash Election Shares that shall be
converted into the right to receive $17.71 in cash shall equal the number
obtained by multiplying (i) 20% of the outstanding PSP11 Series B and C Shares
by (ii) a fraction of which the numerator shall be the number of Series B and C
Cash Election Shares owned by such holder and the denominator shall be the
aggregate number of Series B and C Cash Election Shares. The balance of such
Series B and C Cash Election Shares shall be treated in accordance with the
provisions of Section 2.4.2 hereof. Notwithstanding the foregoing, PSP11, in its
sole discretion, may allow such Series B and C Cash Election Shares to receive
$17.71 in cash even if the aggregate number of Series B and C Cash Election
Shares exceeds 20% of the number of PSP11 Shares outstanding as of the record
date for the meeting of shareholders of PSP11 referred to in Section 7.2.1.
<PAGE>
2.7.3 AOPP Shares.
2.7.3.1 No Proration. If the aggregate number of AOPP Cash
Election Shares is 20% or less than the number of AOPP Shares outstanding as of
the record date for the meeting of shareholders of AOPP referred to in Section
7.2.2, then each such AOPP Cash Election Share shall be converted in the Merger
into the right to receive $24.19 in cash.
2.7.3.2 Proration. If the aggregate number of AOPP Cash
Election Shares exceeds 20%, then each such AOPP Cash Election Share shall be
converted in the Merger into the right to receive cash as follows: the number of
AOPP Cash Election Shares that shall be converted into the right to receive
$24.19 in cash shall equal the number obtained by multiplying (i) 20% of the
outstanding AOPP Shares by (ii) a fraction of which the numerator shall be the
number of AOPP Cash Election Shares owned by such holder and the denominator
shall be the aggregate number of AOPP Cash Election Shares. The balance of such
AOPP Cash Election Shares shall be treated in accordance with the provisions of
Section 2.5.2 hereof. Notwithstanding the foregoing, PSP11, in its sole
discretion, may allow such AOPP Cash Election Shares to receive $24.19 in cash
even if the aggregate number of AOPP Cash Election Shares exceeds 20% of the
number of AOPP Shares outstanding as of the record date for the meeting of
shareholders of AOPP referred to in Section 7.2.2.
2.8 Exchange of Certificates. After the Effective Time, each holder of
a certificate theretofore evidencing outstanding PSP11 Series B and C Shares and
AOPP Shares which were converted into PSP11 Shares pursuant hereto, upon
surrender of such certificate to the Exchange Agent or such other agent or
agents as shall be appointed by the Surviving Corporation, shall be entitled to
receive a certificate representing the number of whole PSP11 Shares into which
the PSP11 Shares theretofore represented by the certificate so surrendered shall
have been converted as provided in Section 2.3.2 hereof and cash payment in lieu
of fractional share interests, if any, as provided in Section 2.11 hereof. As
soon as practicable after the Effective Time, the Exchange Agent will send a
notice and a transmittal form to each holder of record at the Effective Time of
PSP11 Series B and C Shares and AOPP Shares whose stock shall have been
converted into PSP11 Shares, advising such holder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange Agent certificates
evidencing PSP11 Series B and C Shares and AOPP Shares in exchange for
certificates evidencing PSP11 Shares.
2.9 Status Until Surrendered. Until surrendered as provided in Section
2.8 hereof, each outstanding certificate which, prior to the Effective Time,
represented PSP11 Series B and C Shares and AOPP Shares (other than Dissenting
Shares (as defined below), if any) will be deemed for all corporate purposes to
evidence ownership of the number of whole PSP11 Shares into which the PSP11
Series B and C Shares and AOPP Shares evidenced thereby were converted. However,
until such outstanding certificates formerly evidencing PSP11 Series B and C
Shares and AOPP Shares are so surrendered, no dividend payable to holders of
record of PSP11 Shares shall be paid to the holders of such outstanding
certificates in respect of PSP11 Series B and C Shares and AOPP Shares, but upon
surrender of such certificates by such holders there shall be paid to such
holders the amount of any dividends (without interest) theretofore paid with
respect to such whole PSP11 Shares as of any record date on or subsequent to the
Effective Time and the amount of any cash (without interest) payable to such
holder in lieu of fractional share interests pursuant to Section 2.11 hereof.
2.10 Transfer of Shares. After the Effective Time, there shall be no
further registration of transfers of PSP11 Series B and C Shares or AOPP Shares
on the respective corporate records and, if certificates formerly evidencing
such shares are presented to the Surviving Corporation, they shall be cancelled
and exchanged for certificates evidencing PSP11 Shares and cash in lieu of
fractional share interests as herein provided.
<PAGE>
2.11 No Fractional Shares. Notwithstanding any other term or provision
of this Agreement, no fractional PSP11 Shares and no certificates or script
therefor, or other evidence of ownership thereof, will be issued in the Merger.
In lieu of any such fractional share interests, each holder of AOPP Shares or of
PSP11 Series B and C Shares who would otherwise be entitled to such fractional
share will, upon surrender of the certificate representing such shares, receive
a whole PSP11 Share if such fractional share to which such holder would
otherwise have been entitled is .5 of a PSP11 Share or more, and such fractional
share shall be disregarded if it represents less than .5 of a PSP11 Share;
provided, however, that, such fractional share shall not be disregarded if such
fractional share to which such holder would otherwise have been entitled
represents .5 of 1% or more of the total number of PSP11 Shares such holder is
entitled to receive in the Merger. In such event, such holder shall be paid an
amount in cash (without interest), rounded to the nearest $.01, determined by
multiplying (i) the per share closing price on the American Stock Exchange, Inc.
of the PSP11 Shares at the Effective Time by (ii) the fractional interest.
2.12 Dissenting Shares. PSP11 Shares, PSP11 Series B and C Shares and
AOPP Shares held by a holder who has demanded and perfected his right to an
appraisal of such shares in accordance with Section 1300 et seq. of the GCLC and
who has not effectively withdrawn or lost his right to appraisal ("Dissenting
Shares") shall not continue to be owned by the holder thereof or converted into
or represent the right to receive cash and/or PSP11 Shares, but the holder
thereof shall be entitled only to such rights as are granted by Section 1300 et
seq. of the GCLC. Each holder of Dissenting Shares who becomes entitled to
payment for PSP11 Shares, PSP11 Series B and C Shares or AOPP Shares pursuant to
these provisions of the GCLC shall receive payment therefor from the Surviving
Corporation in accordance therewith. If any holder of PSP11 Shares, PSP11 Series
B and C Shares or AOPP Shares who demands appraisal in accordance with Section
1300 et seq. of the GCLC shall effectively withdraw with the consent of the
Surviving Corporation or lose (through failure to perfect or otherwise) his
right to appraisal with respect to PSP11 Shares, PSP11 Series B and C Shares or
AOPP Shares, such shares shall continue to be owned by the holder thereof or
shall automatically be converted into the right to receive PSP11 Shares pursuant
to Section 2.3.2, 2.4.2 or 2.5.2 hereof, as the case may be.
2.13 Assumption of AOPP Options. At the Effective Time, each
outstanding option to purchase AOPP Shares (an "AOPP Option") granted under
AOPP's 1997 Stock Option and Incentive Plan (the "AOPP Plan") shall be assumed
by PSP11 and, whether vested or unvested, shall be converted into, and shall be
deemed to constitute, an option to acquire, on the same terms and conditions
applicable to the AOPP Option, the number of shares of PSP11 Shares that the
holder of the AOPP Option would have received in the Merger if the AOPP Option
had been exercised in full immediately prior to the Effective Time, irrespective
of whether the AOPP Option was in fact then exercisable (a "Converted Option").
The exercise price per share of a Converted Option shall be the aggregate
exercise price of the AOPP Option divided by the number of PSP11 Shares
purchasable upon exercise of the Converted Option. As soon as practicable after
the Effective Time, PSP11 shall deliver to each holder of an AOPP Option an
appropriate notice setting forth the holder's rights pursuant thereto. PSP11
shall comply with the terms of each AOPP Option and take all corporate action
necessary to reserve for issuance a sufficient number of PSP11 Shares for
delivery upon exercise of the Converted Options.
2.14 Exchange of Deeds. At the Effective Time, (i) PSP11 will receive
from escrow deeds for the PSI Exchange Properties and (ii) PSI will receive from
escrow deeds for the PSP11 Exchange Properties. PSP11 and PSI acknowledge that
the PSP11 Exchange Properties, and the PSI Exchange Properties, have the
respective values set forth in Exhibits B and C hereto. PSP11 and PSI also
acknowledge that the Exchange is intended to qualify, as to each of PSP11 and
PSI, for "like-kind exchange" treatment under Section 1031 of the Code.
<PAGE>
3. Closing.
3.1 Time and Place of Closing. If this Agreement is approved by the
shareholders of PSP11, a meeting (the "Closing") shall take place as promptly as
practicable thereafter at which the parties will exchange certificates and other
documents as required by this Agreement. Such Closing shall take place at such
time and place as PSP11 may designate. The date of the Closing shall be referred
to as the "Closing Date."
3.2 Execution and Filing of Merger Agreement. At or before the Closing
and after shareholder approval by PSP11 and AOPP, PSP11 and AOPP shall execute
and deliver the Merger Agreement, together with the requisite Officers'
Certificates, for filing with the California Secretary of State. The Merger
Agreement, together with the requisite Officers' Certificates, shall be duly
filed with the California Secretary of State in accordance with the GCLC as soon
as practicable following the Closing.
4. Representations, Warranties and Agreements of PSP11. PSP11 represents,
warrants and agrees with AOPP and PSI that:
4.1 Authorization. Subject to approval of this Agreement by the
shareholders of PSP11, (i) the execution, delivery and performance of this
Agreement by PSP11 has been duly authorized and approved by all necessary
corporate action of PSP11 and (ii) PSP11 has necessary corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to complete the transactions contemplated hereby.
4.2 Organization and Related Matters. PSP11 is a corporation duly
organized, existing and in good standing under the laws of the State of
California with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as and where now owned,
leased, operated or carried on, as the case may be; and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business carried on by it requires such qualification and where the failure to
so qualify would have a material adverse effect on the business, properties,
results of operations or financial condition of PSP11. PSP11 has no direct or
indirect equitable or beneficial interest in any other corporation other than
PSCC, Inc.
4.3 Capital Stock. The authorized capital stock of PSP11 consists
solely of (i) 2,828,929 shares of Common Stock Series A ($.01 par value),
1,819,937 of which were issued and outstanding as of December 16, 1997, (ii)
184,453 shares of Common Stock Series B ($.01 par value), all of which were
issued and outstanding as of December 16, 1997 and (iii) 522,618 shares of
Common Stock Series C ($.01 par value), all of which were issued and outstanding
as of December 16, 1997 (47,824 of which will be cancelled immediately prior to
the Merger). All of the issued and outstanding shares of capital stock of PSP11
have been duly and validly authorized and issued, and are fully paid and
nonassessable. There are no options or agreements to which PSP11 is a party or
by which it is bound calling for or requiring the issuance of any of PSP11's
capital stock, except (A) the PSP11 Common Stock Series B and C is convertible
into PSP11 Shares in accordance with PSP11's Articles of Incorporation and (B)
as provided in this Agreement.
4.4 Consents and Approvals; No Violation. Assuming approval of the
Merger and of this Agreement by the shareholders of PSP11, neither the execution
and delivery of this Agreement nor the consummation by PSP11 of the transactions
contemplated hereby will: (i) conflict with or result in any breach of any
provision of its Articles of Incorporation or Bylaws; (ii) require any consent,
waiver, approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, except (A) in connection with the
applicable requirements, if any, of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), (B) pursuant to the applicable
<PAGE>
requirements of the federal securities laws and the rules and regulations
promulgated thereunder, (C) the filing of the Merger Agreement and Officers'
Certificates pursuant to the GCLC and appropriate documents with the relevant
authorities of other states in which PSP11 is authorized to do business, (D) in
connection with any state or local tax which is attributable to the beneficial
ownership of PSP11's real property, (E) as may be required by any applicable
state securities or takeover laws, or (F) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a material adverse effect on PSP11
or adversely affect the ability of PSP11 to consummate the transactions
contemplated hereby; (iii) result in a violation or breach of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, mortgage,
agreement or other instrument or obligation to which PSP11 is a party or any of
its properties or assets may be bound, except for such violations, breaches and
defaults which, in the aggregate, would not have a material adverse effect on
PSP11 or adversely affect the ability of PSP11 to consummate the transactions
contemplated hereby; or (iv) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 4.4 are duly
and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to PSP11 or its properties or assets,
except for violations which would not in the aggregate have a material adverse
effect on PSP11 or adversely affect the ability of PSP11 to consummate the
transactions contemplated hereby.
4.5 Litigation. There is no litigation, proceeding or governmental
investigation which, individually or in the aggregate, is or may be material and
adverse, pending or, to the knowledge of PSP11, threatened against PSP11 or
involving any of its properties or assets.
4.6 SEC Reports. Since January 1, 1994, PSP11 has filed all forms,
reports and documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the federal securities laws and the rules
and regulations promulgated by the SEC thereunder, all of which complied in all
material respects with all applicable requirements of the federal securities
laws and such rules and regulations (collectively, the "PSP11 SEC Reports").
None of the PSP11 SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.7 Financial Statements. The financial statements included in the
PSP11 SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as otherwise noted therein), and present fairly the financial position of PSP11
as of their respective dates, and the results of operations of PSP11 for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
4.8 Absence of Certain Changes or Events. Since January 1, 1997, the
business of PSP11 has been carried on only in the ordinary and usual course and
there has not been any material adverse change in its business, results of
operations or financial condition, or any damage or destruction in the nature of
a casualty loss, whether covered by insurance or not, that would materially and
adversely affect its properties, business or results of operations.
4.9 S-4 Registration Statement and Proxy Statement and Prospectus.
None of the information supplied or to be supplied by PSP11 for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
<PAGE>
Statement and Prospectus (as such terms are defined in Section 7.5 hereof) will
(i) in the case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, 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 not misleading, or (ii) in the
case of the Proxy Statement and Prospectus, at the time of the mailing of the
Proxy Statement and Prospectus and at the time of the meeting of the
shareholders of PSP11, 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.
4.10 Insurance. All material insurance of PSP11 is currently in full
force and effect and PSP11 has reported all claims and occurrences to the extent
required by such insurance.
4.11 PSP11 Exchange Properties. PSP11 has valid and insurable fee
simple title to the PSP11 Exchange Properties, free and clear of all liens and
encumbrances, subject to certain matters that do not materially impair the use
or value of the respective PSP11 Exchange Property to which they relate.
4.12 PSI Exchange Properties. PSP11 agrees that it will not dispose of
the PSI Exchange Properties for at least a period of two years after the
Effective Time.
4.13 Disclosure. The representations and warranties by PSP11 in this
Agreement and any certificate or document delivered by it pursuant hereto do not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
5. Representations, Warranties and Agreements of AOPP. AOPP hereby
represents, warrants and agrees with PSP11 and PSI that:
5.1 Authorization. Subject to approval of this Agreement by the
shareholders of AOPP, (i) the execution, delivery and performance of this
Agreement by AOPP has been duly authorized and approved by all necessary
corporate action of AOPP and (ii) AOPP has all necessary corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to complete the transactions contemplated hereby.
5.2 Organization and Related Matters. AOPP owns properties indirectly
through three wholly owned corporations or limited liability companies and is
the general partner of American Office Park Properties, L.P. AOPP and these
entities are collectively referred to as the "AOPP Entities." Each of the AOPP
Entities is duly organized, existing and in good standing under the laws of the
State of California, with all requisite power and authority to own, lease and
operate its properties and to carry on its business as and where now owned,
leased, operated or carried on, as the case may be; and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business carried on by it requires such qualification and where the failure to
so qualify would have a material adverse effect on the business, properties,
results of operations or financial condition of AOPP.
5.3 Capital Stock. The authorized capital stock of AOPP consists
solely of (i) 100,000,000 shares of Common Stock ($.10 par value), 3,579,277.83
of which were issued and outstanding as of December 16, 1997 and (ii)
100,000,000 shares of Preferred Stock ($.10 par value), none of which were
issued and outstanding as of December 16, 1997. All of the issued and
outstanding shares of capital stock or other equity interest of each of the AOPP
Entities have been duly and validly authorized and issued, and are fully paid
and nonassessable.
<PAGE>
5.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement nor the consummation by AOPP of the transactions
contemplated hereby will: (i) conflict with or result in any breach of any
provision of its Articles of Incorporation or Bylaws; (ii) require any consent,
waiver, approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, except (A) in connection with the
applicable requirements, if any, of the HSR Act, (B) pursuant to the applicable
requirements of the federal securities laws and the rules and regulations
promulgated thereunder, (C) the filing of the Merger Agreement and Officers'
Certificates pursuant to the GCLC and appropriate documents with the relevant
authorities of other states in which AOPP is authorized to do business, (D) in
connection with any state or local tax which is attributable to the beneficial
ownership of AOPP's real property, (E) as may be required by any applicable
state securities or takeover laws, or (F) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, would not in the aggregate have a material adverse effect on AOPP
or adversely affect the ability of AOPP to consummate the transactions
contemplated hereby; (iii) result in a violation or breach of, or constitute a
default (or give rise to any right of termination, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, license, mortgage,
agreement or other instrument or obligation to which AOPP is a party or any of
its properties or assets may be bound, except for such violations, breaches and
defaults which, in the aggregate, would not have a material adverse effect on
AOPP or adversely affect the ability of AOPP to consummate the transactions
contemplated hereby; or (iv) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 5.4 are duly
and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to AOPP or its properties or assets,
except for violations which would not in the aggregate have a material adverse
effect on AOPP or adversely affect the ability of AOPP to consummate the
transactions contemplated hereby.
5.5 Litigation. There is no litigation, proceeding or governmental
investigation which, individually or in the aggregate, is or may be material and
adverse, pending or, to the knowledge of AOPP, threatened against any of the
AOPP Entities or involving any of their properties or assets.
5.6 Financial Statements. The financial statements of AOPP as of and
for the periods ended December 31, 1994, 1995 and 1996 and September 30, 1996
and 1997, have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with prior periods (except as otherwise
noted therein), and present fairly the financial position of AOPP as of their
respective dates, and the results of operations of AOPP for the periods
presented therein (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments). Each of the AOPP Entities has filed
all tax returns required to be filed and has paid all taxes required to be paid.
5.7 Absence of Certain Changes or Events. Since January 1, 1997, the
business of the AOPP Entities has been carried on only in the ordinary and usual
course and there has not been any material adverse change in its business,
results of operations or financial condition, or any damage or destruction in
the nature of a casualty loss, whether covered by insurance or not, that would
materially and adversely affect its properties, business or results of
operations.
5.8 S-4 Registration Statement and Proxy Statement and Prospectus.
None of the information supplied or to be supplied by AOPP for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement and Prospectus (as those terms are defined in Section 7.5 hereof) will
(i) in the case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, 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 not misleading, or (ii) in the
<PAGE>
case of the Proxy Statement and Prospectus, at the time of the mailing of the
Proxy Statement and Prospectus and at the time of the meeting of the
shareholders of PSP11, 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.
5.9 Insurance. All material insurance of the AOPP Entities is
currently in full force and effect, and AOPP has reported all claims and
occurrences to the extent required by such insurance.
5.10 Disclosure. The representations and warranties by AOPP in this
Agreement and any certificate or document delivered by it pursuant hereto do not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
5.11 Compliance with Laws. The use and operation of the properties of
the AOPP Entities are in compliance in all material respects with all laws which
are material to their ownership and operation. Notwithstanding the foregoing, no
representation or warranty is made herein regarding compliance of these
properties with ADA or OSHA, except that no AOPP Entity has received written
notice that any of these properties is not in compliance with ADA or OSHA. All
material licenses and entitlements required in connection with the ownership,
construction, use, or occupancy of these properties have been obtained and are
in full force and effect and in good standing, free from violation. No AOPP
Entity has received written notice that any of these properties is in violation
of any law which is material to the ownership and operation of these properties.
5.12 Title Matters. Each of the AOPP Entities has good and marketable
title in fee simple absolute to each of its properties; except that one of the
properties is ground leased by an AOPP Entity, in which case it has the right to
occupy such property pursuant to a legally valid and binding ground lease. All
of these properties are owned or ground leased free and clear of all liens and
encumbrances, other than certain matters, none of which interfere in any
material respect with the existing or intended ownership, occupancy, use,
operation, maintenance or repair of these properties.
5.13 Environmental Matters. Except as may be disclosed in reports
delivered to PSP11, (i) no AOPP Entities have engaged in or knowingly permitted
any operations or activities in any way involving the handling, manufacture,
treatment, storage, use, generation, release, discharge, refining, dumping or
disposal of any hazardous materials on, under, in or about the properties of the
AOPP Entities or transported any hazardous materials to, from or across these
properties, except in all cases in compliance with environmental requirements;
and (ii) to the knowledge of the AOPP Entities, no hazardous materials are
presently constructed, deposited, stored or otherwise located on, under, in or
about any of these properties, except in all cases in compliance with
environmental requirements.
5.14 Leases. The leases described on the rent rolls delivered to PSP11
are all of the leases affecting the properties of the AOPP Entities as of the
date hereof. The rent rolls are true, complete and accurate. Except as set forth
in the rent rolls, no rent has been paid under any lease more than one month in
advance. Except for the leases described on the rent rolls, there are no other
leases, licenses or other agreements affecting the occupancy of any of the
properties of the AOPP Entities. No AOPP Entity has received written notice that
there exists any uncured breach or default under any lease, including, without
limitation, any ground lease by any AOPP Entity affecting any of these
properties, and to the knowledge of AOPP Entities, no pending breach or default
under any lease by any AOPP Entity exists.
<PAGE>
5.15 Contracts. Other than as disclosed in the Proxy Statement and
Prospectus, none of the AOPP Entities is bound by any contract outside the
ordinary course of business. No AOPP Entity has received written notice that
there exists any uncured breach or default under any material contract by any
AOPP Entity affecting any of its properties, and to the knowledge of AOPP
Entities, no pending breach or default exists.
5.16 REIT Status. AOPP has been operated since January 1, 1997 so as
to qualify as a real estate investment trust under Section 856 of the Internal
Revenue Code of 1986. AOPP does not have any earnings or profits that are
attributable to a C corporation taxable year.
6. Representations, Warranties and Agreements of PSI. PSI hereby
represents, warrants and agrees with PSP11 and AOPP that:
6.1 Authorization. The execution, delivery and performance of this
Agreement by PSI has been duly authorized and approved by all necessary
corporate action of PSI, and PSI has all necessary corporate power and authority
to enter into this Agreement, to perform its obligations hereunder and to
complete the transactions contemplated hereby.
6.2 Organization and Related Matters. PSI is a corporation duly
organized, existing and in good standing under the laws of the State of
California, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as and where now owned,
leased, operated or carried on, as the case may be; and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business carried on by it requires such qualification and where the failure to
so qualify would have a material adverse effect on the business, properties,
results of operations or financial condition of PSI.
6.3 S-4 Registration Statement and Proxy Statement and Prospectus.
None of the information supplied or to be supplied by PSI for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement and Prospectus (as those terms are defined in Section 7.5 hereof) will
(i) in the case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, 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 not misleading, or (ii) in the
case of the Proxy Statement and Prospectus, at the time of the mailing of the
Proxy Statement and Prospectus and at the time of the meeting of the
shareholders of PSP11, 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.
6.4 PSI Exchange Properties. PSI has valid and insurable fee simple
title to the PSI Exchange Properties, free and clear of all liens and
encumbrances, subject to certain matters that do not materially impair the use
or value of the respective PSI Exchange Property to which they relate. PSI has
not engaged in or knowingly permitted any operations or activities in any way
involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any hazardous materials on,
under, in or about the PSI Exchange Properties, or transported any hazardous
materials to, from or across the PSI Exchange Properties, except in all cases in
compliance with environmental requirements; and to the knowledge of PSI, no
hazardous materials are presently constructed, deposited, stored, or otherwise
located on, under, in or about the PSI Exchange Properties, except in all cases
in compliance with environmental requirements. The leases described on the rent
rolls delivered to PSP11 are all of the leases affecting the PSI Exchange
Properties as of the date hereof. The rent rolls are true, complete and
accurate. Except as set forth in the rent rolls, no rent has been paid under any
lease more than one month in advance. Except for the leases described on such
<PAGE>
rent rolls, there are no other leases, licenses or other agreements affecting
the occupancy of any of the PSI Exchange Properties. PSI has not received
written notice that there exists any uncured breach or default under any lease,
and to the knowledge of PSI, no pending breach or default under any lease by PSI
exists.
6.5 PSP11 Exchange Properties. PSI agrees that it will not dispose of
the PSP11 Exchange Properties for at least a period of two years after the
Effective Time.
7. Covenants and Agreements.
7.1 Ordinary Course. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Effective Time, each of PSP11
and AOPP will carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and use all reasonable efforts to: (a)
preserve intact its present business, organization and goodwill, (b) maintain
all permits, licenses and authorizations required by applicable laws and (c)
keep available the services of its present employees and preserve its
relationships with customers, suppliers, lenders, lessors, governmental entities
and others having business or regulatory dealings with it. Without the consent
of the other, PSP11 and AOPP will not issue any capital stock or debt securities
convertible into capital stock or enter into any material contracts. PSP11
hereby consents to the issuance of up to 4,482,852 shares of AOPP common stock
in connection with the acquisition of properties from a state pension plan and
sales of AOPP common stock to institutional investors, provided that the terms
of the agreements for such issuances are as described in the Proxy Statement and
Prospectus in all material respects. Each of PSP11 and AOPP will promptly notify
the other of any event or occurrence not in the ordinary and usual course of
business or which may have a material adverse effect on the properties or
financial condition of such party.
7.2 Meeting of Shareholders.
7.2.1 PSP11. PSP11 will take all action necessary in accordance
with applicable law to convene a meeting of its shareholders as promptly as
practicable to consider and vote upon approval of this Agreement, it being
understood that (i) the principal terms of the Agreement must be approved by the
affirmative vote of a majority of the outstanding shares of Common Stock Series
A, Common Stock Series B and Common Stock Series C of PSP11, counted together as
a single class, and (ii) the shares of Common Stock Series B and Common Stock
Series C of PSP11 will be voted with the holders of a majority of the
unaffiliated shares of Common Stock Series A of PSP11.
7.2.2 AOPP. AOPP will take all action necessary in accordance
with applicable law to convene a meeting of its shareholders as promptly as
practicable to consider and vote upon approval of this Agreement.
7.3 Tax Reporting. Each of PSP11 and AOPP agrees to report the Merger
for federal and state income tax purposes, as a reorganization of the type
described in Section 368(a)(1)(A) of the Code.
7.4 Acquisition Proposals.
7.4.1 PSP11. PSP11 will not initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to a merger, consolidation, share exchange or similar transaction involving
PSP11, or any purchase of all or any significant portion of the assets of PSP11,
or any equity interest in PSP11, other than transactions in the ordinary course
of business or the transactions contemplated hereby or described in the Proxy
Statement and Prospectus (a "PSP11 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 a PSP11 Acquisition Proposal;
provided, however, that the Board of Directors on behalf of PSP11 may furnish or
<PAGE>
cause to be furnished information and may participate in such discussions and
negotiations through its representatives with persons who have sought the same
if the failure to provide such information or participate in such negotiations
and discussions might cause the members of the Board of Directors to breach
their fiduciary duty to PSP11's shareholders under applicable law as advised by
counsel. PSP11 will notify AOPP 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 PSP11,
and will keep AOPP informed of the status and terms of any such proposals and
any such negotiations or discussions.
7.4.2 AOPP. AOPP will not initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to a merger, consolidation, share exchange or similar transaction involving
AOPP, or any purchase of all or any significant portion of the assets of AOPP,
or any equity interest in AOPP, other than transactions in the ordinary course
of business or the transactions contemplated hereby or described in the Proxy
Statement and Prospectus (an "AOPP 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 AOPP Acquisition Proposal;
provided, however, that the Board of Directors on behalf of AOPP may furnish or
cause to be furnished information and may participate in such discussions and
negotiations through its representatives with persons who have sought the same
if the failure to provide such information or participate in such negotiations
and discussions might cause the members of the Board of Directors to breach
their fiduciary duty to AOPP's shareholders under applicable law as advised by
counsel. AOPP will notify PSP11 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 AOPP,
and will keep PSP11 informed of the status and terms of any such proposals and
any such negotiations or discussions.
7.5 Registration and Proxy Statements. PSP11 and AOPP will promptly
prepare and file with the SEC a preliminary proxy statement in connection with
the vote of shareholders of PSP11 with respect to the Merger. PSP11 will, as
promptly as practicable, prepare and file with the SEC a registration statement
on Form S-4 (the "S-4 Registration Statement"), containing a proxy
statement/prospectus, in connection with the registration under the Securities
Act of 1933, as amended (the "Securities Act") of the PSP11 Shares to be issued
to holders of AOPP Shares in the Merger (such proxy statement/prospectus,
together with any amendments thereof or supplements thereto, in the form or
forms to be mailed or delivered to the shareholders of PSP11 and AOPP, being
herein called the "Proxy Statement and Prospectus"). PSP11 and AOPP will each
use its best efforts to have or cause the S-4 Registration Statement to be
declared effective as promptly as practicable, and also will take any other
action required to be taken under federal or state securities laws, and PSP11
and AOPP will use their best efforts to cause the Proxy Statement and Prospectus
to be mailed to their respective shareholders at the earliest practicable date.
PSP11 agrees that (i) if at any time prior to the vote of shareholders of PSP11
and AOPP with respect to the Merger any event with respect to PSP11 or the
Merger should occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement and Prospectus or the S-4 Registration
Statement, such event shall be so described, and such amendment or supplement
shall be promptly filed with the SEC and, as required by law, disseminated to
the shareholders of PSP11 and AOPP and (ii) the Proxy Statement and Prospectus
will (with respect to PSP11) comply as to form in all material respects with the
requirements of the federal securities laws. AOPP agrees that (i) if at any time
prior to the vote of shareholders of PSP11 and AOPP with respect to the Merger
any event with respect to AOPP or the Merger should occur which is required to
be described in an amendment of, or a supplement to, the Proxy Statement and
Prospectus or the S-4 Registration Statement, such event shall be so described,
<PAGE>
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of PSP11 and AOPP and (ii) the
Proxy Statement and Prospectus will (with respect to AOPP) comply as to form in
all material respects with the requirements of the federal securities laws.
7.6 Best Efforts. Each of PSP11 and AOPP shall: (i) promptly make its
respective filings and thereafter make any other required submissions under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby; and (ii) use its best efforts to promptly take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
7.7 Registration and Listing of PSP11 Shares. PSP11 will use its best
efforts to register under the applicable provisions of the Securities Act the
PSP11 Shares to be issued in the Merger and to cause such shares to be listed
for trading on the AMEX upon official notice of issuance.
7.8 Distributions. Neither PSP11 nor AOPP will, at any time prior to
the Effective Time, declare or pay any cash distribution on its capital stock or
make any other distribution of assets to its shareholders, except (i) regular
quarterly dividends consistent with prior practice and (ii) cash distributions
required to satisfy REIT distribution requirements.
7.9 Amendments to Articles of Incorporation and Bylaws. Except for the
amendments included in Exhibit D hereto, neither PSP11 nor AOPP will, at any
time prior to the Effective Time, amend its respective articles of incorporation
or bylaws.
8. Conditions.
8.1 Conditions to Each Party's Obligations. The respective obligations
of each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Closing of each of the following
conditions, any or all of which may be waived in whole or in part, to the extent
permitted by applicable law:
8.1.1 Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by both the shareholders of
PSP11 and the shareholders of AOPP as contemplated by Sections 7.2.1 and 7.2.2
hereof.
8.1.2 Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, governmental and regulatory authorities in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (including the expiration of the waiting period requirements
of the HSR Act) shall have been made or obtained (as the case may be) without
material restrictions, except where the failure to obtain such consents,
approvals, permits and authorizations could not reasonably be expected to have a
material adverse effect on PSP11, AOPP or PSI.
8.1.3 Litigation. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree, injunction
or other order (whether temporary, preliminary or permanent) or taken any action
which prohibits the consummation of the transactions contemplated by this
Agreement; provided, however, that the party invoking this condition shall use
its best efforts to have any such judgment, decree, injunction or other order
vacated.
<PAGE>
8.1.4 Registration Statement. The S-4 Registration Statement
shall have been declared effective and no stop order suspending effectiveness
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under federal and state securities laws
relating to the issuance or trading of the shares of PSP11 Common Stock to be
issued in the Merger shall have been received.
8.1.5 Listing of PSP11 Shares on AMEX. The shares of PSP11 Common
Stock to be issued in the Merger shall have been approved for listing on the
AMEX upon official notice of issuance.
8.1.6 PSP11 Fairness Opinion. Prior to the mailing of the Proxy
Statement and Prospectus to the shareholders of PSP11 and AOPP, the Board of
Directors of PSP11 shall have received the opinion of Jefferies & Company, Inc.
in form and substance satisfactory to it to the effect that the terms of the
Merger are, from a financial point of view, fair to the public shareholders of
PSP11, and such opinion shall not have been withdrawn or revoked.
8.1.7 Tax Opinion. The Board of Directors of PSP11 and AOPP shall
have received a legal opinion of Hogan & Hartson L.L.P. that the Merger will
qualify as a tax-free reorganization under Section 368(a) of the Code.
8.1.8 PSI Board Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by the Board of Directors of
PSI.
8.1.9 Merger and Exchange. The Merger and the Exchange are
conditioned on each other.
8.2 Conditions to Obligations of PSP11. The obligations of PSP11 to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSP11 to the extent permitted by applicable law:
8.2.1 Accuracy of Representations; Performance of Agreements.
Each of the representations and warranties of AOPP and PSI contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date (except to the extent they
relate to a particular date), and AOPP and PSI shall have performed or complied
with all agreements and covenants required by this Agreement to be performed or
complied with by them at or prior to the Closing.
8.2.2 Deeds and Cash. PSI shall have delivered into escrow deeds,
in form and substance satisfactory to PSP11, for the PSI Exchange Properties.
8.2.3 Certificate of Officers. PSP11 shall have received such
certificates of officers of AOPP and PSI as PSP11 may reasonably request in
connection with the Closing, including upon request a certificate satisfactory
to it of the Chief Executive Officers and the Chief Financial Officers of AOPP
and PSI to the effect that, to the best of their knowledge, all representations
and warranties of their respective corporation contained in this Agreement are
true and correct in all material respects at and as of the Closing Date as if
made at and as of the Closing Date, and their respective corporation has
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with at or prior to the Closing.
8.2.4 Title to Properties; Environmental Audits. PSP11 in its
sole discretion shall be satisfied as to the status of title to (including the
existence and effect of liens and encumbrances), and the results of an
environmental audit of, each of the real properties owned by AOPP and each of
the PSI Exchange Properties.
<PAGE>
8.2.5 Dissenting Shares. None of the AOPP Shares shall have
become Dissenting Shares.
8.2.6 PSP11 shall have approved all material contracts entered
into by AOPP after execution of this Agreement and be satisfied that appropriate
disclosure with respect to any such contract has been made to the shareholders
of PSP11 and AOPP.
8.3 Conditions to Obligations of AOPP. The obligations of AOPP to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by AOPP to the extent permitted by applicable law.
8.3.1 Accuracy of Representations; Performance of Agreements.
Each of the representations and warranties of PSP11 and PSI contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date (except to the extent they
relate to a particular date), and PSP11 and PSI shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Closing.
8.3.2 Certificate of Officers. AOPP shall have received such
certificates of officers of PSP11 and PSI as AOPP may reasonably request in
connection with the Closing, including upon request a certificate satisfactory
to it of the Chief Executive Officers and the Chief Financial Officers of PSP11
and PSI to the effect that, to the best of their knowledge, all representations
and warranties of their respective corporation contained in this Agreement are
true and correct in all material respects at and as of the Closing Date as if
made at and as of the Closing Date, and their respective corporation has
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with at or prior to the Closing.
8.3.3 Title to Properties; Environmental Audits. AOPP in its sole
discretion shall be satisfied as to the status of title to (including the
existence and effect of liens and encumbrances), and the results of an
environmental audit of, each of the real properties owned by PSP11, excluding
the PSP11 Exchange Properties.
8.3.4 Dissenting Shares. Less than 5% of the outstanding PSP11
Shares shall have become Dissenting Shares.
8.4 Conditions to Obligations of PSI. The obligations of PSI to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSI to the extent permitted by applicable law.
8.4.1 Accuracy of Representations; Performance of Agreements.
Each of the representations and warranties of PSP11 and AOPP contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of the Closing Date (except to the extent they
relate to a particular date) and PSP11 and AOPP shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Closing.
8.4.2 Deeds. PSP11 shall have delivered into escrow deeds, in
form and satisfactory to PSI, for the PSP11 Exchange Properties.
8.4.3 Certificate of Officers. PSI shall have received such
certificates of officers of PSP11 and AOPP as PSI may reasonably request in
<PAGE>
connection with the Closing, including upon request a certificate satisfactory
to it of the Chief Executive Officers and the Chief Financial Officers of PSP11
and AOPP to the effect that, to the best of their knowledge, all representations
and warranties of their respective corporation contained in this Agreement are
true and correct in all material respects at and as of the Closing Date as if
made at and as of the Closing Date, and their respective corporation has
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with at or prior to the Closing.
9. Termination.
9.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after shareholder approval, by the mutual written consent of PSP11, AOPP and
PSI.
9.2 Termination by PSP11, AOPP or PSI. This Agreement may be
terminated and the Merger and the Exchange may be abandoned by action of the
Board of Directors of any of PSP11, AOPP or PSI if (i) both the Merger and the
Exchange shall not have been consummated by December 31, 1998 (provided that the
right to terminate this Agreement under this Section 9.2(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the Merger to
occur on or before such date); (ii) any court of competent jurisdiction in the
United States or some other governmental body or regulatory authority shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable; or
(iii) the shareholders of either PSP11 or AOPP shall have failed to approve, or
have dissented in excess of the limits set forth in Sections 8.2.5 and 8.3.4
with respect to, this Agreement and the transactions contemplated hereby at its
respective meeting of shareholders.
9.3 Termination by PSP11. This Agreement may be terminated by PSP11
and the Merger and the Exchange may be abandoned at any time prior to the
Effective Time, if (i) AOPP or PSI shall have failed to comply in any material
respect with any of the covenants, conditions or agreements contained in this
Agreement to be complied with or performed by AOPP or PSI, respectively, at or
prior to such date of termination, which failure to comply has not been cured
within five business days following notice to such party of such failure to
comply or (ii) any representation or warranty of AOPP or PSI contained in this
Agreement shall not be true in all material respects when made, which inaccuracy
or breach (if capable of cure) has not been cured within five business days
following notice to such party of the inaccuracy or breach, or on and as of the
Closing as if made on and as of the Closing Date.
9.4 Termination by AOPP. This Agreement may be terminated by AOPP and
the Merger and the Exchange may be abandoned at any time prior to the Effective
Time, before or after shareholder approval, if (i) PSP11 or PSI shall have
failed to comply in any material respect with any of the covenants, conditions
or agreements contained in this Agreement to be complied with or performed by
PSP11 or PSI, respectively, at or prior to such date of termination, which
failure to comply has not been cured within five business days following notice
to such party of such failure to comply or (ii) any representation or warranty
of PSP11 or PSI contained in this Agreement shall not be true in all material
respects when made, which inaccuracy or beach (if capable of cure) has not been
cured within five business days following notice to such party of the inaccuracy
or breach, or on and as of the Closing as if made on and as of the Closing Date.
9.5 Termination by PSI. This Agreement may be terminated by PSI and
the Merger and the Exchange may be abandoned at any time prior to the Effective
Time, before or after shareholder approval, if (i) PSP11 or AOPP shall have
failed to comply in any material respect with any of the covenants, conditions
<PAGE>
or agreements contained in this Agreement to be complied with or performed by
PSP11 or AOPP, respectively, at or prior to such date of termination, which
failure to comply has not been cured within five business days following notice
to such party of such failure to comply or (ii) any representation or warranty
of PSP11 or AOPP contained in this Agreement shall not be true in all material
respects when made, which inaccuracy or beach (if capable of cure) has not been
cured within five business days following notice to such party of the inaccuracy
or breach, or on and as of the Closing as if made on and as of the Closing Date.
9.6 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger and the Exchange pursuant to
this Section 9, no party (or any directors, officers, employees, agents or
representatives of any party) shall have any liability or further obligation to
any other party or any person who controls a party within the meaning of the
Securities Act, except as provided in Section 10.1 and except that nothing
herein will relieve any party from liability for any breach of this Agreement.
10. Miscellaneous.
10.1 Payment of Expenses. If the Merger and Exchange are consummated,
the Surviving Corporation shall pay all the expenses incident to preparing for,
entering into and carrying out this Agreement and the consummation of the
transactions contemplated hereby. If the Merger and Exchange are not
consummated, each of PSP11, AOPP and PSI shall pay its own expenses, except that
PSP11, AOPP and PSI shall each pay one-third of any expenses incurred in
connection with the printing of the S-4 Registration Statement and the Proxy
Statement and Prospectus, the real estate appraisals and environmental audits of
the PSP11 Exchange Properties, the PSI Exchange Properties and the properties of
AOPP and preparation for real estate closings, and any filing fees under the HSR
Act, the Securities Act and the Securities Exchange Act of 1934, as amended.
10.2 Survival of Representations, Warranties and Covenants. The
respective representations and warranties of PSP11, AOPP and PSI contained
herein or in any certificate or document delivered pursuant hereto shall expire
with and be terminated and extinguished by the effectiveness of the Merger and
shall not survive the Effective Time. The sole right and remedy arising from a
misrepresentation or breach of warranty, or from the failure of any of the
conditions to be met, shall be the termination of this Agreement by the other
party. This Section 10.2 shall not limit any covenant or agreement of the
parties, which by its terms contemplates performance at or after the Effective
Time.
10.3 Modification or Amendment. The parties may modify or amend this
Agreement by written agreement authorized by the Boards of Directors and
executed and delivered by officers of the respective parties; provided, however,
that after approval of this Agreement by the shareholders of PSP11 or AOPP, no
amendment shall be made which changes any of the principal terms of the Merger
or this Agreement, without the approval of the shareholders of such corporation.
10.4 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
10.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof.
10.6 Interpretation. This Agreement has been negotiated by the parties
and is to be interpreted according to its fair meaning as if the parties had
prepared it together and not strictly for or against any party. Each of the
capitalized terms defined in this Agreement shall, for all purposes of this
Agreement (and whether defined in the plural and used in the singular, or vice
<PAGE>
versa), have the respective meaning assigned to such term in the Section in
which such meaning is set forth. References in this Agreement to "parties" or a
"party" refer to parties to this Agreement unless expressly indicated otherwise.
At each place in this Agreement where the context so requires, the masculine,
feminine or neuter gender includes the others and the singular or plural number
includes the other. "Including" means "including without limitation."
10.7 Headings. The descriptive headings contained in the Sections and
subsections of this Agreement are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
10.8 Parties in Interest. This Agreement, and the rights, interests
and obligations created by this Agreement, shall bind and inure to the benefit
of the parties and their respective successors and permitted assigns, and shall
confer no right, benefit or interest upon any other person, including
shareholders of the respective parties.
10.9 Notices. All notices or other communications required or
permitted under this Agreement shall be in writing and shall be delivered
personally or sent by U.S. mail, postage prepaid, addressed as follows or such
other address as the party to be notified has furnished in writing by a notice
given in accordance with this Section 10.9:
If to PSP11:
Mr. Vern O. Curtis
14158 NW Bronson Creek Drive
Portland, Oregon 97229
and
Mr. Jack D. Steele
4725 N. Camino Sumo
Tucson, Arizona 85718
If to AOPP:
American Office Park Properties, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
Attention: Ronald L. Havner, Jr.
Chief Executive Officer
If to PSI:
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
Attention: Harvey Lenkin
President
Any such notice or communication shall be deemed given as of the date of
delivery, if delivered personally, or on the second day after deposit with the
U.S. Postal Service, if sent by U.S. mail.
10.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.
10.11 Assignment. No rights, interests or obligations of either party
under this Agreement may be assigned or delegated without the prior written
consent of the other party.
10.12 Entire Agreement. This Agreement, including the Merger
Agreement, embodies the entire agreement and understanding between the parties
<PAGE>
pertaining to the subject matter hereof, and supersedes all prior agreements,
understandings, negotiations, representations and discussions, whether written
or oral.
10.13 Severable Provisions. If any of the provisions of this Agreement
may be determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions, and any partially enforceable provisions to the extent
enforceable, shall nevertheless be binding and enforceable.
10.14 Further Action. If at any time after the Effective Time, the
Surviving Corporation shall determine that any assignments, transfers, deeds or
other assurances are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to any property or
rights of AOPP, the officers of either Constituent Corporation are fully
authorized in the name of AOPP or otherwise to execute and deliver such
documents and do all things necessary and proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
PUBLIC STORAGE PROPERTIES XI, INC.
By: /s/ B. WAYNE HUGHES
----------------------------------
B. Wayne Hughes
Chief Executive Officer
AMERICAN OFFICE PARK PROPERTIES, INC.
By: /s/ RONALD L. HAVNER, JR.
----------------------------------
Ronald L. Havner, Jr.
Chief Executive Officer
PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
----------------------------------
Harvey Lenkin
President
<PAGE>
Exhibit A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is entered into as of this _____ day
of _____________, 1998, by and between PUBLIC STORAGE PROPERTIES XI, INC., a
California corporation ("PSP11") and AMERICAN OFFICE PARK PROPERTIES, INC., a
California corporation ("AOPP") with reference to the following:
A. PSP11 was incorporated in 1990 under the laws of California, and on the
date hereof has outstanding _______________ shares of Common Stock Series A,
$.01 par value (the "PSP11 Shares"),__________ shares of Common Stock Series B
and __________ shares of Common Stock Series C.
B. AOPP was incorporated in 1997 under the laws of California, and on the
date hereof its authorized capital stock consists of 100,000,000 shares of
Common Stock, $.10 par value (the "AOPP Shares"), ___________ of which are
issued and outstanding and 100,000,000 shares of Preferred Stock ($.10 par
value), none of which are issued and outstanding.
C. PSP11, AOPP and Public Storage, Inc. ("PSI") have entered into an
Amended and Restated Agreement and Plan of Reorganization dated as of December
17, 1997 (the "Plan"), setting forth certain representations, warranties,
conditions and agreements pertaining to the Merger (as defined below).
D. The Boards of Directors of PSP11, AOPP and PSI have approved the Plan
and this Agreement of Merger, and the requisite shareholder approval has been
obtained.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
1.1 The Merger. At the Effective Time (as defined below), AOPP will be
merged with and into PSP11 (the "Merger") and PSP11 shall be the surviving
corporation. PSP11 and AOPP are sometimes collectively referred to herein as the
"Constituent Corporations" and PSP11, as the surviving corporation of the
Merger, is sometimes referred to herein as the "Surviving Corporation."
1.2 Effective Time. The Merger shall become effective at the time at
which this Agreement, together with the requisite Officers' Certificates of
PSP11 and AOPP, are filed with the California Secretary of State (the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time:
(a) The separate corporate existence of AOPP shall cease and the
Surviving Corporation shall thereupon succeed, without other transfer, to all
the rights and property of AOPP and shall be subject to all the debts and
liabilities of AOPP in the same manner as if the Surviving Corporation had
itself incurred them; all rights of creditors and all liens upon the property of
AOPP shall be preserved unimpaired, provided that such liens upon property of
AOPP shall be limited to the property affected thereby immediately prior to the
Effective Time; and any action or proceeding pending by or against AOPP may be
prosecuted to judgment, which shall bind the Surviving Corporation, or the
Surviving Corporation may be proceeded against or substituted in its place.
(b) The Articles of Incorporation of PSP11, as amended in the
following respects at the Effective Time, shall continue to be the Articles of
Incorporation of the Surviving Corporation until changed as provided by law and
its respective provisions.
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(i) Article I shall be amended to read as follows:
The name of this corporation is PS Business Parks, Inc.
(ii) Section (a) of Article III shall be amended to read as
follows:
(a) General. This corporation is authorized to issue only
Common Stock (referred to herein either as "Common Stock" or
"Common shares"). The total number of Common shares which this
corporation is authorized to issue shall be
______________________________ (__________) of the par value of
One Cent ($.01) each. The Common shares shall be considered one
class and shall be divided into three series, of which
______________________________ (__________) shares will
constitute Common Stock Series A, one hundred eighty-four
thousand four hundred fifty-three (184,453) shares will
constitute Common Stock Series B and five hundred twenty-two
thousand six hundred eighteen (522,618) shares will constitute
Common Stock Series C. The Common Stock Series A, Common Stock
Series B and Common Stock Series C shall be of equal rank and
shall vote together as a class, except as otherwise required by
the California Corporations Code, and shall entitle the holders
thereof to the same rights and privileges, except as expressly
provided in Sections (b) through (d) of this Article III.
ARTICLE II
2.1 Common Stock Series A of PSP11. Each outstanding share of Common
Stock Series A ($.01 par value) of PSP11 (the "PSP11 Shares") would continue to
be owned by holders of PSP11 Shares or converted into the right to receive cash
as follows:
(a) At the Effective Time, subject to Section 2.7.1 of the Plan,
each PSP11 Share as to which a cash election has been made in accordance with
the provisions of Section 2.6 of the Plan and has not been revoked, relinquished
or lost pursuant to Section 2.6 of the Plan (the "Series A Cash Election
Shares") shall be converted into and shall represent the right to receive $20.50
in cash. As soon as practicable after the Effective Time, the registered holders
of Cash Election Shares shall be paid the cash to which they are entitled
hereunder in respect of such Series A Cash Election Shares.
(b) At the Effective Time, subject to Section 2.12 of the Plan,
each PSP11 Share (other than Series A Cash Election Shares) shall continue to be
owned by the holders of the PSP11 Shares.
2.2 Common Stock Series B and C of PSP11. Each outstanding share of
Common Stock Series B and C ($.01 par value) of PSP11 (the "PSP11 Series B and C
Shares") would be converted into the right to receive cash or PSP11 Shares as
follows:
(a) At the Effective Time, subject to Section 2.7.2 of the Plan,
each PSP11 Series B and C Share as to which a cash election has been made in
accordance with the provisions of Section 2.6 of the Plan and has not been
revoked, relinquished or lost pursuant to Section 2.6 of the Plan (the "Series B
and C Cash Election Shares") shall be converted into and shall represent the
right to receive $17.71 in cash. As soon as practicable after the Effective
Time, the registered holders of Series B and C Cash Election Shares shall be
paid the cash to which they are entitled hereunder in respect of such Series B
and C Cash Election Shares.
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(b) At the Effective Time, subject to Section 2.12 of the Plan,
each PSP11 Series B and C Share (other than Series B and C Cash Election Shares)
shall be converted into 0.8641 PSP11 Shares.
2.3 AOPP Shares. Each outstanding share of Common Stock ($.10 par
value) of AOPP (the "AOPP Shares") would be converted into the right to receive
cash or PSP11 Shares as follows:
(a) At the Effective Time, subject to Section 2.7.3 of the Plan,
each AOPP Share as to which a cash election has been made in accordance with the
provisions of Section 2.6 of the Plan and has not been revoked, relinquished or
lost pursuant to Section 2.6 of the Plan (the "AOPP Cash Election Shares") shall
be converted into and shall represent the right to receive $24.19 in cash. As
soon as practicable after the Effective Time, the registered holders of AOPP
Cash Election Shares shall be paid the cash to which they are entitled hereunder
in respect of such AOPP Cash Election Shares.
(b) At the Effective Time, subject to Section 2.12 of the Plan,
each AOPP Share (other than AOPP Cash Election Shares) shall be converted into
1.18 PSP11 Shares.
2.4 Exchange of Certificates. After the Effective Time, each holder of
a certificate theretofore evidencing outstanding PSP11 Series B and C Shares and
AOPP Shares which were converted into PSP11 Shares pursuant hereto, upon
surrender of such certificate to American Stock Transfer & Trust Company (the
"Exchange Agent") or such other agent or agents as shall be appointed by the
Surviving Corporation, shall be entitled to receive a certificate representing
the number of whole PSP11 Shares into which the PSP11 Series B and C Shares and
AOPP Shares theretofore represented by the certificate so surrendered shall have
been converted and cash payment in lieu of fractional share interests, if any.
As soon as practicable after the Effective Time, the Exchange Agent will send a
notice and a transmittal form to each holder of PSP11 Series B and C Shares and
AOPP Shares of record at the Effective Time whose stock shall have been
converted into PSP11 Shares, advising such holder of the effectiveness of the
Merger and the procedure for surrendering to the Exchange Agent certificates
evidencing PSP11 Series B and C Shares and AOPP Shares in exchange for
certificates evidencing PSP11 Shares.
2.5 Status Until Surrendered. Until surrendered as provided in Section
2.4 hereof, each outstanding certificate which, prior to the Effective Time,
represented PSP11 Series B and C Shares and AOPP Shares (other than Dissenting
Shares (as defined below), if any) will be deemed for all corporate purposes to
evidence ownership of the number of whole PSP11 Shares into which the PSP11
Series B and C Shares and AOPP Shares evidenced thereby were converted. However,
until such outstanding certificates formerly evidencing PSP11 Series B and C
Shares and AOPP Shares are so surrendered, no dividend payable to holders of
record of PSP11 Shares shall be paid to the holders of such outstanding
certificates in respect of PSP11 Series B and C Shares and AOPP Shares, but upon
surrender of such certificates by such holders there shall be paid to such
holders the amount of any dividends (without interest) theretofore paid with
respect to such whole PSP11 Shares as of any record date on or subsequent to the
Effective Time and the amount of any cash (without interest) payable to such
holder in lieu of fractional share interests.
2.6 Transfer of Shares. After the Effective Time, there shall be no
further registration of transfers of PSP11 Series B and C Shares and AOPP Shares
on the corporate records and, if certificates formerly evidencing such shares
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for certificates evidencing PSP11 Shares and cash in lieu of
fractional share interests as herein provided.
2.7 No Fractional Shares. Notwithstanding any other term or provision
of this Agreement or the Plan, no fractional PSP11 Shares and no certificates or
script therefor, or other evidence of ownership thereof, will be issued in the
Merger. In lieu of any such fractional share interests, each holder of AOPP
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Shares or of PSP11 Series B and C Shares who would otherwise be entitled to such
fractional share will, upon surrender of the certificate representing such
shares, receive a whole PSP11 Share if such fractional share to which such
holder would otherwise have been entitled is .5 of a PSP11 Share or more, and
such fractional share shall be disregarded if it represents less than .5 of a
PSP11 Share; provided, however, that such fractional share shall not be
disregarded if such fractional share to which such holder would otherwise have
been entitled represents .5 of 1% or more of the total number of PSP11 Shares
such holder is entitled to receive in the Merger. In such event, such holder
shall be paid an amount in cash (without interest), rounded to the nearest $.01,
determined by multiplying (i) the per share closing price on the American Stock
Exchange, Inc. of the PSP11 Shares at the Effective Time by (ii) the fractional
interest.
2.8 Dissenting Shares. PSP11 Shares, PSP11 Series B and C Shares and
AOPP Shares held by a holder who has demanded and perfected a right to an
appraisal of such shares in accordance with Section 1300 et seq. of the General
Corporation Law of California (the "GCLC") and who has not effectively withdrawn
or lost such right to appraisal ("Dissenting Shares") shall not continue to be
owned by the holder thereof or converted into or represent the right to receive
cash and/or PSP11 Shares, but the holder thereof shall be entitled only to such
rights as are granted by Section 1300 et seq. of the GCLC. Each holder of
Dissenting Shares who becomes entitled to payment for PSP11 Shares, PSP11 Series
B and C Shares or AOPP Shares pursuant to these provisions of the GCLC shall
receive payment therefor from the Surviving Corporation in accordance therewith.
If any holder of PSP11 Shares, PSP11 Series B and C Shares or AOPP Shares who
demands appraisal in accordance with Section 1300 et seq. of the GCLC shall
effectively withdraw with the consent of the Surviving Corporation or lose
(through failure to perfect or otherwise) the right to appraisal with respect to
PSP11 Shares, PSP11 Series B and C Shares or AOPP Shares, such shares shall
automatically be converted into the right to receive PSP11 Shares pursuant to
Section 2.1(b), 2.2(b) or 2.3(b) hereof, as the case may be.
2.9 Assumption of AOPP Options. At the Effective Time, each
outstanding option to purchase AOPP Shares (an "AOPP Option") granted under
AOPP's 1997 Stock Option and Incentive Plan (the "AOPP Plan") shall be assumed
by PSP11 and, whether vested or unvested, shall be converted into, and shall be
deemed to constitute, an option to acquire, on the same terms and conditions
applicable to the AOPP Option, the number of shares of PSP11 Shares that the
holder of the AOPP Option would have received in the Merger if the AOPP Option
had been exercised in full immediately prior to the Effective Time, irrespective
of whether the AOPP Option was in fact then exercisable (a "Converted Option").
The exercise price per share of a Converted Option shall be the aggregate
exercise price of the AOPP Option divided by the number of PSP11 Shares
purchasable upon exercise of the Converted Option. As soon as practicable after
the Effective Time, PSP11 shall deliver to each holder of an AOPP Option an
appropriate notice setting forth the holder's rights pursuant thereto. PSP11
shall comply with the terms of each AOPP Option and take all corporate action
necessary to reserve for issuance a sufficient number of PSP11 Shares for
delivery upon exercise of the Converted Options.
ARTICLE III
3.1 Headings. The descriptive headings contained in the Sections of
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
3.2 Parties in Interest. This Agreement, and the rights, interests and
obligations created by this Agreement, shall bind and inure to the benefit of
the parties and their respective successors and permitted assigns, and shall
confer no right, benefit or interest upon any other person, including
shareholders of the respective parties.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.
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3.4 Further Action. If at any time after the Effective Time, the
Surviving Corporation shall determine that any assignments, transfers, deeds or
other assurances are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to any property or
rights of AOPP, the officers of either Constituent Corporation are fully
authorized in the name of AOPP or otherwise to execute and deliver such
documents and do all things necessary and proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation.
3.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof.
3.6 Abandonment of Merger. The Constituent Corporations have the power
to abandon the Merger by mutual written consent prior to the filing of this
Agreement with the California Secretary of State.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
PUBLIC STORAGE PROPERTIES XI, INC.
By: _________________________________
B. Wayne Hughes
Chairman of the Board of Directors
and Chief Executive Officer
By: _________________________________
Obren B. Gerich
Secretary
AMERICAN OFFICE PARK PROPERTIES, INC.
By: _________________________________
Ronald L. Havner, Jr.
Chief Executive Officer
By: _________________________________
Mary Jayne Howard
Assistant Secretary
