SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) AUGUST 31, 1999
COMMERCIAL ASSETS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-12262 84-1240911
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
3410 SOUTH GALENA, SUITE 210 80231
DENVER, COLORADO (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (303) 614-9400
ITEM 5. OTHER EVENTS
Merger Agreement
Commercial Assets, Inc., a Delaware corporation (the "Company"),
has entered into an Agreement and Plan of Merger by and between the Company
and Asset Investors Corporation ("AIC"), dated as of August 31, 1999 (the
"Merger Agreement"), pursuant to which the Company will merge with and into
AIC, with AIC as the surviving entity. Under the terms of the Merger
Agreement, each outstanding share of common stock, par value $0.01, of the
Company will be converted into the right to receive 0.4075 shares of common
stock, par value $0.01, of the Company. The Merger is conditioned upon,
among other things, the approvals of stockholders of the Company and AIC
and receipt of any necessary regulatory approvals. Attached as Exhibit 99.1
and incorporated herein by reference is a copy of the joint press release
of the Company and AIC announcing execution of the Merger Agreement.
ITEM 7. EXHIBITS
2.1 Agreement and Plan of Merger, dated as of August 31, 1999,
by and between the Registrant and Asset Investors
Corporation
99.1 Joint Press Release of the Company and AIC issued August 31,
1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
COMMERCIAL ASSETS, INC.
By: /s/ David M. Becker
___________________________
David M. Becker
Date: September 3, 1999 Chief Financial Officer
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
COMMERCIAL ASSETS, INC.
AND
ASSET INVESTORS CORPORATION
DATED AS OF AUGUST 31, 1999
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER...................................................1
Section 1.1 The Merger.......................................1
Section 1.2 Closing..........................................2
Section 1.3 Effective Time...................................2
Section 1.4 Effects of the Merger............................2
Section 1.5 Certificate of Incorporation and
By-laws of the Surviving Corporation.............2
Section 1.6 Directors and Officers...........................2
ARTICLE II EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES.....................................3
Section 2.1 Effect on CAX Capital Stock......................3
(a) Cancellation of CAX Treasury Stock...........3
(b) Conversion of CAX Common Stock...............3
Section 2.2 Effect on AIC Capital Stock......................3
Section 2.3 Exchange of Certificates.........................3
(a) Exchange Agent...............................3
(b) Exchange Procedures..........................4
(c) Distributions with Respect to Unexchanged
Shares.......................................4
(d) No Further Ownership Rights in CAX
Common Stock.................................5
(e) No Fractional Shares.........................5
(f) Withholding..................................6
(g) Termination of Exchange Fund.................6
(h) No Liability.................................6
(i) Investment of Exchange Fund..................6
(j) Lost Certificates............................7
Section 2.4 Certain Adjustments..............................7
ARTICLE III REPRESENTATIONS AND WARRANTIES...............................7
Section 3.1 Disclosure Schedules.............................7
Section 3.2 Representations and Warranties of CAX............7
(a) Organization, Standing and Corporate
Power.......................................7
(b) Capital Structure...........................8
(c) Authority; Noncontravention.................9
(d) SEC Documents; Undisclosed Liabilities.....10
(e) Information Supplied.......................11
(f) Absence of Certain Changes or Events.......11
(g) REIT Status................................12
(h) Taxes......................................12
(i) Voting Requirements........................13
(j) Brokers....................................13
(k) Fairness Opinion...........................13
(l) Absence of Changes in Benefit Plans........13
(m) Environmental Liability....................14
(n) Certain Contracts..........................15
(o) Compliance with Applicable Laws;
Litigation.................................15
Section 3.3 Representations and Warranties of AIC...........16
(a) Organization, Standing and Corporate Power..16
(b) Capital Structure...........................16
(c) Authority; Noncontravention.................17
(d) SEC Documents; Undisclosed Liabilities......18
(e) Information Supplied........................19
(f) Absence of Certain Changes or Events........19
(g) REIT Status.................................20
(h) Taxes.......................................20
(i) Voting Requirements.........................21
(j) Brokers.....................................21
(k) AIC Benefit Plans...........................21
(l) Environmental Liability.....................22
(m) Certain Contracts...........................22
(n) Compliance with Applicable Laws;
Litigation..................................23
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS...................23
Section 4.1 (a) Conduct of Business by CAX..................23
(b) Conduct of Business of AIC..................24
(c) Other Actions...............................27
(d) Advice of Changes...........................27
Section 4.2 No Solicitation.................................28
ARTICLE V ADDITIONAL AGREEMENTS.......................................30
Section 5.1 Preparation of the Form S-4 and the
Proxy Statement; Stockholders Meetings..........30
Section 5.2 Reasonable Best Efforts.........................31
Section 5.3 Stock Options and Warrants......................32
Section 5.4 Indemnification, Exculpation and Insurance......32
Section 5.5 Fees and Expenses...............................33
Section 5.6 Public Announcements............................36
Section 5.7 Affiliates......................................36
Section 5.8 Stock Exchange Listing..........................36
Section 5.9 Stockholder Litigation..........................36
Section 5.10 Tax Treatment..................................37
Section 5.11 Conveyance Taxes...............................37
Section 5.12 Certain Contracts..............................37
Section 5.13 Voting of shares of CAX owned by AIC...........37
ARTICLE VI CONDITIONS PRECEDENT........................................37
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger...............................37
(a) Governmental and Regulatory Approvals.......37
(b) No Injunctions or Restraints................38
(c) Form S-4....................................38
(d) NYSE Listing................................38
(e) Stockholder Approval........................38
Section 6.2 Conditions to Obligations of AIC................38
(a) Representations and Warranties..............38
(b) Performance of Obligations of CAX...........38
(c) No Material Adverse Change..................38
(d) Tax Opinion.................................39
(e) REIT Qualification..........................39
Section 6.3 Conditions to Obligations of CAX................39
(a) Representations and Warranties..............39
(b) Performance of Obligations of AIC...........39
(c) No Material Adverse Change..................39
(d) Tax Opinion.................................39
(e) REIT Qualification..........................40
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...........................40
Section 7.1 Termination.....................................40
Section 7.2 Effect of Termination...........................41
Section 7.3 Amendment.......................................41
Section 7.4 Extension; Waiver...............................41
ARTICLE VIII GENERAL PROVISIONS..........................................42
Section 8.1 Nonsurvival of Representations and
Warranties......................................42
Section 8.2 Notices.........................................42
Section 8.3 Definitions. For purposes of this Agreement....43
Section 8.4 Interpretation..................................45
Section 8.5 Counterparts....................................45
Section 8.6 Entire Agreement; No Third-Party
Beneficiaries...................................45
Section 8.7 Governing Law...................................45
Section 8.8 Assignment......................................45
Section 8.9 Severability....................................46
Section 8.10 Enforcement....................................46
AGREEMENT AND PLAN OF MERGER, dated as of August 31, 1999, by and
between COMMERCIAL ASSETS, INC., a Delaware corporation ("CAX") and ASSET
INVESTORS CORPORATION, a Delaware corporation ("AIC").
WHEREAS, the respective Boards of Directors of AIC and CAX each
have approved the merger of CAX with and into AIC (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of common stock, par value $.01 per
share, of CAX (the "CAX Common Stock"), other than shares owned, directly
or indirectly, by CAX, will be converted into the right to receive the
Merger Consideration (as defined in Section 2.1(b));
WHEREAS, the respective Boards of Directors of AIC and CAX each
have determined that the Merger and the other transactions contemplated
hereby are advisable and in the best interests of their respective
corporations and stockholders on the terms and conditions set forth in this
Agreement;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
to prescribe various conditions to the Merger; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that,
immediately following the Merger, the Surviving Corporation (as defined in
Section 1.1) will qualify as a real estate investment trust ("REIT") within
the meaning of the Code.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
provisions of the Delaware General Corporation Law (the "DGCL"), at the
Effective Time (as defined in Section 1.3), CAX shall be merged with and
into AIC and the separate corporate existence of CAX shall cease. Following
the Effective Time, AIC shall be the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and
obligations of CAX in accordance with the provisions of the DGCL.
Section 1.2 Closing. Subject to the satisfaction or waiver
of all the conditions to closing with respect to the Merger contained in
Article VI hereof, the closing of the Merger (the "Closing") will take
place at 10:00 a.m., Los Angeles time, on the fifth business day after
satisfaction or waiver of the conditions set forth in Article VI, unless
another time or date is agreed to by the parties hereto (the "Closing
Date"). The Closing will be held at the offices of Skadden, Arps, Slate,
Meagher & Flom, LLP, 300 South Grand Avenue, Suite 3400, Los Angeles,
California 90071 or such other location as is agreed to by the parties
hereto.
Section 1.3 Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on the Closing Date, the parties
shall cause the Merger to be consummated by filing a certificate of merger
or other appropriate documents (the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL with the Secretary of
State of the State of Delaware and shall make all other filings or
recordings required under the DGCL. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with and accepted by
the Secretary of State of the State of Delaware, or at such subsequent date
or time as AIC and CAX shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
Section 1.4 Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
Section 1.5 Certificate of Incorporation and By-laws of the
Surviving Corporation. The certificate of incorporation of AIC, as in
effect immediately prior to the Effective Time, shall be amended in its
entirety to read as set forth in Exhibit A hereof, which shall be the
certificate of incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law. The by-laws of
AIC, as in effect immediately prior to the Effective Time, shall become the
by-laws of the Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
Section 1.6 Directors and Officers. The officers of AIC
immediately prior to the Effective Time, shall become the officers of the
Surviving Corporation until their successors shall have been duly appointed
or qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and the by-laws of the
Surviving Corporation. The directors of the Surviving Corporation shall be
designated in writing by AIC at least 10 days prior to the date that AIC
and CAX mail the Proxy Statement (as defined below) to their, respective
stockholders; provided, that a majority of such directors shall consist of
current directors of AIC or CAX. Such directors shall serve until their
successors shall have been duly elected, appointed or qualified or until
their earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
Section 2.1 Effect on CAX Capital Stock. As of the Effective
Time, by virtue of the Merger and without any action on the part of the
holder of any shares of CAX capital stock:
(a) Cancellation of CAX Treasury Stock. Each share of
CAX Common Stock that is owned directly or indirectly by CAX or
held in the treasury of CAX or by any Subsidiary of CAX shall
automatically be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Conversion of CAX Common Stock. Each issued and
outstanding share of CAX Common Stock (other than shares to be
canceled in accordance with Section 2.1(a)) shall be converted into
the right to receive .4075 (the "Exchange Ratio") validly issued,
fully paid and nonassessable shares of common stock, par value $.01
per share, of AIC (the "AIC Common Stock"). The consideration to be
issued to holders of CAX Common Stock (which shall include shares
of AIC Common Stock calculated as set forth in this Section 2.1(b)
plus cash in lieu of fractional shares as described in Section
2.3(e)) is referred to herein as the "Merger Consideration."
Subject to Section 2.1(a), as of the Effective Time, all such
shares of CAX Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder
of a certificate representing any such shares of CAX Common Stock
shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration and any cash in lieu of
fractional shares of AIC Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in
accordance with Section 2.3 and any dividends or distributions to
which such holder is entitled pursuant to Section 2.3(c), in each
case without interest and less any required withholding taxes.
Section 2.2 Effect on AIC Capital Stock. As of the Effective
Time, each issued and outstanding share of AIC Common Stock shall remain
outstanding and shall represent one share of common stock, par value $.01
per share, of the Surviving Corporation.
Section 2.3 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, AIC
shall enter into an agreement with such bank or trust company as
may be designated by AIC and reasonably satisfactory to CAX (the
"Exchange Agent"), which shall provide that AIC shall deposit with
the Exchange Agent as of the Effective Time, for the benefit of the
holders of shares of CAX Common Stock, for exchange in accordance
with this Article II, through the Exchange Agent, certificates
representing shares of AIC Common Stock together with cash in an
amount necessary to permit the Exchange Agent to satisfy its
obligations under Section 2.3(e)(iii) (such shares of AIC Common
Stock, together with any dividends or distributions with respect
thereto with a record date after the Effective Time, and any cash
payable in lieu of any fractional shares of AIC Common Stock being
hereinafter referred to as the "Exchange Fund") issuable pursuant
to Section 2.1(b) in exchange for outstanding shares of CAX Common
Stock.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail
to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of CAX Common Stock (the "Certificates") whose shares were
converted into the right to receive the Merger Consideration
pursuant to Section 2.1(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and
have such other provisions as CAX and AIC may reasonably specify)
and (ii) instructions for use in surrendering the Certificates in
exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents
as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of AIC
Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II, dividends or other distributions
on such shares of AIC Common Stock which such holder has the right
to receive pursuant to Section 2.3(c), and cash in lieu of any
fractional share of AIC Common Stock pursuant to Section 2.3(e),
and the Certificate so surrendered shall forthwith be canceled. In
the event of a surrender of a Certificate representing shares of
CAX Common Stock which are not registered in the transfer records
of CAX under the name of the person surrendering such Certificate,
a certificate representing the proper number of shares of AIC
Common Stock may be issued to a person other than the person in
whose name the Certificate so surrendered is registered if such
Certificate shall be properly endorsed or otherwise be in proper
form for transfer and the person requesting such issuance shall pay
any transfer or other taxes required by reason of the issuance of
shares of AIC Common Stock to a person other than the registered
holder of such Certificate or establish to the satisfaction of AIC
that such tax has been paid or is not applicable. Until surrendered
as contemplated by this Section 2.3, each Certificate shall be
deemed at any time after the Effective Time to represent only the
right to receive upon such surrender the Merger Consideration which
the holder thereof has the right to receive in respect of such
Certificate pursuant to the provisions of this Article II,
dividends or other distributions in respect of such Merger
Consideration which such holder has the right to receive pursuant
to Section 2.3(c), and cash in lieu of any fractional share of AIC
Common Stock pursuant to Section 2.3(e). No interest shall be paid
or will accrue on any amounts payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with respect to AIC Common
Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the
shares of AIC Common Stock issuable hereunder in respect thereof,
and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.3(e), and all such dividends,
other distributions and cash in lieu of fractional shares of AIC
Common Stock shall be paid by AIC to the Exchange Agent and shall
be included in the Exchange Fund, in each case until the surrender
of such Certificate in accordance with this Article II, subject to
Section 2.3(f). Subject to the effect of applicable escheat or
similar laws, following surrender of any such Certificate there
shall be paid to the holder of the Certificate representing whole
shares of AIC Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares
of AIC Common Stock and the amount of any cash payable in lieu of a
fractional share of AIC Common Stock to which such holder is
entitled pursuant to Section 2.3(e) and (ii) at the appropriate
payment date, the amount of dividends or other distributions
payable with respect to such whole shares of AIC Common Stock with
a record date after the Effective Time and with a payment date
subsequent to such surrender date.
(d) No Further Ownership Rights in CAX Common Stock.
All shares of AIC Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this
Article II (including any cash paid pursuant to this Article II)
shall be deemed to have been issued (and paid) in full satisfaction
of all rights pertaining to the shares of CAX Common Stock
theretofore represented by such Certificates, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make
any other distributions with a record date prior to the Effective
Time which may have been declared or made by CAX on such shares of
CAX Common Stock, as the case may be, which remain unpaid at the
Effective Time, and following the Effective Time there shall be no
further registration of transfers on the stock transfer books of
the Surviving Corporation of the shares of CAX Common Stock which
were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except as
otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or
scrip representing fractional shares of AIC Common Stock shall be
issued upon the surrender for exchange of Certificates, no dividend
or distribution of AIC shall relate to such fractional share
interests and such fractional share interests will not entitle the
owner thereof to vote or to any rights of a stockholder of AIC.
(ii) The Surviving Corporation shall, in lieu
of the issuance of fractional share interests, pay each former
holder of CAX Common Stock an amount in cash equal to the product
obtained by multiplying (A) the fractional share interest to which
such former holder (after taking into account all shares of CAX
Common Stock held of record at the Effective Time by such holder)
would otherwise be entitled by (B) the closing price of the AIC
Common Stock as reported on the New York Stock Exchange (the
"NYSE") Composite Transaction Tape (as reported in The Wall Street
Journal, or, if not reported therein, any other authoritative
source) on the Closing Date.
(iii) As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders
of Certificates with respect to any fractional share interests, the
Exchange Agent shall make available such amounts to such holders of
Certificates subject to and in accordance with the terms of Section
2.3(b).
(f) Withholding. AIC or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration and
any dividends or distributions otherwise payable pursuant to this
Agreement to any holder of shares of CAX Common Stock such amounts
as AIC or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent amounts
are so withheld by AIC or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of CAX Common Stock in respect of
which such deduction and withholding was made by AIC or the
Exchange Agent.
(g) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the
Certificates for six months after the Effective Time shall be
delivered to the Surviving Corporation, upon demand, and any
holders of the Certificates who have not theretofore complied with
this Article II thereafter shall look only to the Surviving
Corporation for payment of their claim for Merger Consideration,
any dividends or distributions with respect to AIC Common Stock and
any cash in lieu of fractional shares of AIC Common Stock.
(h) No Liability. None of CAX, AIC, the Surviving
Corporation or the Exchange Agent shall be liable to any person in
respect of any shares of AIC Common Stock, any dividends or
distributions with respect thereto, any cash in lieu of fractional
shares of AIC Common Stock or any cash from the Exchange Fund, in
each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(i) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund on a daily
basis, as directed by AIC. Any interest and other income resulting
from such investments shall be paid to AIC. If, as a result of any
loss resulting from such investments, the amount of cash remaining
in the Exchange Fund is insufficient to pay the full amount to
which holders of certificates formerly representing CAX Common
Stock are entitled, AIC, promptly upon demand by the Exchange
Agent, shall deposit additional cash into the Exchange Fund in an
amount sufficient to satisfy its obligations to such holders.
(j) Lost Certificates. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost,
stolen or destroyed and the posting by such person of a bond in
such reasonable amount as AIC may direct as indemnity against any
claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration, any unpaid
dividends and distributions on shares of AIC Common Stock
deliverable in respect thereof and any cash in lieu of fractional
shares of AIC Common Stock, in each case pursuant to this
Agreement.
Section 2.4 Certain Adjustments. If, after the date of this
Agreement and on or prior to the Closing Date, the outstanding shares of
AIC Common Stock or CAX Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization, stock
split, reverse stock split, combination or exchange of shares, or any
dividend payable in stock or other securities shall be declared thereon
with a record date within such period, or any similar event shall occur
(any such action, an "Adjustment Event"), the Exchange Ratio shall be
adjusted accordingly to provide to the holders of CAX Common Stock the same
economic effect as contemplated by this Agreement prior to such
reclassification, recapitalization, stock split, reverse stock split,
combination, exchange, dividend or similar event.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Disclosure Schedules. Prior to the execution of
this Agreement, CAX has delivered to AIC a schedule (the "CAX Disclosure
Schedule") and AIC has delivered to CAX a schedule (the "AIC Disclosure
Schedule" and, together, the "Disclosure Schedules") each setting forth,
among other things, certain items or exceptions relating to any or all of
their respective representations and warranties; provided, however, that
notwithstanding anything in this Agreement to the contrary, the inclusion
of an item in a Disclosure Schedule shall not be deemed an admission by the
disclosing party that such item represents a material exception or fact,
event or circumstance or that such item constitutes or is reasonably likely
to result in a Material Adverse Effect or Material Adverse Change (each as
defined in Section 8.3).
Section 3.2 Representations and Warranties of CAX. Except as
disclosed in the CAX SEC Documents (as defined in Section 3.2(d)) filed
prior to the date of this Agreement (the "CAX Filed SEC Documents") or as
set forth on the CAX Disclosure Schedule, CAX represents and
warrants to AIC as follows:
(a) Organization, Standing and Corporate Power. (i)
Each of CAX and its Subsidiaries (as defined in Section 8.3) is a
corporation or other legal entity duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it
is organized and has the requisite corporate or other power, as the
case may be, and authority to carry on its business as now being
conducted, except, as to Subsidiaries, for those jurisdictions
where the failure to be duly organized, validly existing and in
good standing individually or in the aggregate would not have a
Material Adverse Effect on CAX. Each of CAX and its Subsidiaries is
duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or
to be in good standing individually or in the aggregate would not
have a Material Adverse Effect on CAX.
(ii) CAX has made available to AIC prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as in effect on the date
of this Agreement.
(b) Capital Structure. The authorized capital stock
of CAX consists of 75,000,000 shares of CAX Common Stock and
25,000,000 shares of preferred stock, par value $.01 per share, of
CAX (the "CAX Preferred Stock"). At the close of business on June
30, 1999: (i) 10,392,529 shares of CAX Common Stock were issued and
outstanding; (ii) 395,000 shares of CAX Common Stock were reserved
for issuance pursuant to outstanding employee or director stock
options granted under CAX's employee stock option plans (the "CAX
Stock Options"); and (iii) no shares of CAX Preferred Stock had
been designated or issued. All outstanding shares of capital stock
of CAX are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set
forth in this Section 3.2(b) and except for changes since June 30,
1999 resulting from the issuance of shares of CAX Common Stock upon
exercise of CAX Stock Options outstanding as of June 30, 1999, or
as permitted by Section 4.1(a), (i) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or
other voting securities of CAX, (B) any securities of CAX or any
CAX Subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of CAX, (C) any
warrants, calls, options or other rights to acquire from CAX or any
CAX Subsidiary, and any obligation of CAX or any CAX Subsidiary to
issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock
or voting securities of CAX or any CAX Subsidiary, and (ii) there
are no outstanding obligations of CAX or any CAX Subsidiary to
repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold,
any such securities. There are no outstanding (A) securities of CAX
or any CAX Subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities
in any CAX Subsidiary, (B) warrants, calls, options or other rights
to acquire from CAX or any CAX Subsidiary, and any obligation of
CAX or any CAX Subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any CAX
Subsidiary or (C) obligations of CAX or any CAX Subsidiary to
repurchase, redeem or otherwise acquire any such outstanding
securities of CAX Subsidiaries or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Other
than rights granted to AIC and as set forth in the certificate of
incorporation of CAX, neither CAX nor any CAX Subsidiary is a party
to any agreement restricting the transfer of, relating to the
voting of, requiring registration of, or granting any preemptive
or, except as provided by the terms of the CAX Stock Options,
antidilutive rights with respect to, any securities of the type
referred to in the two preceding sentences.
(c) Authority; Noncontravention. CAX has all
requisite corporate power and authority to enter into this
Agreement and, subject to receipt of the CAX Stockholder Approval
(as defined in Section 3.2(i)), to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by CAX and the consummation by CAX of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of CAX, subject to the
receipt of the CAX Stockholder Approval. This Agreement has been
duly executed and delivered by CAX, and assuming the due
authorization, execution and delivery by AIC, constitutes the
legal, valid and binding obligation of CAX, enforceable against CAX
in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors' rights generally and by general
principles of equity (whether considered at law or in equity). The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss
of a benefit under, or result in the creation of any Lien upon any
of the properties or assets of CAX or any of its Subsidiaries
under, (i) the certificate of incorporation or by-laws of CAX or
the comparable organizational or governing documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease to which CAX or any of its Subsidiaries
is a party or other agreement, instrument, permit, concession,
franchise, license or similar authorization applicable to CAX or
any of its Subsidiaries or their respective properties or assets or
(iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, injunction,
order, decree, statute, law, ordinance, rule or regulation
applicable to CAX or any of its Subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) and
(iii), any such conflicts, violations, defaults, rights, losses or
Liens that individually or in the aggregate would not (x) have a
Material Adverse Effect on CAX or (y) materially impair the ability
of CAX to perform their respective obligations under this Agreement
or materially delay or prevent the consummation of the transactions
contemplated hereby. No consent, approval, order or authorization
of, action by or in respect of, or registration, declaration or
filing with, any federal, state, local or foreign government, any
court, administrative, regulatory or other governmental agency,
commission or authority or any nongovernmental self-regulatory
agency, commission or authority (a "Governmental Entity") is
required by or with respect to CAX or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by CAX
or the consummation by CAX of the transactions contemplated by this
Agreement, except for (1) the filing with the SEC of (A) a joint
proxy statement/prospectus relating to the CAX Stockholders Meeting
(as defined in Section 5.1(b)) and the AIC Stockholders Meeting (as
defined in Section 5.1(c)) (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement") and (B) such
reports under Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the transactions contemplated by
this Agreement; (2) any filings with Governmental Entities to
satisfy (A) the applicable requirements of the laws of states in
which CAX and its Subsidiaries are qualified or licensed to do
business or state securities or "blue sky" laws or (B) any filing
required by foreign Governmental Entities; (3) the filing of a
certificate of merger with the Secretary of State of the state of
Delaware; (4) such applications and filings as may be required by
the American Stock Exchange or the SEC in connection with the
delisting by CAX of the CAX Common Stock from the American Stock
Exchange; and (5) such consents, approvals, orders or
authorizations the failure of which to be made or obtained,
individually or in the aggregate, would not (x) have a Material
Adverse Effect on CAX or (y) materially impair the ability of CAX
to perform its obligations under this Agreement or materially delay
or prevent the consummation of the transactions contemplated
hereby.
(d) SEC Documents; Undisclosed Liabilities. Since
December 31, 1997, CAX has filed with the SEC all required reports,
schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) required
to be filed with the SEC (such documents being referred to herein
as the "CAX SEC Documents"). As of their respective dates, the CAX
SEC Documents complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder applicable to such CAX SEC
Documents, and no CAX SEC Document when 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. The financial statements of CAX included
in the CAX SEC Documents complied as to form, as of their
respective dates of filing with the SEC, 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 GAAP (as defined in Section 8.3) (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of CAX and its consolidated
Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal recurring
year-end audit adjustments). Except (i) as reflected in such
financial statements or in the notes thereto or (ii) for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, neither CAX nor any of its
Subsidiaries has any liabilities or obligations of any nature,
whether contingent or otherwise, which, individually or in the
aggregate, would have a Material Adverse Effect on CAX.
(e) Information Supplied. None of the information
supplied or to be supplied by CAX specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 becomes effective under the Securities Act of 1933, as
amended (the "Securities Act"), contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or (ii) the Proxy Statement will, at the date it is
first mailed to CAX's or AIC's stockholders or at the time of the
CAX Stockholders Meeting or the AIC Stockholders Meeting, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they are made, not misleading. The Proxy Statement will
comply as to form in all material respects with the requirements of
the Exchange Act and the rules and regulations thereunder, except
that no representation or warranty is made by CAX with respect to
statements made or incorporated by reference therein based on
information supplied by AIC specifically for inclusion or
incorporation by reference in the Proxy Statement.
(f) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby and except as permitted by Section
4.1(a), since June 30, 1999, CAX and its Subsidiaries have
conducted their business only in the ordinary course, and there has
not been (i) any Material Adverse Change, or any development which
may result in a Material Adverse Change, in CAX, including, but not
limited to, any Material Adverse Change arising from or relating to
fraudulent or unauthorized activity, (ii) any declaration, setting
aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to any of CAX's capital
stock, other than regular quarterly cash dividends on CAX Common
Stock and any dividends which may be required under the Code to
maintain CAX's status as a REIT (as defined in Section 3.2(g)),
(iii) any split, combination or reclassification of any of CAX's
capital stock or any issuance or the authorization of any issuance
of any other securities in respect of, in lieu of or in
substitution for shares of CAX's capital stock, except for
issuances of CAX Common Stock upon the exercise of CAX Stock
Options awarded prior to the date of this Agreement in accordance
with their present terms, (iv) (A) except pursuant to agreements in
effect on such date, any granting by CAX or any of its Subsidiaries
to any current or former director, officer or other employee of CAX
or its Subsidiaries of any CAX Stock Options or any material
increase in compensation, bonus or other benefits, (B) any granting
by CAX or any of its Subsidiaries to any such current or former
director, executive officer or employee of any increase in
severance or termination pay, or (C) any entry by CAX or any of its
Subsidiaries into, or any amendment of, any employment, deferred
compensation, consulting, severance, termination or indemnification
agreement with any such current or former director, executive
officer or employee, (v) except insofar as may have been required
by a change in GAAP or law or regulation, any material change in
accounting methods, principles or practices by CAX affecting its
assets, liabilities or business, (vi) any material tax election by
CAX or any of its Subsidiaries or any settlement or compromise of
any material income tax liability by CAX or any of its
Subsidiaries, or (vii) any new capital commitment or increase in
existing capital commitments, in excess of $1,000,000, individually
or in the aggregate.
(g) REIT Status. For its taxable year ended December
31, 1995 and at all times thereafter CAX has qualified to be
treated as a real estate investment trust within the meaning of
Sections 856-860 of the Code.
(h) Taxes. (i) Each of CAX and its Subsidiaries has
timely filed (or has had filed on its behalf) all material tax
returns and reports required to be filed by it and all such returns
and reports are true, complete and correct in all material
respects, or requests for extensions to file such returns or
reports have been timely filed, granted and have not expired. CAX
and each of its Subsidiaries has timely paid (or CAX has paid on
its behalf) all taxes (as defined herein) shown as due on such
returns and required to be paid prior to the date hereof and has
made provision in accordance with GAAP for all taxes owed or
accrued through the date hereof, and the most recent financial
statements contained in the CAX Filed SEC Documents reflect an
adequate reserve in accordance with GAAP for all taxes payable by
CAX and its Subsidiaries for all taxable periods and portions
thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes with respect
to which CAX or any of its Subsidiaries has received a notice in
writing have been proposed, asserted or assessed against CAX or any
of its Subsidiaries. Except as indicated in Schedule 3.2(k) of the
CAX Disclosure Schedule, CAX has not extended the statute of
limitations for the assessment or collection of taxes with respect
to any taxable year and no requests for such extension are pending.
No written claim has been made by a taxing authority in a
jurisdiction where CAX or a Subsidiary of CAX does not file tax
returns that CAX or such Subsidiary, as the case may be, is or may
be subject to taxation by that jurisdiction. There are no Liens on
any of the assets of CAX or its Subsidiaries that arose in
connection with any failure or alleged failure to pay any taxes.
For taxable years ending December 31, 1995 and thereafter, the
United States federal income tax returns of CAX and each CAX
Subsidiary have not been audited by any governmental authority
responsible for tax matters. Neither CAX nor any of its
Subsidiaries has received written notice of any audit of any tax
return filed by CAX or such Subsidiary, no such audit is currently
being conducted and to the knowledge of the senior management of
CAX neither CAX nor any of its Subsidiaries has been notified that
any such audit is contemplated or pending. Neither CAX nor any of
its Subsidiaries has entered into any closing agreement pursuant to
Section 7121 of the Code. For taxable years ending December 31,
1995 and thereafter, CAX has incurred no material liability for
taxes under Sections 857(b), 857(f), 860(c) or 4981 of the Code, or
IRS Notice 88-19, and neither CAX nor any CAX Subsidiary has
incurred any liability for taxes other than in the ordinary course
of business. Neither CAX nor any CAX Subsidiary holds any asset the
disposition of which would be subject to Section 1374 of the Code
as announced in IRS Notice 88-19. To CAX's knowledge, no event has
occurred, and no condition or circumstance exists, which could
reasonably be expected to result in any material tax described in
the preceding sentence being imposed upon CAX or any CAX
Subsidiary.
(iii) Neither CAX nor any of its Subsidiaries
has taken any action or knows of any fact, agreement, plan or other
circumstance that is likely to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the
Code.
(iv) As used in this Agreement, "taxes" shall
include all (x) Federal, state, local or foreign income, property,
sales, excise and other taxes or similar governmental charges,
including any interest, penalties or additions with respect
thereto, (y) liabilities for the payment of any amounts of the type
described in (x) as a result of being a member of an affiliated,
consolidated, combined or unitary group, and (z) liabilities for
the payment of any amounts as a result of being party to any tax
sharing agreement or as a result of any express or implied
obligation to indemnify any other person with respect to the
payment of any amounts of the type described in clause (x) or (y).
(i) Voting Requirements. The affirmative vote at the
CAX Stockholders Meeting of the holders of a majority of the
outstanding shares of CAX Common Stock (the "CAX Stockholder
Approval") is the only vote of the holders of any class or series
of CAX's capital stock necessary to approve the transactions
contemplated by this Agreement.
(j) Brokers. Other than Jefferies & Company, Inc., a
complete and accurate copy of the engagement letter of which has
been provided to AIC, no broker, investment banker, financial
advisor or other person is entitled to any broker's, financial
advisor's or other finder's fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CAX.
(k) Fairness Opinion. The Board of Directors of CAX
has received the opinion of Jefferies & Company, Inc., CAX's
financial advisor, to the effect that the Merger Consideration is
fair to the holders of the CAX Common Stock, other than AIC, from a
financial point of view.
(l) Absence of Changes in Benefit Plans. (i) CAX has
provided to AIC a true and complete list of (i) all severance and
employment agreements of CAX or its Subsidiaries with any current
or former employee, officer, agent, independent contractor, or
director, (ii) all severance programs, policies and practices of
each of CAX and each of its Subsidiaries, and (iii) all plans or
arrangements of CAX and each of its Subsidiaries relating to its
current or former employees, officers, agents, independent
contractors, or directors which contain change in control
provisions, including in all cases any and all amendments entered
on or prior to the date hereof, and (iv) all CAX Benefit Plans.
Since June 30, 1999, there has not been any adoption or amendment
in any respect by CAX or any of its Subsidiaries of any CAX Benefit
Plan, nor has there been any change in any actuarial or other
assumptions used to calculate funding obligations with respect to
any CAX Benefit Plan, or any change in the manner in which
contributions to any CAX Benefit Plan are made or the basis on
which such contributions are determined which, individually or in
the aggregate, would result in a material increase in CAX's or its
Subsidiaries' liabilities thereunder.
(ii) All of the CAX Stock Options have been
granted in compliance with the terms and provisions of the relevant
CAX Benefit Plan, any awards made thereunder and all applicable
law.
(iii) The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby will not, either alone or in combination with another event
undertaken by CAX or any of its Subsidiaries prior to the date
hereof, (A) entitle any current or former employee, agent,
independent contractor, director or officer of CAX or any trade or
business, whether or not incorporated, which together with CAX or
any of its wholly owned Subsidiaries, to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, (B) accelerate the time of payment or
vesting, or increase the amount of compensation due any such
employee, officer, agent or independent contractor, or (C)
constitute a "change in control" under any CAX Benefit Plan, and
CAX and its board of directors have taken all required actions to
effect the foregoing.
(m) Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions,
causes of action, environmental investigations or remediation
activities or governmental investigations of any nature seeking to
impose on CAX or any of its Subsidiaries, or that reasonably could
be expected to result in the imposition on CAX or any of its
Subsidiaries of, any liability or obligation arising under
applicable statutory or common law standards relating to pollution
or protection of the environment, human health or safety, or under
any local, state or federal environmental statute, regulation,
ordinance, decree, judgment or order relating to pollution,
protection of the environment or human health and safety including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (collectively,
the "Environmental Laws"), pending or, to the knowledge of CAX,
threatened, against CAX or any of its Subsidiaries, with such
exceptions as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on CAX.
Each of CAX and each of its Subsidiaries is, and each former
Subsidiary of CAX was, for so long as such Subsidiary was a
Subsidiary of CAX, in compliance with all Environmental Laws and
has or at such time had all permits required under Environmental
Laws, with such exceptions as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
on CAX and there is no basis for any proceeding, claim, action or
governmental investigation under any Environmental Law that would
impose any liability or obligation on CAX or its Subsidiaries based
on any failure to have, obtain or comply with such permits or
failure to comply with any Environmental Laws, with such exceptions
as would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on CAX. Neither CAX nor
any of its Subsidiaries is subject to any agreement (including any
indemnification agreement), order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory
agency or third party imposing any material liability or obligation
pursuant to or under any Environmental Law that would, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect on CAX.
(n) Certain Contracts. Except for (x) agreements
listed on Schedule 3.2(n) of the CAX Disclosure Schedule, (y)
contracts filed as exhibits to CAX Filed SEC Documents, and (z)
agreements entered into after the date hereof as permitted pursuant
to Section 4.1(a), neither CAX nor any of its Subsidiaries is party
to or bound by (i) any agreement relating to the incurring of
indebtedness (including sale and leaseback and capitalized lease
transactions and other similar financing transactions) providing
for payment or repayment in excess of $1,000,000, (ii) any
agreements relating to capital commitments in excess of $1,000,000
in the aggregate, (iii) any agreement involving annual payments in
excess of $1,000,000 with "change of control" or "event risk"
provisions relating to CAX, (iv) any "material contract" (as such
term is defined in Item 601(b) (l0) of Regulation S-K of the SEC),
or (v) any non-competition agreement or any other agreement or
obligation which purports to limit in any material respect the
manner in which, or the localities in which CAX and its
Subsidiaries, taken as a whole, may conduct business.
(o) Compliance with Applicable Laws; Litigation. (i)
CAX and its Subsidiaries hold all material permits, licenses,
variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are necessary for the lawful operation
of the businesses of CAX and its Subsidiaries, considered as a
whole (the "CAX Permits"), and are not in default under the CAX
Permits or under applicable statutes, laws, ordinances, rules and
regulations, except where the failure to hold such CAX Permits or
to comply with such statutes, laws, ordinances, rules or
regulations or the CAX Permits would not, individually or in the
aggregate, have a Material Adverse Effect on CAX.
(ii) As of the date of this Agreement, no
action, demand, requirement or investigation by any Governmental
Entity and no suit, action or proceeding by any person, in each
case with respect to CAX or any of its Subsidiaries or any of their
respective properties, is pending or, to the knowledge (as defined
in Section 8.3) of CAX, threatened, other than, in each case, those
the outcome of which individually or in the aggregate would not
have a Material Adverse Effect on CAX or materially impair the
ability of CAX to perform its obligations under this Agreement or
prevent the consummation of the transactions contemplated by this
Agreement.
(iii) Neither CAX nor any of its Subsidiaries is
subject to any outstanding order, injunction or decree or is a
party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by,
or is a recipient of any supervisory letter from or has adopted any
resolutions at the request of any Governmental Entity that
restricts the conduct of its business or that in any manner relates
to its management or its business except as would not individually
or in the aggregate have a Material Adverse Effect on CAX (each, a
"Regulatory Agreement"), and neither CAX nor any of its
Subsidiaries (A) has been advised since January l, 1997 by any
Governmental Entity that it is considering issuing or requesting
any such Regulatory Agreement or (B) has knowledge of any pending
or threatened regulatory investigation.
Section 3.3 Representations and Warranties of AIC. Subject
to Section 3.1 and except as disclosed in the AIC SEC Documents (as defined
in Section 3.3(d)) filed prior to the date of this Agreement (the "AIC
Filed SEC Documents") or as set forth on the AIC Disclosure Schedule, AIC
represents and warrants to CAX as follows:
(a) Organization, Standing and Corporate Power. (i)
Each of AIC and its Subsidiaries is a corporation or other legal
entity duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the
requisite corporate or other power, as the case may be, and
authority to carry on its business as now being conducted, except,
as to Subsidiaries, for those jurisdictions where the failure to be
duly organized, validly existing and in good standing individually
or in the aggregate would not have a Material Adverse Effect on
AIC. Each of AIC and its Subsidiaries is duly qualified or licensed
to do business and is in good standing in each jurisdiction in
which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be
so qualified or licensed or to be in good standing individually or
in the aggregate would not have a Material Adverse Effect on AIC.
(ii) AIC has made available to CAX prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as in effect on the date
of this Agreement.
(b) Capital Structure. The authorized capital stock
of AIC consists of 35,000,000 shares of AIC Common Stock and
15,000,000 shares of AIC Preferred Stock. At the close of business
on June 30, 1999: (i) 5,585,697 shares of AIC Common Stock were
issued and outstanding; (ii) 868,869 shares were reserved for
issuance pursuant to outstanding employee or director stock options
granted under the AIC's employee stock option plans (the "AIC Stock
Options"); (iii) 1,000,067 shares were reserved for issuance upon
the exchange of units of limited partnership (the "OP Units") in
Asset Investors Operating Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership"); and (iv) no shares of
AIC Preferred Stock had been designated or issued. All outstanding
shares of capital stock of AIC are, and all shares thereof which
may be issued without violating this Agreement (including, without
limitation, all shares of AIC Common Stock to be issued pursuant to
the Merger) will be, when issued, duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights.
Except as set forth in this Section 3.3(b), and except for changes
since June 30, 1999 resulting from the issuance of shares of AIC
Common Stock (x) upon the exercise of AIC Stock Options outstanding
as of June 30, 1999 or (y) upon the redemption of OP Units
outstanding as of June 30, 1999 (i) there are not issued, reserved
for issuance or outstanding (A) any shares of capital stock or
other voting securities of AIC, (B) any securities of AIC or any
AIC Subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of AIC, (C) any
warrants, calls, options or other rights to acquire from AIC or any
AIC Subsidiary, and any obligation of AIC or any AIC Subsidiary to
issue, any capital stock, voting securities or securities
convertible into or exchangeable or exercisable for capital stock
or voting securities of AIC or any AIC Subsidiary, and (ii) there
are no outstanding obligations of AIC or any AIC Subsidiary to
repurchase, redeem or otherwise acquire any such securities or to
issue, deliver or sell, or cause to be issued, delivered or sold,
any such securities. There are no outstanding (A) securities of AIC
or any AIC Subsidiary convertible into or exchangeable or
exercisable for shares of capital stock or other voting securities
in any AIC Subsidiary, (B) warrants, calls, options or other rights
to acquire from AIC or any AIC Subsidiary, and any obligation of
AIC or any AIC Subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable or exercisable for any capital
stock, voting securities or ownership interests in, any AIC
Subsidiary or (C) obligations of AIC or any AIC Subsidiary to
repurchase, redeem or otherwise acquire any such outstanding
securities of AIC Subsidiaries or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities. Other
than as set forth in the certificate of incorporation of AIC and
the Agreement of Limited Partnership of the Operating Partnership,
neither AIC nor any AIC Subsidiary is a party to any agreement
restricting the transfer of, relating to the voting of or granting
any preemptive or, except as provided by the terms of the AIC Stock
Options, antidilutive rights with respect to, any securities of the
type referred to in the two preceding sentences.
(c) Authority; Noncontravention. AIC has all
requisite corporate power and authority to enter into this
Agreement and, subject to the receipt of the AIC Stockholder
Approval (as defined in Section 3.3(i)), to consummate the
transactions contemplated by this Agreement. The execution and
delivery of this Agreement by AIC and the consummation by AIC of
the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of AIC,
subject to the receipt of the AIC Stockholder Approval. This
Agreement has been duly executed and delivered by AIC and, assuming
the due authorization, execution and delivery by CAX, constitutes
the legal, valid and binding obligation of AIC, enforceable against
AIC in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, reorganization, insolvency and
similar laws affecting creditors' rights generally and by general
principles of equity (whether considered at law or in equity). The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement and
compliance with the provisions of this Agreement will not, conflict
with, or result in any violation of, or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss
of a benefit under, or result in the creation of any Lien upon any
of the properties or assets of AIC or any of its Subsidiaries
under, (i) the certificate of incorporation or by-laws of AIC or
the comparable organizational or governing documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement to which AIC or any
of its Subsidiaries is a party or any other instrument, permit,
concession, franchise, license or similar authorization applicable
to AIC or any of its Subsidiaries or their respective properties or
assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to
AIC or any of its Subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that
individually or in the aggregate would not (x) have a Material
Adverse Effect on AIC or (y) materially impair the ability of AIC
to perform its obligations under this Agreement or materially delay
or prevent consummation of any of the transactions contemplated
hereby. No consent, approval, order or authorization of, action by,
or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to AIC or any of
its Subsidiaries in connection with the execution and delivery of
this Agreement by AIC or the consummation by AIC of the
transactions contemplated by this Agreement, except for (l) the
filing with the SEC of (A) the Proxy Statement, (B) a registration
statement on Form S-4 to be filed with the SEC in connection with
the issuance of AIC Common Stock in the Merger, and (C) such
reports under Section 13(a) or 15(d) of the Exchange Act as may be
required in connection with this Agreement and the transactions
contemplated by this Agreement; (2) the filing of the AIC
Certificate of Merger with the Secretary of State of the State of
Delaware; (3) any filings with Governmental Entities to satisfy (A)
the applicable requirements of the laws of states in which AIC and
its Subsidiaries are qualified or licensed to do business or state
securities or "blue sky" laws or (B) any filings required by
foreign governmental entities; (4) such applications and filings as
may be required by the New York Stock Exchange in connection with
listing the shares of AIC Common Stock to be issued in the Merger;
and (5) such consents, approvals, orders or authorizations the
failure of which to be made or obtained, individually or in the
aggregate, would not (x) have a Material Adverse Effect on AIC or
(y) materially impair the ability of AIC to perform its obligations
under this Agreement or materially delay or prevent the
consummation of any of the transactions contemplated hereby.
(d) SEC Documents; Undisclosed Liabilities. Since
December 31, 1997, AIC has filed with the SEC all reports,
schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) required
to be filed with the SEC (the "AIC SEC Documents"). As of their
respective dates, the AIC SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to
such AIC SEC Documents, and none of the AIC SEC Documents when
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. The
financial statements of AIC included in the AIC SEC Documents
complied as to form, as of their respective dates of filing with
the SEC, 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 GAAP
(except, in the case of unaudited statements, as permitted by Form
l0-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and
fairly present the consolidated financial position of AIC and its
consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal recurring year-end audit adjustments). Except (i) as
reflected in such financial statements or in the notes thereto or
(ii) for liabilities incurred in connection with this Agreement or
the transactions contemplated hereby, neither AIC nor any of its
Subsidiaries has any liabilities or obligations of any nature,
whether contingent or otherwise, which, individually or in the
aggregate, would have a Material Adverse Effect on AIC.
(e) Information Supplied. None of the information
supplied or to be supplied by AIC specifically for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) the Proxy Statement
will, at the date it is first mailed to CAX's or AIC's stockholders
or at the time of the CAX Stockholders Meeting or the AIC
Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not
misleading. The Form S-4 and the Proxy Statement will comply as to
form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by
AIC with respect to statements made or incorporated by reference
therein based on information supplied by CAX specifically for
inclusion or incorporation by reference in the Form S-4 or the
Proxy Statement.
(f) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, since December 31, 1997, AIC and
its Subsidiaries have conducted their business only in the ordinary
course, and there has not been (i) any Material Adverse Change, or
any development which may result in a Material Adverse Change, in
AIC, including, but not limited to, any Material Adverse Change
arising from or relating to fraudulent or unauthorized activity,
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with
respect to any of AIC's capital stock, other than regular quarterly
cash dividends on the AIC Common Stock and any dividends which may
be required under the Code to maintain AIC's status as a REIT,
(iii) any split, combination or reclassification of any of AIC's
capital stock, or any issuance of the authorization of any issuance
of any other securities in respect of, in lieu of or in
substitution for shares of AIC's capital stock, except for
issuances of AIC Common Stock upon (x) the exercise of AIC Stock
Options awarded prior to the date of this Agreement or (y) the
redemption of OP Units outstanding prior to the date of this
Agreement, in either such case in accordance with their present
terms, (iv) (A) any material increase in compensation, bonus or
other benefits of any officer, director or other employee of AIC,
(B) any granting by AIC or any of its Subsidiaries to any such
current or former director, executive officer or employee of any
increase in severance or termination pay, or (C) any entry by AIC
or any of its Subsidiaries into, or any amendment of, any
employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or
former director, executive officer or employee, (v) except insofar
as may have been required by a change in GAAP or law or regulation,
any material change in accounting methods, principles or practices
by AIC affecting its assets, liabilities or business (vi) any
material tax election by AIC or any of its Subsidiaries or any
settlement or compromise of any material income tax liability by
AIC or any of its Subsidiaries or (vii) any new capital commitment
or increase in existing capital commitments, in excess of
$1,000,000 individually or in the aggregate.
(g) REIT Status. For its taxable year ended December
31, 1995 and at all times thereafter, AIC has qualified to be
treated as a real estate investment trust within the
meaning of Sections 856-860 of the Code.
(h) Taxes. (i) Each of AIC and its Subsidiaries has
timely filed (or has had filed on its behalf) all material tax
returns and reports required to be filed by it and all such returns
and reports are true, complete and correct in all material
respects, or requests for extensions to file such returns or
reports have been timely filed, granted and have not expired. AIC
and each of its Subsidiaries has paid (or AIC has paid on its
behalf) all taxes shown as due on such returns and required to be
paid prior to the date hereof and has made provision in accordance
with GAAP for all taxes owed or accrued through the date hereof,
and the most recent financial statements contained in the AIC Filed
SEC Documents reflect an adequate reserve in accordance with GAAP
for all taxes payable by AIC and its Subsidiaries for all taxable
periods and portions thereof accrued through the date of such
financial statements.
(ii) No deficiencies for any taxes with respect
to which AIC or any of its Subsidiaries has received a notice in
writing have been proposed, asserted or assessed against AIC or any
of its Subsidiaries. Except as indicated in Schedule 3.3(j) of the
AIC Disclosure Schedule, AIC has not extended the statute of
limitations for the assessment or collection of taxes with respect
to any taxable year and no requests for such extension are pending.
No written claim has been made by a taxing authority in a
jurisdiction where AIC or a Subsidiary of AIC does not file tax
returns that AIC or such Subsidiary, as the case may be, is or may
be subject to taxation by that jurisdiction. There are no Liens on
any of the assets of AIC or its Subsidiaries that arose in
connection with any failure or alleged failure to pay any taxes.
For taxable years ending December 31, 1995 and thereafter, the
United States federal income tax returns of AIC and each AIC
Subsidiary have not been audited by any governmental authority
responsible for tax matters. Neither AIC nor any of its
Subsidiaries has received written notice of any audit of any tax
return filed by AIC or such Subsidiary, no such audit is currently
being conducted and to the knowledge of the senior management of
AIC neither AIC nor any of its Subsidiaries has been notified that
any such audit is contemplated or pending. Except as previously
disclosed to CAX or its counsel, neither AIC nor any of its
Subsidiaries has entered into any closing agreement pursuant to
Section 7121 of the Code. For taxable years ending December 31,
1995 and thereafter, AIC has incurred no material liability for
taxes under Sections 857(b), 857(f), 860(c) or 4981 of the Code, or
IRS Notice 88-19, and neither AIC nor any AIC Subsidiary has
incurred any liability for taxes other than in the ordinary course
of business. Neither AIC nor any AIC Subsidiary holds any asset the
disposition of which would be subject to Section 1374 of the Code
as announced in IRS Notice 88-19. To AIC's knowledge, no event has
occurred, and no condition or circumstance exists, which could
reasonably be expected to result in any material tax described in
the preceding sentence being imposed upon AIC or any AIC
Subsidiary.
(iii) Neither AIC nor any of its Subsidiaries
has taken any action or knows of any fact, agreement, plan or other
circumstance that is likely to prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the
Code.
(i) Voting Requirements. The affirmative vote at the
AIC Stockholders Meeting (the "AIC Stockholder Approval") of the
holders of a majority of the outstanding shares of AIC Common Stock
is the only vote of the holders of any class or series of AIC's
capital stock necessary to approve the transactions contemplated by
this Agreement.
(j) Brokers. No broker, investment banker, financial
advisor or other person is entitled to any broker's, financial
advisor's or other finder's fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of AIC.
(k) AIC Benefit Plans. (i) AIC has provided to CAX a
true and complete list of (i) all severance and employment
agreements of AIC or its Subsidiaries with any current or former
employee, officer, agent, independent contractor, or director, (ii)
all severance programs, policies and practices of each of AIC and
each of its Subsidiaries, and (iii) all plans or arrangements of
AIC and each of its Subsidiaries relating to its current or former
employees, officers, agents, independent contractors, or directors
which contain change in control provisions, including in all cases
any and all amendments entered on or prior to the date hereof, and
(iv) all AIC Benefit Plans.
(ii) No AIC Stock Options will become
exercisable solely as a result of the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby.
(iii) The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby will not, either alone or in combination with another event
undertaken by AIC or any of its Subsidiaries prior to the date
hereof, (A) entitle any current or former employee, agent,
independent contractor, director or officer of AIC or any trade or
business, whether or not incorporated, which together with AIC or
any of its wholly owned Subsidiaries, to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, (B) accelerate the time of payment or
vesting, or increase the amount of compensation due any such
employee, officer, agent or independent contractor, or (C)
constitute a "change in control" under any AIC Benefit Plan, and
AIC and its board of directors have taken all required actions to
effect the foregoing.
(l) Environmental Liability. There are no legal,
administrative, arbitral or other proceedings, claims, actions,
causes of action, environmental investigations or remediation
activities or governmental investigations of any nature seeking to
impose on AIC or any of its Subsidiaries, or that reasonably could
be expected to result in the imposition on AIC or any of its
Subsidiaries of, any liability or obligation arising under any
Environmental Laws, pending or, to the knowledge of AIC,
threatened, against AIC or any of its Subsidiaries, with such
exceptions as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on AIC.
Each of AIC and each of its Subsidiaries is, and each former
Subsidiary of AIC was, for so long as such Subsidiary was a
Subsidiary of AIC, in compliance with all Environmental Laws and
has or at such time had all permits required under Environmental
Laws, with such exceptions as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
on AIC and there is no basis for any proceeding, claim, action or
governmental investigation under any Environmental Law that would
impose any liability or obligation on AIC or its Subsidiaries based
on any failure to have, obtain or comply with such permits or
failure to comply with any Environmental Laws, with such exceptions
as would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect on AIC. Neither AIC nor
any of its Subsidiaries is subject to any agreement (including any
indemnification agreement), order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory
agency or third party imposing any material liability or
obligation pursuant to or under any Environmental Law that would,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on AIC.
(m) Certain Contracts. Except for (x) agreements
listed on Schedule 3.3(m) of the AIC Disclosure Schedule, (y)
contracts and agreements filed as exhibits to CAX Filed SEC
Documents, and (z) agreements entered into after the date hereof
which are not prohibited by Section 4.1(b), neither AIC nor any of
its Subsidiaries is a party to or bound by (i) any agreement
relating to the incurring of indebtedness (including sale and
leaseback and capitalized lease transactions and other similar
financing transactions) providing for payment or repayment in
excess of $1,000,000, (ii) any agreements relating to capital
commitments in excess of $1,000,000 in the aggregate, (iii) any
agreement involving annual payments in excess of $1,000,000 with
"change of control" or "event risk" provisions relating to AIC,
(iv) any "material contract" (as such term is defined in Item
601(b) (l0) of Regulation S-K of the SEC), or (v) any
non-competition agreement or any other agreement or obligation
which purports to limit in any material respect the manner in
which, or the localities in which AIC and its Subsidiaries, taken
as a whole, may conduct business.
(n) Compliance with Applicable Laws; Litigation. (i)
AIC and its Subsidiaries hold all material permits, licenses,
variances, exemptions, orders, registrations and approvals of all
Governmental Entities which are necessary for the lawful operation
of the businesses of AIC and its Subsidiaries (the "AIC Permits"),
and are not in default under the AIC Permits or under applicable
statutes, laws, ordinances, rules and regulations, except where the
failure to hold such AIC Permits or to comply with such statutes,
laws, ordinances, rules or regulations or AIC Permits would not,
individually or in the aggregate, have a Material Adverse Effect on
AIC.
(ii) As of the date of this Agreement, no
action, demand, requirement or investigation by any Governmental
Entity and no suit, action or proceeding by any person, in each
case with respect to AIC or any of its Subsidiaries or any of their
respective properties, is pending or, to the knowledge of AIC,
threatened, other than, in each case, those the outcome of which
individually or in the aggregate would not have a Material Adverse
Effect on AIC or materially impair the ability of AIC to perform
its obligations under this Agreement or prevent the consummation of
the transactions contemplated by this Agreement.
(iii)Neither AIC nor any of its Subsidiaries is
subject to any Regulatory Agreement, and neither AIC nor any of its
Subsidiaries (A) has been advised since January l, 1997 by any
Governmental Entity that it is considering issuing or requesting
any such Regulatory Agreement or (B) has knowledge of any pending
or threatened regulatory investigation.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 (a) Conduct of Business by CAX. Except as set
forth in the CAX Disclosure Schedule or the CAX Filed SEC Documents, as
otherwise expressly contemplated by this Agreement or as consented to by
AIC in writing during the period from the date of this Agreement to the
Effective Time, CAX shall, and shall cause its Subsidiaries to, carry on
their respective businesses in the ordinary course consistent with past
practice and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use
reasonable efforts to preserve intact their current business organizations
and CAX's status as a REIT, use reasonable efforts to keep available the
services of their current officers and other employees and use reasonable
efforts to preserve their relationships with those persons having business
dealings with them. Without limiting the generality of the foregoing (but
subject to the above exceptions), during the period from the date of this
Agreement to the Effective Time, unless consented to by AIC in writing, CAX
shall not, and shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions by a
direct or indirect wholly owned Subsidiary of CAX to its parent, or
regularly scheduled dividends by a Subsidiary that is partially
owned by CAX or any of its Subsidiaries, provided that CAX or any
such Subsidiary receives or is to receive its proportionate share
thereof, (x) declare, set aside or pay any dividends on, make any
other distributions in respect of, or enter into any agreement with
respect to the voting of, any of its capital stock (except for
regular quarterly cash dividends on CAX Common Stock not
significantly in excess of the dividends declared in the first and
second quarters of 1999 and any dividends which may be required
under the Code to maintain CAX's status as a REIT ), (y) split,
combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, except
for issuances of CAX Common Stock upon the exercise of CAX Stock
Options that are outstanding as of the date of this Agreement in
accordance with their present terms, or (z) other than in the
ordinary course of business, purchase, redeem or otherwise acquire
any shares of capital stock of CAX or any of its Subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities; provided, however,
that CAX shall be permitted to issue CAX Stock Options under CAX
Benefit Plans, exercisable for up to 100,000 shares of CAX Common
Stock with exercise prices equal to or greater than the market
price for CAX Common Stock on the date of issuance;
(ii) other than in the ordinary course of
business, issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other
voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of
CAX Common Stock upon the exercise of CAX Stock Options that are
outstanding as of the date of this Agreement or issued in
accordance with this Agreement);
(iii) amend its certificate of incorporation,
by-laws or other comparable organizational or governing documents;
and
(iv) authorize, or commit or agree to take, any
of the foregoing actions; provided, that the limitations set forth
in this Section 4.1(a) shall not apply to any transaction between
CAX and any wholly owned Subsidiary or between any wholly owned
Subsidiaries of CAX.
(b) Conduct of Business of AIC. Except as set forth
in the AIC Disclosure Schedule or the AIC Filed SEC Documents, as
otherwise expressly contemplated by this Agreement or as consented
to by CAX in writing during the period from the date of this
Agreement to the Effective Time, AIC shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the
ordinary course consistent with past practice and in compliance in
all material respects with all applicable laws and regulations and,
to the extent consistent therewith, use reasonable efforts to
preserve intact their current business organizations and AIC's
status as a REIT, use reasonable efforts to keep available the
services of their current officers and other employees and use
reasonable efforts to preserve their relationships with those
persons having business dealings with them. Without limiting the
generality of the foregoing (but subject to the above exceptions),
during the period from the date of this Agreement to the Effective
Time, unless consented to by CAX in writing, AIC shall not, and
shall not permit any of its Subsidiaries to:
(i) other than dividends and distributions by a
direct or indirect wholly owned Subsidiary of AIC to its parent, or
regularly scheduled dividends by a Subsidiary that is partially
owned by AIC or any of its Subsidiaries, provided that AIC or any
such Subsidiary receives or is to receive its proportionate share
thereof, (x) declare, set aside or pay any dividends on, make any
other distributions in respect of, or enter into any agreement with
respect to the voting of, any of its capital stock (except for
regular quarterly cash dividends on AIC Common Stock not
significantly in excess of the dividends declared in the first and
second quarters of 1999 and any dividends which may be required
under the Code to maintain AIC's status as a REIT), (y) split,
combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, except
for issuances of AIC Common Stock upon the exercise of AIC Stock
Options or the exchange of OP Units that are, in each case,
outstanding as of the date of this Agreement in accordance with
their present terms, or (z) other than in the ordinary course of
business, purchase, redeem or otherwise acquire any shares of
capital stock of AIC or any of its Subsidiaries or any other
securities thereof or any rights, warrants or options to acquire
any such shares or other securities; provided, however, that AIC
shall be permitted to issue AIC Stock Options under AIC Benefit
Plans, exercisable for up to 100,000 shares of AIC Common Stock
with exercise prices equal to or greater than the market price for
AIC Common Stock on the date of issuance;
(ii) other than in the ordinary course of
business, issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien any shares of its capital stock, any other
voting securities or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the issuance of
AIC Common Stock (x) upon the exercise of AIC Stock Options
outstanding as of the date of this Agreement or issued in
accordance with this Agreement or (y) upon the redemption of OP
Units that are outstanding as of the date of this Agreement, in
either such case in accordance with their present terms);
(iii) amend its certificate of incorporation,
by-laws or other comparable organizational or governing documents;
(iv) other than in the ordinary course of
business consistent with past practice, acquire any business
(whether by merger, consolidation, purchase of assets or otherwise)
or acquire any equity interest in any person not an affiliate
(whether through a purchase of stock, establishment of a joint
venture or otherwise);
(v) other than in the ordinary course of
business consistent with past practice, sell, lease, joint venture,
license, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets that are
material in relation to AIC and its Subsidiaries, taken as a whole
(including securitizations), other than the sale of inventory in
the ordinary course of business and except in connection with
borrowings under existing credit facilities or lines of credit in
accordance with the terms of such facilities or lines as of the
date hereof;
(vi) incur any indebtedness for borrowed money
or issue any debt securities or assume, guarantee or endorse, or
otherwise become responsible for the obligations of any person, or
make any loans, advances or capital contributions to, any person
other than its wholly owned Subsidiaries, except in the ordinary
course of business consistent with past practice or except as
attributable to the execution of this Agreement and the
transactions contemplated hereby;
(vii) change its methods of accounting (or
underlying assumptions) in effect at June 30, 1999, except as
required by changes in GAAP or law or regulation or as discussed in
the AIC Filed SEC Documents, or change any of its methods of
reporting income and deductions for Federal income tax purposes
from those employed in the preparation of the Federal income tax
returns of AIC for the taxable years ending December 31, 1998,
except as required by changes in law or regulation;
(viii) make any material tax election
inconsistent with past practice or settle or compromise any
material Federal, state, local or foreign tax liability;
(ix) create, renew, amend, terminate or cancel
or take any other action that could reasonably be expected to
result in the creation, renewal, amendment, termination or
cancellation of any material contract of AIC in a manner which
would reasonably be expected to be materially adverse to AIC;
(x) enter into any new capital commitments or
increase any existing capital commitments in an aggregate amount in
excess of $1,000,000;
(xi) except (A) pursuant to agreements or
arrangements in effect on the date hereof which have been disclosed
in the AIC Disclosure Schedule, (B) for dividends paid in
accordance with Section 4.1(b)(i) or (C) other than transactions
with "preferred stock" subsidiaries of AIC which are in the
ordinary course of business consistent with past practice and for
the primary benefit of AIC, pay, loan or advance any amount to, or
sell, transfer or lease any properties or assets (real, personal or
mixed, tangible or intangible) to, or purchase any properties or
assets, or enter into any agreement or arrangement with, any of its
officers or directors or any affiliate or the immediate family
members or associates of any of its officers or directors, other
than payment of compensation at current salary, incentive
compensation and bonuses and other than properly authorized
business expenses in the ordinary course of business, in each case
consistent with past practice;
(xii) other than as set forth in clause (i)
hereto (A) grant AIC Stock Options, (B) grant to any current or
former director, executive officer or other key employee of AIC or
its Subsidiaries any increase in compensation, bonus or other
benefits (other than increases in base salary in the ordinary
course of business consistent with past practice or arising due to
a promotion or other change in status and consistent with generally
applicable compensation practices), (C) grant to any such current
or former director, executive officer or other employee any
increase in severance or termination pay, (D) amend or adopt any
employment, deferred compensation, consulting, severance,
termination or indemnification agreement with any such current or
former director, executive officer or employee, or (E) amend, adopt
or terminate any AIC Benefit Plan, except as may be required to
retain qualification of any such plan under Section 401(a) of the
Code; or
(xiii) authorize, or commit or agree to take,
any of the foregoing actions; provided, that the limitations set
forth in this Section 4.1(b) shall not apply to any transaction
between AIC and any wholly owned Subsidiary or between any wholly
owned Subsidiaries of AIC.
(c) Other Actions. Except as required by law or as
permitted by this Agreement, CAX and AIC shall not, and shall not
permit any of their respective Subsidiaries to, voluntarily take
any action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of such
party set forth in this Agreement that are qualified as to
materiality becoming untrue at the Effective Time, (ii) any of such
representations and warranties that are not so qualified becoming
untrue in any material respect at the Effective Time, or (iii) any
of the conditions to the Merger set forth in Article VI not being
satisfied.
(d) Advice of Changes. CAX and AIC shall promptly
advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue
or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, (iii) any actual or, to the
knowledge of CAX or AIC, threatened disputes involving an amount in
excess of $1,000,000 with any customer, supplier or service
provider, and (iv) any change or event having, or which, insofar as
can reasonably be foreseen, could reasonably be expected to have, a
Material Adverse Effect on such party or on the truth of their
respective representations and warranties or the ability of the
conditions set forth in Article VI to be satisfied; provided,
however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the
obligations of the parties under this Agreement; and provided,
further, that no such notice shall be deemed an admission by the
disclosing party that such item represents a material exception or
fact, event or circumstance or that such item constitutes or is
reasonably likely to result in a Material Adverse Effect or
Material Adverse Change.
Section 4.2 No Solicitation. (a) CAX and AIC shall not, nor
shall they permit any of their Subsidiaries to, nor shall they authorize or
permit any of their directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other representative
retained by either of them or any of their, respective, Subsidiaries to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing nonpublic information), or take
any other action designed to facilitate, any inquiries or the making of any
proposal which constitutes a Takeover Proposal (as defined below) or (ii)
participate in any substantive discussions or negotiations regarding any
Takeover Proposal; provided, however, that if and to the extent that, at
any time prior to the time of the adoption of this Agreement by a party's
stockholders, the Board of Directors of such party determines in good
faith, after consultation with outside counsel, that its failure to do so
could reasonably be expected to result in a breach of its fiduciary duties
to its stockholders under applicable law, such party may, in response to
any Takeover Proposal which was not solicited by it and which did not
otherwise result from a breach of this Section 4.2(a), (x) furnish
information with respect to such party and its Subsidiaries to any person
making a Takeover Proposal pursuant to a customary confidentiality
agreement (as determined by such party based on the advice of its outside
counsel) and (y) participate in discussions or negotiations regarding such
Takeover Proposal. For purposes of this Agreement, "Takeover Proposal"
means with respect to the party that is the subject of such Takeover
Proposal any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase of a business that constitutes
10% or more of the net revenues, net income or assets of such party and its
Subsidiaries, taken as a whole, or 10% or more of any class of equity
securities of such party, any tender offer or exchange offer that if
consummated would result in any person beneficially owning 10% or more of
any class of any equity securities of such party, or any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving such party (or any of such
party whose business constitutes 10% or more of the net revenues, net
income or assets of such party and its Subsidiaries, taken as a whole),
other than the transactions contemplated by this Agreement or listed on
Schedule 4.1(b) of the AIC Disclosure Schedule.
(b) Except as expressly permitted by this Section
4.2, neither of the Boards of Directors of CAX or AIC nor any
committees thereof shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to the other
party, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or
recommend, or propose publicly to approve or recommend, any
Takeover Proposal, or (iii) cause such party to enter into any
letter of intent, agreement in principle, acquisition agreement or
other agreement (each, an "Acquisition Agreement") related to any
Takeover Proposal. Notwithstanding the foregoing, in the event that
prior to the adoption of this Agreement by CAX's or AIC's
stockholders, as the case may be, the Board of Directors of either
such party determines in good faith, after consultation with
outside counsel, that, in light of a Superior Proposal (as defined
below) its failure to do so could reasonably be expected to result
in a breach of fiduciary duties to its stockholders under
applicable law, may terminate this Agreement solely in order to
concurrently enter into an Acquisition Agreement with respect to
any Superior Proposal. Such termination shall not take place prior
to the third business day following the receipt by the
non-terminating party of written notice advising such party that
the Board of Directors of the terminating party is prepared to
accept a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person
making such Superior Proposal, all of which information will be
kept confidential by the non-terminating party. If, prior to
entering into an Acquisition Agreement with respect to any Superior
Proposal, the Board of Directors of the terminating party receives
a counter offer by the non-terminating party, it shall, in good
faith, consider such counter offer in light of the terms of the
Superior Proposal. For purposes of this Agreement, a "Superior
Proposal," in the case of AIC, means any proposal with respect to a
transaction which the AIC Board of Directors determines in its good
faith judgment, to be more favorable to AIC's stockholders than the
Merger, and, in the case of CAX, means any proposal with respect to
a transaction which the CAX Board of Directors determines in its
good faith judgment to be more favorable to CAX's stockholders than
the Merger without considering any benefit to be received by AIC as
a result of the Merger.
(c) In addition to the obligations set forth in
paragraphs (a) and (b) of this Section 4.2, CAX and AIC shall
promptly advise each other orally and in writing of any request for
information by a party that indicates it may make a Takeover
Proposal or of any Takeover Proposal, the material terms and
conditions of such request or Takeover Proposal and the identity of
the person making such request or Takeover Proposal. CAX and AIC
will keep each other reasonably informed of the status and details
(including amendments or proposed amendments) of any such request
or Takeover Proposal.
(d) Nothing contained in this Section 4.2 shall
prohibit CAX or AIC from taking and disclosing to its stockholders
a position contemplated by Rule l4e-2(a) promulgated under the
Exchange Act if, in the good faith judgment of the Board of
Directors of either CAX or AIC, after consultation with counsel,
failure to so disclose could reasonably be expected to result in a
breach of its fiduciary duties to its stockholders under applicable
law; provided, however, that, neither CAX, AIC nor their respective
Boards of Directors nor any committees thereof shall, except in
connection with a termination permitted by Section 4.2(b), withdraw
or modify, or propose publicly to withdraw or modify, its position
with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, a Takeover
Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of the Form S-4 and the Proxy
Statement; Stockholders Meetings. (a) As soon as practicable following the
date of this Agreement, CAX and AIC shall prepare and file with the SEC the
Proxy Statement and AIC shall prepare and file with the SEC the Form S-4,
in which the Proxy Statement will be included as a prospectus. Each of CAX
and AIC shall use reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as practicable after such
filing, including without limitation, the delivery of customary
representation letters in form and substance reasonably satisfactory to
counsel with respect to the issuance of any requisite tax opinions. CAX and
AIC shall use reasonable best efforts to obtain opinions of tax counsel
necessary for the Form S-4 to be declared effective, including, to the
extent applicable, opinions as to the qualification of each of AIC and CAX
as a REIT. CAX and AIC will use all their respective reasonable efforts to
cause the Proxy Statement to be mailed to the holders of CAX Common Stock
and the holders of AIC Common Stock as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. AIC shall also
take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified or to file a general consent to service
of process) required to be taken under any applicable state securities laws
in connection with the issuance of the AIC Common Stock in the Merger and
AIC shall furnish all information concerning the holders of AIC Common
Stock as may be reasonably requested in connection with any such action. No
filing of, or amendment or supplement to, the Form S-4 or the Proxy
Statement will be made by CAX or AIC without providing the other with the
opportunity to review and comment thereon. AIC will advise CAX, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the AIC Common Stock
issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for amendment of the Proxy
Statement or the Form S-4 or comments thereon and responses thereto or
requests by the SEC for additional information. If at any time prior to the
Effective Time any information relating to CAX or AIC, or any of their
respective affiliates, officers or directors, should be discovered by CAX
or AIC which should be set forth in an amendment or supplement to any of
the Form S-4 or the Proxy Statement, so that any of such documents would
not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information
shall be promptly filed with the SEC and, to the extent required by law,
disseminated to the stockholders of CAX and AIC.
(b) CAX shall, as promptly as reasonably practicable
after the date of this Agreement duly call, give notice of, convene
and hold a meeting of its stockholders (the "CAX Stockholders
Meeting") in accordance with the DGCL for the purpose of obtaining
CAX Stockholder Approval and, subject to its rights under Section
4.2(b), shall, through its Board of Directors, recommend to its
stockholders the approval and adoption of this Agreement and the
Merger.
(c) AIC shall, as promptly as reasonably practicable
after the date of this Agreement give notice of, convene and hold a
meeting of its stockholders (the "AIC Stockholders Meeting") in
accordance with the DGCL for the purpose of obtaining the AIC
Stockholder Approval and shall, through its Board of Directors,
recommend to its stockholders the approval and adoption of this
Agreement and the Merger.
Section 5.2 Reasonable Best Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its reasonable best efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable
to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and
the making of all necessary registrations and filings and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid
an action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other
Governmental Entity or any Restraint (as defined in Section 6.1(b)) vacated
or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and
to fully carry out the purposes of, this Agreement. Nothing set forth in
this Section 5.2(a) will limit or affect actions permitted to be taken
pursuant to Section 4.2.
(b) In connection with and without limiting the
foregoing, CAX and AIC shall use reasonable best efforts (i) to
take all action necessary to ensure that no state takeover statute
or similar statute or regulation (other than Section 251, et seq.
of the DGCL) is or becomes applicable to this Agreement or the
Merger or any of the other transactions contemplated hereby or
thereby and (ii) if any state takeover statute or similar statute
or regulation becomes applicable to this Agreement or the Merger or
any other transaction contemplated hereby or thereby, to take all
action necessary to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as
promptly as practicable on the terms contemplated by this Agreement
and otherwise to minimize the effect of such statute or regulation
on the Merger and the other transactions contemplated by this
Agreement.
(c) Each of CAX and AIC shall cooperate with each
other in obtaining the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, dated as of the Effective Time, to the effect that the
Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code. In connection therewith, each of CAX
and AIC shall deliver to such counsel customary representation
letters in form and substance reasonably satisfactory to such
counsel (the representation letters referred to in this sentence
are collectively referred to as the "Tax Certificates").
Section 5.3 Stock Options and Warrants. At the Effective
Time, each outstanding CAX Stock Option, which has not been exercised,
shall remain outstanding and shall be deemed to constitute an option or
right to acquire or exchange, as the case may be, on the same terms and
conditions as were applicable under such CAX Stock Option, .4075 shares of
AIC Common Stock and cash in lieu of any fractional shares in accordance
with Section 2.3(e), subject to such further adjustments as may be
necessary or appropriate to preserve the status of any such options as
incentive stock options under Section 422 of the Code.
Section 5.4 Indemnification, Exculpation and Insurance. (a)
All rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor
of the current or former directors, officers, employees or agents of CAX
and its Subsidiaries as provided in their respective certificates of
incorporation or by-laws (or comparable organizational or governing) and
any indemnification agreements or arrangements of CAX the existence of
which does not cause a breach of this Agreement shall survive the Merger
and shall continue in full force and effect, without amendment, after the
Effective Time and all obligation of CAX and/or its Subsidiaries shall,
from and after the Effective Time be assumed by and become obligations of
the Surviving Corporation; provided, however, that all rights to
indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim. AIC agrees from
and after the Effective Time, to pay any expenses of any indemnified person
under this Section 5.4 in advance of the final disposition of any action,
proceeding or claim relating to any such act or omission to the fullest
extent permitted under the DGCL upon receipt from the applicable
indemnified person to whom advances are to be advanced of any undertaking
to repay such advances required under the DGCL. AIC shall, from and after
the Effective Time, cooperate in the defense of any such matter.
(b) From and after the Effective Time, AIC shall, to
the fullest extent permitted by applicable law, indemnify, defend
and hold harmless each person who is now, or has been at any time
prior to the date hereof, or who becomes prior to the Effective
Time, a director, officer, employee or agent of CAX or of any
Subsidiary of CAX or of any predecessor to CAX or any of its
Subsidiaries (each an "Indemnified Party" and collectively, the
"Indemnified Parties)" against all expenses (including reasonable
attorney's fees and expenses), judgments, claims, damages or
liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time (and whether
asserted or claimed prior to, at or after the Effective Time) that
are, in whole or in part, based on or arising out of the fact that
such person is or was a director, officer, employee or agent of CAX
or any Subsidiary of CAX or of any predecessor to CAX or any of its
Subsidiaries (the "Indemnified Liabilities"), including, without
limitation, all Indemnified Liabilities to the extent they are
based on or arise out of or pertain to the transactions
contemplated by this Agreement. In the event of any such loss,
expense, claim, damage or liability (whether or not arising before
the Effective Time), (i) AIC agrees to pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which
counsel shall be reasonably satisfactory to AIC, promptly after
statements therefor are received and otherwise advance to such
Indemnified Party, upon request, reimbursement of documented
expenses reasonably incurred, in either case to the extent not
prohibited by the DGCL, and (ii) AIC agrees to cooperate in the
defense of any such matter; provided, however, that AIC shall not
be liable for any settlement effected without AIC's written consent
(which consent shall not be unreasonably withheld or unreasonably
delayed).
(c) In the event that the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges
into any other person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision
will be made so that the successors and assigns of the Surviving
Corporation, as applicable, will assume the obligations thereof set
forth in this Section 5.4.
(d) The provisions of this Section 5.4 (i) are
intended to be for the benefit of, and will be enforceable by, each
indemnified party, his or her heirs and his or her representatives
and (ii) are in addition to, and not in substitution for, any other
rights to indemnification or contribution that any such person may
have by contract or otherwise.
(e) For six years after the Effective Time, AIC shall
maintain in effect CAX's current directors' and officers' liability
insurance covering acts or omissions occurring prior to the
Effective Time with respect to those persons who are currently
covered by CAX's directors' and officers' liability insurance
policy on terms with respect to such coverage and amount no less
favorable in the aggregate to CAX's directors and officers, as the
case may be, currently covered by such insurance than those of such
policy in effect on the date of this Agreement; provided, that in
the event that the aggregate premiums for insurance for the benefit
of persons currently covered by CAX's officers' and directors'
insurance policy under this Section 5.4(e) are in excess of 150% of
the aggregate premiums paid by CAX in 1998 on an annualized basis
for such purpose then AIC shall only be obligated to maintain such
insurance coverage as is reasonably available for such amount.
Section 5.5 Fees and Expenses. (a) Except as provided in
this Section 5.5, all fees and expenses incurred in connection with the
Merger, this Agreement, and the transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses, whether
or not the Merger is consummated.
(b) Subject to the provisions of Section 5.5(c), (i)
in the event that this Agreement is terminated by CAX pursuant to
Section 7.1(e), then, concurrently with any such termination, CAX
shall pay AIC a fee equal to $2 million by wire transfer of same
day funds.
(ii) In the event that this Agreement is
terminated by AIC pursuant to Section 7.1(e), then, concurrently
with any such termination, AIC shall pay CAX a fee equal to $2
million by wire transfer of same day funds.
(iii) In the event that (A) a CAX
Pre-Termination Takeover Proposal Event (as defined below) shall
occur and thereafter this Agreement is terminated by either CAX or
AIC pursuant to Section 7.1(b) (ii), or by AIC pursuant to Section
7.1(f) or 7.1(g) and (B) prior to the date that is 12 months after
the date of such termination CAX enters into an Acquisition
Agreement or an acquisition of CAX is consummated, then CAX shall
promptly, but in no event later than two business days after the
date the consummation of the transactions set forth in such
Acquisition Agreement (or any other Acquisition Agreement entered
into within 12 months after the date of such termination of this
Agreement) (or, in the case of a tender offer, the date that shares
of CAX are purchased), pay AIC a fee equal to $2 million by wire
transfer of same day funds.
(iv) In the event that (A) an AIC
Pre-Termination Takeover Proposal Event (as defined below) shall
occur and thereafter this Agreement is terminated by either CAX or
AIC pursuant to Section 7.1(b) (iii), or by CAX pursuant to Section
7.1(f) or 7.1(g) and (B) prior to the date that is 12 months after
the date of such termination AIC enters into an Acquisition
Agreement or an acquisition of AIC is consummated, then AIC shall
promptly, but in no event later than two business days after the
date the consummation of the transactions set forth in such
Acquisition Agreement (or any other Acquisition Agreement entered
into within 12 months after the date of such termination of this
Agreement) (or, in the case of a tender offer, the date that shares
of AIC are purchased), pay CAX a fee equal to $2 million by wire
transfer of same day funds.
(v) In the event that this Agreement is
terminated under the circumstances contemplated by Section 5.5(b)
(iii), CAX shall pay, upon AIC's request, the reasonable
out-of-pocket expenses (including reasonable attorney's fees)
incurred by AIC in connection with this Agreement and the
transactions contemplated hereby, which shall be credited against
any fee payable pursuant to Section 5.5(b) (iii).
(vi) In the event that this Agreement is
terminated under the circumstances contemplated by Section 5.5(b)
(iv), AIC shall pay, upon CAX's request, the reasonable
out-of-pocket expenses (including reasonable attorney's fees)
incurred by CAX in connection with this Agreement and the
transactions contemplated hereby, which shall be credited against
any fee payable pursuant to Section 5.5(b) (iv).
(vii) For purposes of this Section 5.5(b), a CAX
"Pre-Termination Takeover Proposal Event" shall be deemed to occur
if a Takeover Proposal for CAX shall have been made public or any
person shall have publicly announced an intention (whether or not
conditional) to make a Takeover Proposal for CAX and shall have not
withdrawn such Takeover Proposal for CAX at the time of the action
giving rise to the termination of this Agreement.
(viii) For purposes of this Section 5.5(b), an
"AIC Pre-Termination Takeover Proposal Event" shall be deemed to
occur if a Takeover Proposal for AIC shall have been made public or
any person shall have publicly announced an intention (whether or
not conditional) to make a Takeover Proposal for AIC and shall have
not withdrawn such Takeover Proposal for AIC at the time of the
action giving rise to the termination of this Agreement.
(ix) The parties acknowledge that the
agreements contained in this Section 5.5(b) are an integral part of
the transactions contemplated by this Agreement, and that, without
these agreements, the other parties would not enter into this
Agreement. Accordingly, if CAX or AIC, as the case may be, fails
promptly to pay the amount due to be paid by it pursuant to this
Section 5.5(b), and, in order to obtain such payment, the other
party commences a suit which results in a judgment against the
defaulting party for any of the fees set forth in this Section
5.5(b), the defaulting party shall pay to the non-defaulting party
its costs and expenses (including attorneys' fees and expenses) in
connection with such suit.
(c) Payment of the Break-Up Fee (as defined below)
shall be compensation and liquidated damages for the loss suffered
by AIC or CAX, as the case may be, as the result of the failure of
the Merger to be consummated and to avoid the difficulty of
determining damages under the circumstances, and CAX or AIC, as the
case may be, shall have no other liability to the other party,
other than the payment of the Break-Up Fee. The "Break-Up Fee"
shall be an amount equal to the lesser of (i) the aggregate amount
of all fees due to a party under Section 5.5(b) (the "Base Amount")
and (ii) the sum of (A) the maximum amount that can be paid to such
party in the year in which this Agreement is terminated (the
"Termination Year") and in all relevant taxable years thereafter
without causing it to fail to meet the requirements of Sections
856(c) (2) and (3) of the Code (the "REIT Requirements") for such
year, determined as if the payment of such amount did not
constitute income described in Section 856(c)(2)(A)-(H) and
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined
by independent accountants to such party, and (B) in the event such
party receives an opinion of counsel (a "Break-Up Fee Opinion") to
the effect that its receipt of the Base Amount would either
constitute Qualifying Income or would be excluded from gross income
within the meaning of the REIT Requirements, the Base Amount less
the amount payable under clause (A) above. If the amount payable
for the Termination Year under the preceding sentence is less than
the Base Amount, the receiving party shall notify paying party in
writing, and paying party shall place the remaining portion of the
Base Amount in escrow and shall not release any portion thereof to
the receiving party and the receiving party shall not be entitled
to any such amount unless and until paying party receives either of
the following: (i) a letter from the receiving party's independent
accountants indicating the maximum amount that can be paid at that
time to the receiving party without causing the receiving party to
fail to meet the REIT Requirements for any relevant taxable year,
in which event paying party shall pay such maximum amount, or (ii)
a Break-Up Fee Opinion, in which event paying party shall pay to
the receiving party the unpaid Base Amount. Paying party's
obligation to pay any unpaid portion of the Break-Up Fee shall
terminate ten years from the date of this Agreement and paying
party shall have no obligation to make any further payments
notwithstanding that the entire Base Amount has not been paid as of
such date.
(d) AIC and CAX each shall be responsible for
one-half of any and all filing fees required to be paid to the SEC
in connection with the transactions contemplated hereby.
Section 5.6 Public Announcements. CAX and AIC will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with and use reasonable efforts to agree
on, any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, and
shall not issue any such press release or make any such public statement
prior to such consultation, except as either party may determine is
required by applicable law or court process or by obligations pursuant to
any listing agreement with any national securities exchange. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
Section 5.7 Affiliates. Concurrently with the execution of
this Agreement (or with respect to relevant persons who are not available
on the date of this Agreement, as soon as practicable after the date of
this Agreement), CAX shall deliver to AIC a written agreement substantially
in the form attached as Exhibit B hereto of all of the persons who are
"affiliates" of CAX for purposes of Rule 145 under the Securities Act, all
of whom are, as of the date of this Agreement, identified in Section 5.7 of
the CAX Disclosure Schedule. Section 5.7 of the CAX Disclosure Schedule
shall be updated by CAX as necessary to reflect changes from the date of
this Agreement and CAX shall use all reasonable efforts to cause each
person added to such schedule after the date of this Agreement to deliver a
similar agreement.
Section 5.8 Stock Exchange Listing. AIC shall use reasonable
best efforts to cause the AIC Common Stock issuable pursuant to the Merger,
to be approved for listing on the NYSE, subject to official notice of
issuance, in each case as promptly as practicable after the date of this
Agreement, and in any event prior to the Closing Date.
Section 5.9 Stockholder Litigation. Each of CAX and AIC
shall give the other the reasonable opportunity to participate in the
defense of any stockholder litigation against CAX or AIC, as applicable,
and its directors relating to the transactions contemplated by this
Agreement.
Section 5.10 Tax Treatment. Each of CAX and AIC shall use
reasonable best efforts to cause the Merger to qualify as a reorganization
under the provisions of Section 368(a) of the Code and to obtain the
opinion of counsel referred to in Sections 6.2(d) and 6.3(d) and each of
CAX and AIC agrees that it shall take no action that would cause such tax
treatment not to be obtained. Each of CAX and AIC shall also use reasonable
best efforts to qualify, and to maintain its qualification, as a REIT under
the Code during the period from the date of this Agreement to the Closing
Date, and to obtain the opinion of counsel referred to in Sections 6.2(e)
and 6.3(e).
Section 5.11 Conveyance Taxes. CAX and AIC shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes,
any transfer, recording, registration and other fees or any similar taxes
which become payable in connection with, and are solely and directly
related to, the transactions contemplated by this Agreement ("Transfer
Taxes") that are required or permitted to be filed on or before the
Effective Time. AIC and CAX shall pay or cause to be paid, without
deduction or withholding any amounts otherwise payable to their respective
stockholders, all Transfer Taxes (other than any such taxes that are solely
the liability of such stockholders under applicable state law)
Section 5.12 Certain Contracts. The Surviving Corporation
shall expressly assume the obligations of CAX or any of its Subsidiaries
under contracts, indentures, guarantees, securities, leases and other
instruments thereof in accordance with their respective terms, as and to
the extent necessary to avoid any breach, penalty, termination, default,
payment or prepayment that would otherwise result from the execution of
this Agreement or the consummation of the transactions contemplated hereby.
Section 5.13 Voting of shares of CAX owned by AIC. AIC shall
vote any and all shares of CAX Common Stock it owns and shall cause its
Subsidiaries to vote any and all shares of CAX Common Stock they own in
favor of the Merger.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver by each of CAX and AIC on or prior to
the Closing Date of the following conditions:
(a) Governmental and Regulatory Approvals. Other than
the filing provided for under Section 1.4, all consents, approvals
and actions of, filings with and notices to any Governmental Entity
required of CAX, AIC or any of their Subsidiaries to consummate the
Merger and the other transactions contemplated hereby shall have
been obtained or made, the failure of which to be obtained or taken
is reasonably expected to have a Material Adverse Effect on the
Surviving Corporation and its prospective Subsidiaries, taken as a
whole.
(b) No Injunctions or Restraints. No judgment, order,
decree, statute, law, ordinance, rule or regulation, entered,
enacted, promulgated, enforced or issued by any court or other
Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") shall be in
effect (i) preventing the consummation of the Merger, or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on
CAX or AIC, as applicable; provided, however, the party relying
upon this condition shall have complied with Section 5.2(a) (iii).
(c) Form S-4. The Form S-4 shall have become
effective under the Securities Act prior to the mailing of the
Proxy Statement by CAX and AIC to their respective stockholders and
no stop order or proceedings seeking a stop order shall have been
entered or be pending by the SEC.
(d) NYSE Listing. The shares of AIC Common Stock
issuable to CAX's stockholders pursuant to the Merger shall have
been approved for listing on the NYSE, subject to official notice
of issuance.
(e) Stockholder Approval. The CAX Stockholder
Approval and the AIC Stockholder Approval shall have been obtained.
Section 6.2 Conditions to Obligations of AIC. The obligation
of AIC to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The
representations and warranties of CAX set forth herein shall be
true and correct both when made and at and as of the Closing Date,
as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to
"materiality", "Material Adverse Effect" or "Material Adverse
Change" set forth therein) does not have, and would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on CAX.
(b) Performance of Obligations of CAX. CAX shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date in all material respects,
it being agreed that a failure to comply with the provisions of
Section 4.1(a) in any respect shall be deemed to be a material
breach with the effect that AIC shall not be obligated to complete
the Merger.
(c) No Material Adverse Change. At any time after the
date of this Agreement there shall not have been a Material Adverse
Change relating to CAX.
(d) Tax Opinion. AIC shall have received from
Skadden, Arps, Slate, Meagher & Flom LLP an opinion to the effect
that the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and CAX and AIC will each be
a party to such reorganization within the meaning of Section 368(b)
of the Code.
(e) REIT Qualification. AIC shall have received an
opinion from Skadden, Arps, Slate, Meagher & Flom LLP, in form and
substance reasonably satisfactory to AIC, dated as of the Closing
Date, substantially to the effect that, commencing with the taxable
year that began on January 1, 1998, CAX was organized in conformity
with the requirements for qualification as a REIT under the Code,
and its actual method of operation from January 1, 1998 through the
Closing Date has enabled, and its proposed method of operation will
enable it to meet the requirements for qualification and taxation
as a REIT. In rendering the tax opinions described in Sections
6.2(d), 6.2(e), 6.3(d) and 6.3(e), counsel may require delivery of
and rely upon customary representations.
Section 6.3 Conditions to Obligations of CAX. The obligation
of CAX to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The
representations and warranties of AIC set forth herein shall be
true and correct both when made and at and as of the Closing Date,
as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such date), except
where the failure of such representations and warranties to be so
true and correct (without giving effect to any limitation as to
"materiality", "Material Adverse Effect" or "Material Adverse
Change" set forth therein) does not have, and would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect on AIC.
(b) Performance of Obligations of AIC. AIC shall have
performed all obligations required to be performed by it under this
Agreement at or prior to the Closing Date in all material respects,
it being agreed that a failure to comply with the provisions of
Section 4.1(b) in any respect shall be deemed to be a material
breach with the effect that CAX shall not be obligated to complete
the Merger.
(c) No Material Adverse Change. At any time after the
date of this Agreement there shall not have been a Material Adverse
Change relating to AIC.
(d) Tax Opinion. CAX shall have received from
Skadden, Arps, Slate, Meagher & Flom LLP an opinion to the effect
that the Mergers will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and CAX and AIC will each be
a party to such reorganization within the meaning of Section 368(b)
of the Code.
(e) REIT Qualification. CAX shall have received an
opinion from Skadden, Arps, Slate, Meagher & Flom LLP, in form and
substance reasonably satisfactory to CAX, dated as of the Closing
Date, substantially to the effect that, commencing with the taxable
year that began on January 1, 1998, AIC was organized in conformity
with the requirements for qualification as a REIT under the Code,
and its actual method of operation from January 1, 1998 through the
Closing Date has enabled, and its proposed method of operation will
enable it to meet the requirements for qualification and taxation
as a REIT.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, and (except as otherwise provided in
Section 4.2(b)) whether before or after the CAX Stockholder Approval, NewCo
Stockholder Approval or the AIC Stockholder Approval:
(a) by mutual written consent of CAX and AIC;
(b) by either CAX or AIC:
(i) if the Merger shall not have been
consummated by the earlier to occur of (i) 60 days following the
date that the SEC declares the S-4 effective, and (ii) March 31,
2000; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(b) (i) shall not be available to any
party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time.
(ii) if the CAX Stockholder Approval shall not
have been obtained at the CAX Stockholders Meeting duly convened
therefor at which a vote thereon is taken or at any adjournment or
postponement thereof at which a vote thereon is taken;
(iii) if the AIC Stockholder Approval shall not
have been obtained at the AIC Stockholders Meeting duly convened
therefor at which a vote thereon is taken or at any adjournment or
postponement thereof at which a vote thereon is taken;
(iv) if any Restraint having any of the effects
set forth in Section 6.1(b) shall be in effect and shall have
become final and nonappealable;
(c) by AIC, if CAX shall have breached or failed to
perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.2(a) or (b),
and (B) is incapable of being cured by CAX or is not cured within
30 days of written notice thereof (a "CAX Material Breach")
(provided that AIC is not then in AIC Material Breach (as defined
in Section 7.1(d)) of any representation, warranty, covenant or
other agreement contained in this Agreement;
(d) by CAX, if AIC shall have breached or failed to
perform in any material respect any of its representations,
warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.3(a) or (b),
and (B) is incapable of being cured by AIC or is not cured within
30 days of written notice thereof (a "AIC Material Breach")
(provided that CAX is not then in CAX Material Breach of any
representation, warranty, covenant or other agreement contained in
this Agreement;
(e) by CAX or AIC, as applicable in accordance with
Section 4.2(b);
(f) by AIC or CAX if (i) the Board of Directors of
the other party or any committee thereof shall have withdrawn or
modified its approval or recommendation of the Merger or this
Agreement, or approved or recommended any Takeover Proposal or (ii)
the Board of Directors of such party shall have resolved to do any
of the foregoing; or
(g) by AIC or CAX, as applicable, if the other party
or any of its officers, directors, representatives or agents (other
than, in the case of CAX, any officer, director, representative or
agent of CAX who is also an officer, director, representative or
agent of AIC) shall take any of the actions proscribed by Section
4.2 (but for the exceptions therein allowing certain actions to be
taken pursuant to the proviso to the first sentence of Section
4.2(a), the second sentence of Section 4.2(b) or Section 4.2(d)).
Section 7.2 Effect of Termination. In the event of
termination of this Agreement by either CAX or AIC as provided in Section
7.1, this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of CAX or AIC, other than as
contemplated by the provisions of Section 3.2(m) or as provided in Section
5.5, this Section 7.2 and Article VIII, which provisions survive such
termination, and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the
parties at any time before or after the CAX Stockholder Approval or the AIC
Stockholder Approval; provided, however, that after any such approval,
there shall not be made any amendment that by law requires further approval
by the stockholders of CAX or AIC without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of all of the parties.
Section 7.4 Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.3, waive compliance by
the other party with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed
on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective
Time.
Section 8.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall
be deemed given if delivered personally, telecopied (which is confirmed) or
sent by overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to AIC, to
Asset Investors Corporation
3410 South Galena Street, Suite 210
Denver, Colorado 80231
Telecopy No.: (303) 614-9301
Attention: Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90021
Telecopy No.: (213) 687-5600
Attention: Michael V. Gisser
(b) if to CAX, to
Commercial Assets, Inc.
3410 South Galena Street, Suite 210
Denver, Colorado 80231
Telecopy No.: (303) 614-9301
Attention: Chief Executive Officer
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019
Telecopy No.: (212) 757-3990
Attention: Matthew Nimetz, Esq.
Section 8.3 Definitions. For purposes of this Agreement:
(a) except as otherwise provided for in this
Agreement, an "affiliate" of a specified person, is a person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the
person specified, where "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership
of voting securities, by contract, or otherwise; provided, however,
that AIC and its directors, officers and controlling persons are
not considered affiliates of CAX for the purposes of the
representations and warranties and covenants;
(b) "Benefit Plan" means collective bargaining
agreement, employment agreement, consulting agreement, severance
agreement or any bonus, pension, postRetirement benefit, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization,
medical, dental or other plan, arrangement or understanding
providing benefits to any current or former employee, officer,
agent, independent contractor, or director of any person or any of
its Subsidiaries.
(c) "GAAP" means generally accepted accounting
principles and practices which are recognized as such on the date
of this Agreement by the American Institute of Certified Public
Accountants acting through its Accounting Principles Board or by
the Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently
applied for all periods after the date of this Agreement so as to
properly reflect the financial conditions, and the results of
operations, stockholders' equity and cash flows, of the subject
thereof, and its consolidated subsidiaries;
(d) "Liens" means any pledges, claims, liens,
charges, encumbrances and security interests securing indebtedness
or similar obligations (collectively, "Liens")
(e) "Material Adverse Change" or "Material Adverse
Effect" means, when used in connection with CAX or AIC, any change,
effect, event, occurrence or state of facts that is, or would
reasonably be expected to be individually or in the aggregate
materially adverse to the business, financial condition or results
of operations of such party and its Subsidiaries taken as a whole,
other than any change, effect, event or occurrence constituting or
relating to any of the following:
(i) the United States economy or securities
markets in general;
(ii) this Agreement or the transactions
contemplated hereby or the announcement thereof;
(iii) the manufactured housing community
industry in general, and not specifically relating to CAX or AIC or
their respective Subsidiaries;
(iv) the resignation of officers or employees
of CAX or AIC or their respective Subsidiaries; and
(v) changes in GAAP;
(f) "person" means an individual, corporation,
partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity;
(g) a "Subsidiary" any person means (a) a corporation
in which such person, a subsidiary of such person, or such person
and one or more subsidiaries of such person, directly or
indirectly, at the date of determination, has either (i) a majority
ownership interest or (ii) the power, under ordinary circumstances,
to elect, or to direct the election of, a majority of the board of
directors of such corporation, or (b) a partnership in which such
person, a subsidiary of such person, or such person and one or more
subsidiaries of such person (i) is, at the date of determination, a
general partner of such partnership, or (ii) has a majority
ownership interest in such partnership or the right to elect, or to
direct the election of, a majority of the governing body of such
partnership, or (c) any other person (other than a corporation or a
partnership) in which such person, a subsidiary of such person, or
such person and one or more subsidiaries of such person has either
(i) at least a majority ownership interest or (ii) the power to
elect, or to direct the election of, a majority of the directors or
other governing body of such person;
(h) "belief" of any person which is not an individual
means the actual belief of such person's executive officers; and
(i) "knowledge" of any person which is not an
individual means the actual knowledge of such person's executive
officers.
Section 8.4 Interpretation. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation". The words "hereof",
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement
shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including
(in the case of agreements or instruments) by waiver or consent and (in the
case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a person are also to its permitted successors and assigns.
Section 8.5 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.
Section 8.6 Entire Agreement; No Third-Party Beneficiaries.
This Agreement (including the documents and instruments referred to herein)
(a) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, between the parties with respect
to the subject matter of this Agreement and (b) except for the provisions
of Article II, Sections 5.4 and 5.5, is not intended to confer upon any
person other than the parties any rights or remedies.
Section 8.7 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof.
Section 8.8 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise by any of
the parties hereto without the prior written consent of the other parties.
Any assignment in violation of the preceding sentence shall be void.
Subject to the preceding two sentences, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section 8.9 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by
applicable law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
Section 8.10 Enforcement. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy
at law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any
Federal court located in the State of Delaware or in Delaware state court,
this being in addition to any other remedy to which they are entitled at
law or in equity.
IN WITNESS WHEREOF, AIC and CAX each have caused this Agreement to
be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
ASSET INVESTORS CORPORATION
By /s/ David M. Becker
______________________________
Name: David M. Becker
Title: Chief Financial Officer
COMMERCIAL ASSETS, INC.
By /s/ David M. Becker
______________________________
Name: David M. Becker
Title: Chief Financial Officer
ASSET INVESTORS CORPORATION AND
COMMERCIAL ASSETS, INC. ANNOUNCE MERGER
DENVER, COLORADO, August 31, 1999 (NYSE: AIC) (AMEX: CAX)
Asset Investors Corporation ("AIC") and Commercial Assets, Inc. ("CAX")
today jointly announced that they have entered into a definitive merger
agreement. The agreement calls for AIC to issue 0.4075 shares of its
common stock for each outstanding share of CAX's common stock. Also, AIC
will change its name to American Land Lease, Inc.
AIC and CAX are affiliated real estate investment trusts (REITs) that hold
interests in manufactured home communities. AIC manages and owns 27% of
CAX and has interests in 22 manufactured home communities and two
recreational vehicle parks. CAX has interests in 11 manufactured home
communities and owns 2% of AIC. As CAX's manager, AIC personnel perform
all of CAX's daily activities and the companies have the same officers.
The combined company will have interests in 6,300 developed homesites and
4,000 expansion sites, primarily in Florida and Arizona, at an historical
cost of $195 million and subject to $64 million of debt.
Based on the historical earnings of the companies, elimination of duplicate
expenses and assuming that the combined company makes no future
acquisitions of manufactured home communities, AIC expects the merger to be
dilutive, on a quarterly basis, by approximately $0.04 per share to both
Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")
until the combined company is fully invested in manufactured home
communities.
"This transaction re-combines AIC and CAX into a single, larger company
focused on manufactured home communities. In 1993, CAX was spun-off from
AIC with AIC retaining a 27% stock interest. Now that they are in the same
business and use the same personnel, it makes sense to combined two small,
affiliated companies into a single, better capitalized company," said Bruce
Moore, President and Chief Operating Officer of both AIC and CAX.
"The complete earnings potential for the combined company will not be
realized until we are able to become fully invested in manufactured home
communities as CAX has only recently begin to re-deploy its capital into
this asset class. We will need to invest an additional $100 million in
manufactured home communities before we are fully invested given our
current capital structure. Since May 1997, the companies have invested a
combined $190 million," said Mr. Moore.
Closing of the merger is subject to customary closing conditions and the
approval of both CAX's and AIC's stockholders. AIC's Board of Directors
has approved the merger. CAX's Board of Directors, acting upon the
recommendation of a Special Committee of Independent Directors, has also
approved the merger. Closing is expected to occur during the fourth
quarter of 1999.
Jefferies & Company, Inc. acted as financial advisor and has rendered a
fairness opinion to CAX's Board of Directors in connection with the merger.
The foregoing estimates of dilution to FFO and AFFO constitute "forward-
looking statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. Such factors include: general
economic and business conditions; interest rate changes; financing and
refinancing risks; risks inherent in owning real estate or debt secured by
real estate; future occupancy rates; competition; the Company's ability to
acquire manufactured home communities at acceptable prices and with
acceptable returns, to reduce expense levels, to implement rent increases
and other risks set forth in the Company's Securities and Exchange
Commission's filings.
Contact: Terry Considine, Chief Executive Officer (303) 691-4330
Bruce E. Moore, President (610) 388-9615
David M. Becker, Chief Financial Officer (303) 614-9422
