<PAGE> 1
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): February 19, 1998
SIMON DEBARTOLO GROUP, INC.
(Exact name of registrant as specified in charter)
MARYLAND 1-12618 35-1901999
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
115 WEST WASHINGTON STREET 46204
INDIANAPOLIS, INDIANA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (317) 685-1600
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ITEM 5. OTHER EVENTS
Simon DeBartolo Group, Inc. ("SDG"), Corporate Property Investors
("CPI"), and Corporate Realty Consultants, Inc. ("CRC") have entered into an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of February 18,
1998, pursuant to which SDG will be merged into a wholly owned subsidiary of CPI
(the "Merger"). Upon consummation of the Merger, holders of SDG common stock
will receive shares of CPI common stock on a one-for-one basis and beneficial
interests in shares of CRC common stock. Pursuant to the Merger Agreement, each
holder of CPI common stock will receive consideration of $179 per share,
consisting of, subject to adjustment, a dividend of (i) $90 in cash, (ii) 1.0818
additional shares of CPI common stock and (iii) 0.19 shares of 6.50% Series A
Convertible Preferred Stock of CPI, each of which shares will have a liquidation
preference of $100. The common stock component of the consideration is based on
a fixed exchange ratio using SDG's February 17, 1998, closing price of $33-5/8,
and is subject to a 15% symmetrical collar based upon the price of SDG common
stock determined at closing. The transaction is expected to be completed during
the third quarter of 1998 and is subject to the approval of SDG's shareholders,
as well as customary regulatory and other conditions. A majority of CPI's
shareholders have already approved the transaction. The foregoing description is
qualified in its entirety by reference to the Merger Agreement, a copy of which
is attached hereto as Exhibit 10.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
10.1 Agreement and Plan of Merger, dated as of February 18,
1998, by and among Simon DeBartolo Group, Inc.,
Corporate Property Investors and Corporate Realty
Consultants, Inc.
99.1 Press Release issued by Simon DeBartolo Group, Inc.,
dated February 19, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIMON DEBARTOLO GROUP, INC.
/s/ James M. Barkley
-----------------------
Name: James M. Barkley
Title: Secretary
February 23, 1998
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EXHIBIT INDEX
Exhibit
10.1 Agreement and Plan of Merger, dated February 18, 1998, by and among Simon
DeBartolo Group, Inc., Corporate Property Investors and
Corporate Realty Consultants, Inc.
99.1 Press Release issued by Simon DeBartolo Group, Inc., dated February 19,
1998.
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EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
dated as of February 18, 1998
by and among
SIMON DEBARTOLO GROUP, INC.,
CORPORATE PROPERTY INVESTORS
and
CORPORATE REALTY CONSULTANTS, INC.
================================================================================
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TABLE OF CONTENTS
Page
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ARTICLE I
The Reorganization and Distribution; The Merger
-----------------------------------------------
SECTION 1.1. The Reorganizations and
Distributions........................................... 2
SECTION 1.1.1. Reorganizations of C1 and C2............................... 2
SECTION 1.1.2. Distributions and Recapitalization......................... 4
SECTION 1.1.3. Cash Amount and Conversion Number.......................... 5
SECTION 1.1.4. No Fractional Shares....................................... 5
SECTION 1.2. The Merger................................................. 6
SECTION 1.3. Closing.................................................... 6
SECTION 1.4. Effective Time............................................. 7
SECTION 1.5. Articles of Incorporation and
By-laws................................................. 7
SECTION 1.5.1. C1 Certificate of Incorporation and
By-laws................................................. 7
SECTION 1.5.2. A1/MS Certificate of Incorporation and
By-laws................................................. 8
SECTION 1.5.3. C2 Certificate of Incorporation
and By-laws.............................................. 8
SECTION 1.6. Directors and Officers..................................... 9
SECTION 1.6.1. Directors and Officers of C1............................... 9
SECTION 1.6.2. Directors and Officers of C2............................... 9
SECTION 1.6.3. Directors and Officers of the
Surviving Corporation.................................... 10
SECTION 1.7. Effects of the Merger...................................... 10
SECTION 1.8. Further Assurances......................................... 10
SECTION 1.9. A1 Stock Issuance.......................................... 10
ARTICLE II
Merger Consideration; Conversion of Shares
------------------------------------------
SECTION 2.1. Merger Consideration; Conversion of
Capital Stock........................................... 11
SECTION 2.1.1. Conversion of A1 Capital Stock............................. 11
SECTION 2.2. Pairing of Shares.......................................... 12
SECTION 2.3. Exchange of Certificates................................... 12
SECTION 2.3.1. Rights of Certificateholders............................... 12
SECTION 2.3.2. Exchange Agent............................................. 12
SECTION 2.3.3. Exchange Procedures........................................ 13
SECTION 2.3.4. Distributions with Respect to
Unexchanged Shares...................................... 13
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2
Page
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SECTION 2.3.5. No Further Ownership Rights in Capital
Stock of A1............................................. 14
SECTION 2.3.6. No Fractional Shares....................................... 15
SECTION 2.3.7. Termination of Exchange Fund and
Stock Trust............................................. 16
ARTICLE III
Representations and Warranties of A1
------------------------------------
SECTION 3.1. Representations and Warranties of
A1...................................................... 16
SECTION 3.1.1. Organization and Qualification............................. 16
SECTION 3.1.2. Capital Stock.............................................. 18
SECTION 3.1.3. Authority Relative to this
Agreement............................................... 20
SECTION 3.1.4. Non-Contravention; Approvals and
Consents................................................ 20
SECTION 3.1.5. SEC Reports and Financial
Statements.............................................. 22
SECTION 3.1.6. Absence of Certain Changes or
Events.................................................. 23
SECTION 3.1.7. [Intentionally Omitted].................................... 23
SECTION 3.1.8. Legal Proceedings.......................................... 23
SECTION 3.1.9. Information Supplied....................................... 24
SECTION 3.1.10. Compliance with Laws and Orders............................ 24
SECTION 3.1.11. Compliance with Agreements; Certain
Agreements.............................................. 25
SECTION 3.1.12. Taxes...................................................... 25
SECTION 3.1.13. Employee Benefit Plans; ERISA.............................. 26
SECTION 3.1.14. Labor Matters.............................................. 27
SECTION 3.1.15. Environmental Matters...................................... 28
SECTION 3.1.16. Intellectual Property Rights............................... 30
SECTION 3.1.17. Real Property.............................................. 30
SECTION 3.1.18. Vote Required.............................................. 30
SECTION 3.1.19. Opinion of Financial Advisor............................... 31
ARTICLE IV
Representations and Warranties of C1 and C2
-------------------------------------------
SECTION 4.1. Representations and Warranties of
C1...................................................... 31
SECTION 4.1.1. Organization and Qualification............................. 31
SECTION 4.1.2. Capital Stock.............................................. 33
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3
Page
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SECTION 4.1.3. Authority Relative to this
Agreement............................................... 35
SECTION 4.1.4. Non-Contravention; Approvals and
Consents................................................ 36
SECTION 4.1.5. C1 Financial Statements and Other
Documents............................................... 37
SECTION 4.1.6. Absence of Certain Changes or
Events.................................................. 38
SECTION 4.1.7. Undisclosed Liabilities.................................... 38
SECTION 4.1.8. Legal Proceedings.......................................... 38
SECTION 4.1.9. Information Supplied....................................... 39
SECTION 4.1.10. Compliance with Laws and Orders............................ 39
SECTION 4.1.11. Compliance with Agreements; Certain
Agreements.............................................. 40
SECTION 4.1.12. Taxes...................................................... 41
SECTION 4.1.13. Employee Benefit Plans; ERISA.............................. 42
SECTION 4.1.14. Labor Matters.............................................. 43
SECTION 4.1.15. Environmental Matters...................................... 44
SECTION 4.1.16. Intellectual Property Rights............................... 45
SECTION 4.1.17. Real Property.............................................. 45
SECTION 4.1.18. Vote Required.............................................. 46
SECTION 4.1.19. Opinion of Financial Advisor............................... 46
SECTION 4.1.20. Ownership of A1 Common Stock............................... 46
SECTION 4.2. Representations and Warranties of
C2...................................................... 46
SECTION 4.2.1. Organization and Qualification............................. 46
SECTION 4.2.2. Capital Stock.............................................. 48
SECTION 4.2.3. Authority Relative to this
Agreement............................................... 50
SECTION 4.2.4. Non-Contravention; Approvals and
Consents................................................ 51
SECTION 4.2.5. C2 Financial Statements and Stockholder
Reports................................................. 52
SECTION 4.2.6. Absence of Certain Changes or
Events.................................................. 52
SECTION 4.2.7. [Intentionally Omitted].................................... 53
SECTION 4.2.8. Legal Proceedings.......................................... 53
SECTION 4.2.9. Information Supplied....................................... 53
SECTION 4.2.10. Compliance with Laws and Orders............................ 54
SECTION 4.2.11. Compliance with Agreements; Certain
Agreements.............................................. 54
SECTION 4.2.12. Taxes...................................................... 55
SECTION 4.2.13. Employee Benefit Plans; ERISA.............................. 56
SECTION 4.2.14. [Intentionally Omitted].................................... 56
SECTION 4.2.15. Environmental Matters...................................... 56
SECTION 4.2.16. Intellectual Property Rights............................... 57
SECTION 4.2.17. [Intentionally Omitted].................................... 58
SECTION 4.2.18. Vote Required.............................................. 58
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Page
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SECTION 4.2.19. Ownership of A1 Common Stock............................... 58
ARTICLE V
Covenants
---------
SECTION 5.1. Conduct Pending the Closing................................ 58
SECTION 5.1.1. Preservation of REIT Status................................ 58
SECTION 5.1.2. Conduct of Business by C1 and C2
Pending the Closing..................................... 58
SECTION 5.1.3. Conduct of Business by A1 Pending the
Closing ................................................ 62
SECTION 5.1.4. Advice of Changes.......................................... 63
SECTION 5.1.5. Notice and Cure............................................ 64
SECTION 5.1.6. Fulfillment of Conditions.................................. 64
SECTION 5.2. No Solicitations by C1 and C2.............................. 64
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.1. Access to Information;
Confidentiality......................................... 65
SECTION 6.2. Preparation of Registration
Statement and Proxy Statement........................... 66
SECTION 6.3. Approvals of Stockholders.................................. 67
SECTION 6.3.1. A1 Stockholder Approval.................................... 67
SECTION 6.3.2. C1 and C2 Stockholders' Approvals.......................... 67
SECTION 6.3.3. Cooperation for Stockholders'
Meetings................................................ 68
SECTION 6.4. Affiliates................................................. 68
SECTION 6.5. Stock Exchange Listing..................................... 68
SECTION 6.6. Certain Tax Matters........................................ 68
SECTION 6.7. Regulatory and Other Approvals............................. 69
SECTION 6.8. Employee Benefit Plans..................................... 69
SECTION 6.9. Stock Plans................................................ 69
SECTION 6.9.1. Treatment of A1 Stock Plans................................ 69
SECTION 6.9.2. Treatment of C1 Stock Plans................................ 70
SECTION 6.9.3. Restricted Stock........................................... 71
SECTION 6.10. Trustees', Directors' and Officers'
Indemnification and Insurance........................... 71
SECTION 6.11. Expenses................................................... 74
SECTION 6.12. Brokers or Finders......................................... 74
SECTION 6.13. Takeover Statutes.......................................... 74
SECTION 6.14. Conveyance Taxes........................................... 75
SECTION 6.15. Transfer Tax............................................... 75
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5
Page
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SECTION 6.16. Post-Closing Asset Sales................................... 75
SECTION 6.17. Merger Sub................................................. 76
SECTION 6.18. Transfer of Assets......................................... 76
SECTION 6.19. Existing Agreements........................................ 77
ARTICLE VII
Conditions
----------
SECTION 7.1. Conditions to Each Party's
Obligation To Effect the Merger......................... 77
SECTION 7.1.1. Stockholder Approvals...................................... 77
SECTION 7.1.2. Registration Statement; State
Securities Laws......................................... 78
SECTION 7.1.3. Exchange Listing........................................... 78
SECTION 7.1.4. No Injunctions or Restraints............................... 78
SECTION 7.1.5. Tax Opinions............................................... 78
SECTION 7.1.6. C1 Delaware Reorganization................................. 80
SECTION 7.2. Conditions to Obligation of C1 and
C2 To Effect the Merger................................. 80
SECTION 7.2.1. Representations and Warranties............................. 81
SECTION 7.2.2. Performance of Obligations................................. 81
SECTION 7.2.3. Comfort Letters............................................ 81
SECTION 7.2.4. No Material Adverse Change................................. 81
SECTION 7.2.5. Proceedings................................................ 81
SECTION 7.2.6. Governmental and Regulatory and Other
Consents and Approvals.................................. 82
SECTION 7.3. Conditions to Obligation of A1 To
Effect the Merger....................................... 82
SECTION 7.3.1. Representations and Warranties............................. 82
SECTION 7.3.2. Performance of Obligations................................. 82
SECTION 7.3.3. Comfort Letters............................................ 83
SECTION 7.3.4. No Material Adverse Change................................. 83
SECTION 7.3.5. Proceedings................................................ 83
SECTION 7.3.6. Related Agreements......................................... 83
SECTION 7.3.7. Governmental and Regulatory and Other
Consents and Approvals.................................. 83
ARTICLE VIII
Termination, Amendment and Waiver
---------------------------------
SECTION 8.1. Termination................................................ 84
SECTION 8.2. Effect of Termination...................................... 84
SECTION 8.3. Amendment.................................................. 86
SECTION 8.4. Waiver..................................................... 86
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6
Page
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ARTICLE IX
General Provisions
------------------
SECTION 9.1. Non-Survival of Representations,
Warranties, Covenants and
Agreements.............................................. 87
SECTION 9.2. Notices.................................................... 87
SECTION 9.3. Entire Agreement; Incorporation of
Exhibits; Construction.................................. 88
SECTION 9.4. Public Announcements....................................... 89
SECTION 9.5. No Third-Party Beneficiary................................. 89
SECTION 9.6. No Assignment; Binding Effect.............................. 89
SECTION 9.7. Headings................................................... 89
SECTION 9.8. Invalid Provisions......................................... 89
SECTION 9.9. Governing Law.............................................. 90
SECTION 9.10. Enforcement of Agreement................................... 90
SECTION 9.11. Certain Definitions........................................ 90
SECTION 9.12. Waiver of Jury Trial....................................... 92
SECTION 9.13. Counterparts............................................... 92
Exhibits
EXHIBIT A - Form of Stockholder Voting Agreement
EXHIBIT B - Form of C1/C2 Issuance Agreement
EXHIBIT C - Form of C1 Series A Preferred Stock
EXHIBIT D - Form of C1 Certificate of Incorporation
EXHIBIT E - Form of C By-laws
EXHIBIT F - Form of C2 Certificate of Incorporation
EXHIBIT G - Form of C2 By-laws
EXHIBIT H - Form of Affiliate Agreement
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GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"A1" -- Preamble
"A1 Affiliates" -- Section 6.4
"A1 Class A Stock" -- Section 3.1.2
"A1 Class B Stock" -- Section 3.1.2
"A1 Class C Stock" -- Section 3.1.2
"A1 Common Stock" -- Section 3.1.2
"A1 Disclosure Letter" -- Section 3.1.1
"A1 Employee Benefit Plan" -- Section 3.1.13
"A1 Entities" -- Section 3.1.1
"A1 Financial Statements" -- Section 3.1.5
"A1 Operating Partnership" -- Section 6.16
"A1 Permissible Issuance Arrangements" -- Section 3.1.2
"A1 Permitted Minority Investments" -- Section 3.1.1
"A1 Permits" -- Section 3.1.10
"A1 Preferred Stock" -- Section 3.1.2
"A1 SEC Reports" -- Section 3.1.5
"A1 Series A Preferred Stock" -- Section 3.1.2
"A1 Series B Preferred Stock" -- Section 3.1.2
"A1 Series C Preferred Stock" -- Section 3.1.2
"A1 Stock Option" -- Section 6.9.1
"A1 Stock Plans" -- Section 3.1.2
"A1 Stockholders' Approval" -- Section 6.3.1
"A1 Stockholders' Meeting" -- Section 6.3.1
"A1/MS Articles of Incorporation" -- Section 1.5.2
"A1/MS By-laws" -- Section 1.5.2
"affiliate" -- Section 9.11(a)
"Affiliate Agreement" -- Section 6.4
"Agreement" -- Preamble
"Alternative Proposal for C1 or C2" -- Section 5.2
"Applicable Merger Consideration" -- Section 2.3.3
"Articles of Merger" -- Section 1.4
"beneficially" -- Section 9.11(b)
"business day" -- Section 9.11(c)
"C1" -- Preamble
"C1 and C2 Stockholders' Meeting" -- Section 6.3.2
"C1 By-laws" -- Section 1.5.1
"C1 Class B Common Shares" -- Section 2.1.1
"C1 Class C Common Shares" -- Section 2.1.1
"C1 Common Shares" -- Section 4.1.2
"C1 Charter" -- Section 1.5.1
"C1 Deferral Plans" -- Section 4.1.1
"C1 Delaware" -- Section 1.1.1
"C1 Delaware Common Stock" -- Section 1.1.1
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"C1 Delaware Reorganization" -- Recitals
"C1 Disclosure Letter" -- Section 4.1.1
"C1 Employee Benefit Plan" -- Section 4.1.13
"C1 Entities" -- Section 4.1.1
"C1 ESPP Contracts" -- Section 4.1.2
"C1 Financial Statements" -- Section 4.1.5
"C1 Option Plan" -- Section 4.1.2
"C1 Permissible Issuance Arrangements" -- Section 4.1.2
"C1 Permissible Redemption Arrangements" -- Section 4.1.2
"C1 Permits" -- Section 4.1.10
"C1 Permitted Minority Investments" -- Section 4.1.1
"C1 Preference Shares" -- Section 4.1.2
"C1 QSPP" -- Section 4.1.2
"C1 Reports" -- Section 4.1.5
"C1 Series A Preferred Stock" -- Section 1.1.2
"C1 Stock Option" -- Section 6.9.2
"C1 Stockholders' Approval" -- Section 6.3.2
"C1 Termination Agreements" -- Section 4.1.2
"C1 6.50% Preference Shares" -- Section 1.1.1
"C1 and C2 Stockholders' Meeting" -- Section 6.3.2
"C1/C2 Entities" -- Section 4.1.1
"C1/C2 Issuance Agreement" -- Section 1.1.1
"C2" -- Preamble
"C2 By-laws" -- Section 1.5.2
"C2 Certificate of Incorporation" -- Section 1.5.3
"C2 Common Stock" -- Section 4.2.2
"C2 Disclosure Letter" -- Section 4.2.1
"C2 Employee Benefit Plan" -- Section 4.2.13
"C2 Entities" -- Section 4.1.1
"C2 Financial Statements" -- Section 4.2.5
"C2 Merger" -- Section 1.1.1
"C2 Permitted Minority Investments" -- Section 4.2.1
"C2 Permits" -- Section 4.2.10
"C1 Series A Preferred Stock" -- Section 1.1.2
"C2 Stockholders' Approval" -- Section 6.3.2
"C2 Trust Agreements" -- Section 4.2.2
"CERCLA" -- Section 3.1.15
"Certificates" -- Section 2.3.1
"Charter Document Right" -- Section 4.1.7
"Charter Documents" -- Section 3.1.4
"Closing" -- Section 1.3
"Closing Date" -- Section 1.3
"Code" -- Recitals
"cold comfort letters" -- Section 7.3.3
"Confidentiality Agreement" -- Section 6.1
"Consolidated Non-Corporate Affiliate" -- Section 9.11(d)
"Constituent Corporations" -- Section 1.2
"Contracts" -- Section 3.1.4
"control", "controlling", "controlled
by" and "under common control with" -- Section 9.11(a)
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"Declaration of Trust" -- Section 4.1.1
"Delaware Secretary of State" -- Section 4.1.4
"Department Stores" -- Section 4.1.17
"DGCL" -- Section 1.1.1
"Effective Time" -- Section 1.4
"Entities" -- Section 5.1.2
"Environmental Law" -- Section 3.1.15
"Environmental Permits" -- Section 3.1.15
"ERISA" -- Section 3.1.13
"Excess Shares" -- Section 2.3.6
"Excess Stock" -- Section 3.1.2
"Exchange Act" -- Section 3.1.4
"Exchange Agent" -- Section 2.3.2
"Exchange Fund" -- Section 2.3.2
"Fractional Shares" -- Section 2.3.6
"GM Building" -- Section 6.18
"Governmental or Regulatory Authority" -- Section 3.1.4
"group" -- Section 9.11(g)
"Hazardous Material" -- Section 3.1.15
"Indemnified Liabilities" -- Section 6.10(a)
"Indemnified Parties" -- Section 6.10(a)
"Indemnifying Party" -- Section 6.10(a)
"Intellectual Property" -- Section 3.1.16
"knowledge" -- Section 9.11(e)
"laws" -- Section 3.1.4
"Lien" -- Section 3.1.2
"Limited Shares" -- Section 1.5.1
"Maryland Secretary of State" -- Section 1.4
"material", "material adverse
effect" and "materially adverse" -- Section 9.11(f)
"Merger" -- Recitals
"Merger Sub" -- Recitals
"MGCL" -- Section 1.2
"NYSE" -- Section 7.1.3
"Option Plans" -- Section 6.9.2
"Options" -- Section 3.1.2
"orders" -- Section 3.1.4
"Ownership Limit" -- Section 1.5.1
"Paired Shares" -- Section 2.2
"Payment Amount" -- Section 8.2
"Permanent Restriction" -- Section 6.9.3
"person" -- Section 9.11(g)
"Plan" -- Section 3.1.13
"Principal Properties" -- Section 4.1.17
"Proxy Statement" -- Section 3.1.9
"REA" -- Section 4.1.17
"Registration Statement" -- Section 4.1.9
"REIT" -- Section 1.5.1
"REIT Requirements" -- Section 1.5.1
"Representatives" -- Section 9.11(h)
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"SEC" -- Section 1.6.1
"Securities Act" -- Section 3.1.4
"Significant Entities" -- Section 9.11(i)
"Stockholder Agreement" -- Recitals
"Stockholders' Meetings" -- Section 6.3.2
"Stock Trust" -- Section 2.3.6
"Subsidiary" -- Section 9.11(j)
"Surviving Corporation" -- Section 1.2
"taxes" -- Section 3.1.12
"Termination Fee" -- Section 8.2
"Transfer Taxes" -- Section 6.15
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This AGREEMENT AND PLAN OF MERGER dated as of
February 18, 1998 (this "Agreement") is made and entered
into by and among Simon DeBartolo Group, Inc., a
Maryland corporation ("A1"), Corporate Property
Investors, a Massachusetts business trust ("C1"), and
Corporate Realty Consultants, Inc., a Delaware
corporation ("C2").
WHEREAS, the Board of Directors of A1 and the Board of Trustees of
C1 have each determined that it is advisable and in the best interests of their
respective stockholders and shareholders to consummate, and have approved, the
business combination transaction provided for herein in which a newly formed,
wholly owned subsidiary organized under the laws of the State of Maryland
("Merger Sub") of C1 Delaware (the successor to C1 by means of the C1 Delaware
Reorganization (as defined herein)) would merge with and into A1 (the "Merger");
WHEREAS, the Board of Directors of A1 and the Board of Trustees of
C1 have each determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is fair to and in the best
interests of their respective stockholders and shareholders;
WHEREAS, prior to the record date for the stockholder meeting of C1
referred to in Section 6.3.2, C1 intends to consummate its long-standing plan to
reorganize as a corporation organized under the laws of the State of Delaware on
the terms described herein (the "C1 Delaware Reorganization");
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Merger is intended to preserve C1's and C2's status as
grandfathered from the application of Section 269B(a)(3) of the Code pursuant to
Section 136(c)(3) of the Deficit Reduction Act of 1984;
WHEREAS, as an inducement to A1 to enter into this Agreement, each
of the Board of Trustees of C1, the Board of Directors of C2 and certain
shareholders of C1 and C2 have approved the terms of a Stockholder Voting
Agreement in the form of Exhibit A (the "Stockholder Agreement") to be entered
into by A1 and holders of C1 Common Shares (as
<PAGE> 13
2
defined herein) representing at least a majority of all the outstanding C1
Common Shares and C1 Preference Shares (as defined herein) and a majority of the
total voting power of all the outstanding shares of C2 Common Stock (as defined
herein) and by the holders of C1 Preference Shares representing at least two
thirds of the total voting power of all the outstanding C1 Preference Shares,
concurrently with the execution of this Agreement, pursuant to which each of
such shareholders has agreed to vote its capital stock holdings for approval of
the Merger and the transactions contemplated by this Agreement; and
WHEREAS, A1, C1 and C2 desire to make certain representations,
warranties and agreements in connection with, and also to prescribe various
conditions to, the Merger.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
The Reorganization and Distribution; the Merger
SECTION 1.1. The Reorganizations and Distributions.
1.1.1. Reorganizations of C1 and C2. (a) Prior to the record date
for the stockholder meeting of C1 referred to in Section 6.3.2, C1 shall use its
reasonable best efforts to effect the C1 Delaware Reorganization and thereby
reorganize as a corporation incorporated under the laws of the State of Delaware
(C1, as so reorganized, is referred to herein as "C1 Delaware"). In connection
with the C1 Delaware Reorganization, (i) C1 shall, subject to obtaining the
requisite approval of its shareholders, merge with and into a newly formed
corporation wholly owned by C1 and organized under the laws of the Commonwealth
of Massachusetts and (ii) immediately thereafter, the surviving corporation
shall merge with and into a newly formed corporation wholly owned by such
surviving corporation and organized under the laws of the State of Delaware, in
each case on a basis that is a tax-free reorganization within the meaning of
Section 368(a) of the Code and does not adversely affect C1's and C2's status as
grandfathered from the
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3
application of Section 269B(a)(3) of the Code pursuant to Section 136(c)(3) of
the Deficit Reduction Act of 1984. In connection with the C1 Delaware
Reorganization, (i) each issued and outstanding C1 Common Share (as defined in
Section 4.1.2) shall be converted into the right to receive one share of common
stock, par value $.01 per share, of C1 Delaware ("C1 Delaware Common Stock") and
(ii) each issued and outstanding 6.50% First Series Preference Share of C1
issued under a Certificate of Designation executed August 4, 1994 (the "C1 6.50%
Preference Shares") shall be converted into one share of 6.50% First Series
Preferred Stock, par value $1,000 per share, of C1 Delaware having rights,
restrictions, privileges and preferences substantially the same as those
provided for with respect to the C1 6.50% Preference Shares on the date hereof.
In connection with the C1 Delaware Reorganization, C1 Delaware shall adopt a
certificate of incorporation and by-laws that do not contain any restrictions on
the consummation of the transactions contemplated hereby that are substantially
more burdensome to C1, C2 or A1 than are currently contained in the Declaration
of Trust and Trustee's Regulations of C1. By virtue of the C1 Delaware
Reorganization, C1 Delaware will succeed to all of the rights and obligations of
C1 under this Agreement.
(b) Also in connection with the C1 Delaware Reorganization, (i) C1
Delaware and C2 shall enter into an Issuance Agreement in the form set forth as
Exhibit B hereto (the "C1/C2 Issuance Agreement") and (ii) C2 shall engage in a
merger (the "C2 Merger") with a wholly owned Subsidiary of C2 under the
appropriate provisions of the Delaware General Corporation Law (the "DGCL")
pursuant to which (w) C2 shall be the surviving entity, (x) the shares of C2
Common Stock (as defined in Section 4.2.2) not held pursuant to the C2 Trust
Agreements (as defined in Section 4.2.2) shall be canceled, the holders of any
such canceled shares being entitled to receive cash in an amount equal to $10
times the number of shares so canceled, (y) each 100 shares of C2 Common Stock
outstanding and held pursuant to the C2 Trust Agreements shall be converted into
one such share and (z) the authorized share capitalization of C2 shall be fixed
at 1,000,000 shares of C2 Common Stock and 1,000,000 shares of C2 Permitted
Preferred Stock (as such term is defined in the C1/C2 Issuance Agreement).
<PAGE> 15
4
1.1.2. Distributions and Recapitalization. Prior to the Effective
Time the following actions shall be taken (without duplication):
(i) A1, with the cooperation and consent of C1 Delaware, shall use
commercially reasonable efforts to obtain financing in an amount
sufficient to finance the cash distribution referred to in clause (ii)
below;
(ii) C1 Delaware shall declare a per share dividend on the C1 Common
Shares issued and outstanding prior to the distribution of C1 Common
Shares set forth in clause (iii) of this Section 1.1.2, payable in cash to
the holders of record of such C1 Common Shares as of the close of business
on the business day immediately preceding the day of the Effective Time,
consisting of an amount equal to the Cash Amount (as defined below);
(iii) C1 Delaware shall declare a per share dividend on the issued
and outstanding C1 Common Shares, payable in new C1 Common Shares to the
holders of record of such C1 Common Shares as of the close of business on
the business day immediately preceding the day of the Effective Time,
consisting of 1.0818 C1 Common Shares;
(iv) C1 Delaware shall declare a per share dividend on the C1 Common
Shares issued and outstanding prior to the distribution of C1 Common
Shares set forth in clause (iii) of this Section 1.1.2 payable in shares
of Series A Convertible Preferred Stock, par value $.01 per share, of C1
Delaware having the rights, restrictions, privileges and preferences as
set forth on Exhibit C hereto (the "C1 Series A Preferred Stock") to
holders of record of such C1 Common Shares as of the close of business on
the business day immediately preceding the day of the Effective Time,
consisting of 0.19 of a share of C1 Series A Preferred Stock for each C1
Common Share; and
(v) C1 Delaware shall take such actions as shall be required to make
the appropriate adjustments to all outstanding options and conversion
rights to acquire C1 Common Shares to reflect the transactions described
in clauses (ii), (iii) and (iv) above in accordance with the terms of such
options and rights (it being understood that in connection with the
adjustment for the distributions set forth in clauses (ii) and (iv) above,
for purposes of the Certificate of Designation for the C1 Preference
Shares, the "current market price" per C1 Common Share shall be $177.67.
<PAGE> 16
5
1.1.3. Cash Amount and Conversion Number. The amount of the cash
dividend to be declared by C1 Delaware pursuant to Section 1.1.2(ii) above (the
"Cash Amount") shall be $90.00 per C1 Common Share, subject to adjustment as
follows:
(i) if the Market Price for the A1 Class A Stock (as defined in
Section 3.1.2.) at the Effective Time exceeds $38.67, then the Cash Amount
shall be reduced by an amount equal to such excess multiplied by 2.0818;
and
(ii) if the Market Price for the A1 Class A Stock at the Effective
Time is less than $28.58, then the Cash Amount shall be increased by an
amount equal to such deficiency multiplied by 2.0818.
For purposes of this Section 1.1.3, the "Market Price for the A1
Class A Stock at the Effective Time" shall be the average of the closing prices
per share for the A1 Class A Stock on the New York Stock Exchange for the 20
consecutive trading days ending on the fifth trading day prior to the Effective
Time.
1.1.4. No Fractional Shares. (a) No certificate or scrip
representing fractional C1 Common Shares will be issued pursuant to the dividend
payments described in Section 1.1.2, and any such fractional share will not
entitle the owner thereof to vote or to any rights of a stockholder of the C1
Delaware.
(b) As promptly as practicable following the dividend payments
described in Section 1.1.2, C1 Delaware shall cause to be distributed to the
holders of C1 Common Shares who are entitled to receive such dividends, in
substantially the same manner described in Section 2.3.6, the amount of cash, if
any, to be paid to such holders of in lieu of any fractional C1 Common Share.
SECTION 1.2. The Merger. (a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time, Merger Sub shall be merged
with and into A1 in accordance with the Maryland General Corporation Law (the
"MGCL"). At the Effective Time, the separate existence of Merger Sub shall cease
and A1 shall continue as the surviving corporation in the Merger (the "Surviving
Corporation"). A1 and Merger Sub Delaware are sometimes referred to herein as
the "Constituent Corporations". As a result of the Merger, the outstanding
shares of capital stock of the Constituent Corporations shall remain
<PAGE> 17
6
outstanding or be converted or canceled in the manner provided in Section 2.1.
(b) A1 shall have the right, with the consent of C1 (which consent
shall not be unreasonably withheld), for a period of 30 days from the date
hereof, to request that the parties change the structure of the Merger and the
other transactions contemplated hereby such that a wholly owned subsidiary of A1
would merge with and into C1, with C1 as the surviving corporation. Such change
would be set forth in an amendment to this Agreement which shall be reasonably
acceptable to C1 and would provide that, among other things,
(x) each issued and outstanding C1 Common Share shall be converted
into:
(i) a number of shares of A1 Common Stock equal to one plus the
number of C1 Common Shares that would otherwise have been received with
respect to each outstanding C1 Common Share pursuant to Article 1 hereof;
(ii) an amount in cash equal to the Cash Amount payable pursuant to
Article I hereof with respect to each C1 Common Share, subject to
adjustment as provided therein; and
(iii) shares of preferred stock of A1 having the rights,
restrictions, privileges and preferences as set forth in Exhibit C hereto;
and
(y) each issued and outstanding C1 6.50% Preference Share shall be
converted into one share of a new series of preferred stock of A1 having
economic terms and rights, restrictions, privileges and preferences
substantially the same as those provided for with respect to the C1 6.50%
Preferences Shares.
If A1 makes such request and C1 consents to such request within such
30-day period, the parties agree to use their best efforts to promptly prepare,
execute and deliver an amendment to this Agreement that accomplishes the
foregoing and containing other terms and conditions reasonably required therein.
Notwithstanding the foregoing, until any such amendment to this Agreement is
executed, this Agreement shall remain in full force and effect in accordance
with its terms.
SECTION 1.3. Closing. Unless this Agreement shall have been
terminated and the transactions herein
<PAGE> 18
7
contemplated shall have been abandoned pursuant to Section 8.1, and subject to
the satisfaction or waiver (where applicable) of the conditions set forth in
Article VII, the closing of the Merger (the "Closing") will take place at the
offices of Willkie Farr & Gallagher, New York, New York, at 10:00 a.m., local
time, on the second business day following satisfaction of the conditions set
forth in Article VII, unless another date, time or place is agreed to in writing
by the parties hereto (the "Closing Date"). At the Closing there shall be
delivered to A1, C1 and C2 the certificates and other documents and instruments
required to be delivered under Article VII.
SECTION 1.4. Effective Time. At the Closing, articles of merger or
other appropriate documents shall be duly prepared and executed by the
Constituent Corporations (the "Articles of Merger") in accordance with Section
3-110 of the MGCL and thereafter delivered to the State Department of
Assessments and Taxation of the State of Maryland (the "Maryland Secretary of
State") for filing as provided in Section 107 of the MGCL the Articles of Merger
and the Articles of Merger also shall be filed with any local recording office
as required, in each case, as soon as practicable on the Closing Date. The
Merger will become effective at such time as the Articles of Merger have been
filed with the Maryland Secretary of State or at such other time as may be
agreed upon by the parties and specified in the Articles of Merger in accordance
with applicable law. The date and time when the Merger becomes effective is
referred to herein as the "Effective Time".
SECTION 1.5. Articles of Incorporation and By-laws.
1.5.1. C1 Certificate of Incorporation and Bylaws. (a) At the
Effective Time, (i) the certificate of incorporation of C1 Delaware in effect
immediately prior to the Effective Time shall be amended and restated in its
entirety to be substantially in the form of Exhibit D hereto and, as so amended
and restated, such certificate of incorporation shall be the certificate of
incorporation of C1 (the "C1 Charter") until thereafter amended as provided by
law and the C1 Charter and (ii) the By-laws of C1 Delaware shall be amended and
restated in their entirety to be substantially in the form of Exhibit E hereto
and, as so amended and restated, such by-laws shall be the By-laws of C1 (the
"C1 By-laws") until thereafter amended as provided by law, the C1 charter and
such By-laws.
<PAGE> 19
8
(b) In order for C1 to meet the requirements to (i) qualify as a
real estate investment trust which meets the requirements of Sections 856
through 860 of the Code (a "REIT", and the requirements for such qualification,
the "REIT Requirements"), (ii) avoid any Federal income or excise tax liability
and (iii) otherwise maintain the current Federal income tax treatment of the
pairing arrangement for the shares of C2 Common Stock following the Merger, the
C1 Charter will provide that, subject to the exceptions set forth therein, no
person or entity shall own, or be deemed to own by virtue of the attribution
provisions of Section 544 of the Code (as modified by Section 856(h)(1)(B) of
the Code) or Section 318 of the Code (as modified by Section 856(d)(5) of the
Code), more than 6.8% of the outstanding Paired Shares (the "Ownership Limit")
at or after the Effective Time. Accordingly, if any holder (other than a holder
which is excepted from Ownership Limit restriction pursuant to the C1 Charter,
but only to the extent of such exception) would receive in connection with the
Merger a number of Paired Shares such that any person or entity would own, or be
deemed to own under the applicable attribution rules of the Code referred to
above, Paired Shares in excess of the Ownership Limit, then such holder shall
acquire no right or interest in such number of Paired Shares which would cause
such person or entity to exceed the Ownership Limit, but such holder shall, in
lieu of receiving those Paired Shares which would cause the Ownership Limit to
be exceeded (the "Limited Shares"), have the right to be paid by C1 an amount in
cash for such Limited Shares equal to the product of the Market Price multiplied
by the number of such Limited Shares.
1.5.2. A1/MS Certificate of Incorporation and Bylaws. At the
Effective Time, (i) the Amended and Restated Articles of Incorporation of A1 as
in effect immediately prior to the Effective Time shall be amended so that the
name of the Surviving Corporation shall be "SDG Properties, Inc." and, as so
amended, such Amended and Restated Articles of Incorporation shall be the
Articles of Incorporation of the Surviving Corporation (the "A1/MS Articles of
Incorporation") until thereafter amended as provided by law and the A1/MS
Articles of Incorporation and (ii) the Amended and Restated By-laws of A1 as in
effect immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation (the "A1/MS By-laws") until thereafter amended as provided
by law, the A1/MS Articles of Incorporation and such By-laws.
1.5.3. C2 Certificate of Incorporation and By-laws. At the
Effective Time, (i) the Certificate of
<PAGE> 20
9
Incorporation of C2 as in effect immediately prior to the Effective Time shall
be amended and restated in their entirety to be substantially in the form of
Exhibit F hereto and, as so amended and restated, such Certificate of
Incorporation shall be the Certificate of Incorporation of C2 (the "C2
Certificate of Incorporation") until thereafter amended as provided by law and
the C2 Certificate of Incorporation and (ii) the By-laws of C2 as in effect
immediately prior to the Effective Time shall be amended and restated in their
entirety to be substantially in the form of Exhibit G hereto and, as so amended
and restated, such By-laws shall be the By-laws of C2 (the "C2 By-laws") until
thereafter amended as provided by law, the C2 Certificate of Incorporation and
such By-laws.
SECTION 1.6. Directors and Officers.
1.6.1. Directors and Officers of C1. (a) At the Effective Time, the
Board of Directors of C1 will consist of 13 directors and will include Hans C.
Mautner and two other directors to be designated by C1 (which directors shall be
"Independent Directors" (as defined in the C1 Charter)). Such directors of C1
will commence to serve at the Effective Time and will remain directors until
their successors have been duly elected and qualified or until their earlier
death, resignation or removal in accordance with the C1 By-laws.
(b) Immediately after the Effective Time, Mr. Mautner shall serve as
Vice Chairman and Mark S. Ticotin shall serve as an Executive Senior Vice
President of C1 and the remaining officers of C1 shall be designated by A1. Such
officers will commence to serve at the Effective Time and will remain officers
until their successors have been duly elected and qualified or until their
earlier death, resignation or removal in accordance with the C1 By-laws.
1.6.2. Directors and Officers of C2. (a) At Effective Time, the
Board of Directors of C2 will consist of 13 directors and will include Hans C.
Mautner and two other directors to be designated by C1 (which directors shall be
"Independent Directors" (as defined in the C1 Charter)). The directors of C2
will commence to serve at the Effective Time and will remain directors until
their successors have been duly elected and qualified or until their earlier
death, resignation or removal in accordance with the C2 By-laws.
(b) Immediately after the Effective Time, Mr. Mautner shall serve as
Vice Chairman and Mr. Ticotin
<PAGE> 21
10
shall serve as Executive Senior Vice President of C2 and the remaining officers
of C2 shall be designated by A1. Such officers will commence to serve at the
Effective Time and will remain officers until their successors have been duly
elected and qualified or until their earlier death, resignation or removal in
accordance with the C2 By-laws.
SECTION 1.6.3. Directors and Officers of the Surviving Corporation.
(a) The directors of A1 at the Effective Time shall be the directors of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
(b) The officers of A1 at the Effective Time shall be the officers
of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
SECTION 1.7. Effects of the Merger. Subject to the foregoing, the
effects of the Merger shall be as provided in the applicable provisions of the
MGCL.
SECTION 1.8. Further Assurances. Each party hereto will, either
prior to or after the Effective Time, execute such further documents,
instruments, deeds, bills of sale, assignments and assurances and take such
further actions as may reasonably be requested by one or more of the others to
consummate the Merger, to vest the Surviving Corporation with full title to all
assets, properties, privileges, rights, approvals, immunities and franchises of
the Constituent Corporations or to effect the other purposes of this Agreement.
SECTION 1.9. A1 Stock Issuance. At the Effective Time, A1 shall
issue to such persons as may be jointly designated by C1 and A1 such number of
whole or fractional shares of common stock of A1 for such consideration as may
be mutually agreed by C1 and A1 as to preserve A1's status as a REIT.
<PAGE> 22
11
ARTICLE II
Merger Consideration; Conversion of Shares
SECTION 2.1. Merger Consideration; Conversion of Capital Stock.
2.1.1. Conversion of A1 Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of capital
stock of A1:
(a) Each issued and outstanding share of (i) A1 Class A Stock (as
defined in Section 3.12) (other than shares canceled in accordance with
Section 2.1.1(b)) shall be converted into the right to receive from C1 one
fully paid and nonassessable C1 Common Share, (ii) A1 Class B Stock (as
defined in Section 3.1.2) (other than shares canceled in accordance with
Section 2.1.1(b) or with respect to which a demand to receive payment of
the fair value therefor in accordance with Section 3-203 of the MGCL has
been perfected) shall be converted into the right to receive from C1 one
fully paid and nonassessable C1 Class B Common Share, par value $.0001 per
share (the "C1 Class B Common Shares"), and (iii) A1 Class C Stock (as
defined in Section 3.1.2) (other than shares canceled in accordance with
Section 2.1.1(b) or with respect to which a demand to receive payment of
the fair value therefor in accordance with Section 3-203 of the MGCL has
been perfected) shall be converted into the right to receive from C1 one
fully paid and nonassessable C1 Class C Common Share, par value $.0001 per
share (the "C1 Class C Common Shares"). Each issued and outstanding share
of A1 Preferred Stock (as defined in Section 3.1.2) shall not be affected
by the Merger and will remain one issued and outstanding share of
preferred stock of the Surviving Corporation.
(b) All shares of A1 Common Stock that are owned by A1 as treasury
stock and any shares of A1 Common Stock owned by C1 Delaware, C2, or any
wholly owned Entity (as defined in Section 5.1) of C1 Delaware or C2 shall
be canceled and retired and shall cease to exist and no stock of the C1 or
other consideration shall be delivered in exchange therefor.
(c) Each outstanding option to purchase shares of A1 Common Stock
shall be converted in the manner described in Section 6.9.1.
<PAGE> 23
12
SECTION 2.2. Pairing of Shares. At the Effective Time, C1 Delaware
and C2 shall take the actions required of them pursuant to the C1/C2 Issuance
Agreement so that each and every C1 Common Share, C1 Class B Common Share or C1
Class C Common Share, as the case may be, outstanding or issued in connection
with the Merger or Section 1.1.2 will be entitled to a beneficial interest in
shares of C2 Common Stock pursuant to the C2 Trust Agreements (the C1 Common
Shares and the related beneficial interests in C2 Common Stock, the "Paired
Shares").
SECTION 2.3. Exchange of Certificates.
2.3.1. Rights of Certificateholders. At the Effective Time all
shares of A1 Common Stock converted in accordance with Section 2.1 will cease to
be outstanding, will be canceled and retired and will cease to exist, and each
holder of a certificate which, immediately prior to the Effective Time,
represented any such shares (collectively, the "Certificates") will thereafter
cease to have any rights with respect to such Common Stock Certificates, except
the right to receive, without interest, upon exchange of such Common Stock
Certificates in accordance with this Section 2.3, certificates representing the
number of shares of C1 Common Shares, C1 Class B Common Shares or C1 Class C
Common Shares, as the case may be, to which the holder thereof is entitled
pursuant to Section 2.1, together with the payments to which such holder is
entitled pursuant to this Section 2.3. No holder of a Certificate shall have any
rights as a stockholder of C1 or as the owner of beneficial interests in capital
stock of C2 until such holder's Certificates have been exchanged for
certificates representing the Paired Shares as provided herein.
2.3.2. Exchange Agent. Promptly following the Effective Time, C1
Delaware shall make available to an exchange agent to be designated before the
Closing Date by A1 and reasonably acceptable to C1 (the "Exchange Agent"), (x)
certificates representing the number of duly authorized whole Paired Shares
issuable in connection with the Merger and (y) an amount of cash equal to the
aggregate amount payable in accordance with Sections 1.5.1(b) and 2.3.6, to be
held for the benefit of and distributed to the holders of Certificates in
accordance with this Section. The Exchange Agent shall agree to hold such
certificates and funds (such certificates and funds, together with earnings
thereon, being referred to herein as the "Exchange Fund") for delivery as
contemplated by this Section and upon such additional terms as may be agreed
upon by the Exchange Agent and C1 Delaware.
<PAGE> 24
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2.3.3. Exchange Procedures. As soon as reasonably practicable after
the Effective Time, C1 shall cause the Exchange Agent to mail to each holder of
record of Certificates (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as C1, may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the shares issuable in connection with the Merger and the cash
payable pursuant to Sections 1.5.1(b) and 2.3.6. Upon surrender of a Certificate
for cancelation to the Exchange Agent, together with such letter of transmittal
duly executed and completed in accordance with its terms, the holder of such
Certificate shall be entitled to receive in exchange therefor the aggregate
consideration which such holder has the right to receive pursuant to the
provisions of this Article II (the "Applicable Merger Consideration"), as
adjusted by the cash amount payable in accordance with Section 1.5.1(b) and plus
the cash amount payable in accordance with Section 2.3.6, and the Certificates
so surrendered shall forthwith be canceled. In no event shall the holder of any
Certificate be entitled to receive interest on any funds to be received in the
Merger. In the event of a transfer of ownership of shares of A1 Common Stock,
which is not registered in the transfer records of the issuer thereof, a
certificate representing that number of whole Paired Shares (as adjusted by the
cash amount payable in accordance with Section 1.5.1(b) and plus the cash amount
payable in accordance with Section 2.3.6), may be issued to a transferee if the
Certificate is presented to the Exchange Agent accompanied by all documents
required to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.3.3, each Certificate shall be deemed at any time
after the Effective Time for all corporate purposes of C1, except as limited by
Section 2.3.4 below, to represent ownership of the shares into which the shares
shown thereon have been converted as contemplated by this Article II.
Notwithstanding the foregoing, Certificates surrendered for exchange by any
person constituting an "affiliate" of A1 for purposes of Section 6.4 shall not
be exchanged until C1 has received an Affiliate Agreement (as defined in Section
6.4) in accordance with the provisions of Section 6.4.
2.3.4. Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to C1 Common
<PAGE> 25
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Shares, C1 Class B Common Shares of C1 Class C Common Shares, as the case may
be, with a record date on or after the Effective Time, and no distributions to
be made to the beneficial owners of interests in C2 Common Stock arising out of
a dividend or distribution declared or made by C2 with respect to C2 Common
Stock after the Effective Time with a record date on or after the Effective
Time, shall be paid to the holder of any unsurrendered Certificate with respect
to the shares represented thereby and no cash payment shall be paid to any such
holder pursuant to Sections 1.5.1(b) and 2.3.6 until the holder of record of
such Certificate shall surrender such Certificate in accordance with this
Section. Until paid to the holders of such unsurrendered Certificates in
accordance with this Section 2.3.4, all such dividends and other distributions,
and all cash payments to be paid pursuant to Section 1.5.1(b) and 2.3.6, shall
be delivered to the Exchange Agent and held by it as part of the Exchange Fund.
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the Certificates
representing the Paired Shares issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions, if any, with a record date on or after the Effective Time which
theretofore became payable, but which were not paid by reason of the immediately
preceding sentence, with respect to such whole number of C1 Common Shares and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole number of C1 Common Shares, C1 Class B Common Shares of C1 Class C
Common Shares, as the case may be.
2.3.5. No Further Ownership Rights in Capital Stock of A1. All cash
and Paired Shares issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Sections
1.5.1(b) or 2.3.6) shall be deemed to have been issued at the Effective Time in
full satisfaction of all rights pertaining to the shares of capital stock
represented thereby, subject, however, to C1's obligation to pay any dividends
which may have been declared by A1, C1 or C2 on such shares of capital stock in
accordance with the terms of this Agreement and which remained unpaid at the
Effective Time. From and after the Effective Time, the stock transfer books of
A1 shall be closed and there shall be no further registration of transfers on
the stock transfer books of C1 of the shares of capital stock of A1 or Merger
Sub which
<PAGE> 26
15
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to C1 for any reason, they shall be
canceled and exchanged as provided in this Section.
2.3.6. No Fractional Shares. (a) No certificate or scrip
representing fractional C1 Common Shares, C1 Series A Preferred Shares, C1 Class
B Common Shares or C1 Class C Common Shares, as applicable (any such fractional
shares, the "Fractional Shares"), will be issued in the Merger upon the
surrender for exchange of Certificates or issued pursuant to Section 1.1.2(iv),
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a stockholder of C1.
(b) As promptly as practicable following the Effective Time, the
Exchange Agent shall determine the aggregate number of whole shares represented
by Fractional Shares of any class or series to which holders of Fractional
Shares would be entitled but for the provisions of clause (a) of this Section
2.3.6 (such number of shares being herein called the "Excess Shares"). As soon
after the Effective Time as practicable, the Exchange Agent, as agent for the
holders of Fractional Shares, shall sell the Excess Shares at then prevailing
prices on the NYSE, all in the manner provided in paragraph (c) of this Section
2.3.6.
(c) The sale of the Excess Shares by the Exchange Agent shall be
executed on the NYSE through a member firm of the NYSE and shall be executed in
round lots to the extent practicable. Until the net proceeds of such sale or
sales have been distributed to the holders of Fractional Shares, the Exchange
Agent will hold such proceeds in trust for the holders of Fractional Shares (the
"Stock Trust"). C1 shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of the Excess Shares. The
Exchange Agent shall determine the portion of the Stock Trust to which each
holder of Fractional Shares shall be entitled, if any, by multiplying the amount
of the aggregate net proceeds comprising the Stock Trust by a fraction the
numerator of which is the amount of the fractional share interest to which such
holder of Fractional Shares is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of
Fractional Shares of the same class or series are entitled.
(d) As soon as practicable after the determination of the amount of
cash, if any, to be paid to
<PAGE> 27
16
holders of Fractional Shares in lieu of any fractional share interests in
accordance with the immediately preceding paragraph, the Exchange Agent shall
make available such amounts to such holders of Fractional Shares.
2.3.7. Termination of Exchange Fund and Stock Trust. Any portion of
the Exchange Fund and Stock Trust which remains undistributed to the holders of
Certificates or C1 Common Shares, as applicable, for six (6) months after the
Effective Time shall be delivered to C1, upon demand, and any stockholders who
have not theretofore complied with this Article II shall thereafter look only to
C1 (subject to abandoned property, escheat and other similar laws) as general
creditors for payment of their claim for the Applicable Merger Consideration,
any cash payable in respect thereof pursuant to Sections 2.3.1(b) or 2.3.6 and
any dividends or distributions with respect thereto. C1 shall not be liable to
any such holder of shares for Paired Shares (or dividends or distributions with
respect thereto) or cash payable in respect thereof delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
Representations and Warranties of A1
SECTION 3.1. Representations and Warranties of A1. A1 represents and
warrants to C1 and C2 as follows:
3.1.1. Organization and Qualification. Each of A1 and the
Subsidiaries (as defined in Section 9.11) of A1 is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties, except for such failures to be so incorporated,
existing and in good standing or to have such power and authority which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on A1 and the Subsidiaries and
Consolidated Non-Corporate Affiliates (as defined in Section 9.11) of A1
(collectively, the "A1 Entities") taken as a whole. Each of the Consolidated
Non-Corporate Affiliates of A1 is a trust, limited liability company or
partnership duly organized, validly existing and, if applicable, is in good
standing under the laws of its jurisdiction of organization and has all
requisite power and authority to conduct its business as
<PAGE> 28
17
and to the extent conducted and to own, use and lease its assets and properties,
except for such failures to be so organized, existing or in good standing or to
have such power and authority which, individually or in the aggregate, are not
having and could not reasonably be expected to have a material adverse effect on
the A1 Entities taken as a whole. Each A1 Entity is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary, except for such failures to be so qualified, licensed or admitted and
in good standing which, individually or in the aggregate, are not having and
could not be reasonably expected to have a material adverse effect on the A1
Entities taken as a whole. Section 3.1.1 of the letter dated the date hereof and
delivered by A1 to C1 concurrently with the execution and delivery of this
Agreement (the "A1 Disclosure Letter") sets forth, as of the date hereof, (i)
with respect to each Subsidiary of A1, (A) the name of such Subsidiary and (B)
if such Subsidiary is not wholly owned, directly or indirectly, by A1, (1) its
authorized capital stock, (2) the number of issued and outstanding shares of its
capital stock and (3) the record and beneficial owners of outstanding shares of
its capital stock and (ii) with respect to each Consolidated Non- Corporate
Affiliate of A1, (A) the name, type of entity and jurisdiction of organization
of such Consolidated Non- Corporate Affiliate and (B) the names of all parties
other than A1 Entities that own equity interests therein. Except for interests
in the A1 Entities and as disclosed in Section 3.1.1 of the A1 Disclosure Letter
and as disclosed in the A1 SEC Reports (as defined below), as of the date
hereof, neither A1 nor any other A1 Entity directly or indirectly owns any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, (i) any corporation or
(ii) any trust, limited liability company, partnership, joint venture or other
non-corporate business association or entity (other than investments in such
entities that (A) in the aggregate are reflected in the latest A1 Financial
Statements (as defined herein) as having a value not exceeding $20,000,000, (B)
by operation of law (including the interposition of a Subsidiary or Consolidated
Non- Corporate Affiliate holding only such investments) expose no A1 Entity
(other than such an interposed A1 Entity) to any liability with respect to the
obligations of such entities, whether as a controlling person, partner,
guarantor, surety or otherwise and (C) do not and could not reasonably be
expected to cause A1 to fail to meet any REIT Requirement
<PAGE> 29
18
(the exceptions to the general representation set forth in this sentence, the
"A1 Permitted Minority Investments")). A1 has previously delivered to C1 and C2
correct and complete copies of its articles of incorporation and Bylaws, each as
amended to the date hereof.
3.1.2. Capital Stock. (a) As of the date hereof, the authorized
capital stock of A1 consists solely of 375,796,000 shares of Common Stock, par
value $0.0001 per share (the "A1 Class A Stock"), 12,000,000 shares of Class B
Common Stock, par value $0.0001 per share (the "A1 Class B Stock"), 4,000 shares
of Class C Common Stock, par value $0.0001 per share (the "A1 Class C Stock" and
together with the A1 Class A Stock and the A1 Class B Stock, the "A1 Common
Stock"), 9,200,000 shares of 8 3/4% Series B Cumulative Redeemable Preferred
Stock, par value $0.0001 per share (the "A1 Series B Preferred Stock"),
3,000,000 shares of 7.89% Series C Cumulative Step-Up Premium Rate Preferred
Stock, par value $0.0001 per share (the "A1 Series C Preferred Stock" and
together with the A1 Series B Preferred Stock and the A1 Series B Preferred
Stock, the "A1 Preferred Stock"), and 250,000,000 shares of Excess Stock, par
value $.0001 per share (the "Excess Stock"). As of February 17, 1998, (i)
106,482,222 shares of A1 Class A Stock, 3,200,000 shares of Class B Stock, 4,000
shares of Class C Stock, no shares of Series A Preferred Stock, 8,000,000 shares
of Series B Preferred Stock, 3,000,000 shares of Series C Preferred Stock and no
shares of Excess Stock were issued and outstanding, (ii) no shares of any of
such classes of stock were held by A1 in its treasury and (iii) 4,595,000 and
100,000 shares of A1 Common Stock were reserved for issuance pursuant to A1's
Employee Stock Option Plan and A1's Director Stock Option Plan, respectively
(collectively, the "A1 Stock Plans") ((i), (ii) and (iii), collectively, the "A1
Permissible Issuance Arrangements"). Between such date and the date hereof,
except as set forth in Section 3.1.2 of the A1 Disclosure Letter, there has been
no change in the number of issued and outstanding shares of A1 Common Stock or
shares of A1 Common Stock held in treasury or reserved for issuance other than
pursuant to the A1 Permissible Issuance Arrangements. All of the issued and
outstanding shares of A1 Common Stock and A1 Preferred Stock are, and all shares
reserved for issuance will be, upon issuance in accordance with the terms
specified in the instruments or agreements pursuant to which they are issuable,
duly authorized, validly issued, fully paid and nonassessable. Except pursuant
to this Agreement and except as set forth in Section 3.1.2 of the A1 Disclosure
Letter and as set forth in the A1 SEC Reports, as of the date hereof, there are
no outstanding subscriptions, options,
<PAGE> 30
19
warrants, rights (including "phantom" stock rights), preemptive rights or other
contracts, commitments, understandings or arrangements, including any right of
conversion or exchange under any outstanding security, instrument or agreement
(together, "Options"), obligating any A1 Entity to issue or sell any equity
interest in A1 or to grant, extend or enter into any Option with respect thereto
other than pursuant to A1 Permissible Issuance Arrangements. Except pursuant to
this Agreement and except as set forth in Section 3.1.2 of the A1 Disclosure
Letter, as of the date hereof, there are no outstanding contractual obligations
of any A1 Entity to repurchase, redeem or otherwise acquire any equity interest
in A1.
(b) Except as disclosed in Section 3.1.2 of the A1 Disclosure
Letter, all of the outstanding shares of capital stock of each Subsidiary of A1
are duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by A1 or any other A1 Entity wholly owned, directly
or indirectly, by A1, free and clear of any liens, claims, mortgages, deeds of
trust, deeds to secure debt, encumbrances, pledges, security interests, equities
and charges of any kind (each a "Lien"). Except as disclosed in Section 3.1.2 of
the A1 Disclosure Letter, all equity interests in the Consolidated Non-Corporate
Affiliates of A1 that are not owned by third parties (as disclosed in Section
3.1.1 of the A1 Disclosure Letter) are owned by other A1 Entities, free and
clear of any Liens. Except as disclosed in Section 3.1.2 of the A1 Disclosure
Letter and as set forth in the A1 SEC Reports, as of the date hereof, there are
no (i) outstanding Options (other than Options in favor of A1 or any other A1
Entity wholly owned, directly or indirectly, by A1) obligating any A1 Entity to
issue or sell any shares of capital stock of, or other equity interest in, any
Subsidiary or Consolidated Non-Corporate Affiliate of A1 or to grant, extend or
enter into any such Option or (ii) voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
A1 or an A1 Entity wholly owned, directly or indirectly, by A1 with respect to
the voting of or the right to participate in dividends or other earnings on any
capital stock of any Subsidiary of A1 or an any equity interest in any
Consolidated Non-Corporate Affiliate of A1, other than as set forth in such A1
Entity's Charter Documents.
(c) Except as disclosed in Section 3.1.2 of the A1 Disclosure Letter
and as set forth in the A1 SEC Reports, as of the date hereof, there are no
outstanding contractual obligations (other than Options in favor of A1 or an A1
<PAGE> 31
20
Entity wholly owned, directly or indirectly, by A1) of any A1 Entity to
repurchase, redeem or otherwise acquire any shares of capital stock of, or other
equity interest in, any Subsidiary or Consolidated Non-Corporate Affiliate of
A1. Except as disclosed in Section 3.1.2 of the A1 Disclosure Letter, as of the
date hereof, there are no outstanding contractual obligations of any A1 Entity
to provide funds to, or to make any investment (in the form of a loan, capital
contribution or otherwise) in, any A1 Entity or other person (except for A1 and
A1 Entities wholly owned, directly or indirectly, by A1), other than in
connection with A1 Permitted Minority Investments.
3.1.3. Authority Relative to this Agreement. A1 has full corporate
power and authority to enter into this Agreement and, subject, with respect to
the Merger, to obtaining the A1 Stockholders' Approval (as defined in Section
6.3.1), to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by A1 and the consummation by A1 of the transactions contemplated hereby have
been duly and validly approved by its Board of Directors, the Board of Directors
of A1 has recommended adoption of this Agreement by its stockholders and
directed that this Agreement be submitted to its stockholders for their
consideration, and no other corporate proceedings on the part of A1 or its
stockholders are necessary to authorize the execution, delivery and performance
of this Agreement by A1 and the consummation by A1 of the transactions
contemplated hereby, other than obtaining the A1 Stockholders' Approval. This
Agreement has been duly and validly executed and delivered by A1 and constitutes
a legal, valid and binding obligation of A1, enforceable against A1 in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.1.4. Non-Contravention; Approvals and Consents. (a) The execution
and delivery of this Agreement by A1 do not, and the performance by A1 of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, (i) conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancelation, modification or acceleration of, or result in the
creation
<PAGE> 32
21
or imposition of any Lien upon any of the assets or properties of any A1 Entity
under, any of the terms, conditions or provisions of (x) the certificate or
articles of incorporation or By-laws (in the case of a corporation), trust
agreement, declaration of trust, deed or trustees' regulations (in the case of a
trust), limited liability company or operating agreement or registration
certificate (in the case of a limited liability company) or agreement or
certificate of partnership or joint venture (in the case of a partnership or
joint venture) (including, in each such case, all amendments, supplements, other
modifications and assignments thereof) ("Charter Documents") of any A1 Entity,
or (y) subject to the obtaining of the A1 Stockholders' Approval and the taking
of the actions described in paragraph (b) of this Section and the obtaining of
the consents and approvals, the making of the filings and the giving of the
notices described in Section 3.1.4 of the A1 Disclosure Letter, (1) any statute,
law, rule, regulation or ordinance (together, "laws"), or any judgment, decree,
order, writ, permit or license (together, "orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision (a "Governmental or Regulatory Authority")
applicable to any A1 Entity or any of its assets or properties, or (2) any note,
bond, mortgage, deed of trust, deed to secure debt, security agreement,
co-tenancy agreement, reciprocal easement agreement, management agreement,
leasing agreement, indenture, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind (including, in
each case, all amendments, supplements, other modifications and assignments
thereof) (together, "Contracts") to which any A1 Entity is a party or by which
any A1 Entity or any of its assets or properties is bound, excluding from the
foregoing clauses (1) and (2) conflicts, violations, breaches, defaults, rights
of payment or reimbursement, terminations, cancellations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on the A1 Entities taken as a whole or on the ability of A1 to consummate
the transactions contemplated by this Agreement or (ii) to the knowledge of A1,
adversely affect the qualification of A1 as a REIT.
(b) Except (i) for the filing of the Proxy Statement (as defined in
Section 3.1.9) and the Registration Statement (as defined in Section 4.1.9) with
the SEC pursuant to the Securities Exchange Act of 1934, as amended,
<PAGE> 33
22
and the rules and regulations thereunder (the "Exchange Act"), and the
Securities Act of 1933, as amended, and the rules and regulations thereunder
(the "Securities Act"), the declaration of the effectiveness of the Registration
Statement by the SEC and filings with various state securities authorities that
are required in connection with the transactions contemplated by this Agreement,
(ii) for the filing of the Articles of Merger and other appropriate merger
documents required by the MGCL with the Maryland Secretary of State and, in each
case, with any local recording office, and appropriate documents with the
relevant authorities of other states in which any of the Constituent
Corporations are qualified to do business, (iii) for such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under (A) the laws of any foreign country in which any A1 Entity
conducts any business or owns any property or assets or (B) any federal, state,
local or foreign Environmental Law (as defined below) and (iv) as disclosed in
Section 3.1.4 of the A1 Disclosure Letter, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority or other
public or private third party is necessary or required under any of the terms,
conditions or provisions of any law or order of any Governmental or Regulatory
Authority or any Contract to which any A1 Entity is a party or by which any A1
Entity or any of its assets or properties is bound for the execution and
delivery of this Agreement by A1, the performance by A1 of its obligations
hereunder or the consummation by A1 of the transactions contemplated hereby,
other than such consents, approvals, actions, filings and notices which the
failure to make or obtain, as the case may be, individually or in the aggregate,
could not be reasonably expected to have a material adverse effect on the A1
Entities taken as a whole or on the ability of A1 to consummate the transactions
contemplated by this Agreement.
3.1.5. SEC Reports and Financial Statements. A1 has delivered to C1
and C2 prior to the execution of this Agreement a true and complete copy of each
form, report, schedule, registration statement (as declared effective and any
posteffective amendments), definitive proxy statement and other document
(together with all amendments thereof and supplements thereto, except as
provided above with respect to registration statements) filed by A1 or any other
A1 Entity with the SEC since January 1, 1996 (as such documents have since the
time of their filing been amended or supplemented, the "A1 SEC Reports"), which
are all the documents (other than preliminary material) that A1 or any other A1
Entity were required to file with the SEC since
<PAGE> 34
23
such date. As of their respective dates, the A1 SEC Reports (i) complied as to
form in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements (including, in each case, the notes, if any, thereto) included in the
A1 SEC Reports (the "A1 Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments (which are not expected to be, individually
or in the aggregate, materially adverse to the A1 Entities taken as a whole))
the consolidated financial position of A1 and its consolidated subsidiaries as
at the respective dates thereof and the consolidated results of their operations
and cash flows for the respective periods then ended. Except as set forth in
Section 3.1.5 of the A1 Disclosure Letter, each Subsidiary and Consolidated Non-
Corporate Affiliate of A1 in existence on the date hereof is fully consolidated
with A1 in the A1 Financial Statements for all periods covered thereby.
3.1.6. Absence of Certain Changes or Events. Except as disclosed in
the A1 SEC Reports filed prior to the date of this Agreement, between September
30, 1997 and the date hereof there has not been any change, event or development
having, or that could be reasonably expected to have, individually or in the
aggregate, a material adverse effect on the A1 Entities taken as a whole.
3.1.7. [Intentionally Omitted].
3.1.8. Legal Proceedings. Except as disclosed in the A1 SEC Reports
filed prior to the date of this Agreement or in Section 3.1.8 of the A1
Disclosure Letter, as of the date hereof, (i) there are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of A1, threatened
against, relating to or affecting, nor to the knowledge of A1 are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened
<PAGE> 35
24
against, relating to or affecting any A1 Entity or any of its assets and
properties which, individually or in the aggregate, could be reasonably expected
to have a material adverse effect on the A1 Entities taken as a whole or on the
ability of A1 to consummate the transactions contemplated by this Agreement and
(ii) no A1 Entity is subject to any order of any Governmental or Regulatory
Authority which, individually or in the aggregate, is having or could be
reasonably expected to have a material adverse effect on the A1 Entities taken
as a whole or on the ability of A1 to consummate the transactions contemplated
by this Agreement.
3.1.9. Information Supplied. The joint proxy statement relating to
the Stockholders' Meetings (as defined in Section 6.3.2), as amended or
supplemented from time to time (as so amended and supplemented, the "Proxy
Statement"), and any other documents to be filed by A1 with the SEC or any other
Governmental or Regulatory Authority in connection with the Merger and the other
transactions contemplated hereby will (in the case of the Proxy Statement and
any such other documents filed with the SEC under the Exchange Act or the
Securities Act) comply as to form in all material respects with the requirements
of the Exchange Act and the Securities Act, as applicable, and will not, on the
date of its filing or, in the case of the Proxy Statement, at the date it is
first mailed to stockholders of A1 and at the time of the A1 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, except that no representation is made by A1 with respect to
information supplied by or on behalf of C1 or C2 or any of their respective
Subsidiaries, shareholders or stockholders expressly for inclusion therein.
3.1.10. Compliance with Laws and Orders. The A1 Entities hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "A1 Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the A1 Entities taken as a whole.
The A1 Entities are in compliance with the terms of the A1 Permits, except
failures so to comply which, individually or in the aggregate, are not having
and could not be reasonably expected to have a material adverse effect on the A1
Entities taken as a whole.
<PAGE> 36
25
Except as disclosed in the A1 SEC Reports filed prior to the date of this
Agreement or in Section 3.1.10 of the A1 Disclosure Letter, the A1 Entities are
not in violation of or default under any law or order of any Governmental or
Regulatory Authority, except for such violations or defaults which, individually
or in the aggregate, are not having and could not be reasonably expected to have
a material adverse effect on the A1 Entities taken as a whole.
3.1.11. Compliance with Agreements; Certain Agreements. Except as
disclosed in the A1 SEC Reports filed prior to the date of this Agreement or in
Section 3.1.11 of the A1 Disclosure Letter, neither any A1 Entity nor, to the
knowledge of A1, any other party thereto is in breach or violation of, or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, could be
reasonably expected to result in a default under, (i) the Charter Documents of
any A1 Entity that is a corporation or (ii) any Contract to which any A1 Entity
is a party or by which any A1 Entity or any of its assets or properties is bound
or any Charter Document of any A1 Entity that is not a corporation, except in
the case of this clause (ii) for breaches, violations and defaults which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the A1 Entities taken as a whole.
3.1.12. Taxes. (a) Each A1 Entity has timely filed all material tax
returns and reports required to be filed by it, or requests for extensions to
file such returns or reports have been timely filed or granted and have not
expired, and all such tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to timely file or failures to
be complete and accurate in all respects, as applicable, individually or in the
aggregate, would not have a material adverse effect on the A1 Entities taken as
a whole. Each A1 Entity has paid (or A1 has paid on its behalf) all taxes shown
as due on such tax returns and reports and all material taxes otherwise due. The
most recent financial statements contained in the A1 SEC Reports reflect an
adequate reserve for all taxes payable by the A1 Entities for all taxable
periods and portions thereof accrued through the date of such financial
statements, and no deficiencies for any taxes have been proposed, asserted or
assessed against any A1 Entity that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that would
not, individually or in the aggregate, have a material adverse effect on the A1
Entities
<PAGE> 37
26
taken as a whole. Except as set forth in Section 3.1.12 of the A1 Disclosure
Letter, as of the date hereof, no requests for waivers of the time to assess or
collect any taxes against any A1 Entity have been granted or are pending, and no
audits or examinations of any A1 Entity are being conducted or, to the knowledge
of any A1 Entity, threatened by any taxing authority.
(b) No A1 Entity has taken any action that would create a material
risk that the Merger would not qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code.
(c) At all times since December 31, 1993, A1 has qualified as a REIT
and its current method of operation will enable it to continue to qualify as a
REIT.
(d) The execution or delivery by A1 of this Agreement and the
consummation by A1 of the transactions contemplated hereby or compliance with or
fulfillment of the terms and provisions hereof by A1, to the knowledge of A1,
will not adversely affect the qualification of A1 as a REIT or adversely affect
the qualification of C1 as a REIT after the Effective Time.
(e) Except as set forth in Section 3.1.12 of the A1 Disclosure
Letter, no A1 Entity is bound by any effective private letter ruling, closing
agreement or similar agreement with any taxing authority (an "A1 Tax Ruling"),
no U.S. A1 Entity has any applications or requests outstanding for any such
rulings or agreements and no such A1 Tax Ruling has been revoked or modified in
any manner.
(f) A1 is not, and has not at any time been, a member of any
consolidated, combined or unitary group for Federal, state, local and foreign
tax purposes.
(g) As used in this Section 3.1.12 and in Sections 4.1.12 and
4.2.12, "taxes" shall include all Federal, state, local and foreign income,
franchise, property, sales, use, excise and other taxes, including obligations
for withholding taxes from payments due or made to any other person and any
interest, penalties or additions to tax.
3.1.13. Employee Benefit Plans; ERISA. (a) Except as described in
the A1 SEC Reports filed prior to the date of this Agreement or as would not
have a material adverse effect on the A1 Entities taken as a whole, as of the
date hereof, (i) all A1 Employee Benefit Plans (as
<PAGE> 38
27
defined below) are in compliance with all applicable requirements of law,
including ERISA and the Code, and (ii) no A1 Entity has any liabilities or
obligations with respect to any such A1 Employee Benefit Plans, whether accrued,
contingent or otherwise, nor to the knowledge of A1 are any such liabilities or
obligations expected to be incurred.
(b) As used herein:
(i) "A1 Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required
to be contributed to by any A1 Entity for the benefit of the
current or former employees or directors of any A1 Entity and
existing on the date of this Agreement or at any time
subsequent thereto and on or prior to the Effective Time and,
in the case of a Plan which is subject to Part 3 of Title I of
the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"),
Section 412 of the Code or Title IV of ERISA, at any time
during the five-year period preceding the date of this
Agreement; and
(ii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement,
stock purchase, stock option, stock ownership, stock
appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria,
life, health, medical, accident, disability, workmen's
compensation or other insurance, severance, separation,
termination, change of control or other benefit plan,
agreement, practice, policy, program or arrangement of any
kind, whether written or oral, including, but not limited to
any "employee benefit plan" within the meaning of Section 3(3)
of ERISA.
(c) No part of the assets of A1 or any A1 Entity constitute "plan
assets" within the meaning of 29 C.F.R. Section 2510.101.
3.1.14. Labor Matters. Except as disclosed in the A1 SEC Reports
filed prior to the date of this Agreement or in Section 3.1.14 of the A1
Disclosure Letter, there are no material controversies pending or, to the
knowledge of A1, threatened between any A1 Entity and any representatives
<PAGE> 39
28
of its employees, except as would not, individually or in the aggregate, have a
material adverse effect on the A1 Entities taken as a whole, and, to the
knowledge of A1, there are no material organizational efforts presently being
made involving any of the now unorganized employees of any A1 Entity except as
could not, individually or in the aggregate, have a material adverse effect on
the A1 Entities taken as a whole.
3.1.15. Environmental Matters. (a) Except as disclosed in Section
3.1.15 of the A1 Disclosure Letter, each A1 Entity has obtained or submitted
timely applications for all licenses, permits, authorizations, registrations
approvals and consents from Governmental or Regulatory Authorities which are
required under any applicable Environmental Law (as defined below) in respect of
its business or operations ("Environmental Permits"), except for such failures
to have Environmental Permits and to submit timely applications which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the A1 Entities taken as a whole. Each of such
Environmental Permits obtained by such A1 Entity is in full force and effect and
each A1 Entity is in compliance with the terms and conditions of all such
Environmental Permits and with all applicable Environmental Laws, except for
such failures to be in full force and effect or in compliance which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the A1 Entities taken as a whole.
(b) Except as disclosed in the A1 SEC Reports filed prior to the
date of this Agreement or in Section 3.1.15 of the A1 Disclosure Letter, to the
knowledge of A1 as of the date hereof, no site or facility now or previously
owned, operated or leased by any A1 Entity is listed or proposed for listing on
the National Priorities List promulgated pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, and
the rules and regulations thereunder ("CERCLA"), or on any similar state or
local list of sites requiring investigation or cleanup.
(c) Except as disclosed in the A1 SEC Reports filed prior to the
date of this Agreement or in Section 3.1.15 of the A1 Disclosure Letter, no
Liens have arisen under or pursuant to any Environmental Law on any site or
facility owned, operated or leased by any A1 Entity, other than any such Liens
not individually or in the aggregate material to the A1 Entities taken as a
whole, and no action of any Governmental or Regulatory Authority has
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29
been taken or, to the knowledge of A1, is in process which could subject any of
such properties to such Liens, except for such Liens which, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on the A1 Entities taken as a whole, and no A1 Entity is required to
place any notice or restriction relating to the presence of Hazardous Materials
at any such site or facility owned by it in any deed to the real property on
which such site or facility is located, except for such notices or restrictions
which, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the A1 Entities taken as a whole.
(d) Except as disclosed in Section 3.1.15 of the A1 Disclosure
Letter, as of the date hereof, there have been no written reports, environmental
investigations, studies, audits, tests, reviews or other analyses conducted by,
or which are in the possession of, any A1 Entity in relation to any site or
facility now or previously owned, operated or leased by any A1 Entity that both
(i) conclude that any A1 Entity could have liability under Environmental Laws
that, individually or in the aggregate, could reasonably be expected to have a
material adverse effect on the A1 Entities taken as a whole, and (ii) have not
been delivered to C1 and C2 prior to the execution of this Agreement.
(e) As used herein:
(i) "Environmental Law" means any law, regulation or order of any
Governmental or Regulatory Authority relating to the
regulation or protection of human health, safety or the
environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes into the
environment (including, without limitation, ambient air, soil,
surface water, ground water, wetlands, land or subsurface
strata), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes; and
(ii) "Hazardous Material" means (A) any petroleum or petroleum
products, flammable explosives, radioactive materials,
asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing levels of
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polychlorinated biphenyls (PCBs); (B) any chemicals or other
materials or substances which are now or hereafter become
defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants" or words of similar
import under any Environmental Law; and (C) any other chemical
or other material or substance, exposure to which is
prohibited, limited or regulated by any Governmental or
Regulatory Authority under any Environmental Law.
3.1.16. Intellectual Property Rights. Each A1 Entity has all right,
title and interest in, or a valid and binding license to use, all Intellectual
Property (as defined below) individually or in the aggregate material to the
conduct of the businesses of the A1 Entities taken as a whole. No A1 Entity is
in default (or with the giving of notice or lapse of time or both, would be in
default) under any license to use such Intellectual Property, such Intellectual
Property is not, to the knowledge of A1, being infringed by any third party, and
no A1 Entity is infringing any Intellectual Property of any third party, except
for such defaults and infringements which, individually or in the aggregate, are
not having and could not be reasonably expected to have a material adverse
effect on the A1 Entities taken as a whole. For purposes of this Agreement,
"Intellectual Property" means patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and service
mark rights, service names and service name rights, copyrights and copyright
rights and other proprietary intellectual property rights and all pending
applications for and registrations of any of the foregoing.
3.1.17. Real Property. Section 3.1.17 of the A1 Disclosure Letter
sets forth a list of all principal properties owned or leased (as lessee) by the
A1 Entities as of the date hereof.
3.1.18. Vote Required. Assuming the accuracy of the representation
and warranty contained in Sections 4.1.20 and 4.2.19, the affirmative vote of
the holders of record of at least two-thirds of the outstanding shares of A1
Common Stock with respect to the adoption of this Agreement is the only vote of
the holders of any class or series of the capital stock of A1 required to
approve the Merger and the other transactions contemplated hereby.
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31
3.1.19. Opinion of Financial Advisor. The Board of Directors of A1
has received the opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated
("Merrill Lynch"), financial advisor to A1, to the effect that, as of the date
hereof, the consideration to be received by the holders of A1 Common Stock
pursuant to this Agreement is fair from a financial point of view to such
holders.
ARTICLE IV
Representations and Warranties of C1 and C2
SECTION 4.1 Representations and Warranties of C1. C1 represents and
warrants to A1 as follows:
4.1.1. Organization and Qualification. Each of C1 and the
Consolidated Non-Corporate Affiliates of C1 is a trust, limited liability
company or partnership duly organized, validly existing and, if applicable, is
in good standing under the laws of its jurisdiction of organization and has all
requisite power and authority to conduct its business as and to the extent
conducted and to own, use and lease its assets and properties, except for such
failures to be so organized, existing or in good standing or to have such power
and authority which, individually or in the aggregate, are not having and could
not reasonably be expected to have a material adverse effect on C1 and the
Subsidiaries and Consolidated Non-Corporate Affiliates of C1 (collectively, the
"C1 Entities") and C2 and the Subsidiaries and Consolidated Non-Corporate
Affiliates of C2 (collectively, the "C2 Entities"; and, together with the C1
Entities, the "C1/C2 Entities") taken as a whole. Each Subsidiary of C1 is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all requisite power and
authority to conduct its business as and to the extent now conducted and to own,
use and lease its assets and properties, except for such failures to be so
incorporated, existing and in good standing or to have such power and authority
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on the C1/C2 Entities
taken as a whole. Each C1 Entity is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
which,
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32
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. Section 4.1.1 of the letter dated the date hereof and delivered by C1 to
A1 concurrently with the execution and delivery of this Agreement (the "C1
Disclosure Letter") sets forth, as of the date hereof, (i) with respect to each
Subsidiary of C1, (A) the name and jurisdiction of incorporation of such
Subsidiary and (B) if such Subsidiary is not wholly owned, directly or
indirectly, by C1, (1) its authorized capital stock, (2) the number of issued
and outstanding shares of its capital stock and (3) the record and beneficial
owners of outstanding shares of its capital stock and (ii) with respect to each
Consolidated Non-Corporate Affiliate of C1, (A) the name, type of entity and
jurisdiction of organization of such Consolidated Non-Corporate Affiliate, (B)
the names of all parties that own equity interests therein and (C) the method of
consolidation employed with respect to the consolidation of the accounts of such
Consolidated Non-Corporate Affiliate in the financial statements of C1,
including the percentage(s) employed in the case of proportional consolidation.
Except for interests in the C1 Entities and as disclosed in Section 4.1.1 of the
C1 Disclosure Letter, as of the date hereof, neither C1 nor any other C1 Entity
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, (i) any corporation (other than less than 9.8% of any series or
class of capital stock acquired or held for the purpose of meeting C1's
obligations under its Trustees' and Officers' Deferred Remuneration Plan and
Supplemental Executive Retirement Plan (the "C1 Deferral Plans")) or (ii) any
trust, limited liability company, partnership, joint venture or other
non-corporate business association or entity (other than (x) as noncontrolling
investments acquired or held for the purpose of meeting C1's obligations under
the C1 Deferral Plans and (y) investments in such entities that (A) in the
aggregate are reflected in the latest C1 Financial Statements (as defined
herein) as having a value not exceeding $20,000,000, (B) by operation of law
(including the interposition of a C1 Entity holding only such investments)
expose no C1 Entity (other than such an interposed C1 Entity) to any liability
with respect to the obligations of such entities, whether as a controlling
person, partner, guarantor, surety or otherwise and (C) do not and could not
reasonably be expected to cause C1 to fail to meet any REIT Requirement (the
exceptions to the general representation set forth in this sentence, the "C1
Permitted Minority Investments")). C1 has previously delivered to A1 correct and
complete
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33
copies of the Second Amended and Restated Declaration of Trust (C1's
"Declaration of Trust") and Trustee's Regulations of C1, each as amended to the
date hereof.
4.1.2. Capital Stock. (a) As of the date of this Agreement, the
total number of preference shares of beneficial interest in C1 ("C1 Preference
Shares") which C1 has the authority to issue is 209,249 and the total number of
common shares of beneficial interest in C1 (the "C1 Common Shares") which C1 has
the authority to issue is as set forth in Exhibit A of C1's Declaration of
Trust, as amended through the date hereof. As of the date hereof, the C1
Preference Shares and the C1 Common Shares represent all the authorized shares
of beneficial interest in C1. As of February 17, 1998, 209,249 C1 Preference
Shares were issued and outstanding, consisting solely of the C1 6.50% Preference
Shares. As of February 17, 1998, 25,326,909 C1 Common Shares were issued and
outstanding 1,092,500, C1 Common Shares were held in the treasury of C1 and
2,600,000 C1 Common Shares were reserved for issuance pursuant to C1 Permissible
Issuance Arrangements (as defined below) other than those described in clause
(i) of the definition thereof. Between such date and the date hereof, except as
set forth in Section 4.1.2 of the C1 Disclosure Letter, there has been no change
in the number of issued and outstanding C1 Common Shares or the number of C1
Common Shares held in treasury or reserved for issuance other than pursuant to
(i) contracts entered into pursuant to C1's 1997 Plan for Shareholder
Contractual Purchases (the "C1 QSPP"), (ii) contracts (the "C1 ESPP Contracts")
styled "Employee Share Purchase Plan Contract", or similarly styled, entered
into before the date hereof, (iii) option agreements entered into in connection
with grants of options under the 1993 Share Option Plan of C1 (the "C1 Option
Plan") made before the date hereof, (iv) the C1 Deferral Plans, (v) the
conversion provisions of the Certificate of Designation for the C1 Preference
Shares and (vi) contracts ("C1 Termination Agreements") with individuals, other
than executive officers, whose employment with C1 has been terminated in the
ordinary course of business of the C1 Entities, which contracts provide for the
repurchase of C1 Common Shares held by such individuals and/or the cancelation
of options issued to such individuals under the C1 Option Plan (the contracts
and arrangements described in clauses (i), (iii), (iv) and (v), the "C1
Permissible Issuance Arrangements"; the contracts and arrangements described in
clauses (ii), (iii), (iv), (v) and (vi), the "C1 Permissible Redemption
Arrangements"). All of the issued and outstanding C1 Common Shares and C1
Preference Shares are, and all such shares reserved for issuance will be, upon
issuance in accordance
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34
with the terms specified in the instruments or agreements pursuant to which they
are issuable, duly authorized, validly issued, fully paid and nonassessable and
all C1 Common Shares issuable in exchange for shares of A1 Common Stock at the
Effective Time and the related beneficial interests in shares of C2 Common Stock
will be paired with each other pursuant to the C2 Trust Agreements in the same
ratio as all other C1 Common Shares and related beneficial interests in shares
of C2 Common Stock are paired, as such ratio may be changed from time to time.
Except pursuant to this Agreement and except as set forth in Section 4.1.2 of
the C1 Disclosure Letter, as of the date hereof, there are no outstanding
Options obligating any C1/C2 Entity to issue or sell any shares of beneficial
interest or other equity interest in C1 or to grant, extend or enter into any
Option with respect thereto other than pursuant to C1 Permissible Issuance
Arrangements. Except pursuant to this Agreement and except as set forth in
Section 4.1.2 of the C1 Disclosure Letter, as of the date hereof, there are no
outstanding contractual obligations of any C1/C2 Entity to repurchase, redeem or
otherwise acquire any shares of beneficial interest or other equity interest in
C1 other than pursuant to C1 Permissible Redemption Arrangements.
(b) Except as disclosed in Section 4.1.2 of the C1 Disclosure
Letter, all of the outstanding shares of capital stock of each Subsidiary of C1
are duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by C1 or another C1 Entity wholly owned, directly or
indirectly, by C1, free and clear of any Liens. Except as disclosed in Section
4.1.2 of the C1 Disclosure Letter, all equity interests in the Consolidated
Non-Corporate Affiliates of C1 that are not owned by third parties (as disclosed
in Section 4.1.1 of the C1 Disclosure Letter) are owned by other C1 Entities,
free and clear of any Liens. Except as disclosed in Section 4.1.2 of the C1
Disclosure Letter, as of the date hereof, there are no (i) outstanding Options
(other than Options in favor of C1 or a C1 Entity wholly owned, directly or
indirectly, by C1) obligating any C1 Entity to issue, sell or otherwise transfer
any shares of capital stock of, or other equity interest in, any Subsidiary or
Consolidated Non-Corporate Affiliate of C1 or to grant, extend or enter into any
such Option or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person other than C1 or another C1
Entity wholly owned, directly or indirectly, by C1 with respect to the voting of
or the right to participate in dividends or other earnings on any capital stock
of any Subsidiary of C1 or any equity interest in any Consolidated Non-Corporate
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35
Affiliate of C1, other than as set forth in such C1 Entity's Charter Documents.
(c) Except as disclosed in Section 4.1.2 of the C1 Disclosure
Letter, as of the date hereof, there are no outstanding contractual obligations
(other than Options in favor of C1 or a C1 Entity wholly owned, directly or
indirectly, by C1) of any C1 Entity to repurchase, redeem or otherwise acquire
any shares of capital stock of, or other equity interest in, any Subsidiary or
Consolidated Non- Corporate Affiliate of C1. Except as disclosed in Section
4.1.2 of the C1 Disclosure Letter, as of the date hereof, there are no
outstanding contractual obligations of any C1 Entity to provide funds to, or to
make any investment (in the form of a loan, capital contribution or otherwise)
in, any C1 Entity or other person (except for C1 and C1 Entities wholly owned,
directly or indirectly, by C1), other than in connection with C1 Permitted
Minority Investments.
4.1.3. Authority Relative to this Agreement. C1 has all requisite
power and authority to enter into this Agreement and, subject, (i) with respect
to the C1 Delaware Reorganization, to obtaining the requisite approval of the
shareholders of C1 and (ii) with respect to the Merger, to obtaining the C1
Stockholders' Approval (as defined in Section 6.3.2), to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by C1, and the consummation by C1 of
the transactions contemplated hereby, have been duly and validly approved by its
Board of Trustees, the Board of Trustees of C1 has recommended adoption of this
Agreement by the shareholders of C1 and directed that this Agreement, the
conduct of the C1 Delaware Reorganization and the issuance of C1 Common Shares
in connection with the Merger and Section 1.1.2 be submitted to the shareholders
of C1 for their consideration, and no other corporate or trust proceedings on
the part of either of C1 or its shareholders are necessary to authorize the
execution, delivery and performance of this Agreement by C1 and the consummation
by C1 of the transactions contemplated hereby, other than obtaining the
requisite approval of the shareholders of C1 for the C1 Delaware Reorganization
and obtaining the C1 Stockholders' Approval. This Agreement has been duly and
validly executed and delivered by C1 and constitutes a legal, valid and binding
obligation of C1 enforceable against C1 in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by
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36
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.1.4. Non-Contravention; Approvals and Consents. (a) The execution
and delivery of this Agreement by C1 do not, and the performance by C1 of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, (i) conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancelation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of any
C1 Entity under, any of the terms, conditions or provisions of (x) the Charter
Documents of any C1 Entity, or (y) subject to the obtaining of requisite
approval of the shareholders of C1 for the C1 Delaware Reorganization and the C1
Stockholders' Approval and the taking of the actions described in paragraph (b)
of this Section and the obtaining of the consents and approvals, the making of
the filings and the giving of the notices described in Section 4.1.4 of the C1
Disclosure Letter, (1) any laws or orders of any Governmental or Regulatory
Authority applicable to any C1 Entity or any of its assets or properties, or (2)
any Contracts to which any C1 Entity is a party or by which any C1 Entity or any
of its assets or properties is bound, excluding from the foregoing clauses (1)
and (2) conflicts, violations, breaches, defaults, rights of payment or
reimbursement, terminations, cancelations, modifications, accelerations and
creations and impositions of Liens which, individually or in the aggregate,
could not be reasonably expected to have a material adverse effect on the C1/C2
Entities taken as a whole or on the ability of C1 to consummate the transactions
contemplated by this Agreement or (ii) to the knowledge of C1, adversely affect
the qualification of C1 as a REIT.
(b) Except (i) for the filing of the Proxy Statement and the
Registration Statement with the SEC pursuant to the Exchange Act and the
Securities Act, the declaration of the effectiveness of the Registration
Statement by the SEC and filings with various state securities authorities that
are required in connection with the transactions contemplated by this Agreement,
(ii) for the filing by C1 of articles of merger and other appropriate merger
documents required by the Massachusetts Business Corporation Law with the
Secretary of the Commonwealth of Massachusetts and a certificate of merger and
other appropriate merger documents required by the DGCL with the
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37
Secretary of State of the State of Delaware (the "Delaware Secretary of State")
and, in each case, with any local recording office in connection with the C1
Delaware Reorganization, and the filing of the Articles of Merger and other
appropriate merger documents required by the MGCL with the Maryland Secretary of
State and, in each case, with any local recording office, and appropriate
documents with the relevant authorities of other states in which the Constituent
Corporations are qualified to do business in connection with the Merger, (iii)
for such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under (A) the laws of any foreign
country in which any C1 Entity conducts any business or owns any property or
assets or (B) any federal, state, local or foreign Environmental Law and (iv) as
disclosed in Section 4.1.4 of the C1 Disclosure Letter, no consent, approval or
action of, filing with or notice to any Governmental or Regulatory Authority or
other public or private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which any C1 Entity is a party
(including, without limitation, any Charter Documents of any C1 Consolidated
Non-Corporate Affiliate) or by which any C1 Entity or any of its assets or
properties is bound for the execution and delivery of this Agreement by C1, the
performance by C1 of its obligations hereunder or the consummation of the
transactions contemplated hereby, other than such consents, approvals, actions,
filings and notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the C1/C2 Entities taken as a whole or on the ability
of C1 to consummate the transactions contemplated by this Agreement.
4.1.5. C1 Financial Statements and Other Documents. (a) Prior to the
execution of this Agreement, C1 has delivered to A1 true and complete copies of
the audited balance sheets of C1 as of December 31, 1995, 1996 and 1997, and the
related audited statements of income, shareholders' equity and cash flows for
each of the fiscal years then ended, together with the notes thereto and a true
and correct copy of the report on such audited information by Ernst & Young LLP
(such financial statements, including the notes, if any, thereto, being referred
to herein as the "C1 Financial Statements"). The C1 Financial Statements were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present the consolidated
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38
financial position of C1 as at the respective dates thereof and the related
results of operations and cash flows for the respective periods indicated.
Except as set forth in Section 4.1.1 of the C1 Disclosure Letter, each
Subsidiary and Consolidated Non-Corporate Affiliate of C1 in existence on the
date hereof is fully consolidated with C1 in the C1 Financial Statements for all
periods covered thereby.
(b) C1 has delivered to A1 prior to the execution of this Agreement
a true and complete copy of each letter, proxy and other document (together with
all amendments thereof and supplements thereto) provided by C1 to its
shareholders between December 31, 1996 and the date hereof (the "C1 Reports").
As of their respective dates, the C1 Reports did not contain any untrue
statement of a material fact and did not omit any fact that directly conflicts
with any material statement contained therein.
4.1.6. Absence of Certain Changes or Events. Except as disclosed in
Section 4.1.6 of the C1 Disclosure Letter, (a) between December 31, 1997 and the
date hereof there has not been any change, event or development having, or that
could be reasonably expected to have, individually or in the aggregate, a
material adverse effect on the C1/C2 Entities taken as a whole, (b) between
December 31, 1997 and the date hereof, no party to any Charter Document or
co-tenancy agreement of any C1 Entity has exercised any "buy-sell", right of
first refusal, right or first offer or other comparable right (each, a "Charter
Document Right") pursuant to such Charter Document or co-tenancy agreement and
(c) between December 31, 1997 and the date hereof no C1 Entity has taken any
action which, if taken after the date hereof, would constitute a breach of any
provision of paragraphs (c), (d), (e), (f), (g), (h), (i), (j), (k) or, solely
with respect to the foregoing paragraphs, (l) of Section 5.1.2.
4.1.7. Undisclosed Liabilities. C1 has no liabilities that would be
required to be shown on the financial statements, including the notes thereto,
of C1 prepared in accordance with generally accepted accounting principles
applied on a consistent basis with prior periods and that (a) are not disclosed
in the C1 Financial Statements and (b) would, or would reasonably be expected
to, have a material adverse effect on C1 and C2 taken as a whole.
4.1.8. Legal Proceedings. Except as disclosed in the C1 Financial
Statements or in Section 4.1.8 of the C1 Disclosure Letter, as of the date
hereof, (i) there are
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no actions, suits, arbitrations or proceedings pending or, to the knowledge of
C1, threatened against, relating to or affecting, nor to the knowledge of C1 are
there any Governmental or Regulatory Authority investigations or audits pending
or threatened against, relating to or affecting any C1 Entity or any of its
assets and properties which, individually or in the aggregate, could be
reasonably expected to have a material adverse effect on the C1/C2 Entities
taken as a whole or on the ability of C1 to consummate the transactions
contemplated by this Agreement, and (ii) no C1 Entity is subject to any order of
any Governmental or Regulatory Authority which, individually or in the
aggregate, is having or could be reasonably expected to have a material adverse
effect on the C1/C2 Entities taken as a whole or on the ability of C1 to
consummate the transactions contemplated by this Agreement.
4.1.9. Information Supplied. The registration statement to be filed
with the SEC by C1 and C2 in connection with the issuance of C1 Common Shares
and beneficial interests in C2 Common Stock pursuant to this Agreement, as
amended or supplemented from time to time (as so amended and supplemented, the
"Registration Statement"), and any other documents to be filed by C1 with the
SEC or any other Governmental or Regulatory Authority in connection with the
Merger and the other transactions contemplated hereby, will (in the case of the
Registration Statement and any such other documents filed with the SEC under the
Securities Act or the Exchange Act) comply as to form in all material respects
with the requirements of the Securities Act and the Exchange Act, as applicable,
and will not, on the date of its filing or, in the case of the Registration
Statement, at the time it becomes effective under the Securities Act, at the
date the Proxy Statement is first mailed to stockholders of C1 and C2 and at the
times of the Stockholders' Meetings, 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, except that no representation is made
by C1 with respect to information supplied by or on behalf of A1 or any of its
Subsidiaries expressly for inclusion therein and information incorporated by
reference therein from documents filed with the SEC by any A1 Entity.
4.1.10. Compliance with Laws and Orders. The C1 Entities hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
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their respective businesses (the "C1 Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. The C1 Entities are in compliance with the terms of the C1 Permits,
except failures so to comply which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the C1/C2 Entities taken as a whole. Except as disclosed in Section 4.1.10 of
the C1 Disclosure Letter, the C1 Entities are not in violation of or default
under any law or order of any Governmental or Regulatory Authority, except for
such violations or defaults which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the C1/C2 Entities taken as a whole.
4.1.11. Compliance with Agreements; Certain Agreements. (a) Except
as disclosed in Section 4.1.11 of the C1 Disclosure Letter, neither any C1
Entity nor, to the knowledge of C1, any other party thereto is in breach or
violation of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
both, could be reasonably expected to result in a default under, (i) the Charter
Documents of any C1 Entity that is a corporation, (ii) any Contract to which any
C1 Entity is a party or by which any C1 Entity or any of its assets or
properties is bound or any Charter Document of any C1 Entity that is not a
corporation, except in the case of this clause (ii) for breaches, violations and
defaults which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on the C1/C2 Entities
taken as a whole. Each Charter Document or co-tenancy agreement of each C1
Consolidated Non-Corporate Affiliate and, to the knowledge of C1, each material
Contract to which any C1 Entity is a party or by which any of its assets or
properties is bound, is in full force and effect, other than invalidities and
other defects (x) due to the actions of other parties to any such Charter
Document or material Contract or (y) that have not had, and would not reasonably
be expected to have, a material adverse effect on C1 and C2 taken as a whole. C1
has made available to A1 correct and complete copies of all Charter Documents
and co-tenancy agreements of the C1 Entities, except as would not, and would not
reasonably be expected to, have a material adverse effect on the ability of C1,
C2 or A1 to consummate the transactions contemplated hereby.
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41
(b) No C1 Entity other than C1 has employed any individuals,
retained any current or former employees of C1 as consultants or reimbursed any
current or former employees of C1 for any business related or other expenses
(provided, however, that such C1 Entities may have reimbursed C1 for payments of
such nature). No C1 Entity other than C1 has paid any trustees', directors' or
similar fees to current or former trustees or directors of any C1 Entity other
than C1. Except as disclosed in Section 4.1.11 of the C1 Disclosure Letter or as
provided for in this Agreement, as of the date hereof, C1 is not a party to any
oral or written (i) consulting agreement with any current or former employee of
C1 not terminable on 30 days' or less notice involving the payment of more than
$10,000 per annum or $100,000 per annum in the aggregate for all such
agreements, (ii) union or collective bargaining agreement which covers more than
100 employees, (iii) agreement with any executive officer or other employee of
C1 the benefits of which are contingent or vest, or the terms of which are
materially altered, upon the occurrence of the transactions contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other
employee of C1 providing any term of employment or compensation guarantee that
extends for a period longer than one year or (v) agreement or plan, including
any stock option, stock appreciation right, restricted stock or stock purchase
plan, any of the benefits of which will be increased (other than as a result of
any change in market values of the securities of any party or the Surviving
Corporation), or the vesting of the benefits under which will be accelerated by
the occurrence of the transactions contemplated by this Agreement.
4.1.12. Taxes. (a) Each C1 Entity has timely filed all material tax
returns and reports required to be filed by it, or requests for extensions to
file such returns or reports have been timely filed or granted and have not
expired, and all such tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to timely file or failures to
be complete and accurate in all respects, as applicable, individually or in the
aggregate, would not have a material adverse effect on the C1/C2 Entities taken
as a whole. Each C1 Entity has paid (or C1 has paid on its behalf) all taxes
shown as due on such tax returns and reports and all material taxes otherwise
due. The most recent C1 Financial Statements reflect an adequate reserve for all
taxes payable by the C1 Entities for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies for
any taxes have been proposed, asserted
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42
or assessed against any C1 Entity that are not adequately reserved for, except
for inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a material adverse effect on
the C1/C2 Entities taken as a whole. Except as set forth in Section 4.1.12 of
the C1 Disclosure Letter, as of the date hereof, no requests for waivers of the
time to assess or collect any taxes against any C1 Entity have been granted or
are pending, and no audits or examinations of any C1 Entity are being conducted
or, to the knowledge of C1, threatened by any taxing authority.
(b) No C1 Entity has taken any action that would create a material
risk that the Merger would not qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code.
(c) At all times since December 31, 1971, C1 has qualified as a REIT
and its current method of operation will enable it to continue to qualify as a
REIT.
(d) Except as set forth in Section 4.1.12 of the C1 Disclosure
Letter, no C1 Entity is bound by any effective private letter ruling, closing
agreement or similar agreement with any taxing authority (a "C1 Tax Ruling"), no
C1 Entity has any applications or requests outstanding for any such rulings or
agreements and no C1 Tax Ruling has been revoked or modified in any manner.
4.1.13. Employee Benefit Plans; ERISA. (a) Except as reflected in
the C1 Financial Statements or as disclosed in Section 4.1.13 of the C1
Disclosure Letter or as would not have a material adverse effect on the C1/C2
Entities taken as a whole, as of the date hereof, (i) all C1 Employee Benefit
Plans (as defined below) are in compliance with all applicable requirements of
law, including ERISA and the Code, and (ii) no C1 Entity has any liabilities or
obligations with respect to any such C1 Employee Benefit Plans, whether accrued,
contingent or otherwise, nor to the knowledge of C1 are any such liabilities or
obligations expected to be incurred. Except as disclosed in Section 4.1.13 of
the C1 Disclosure Letter or as otherwise provided herein, no C1 Employee Benefit
Plan in effect on the date hereof contains any provision that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee of C1 by virtue of the
execution of, and performance of the transactions contemplated in, this
Agreement (either alone or together
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43
with the occurrence of any additional of subsequent events). As of the date
hereof, the only severance agreements or severance policies applicable to the
employees, trustees or directors of any C1 Entity are the agreements and
policies specifically referred to in Section 4.1.13 of the C1 Disclosure Letter.
C1 has furnished to A1 correct and complete copies of all written C1 Employee
Benefit Plans of each C1 Entity (or summary descriptions thereof) as in effect
on the date hereof.
(b) As used herein "C1 Employee Benefit Plan" means any Plan entered
into, established, maintained, sponsored, contributed to or required to be
contributed to by any C1 Entity for the benefit of the current or former
employees, trustees, or directors of any C1 Entity and existing on the date of
this Agreement or at any time subsequent thereto and on or prior to the
Effective Time and, in the case of a Plan which is subject to Part 3 of Title I
of ERISA, Section 412 of the Code or Title IV of ERISA, at any time during the
five-year period preceding the date of this Agreement.
(c) Except as reflected in Section 4.1.13 of the C1 Disclosure
Letter, (i) no C1 Employee Benefit Plan provides retiree medical or retiree life
insurance benefits to any person, (ii) no C1 Employee Benefit Plan is subject to
Title IV of ERISA or Section 412 of the Code and (iii) no event has occurred
with respect to which any C1 Entity could reasonably be expected to have
liability under Title IV of ERISA or Section 412 of the Code.
(d) Except as disclosed in Section 4.1.13 of the C1 Disclosure
Letter, no C1 entity is a party to or obligated under any agreement, plan,
contract or other arrangement to make payments, nor have any payments been made,
that would be considered "excess parachute payments" under Section 280G of the
Code.
(e) Each of C1 and C2 presently qualify, have at all times in the
past qualified, and shall continue to qualify until the Effective Time as a
"real estate operating company" for purposes of ERISA as defined in 29 C.F.R.
Section 2510.101.
4.1.14. Labor Matters. Except as disclosed in Section 4.1.14 of the
C1 Disclosure Letter, there are no material controversies pending or, to the
knowledge of C1, threatened between any C1 Entity and any representatives of its
employees, except as would not, individually or in the aggregate, have a
material adverse effect on the
<PAGE> 55
44
C1/C2 Entities taken as a whole, and, to the knowledge of C1, there are no
material organizational efforts presently being made involving any of the now
unorganized employees of any C1 Entity, except as could not, individually or in
the aggregate, have a material adverse effect on the C1/C2 Entities taken as a
whole.
4.1.15. Environmental Matters. (a) Each C1 Entity has obtained or
submitted timely applications for all Environmental Permits which are required
under any applicable Environmental Law in respect of its business or operations,
except for such failures to have Environmental Permits and to submit timely
applications which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. Each of such Environmental Permits obtained by such C1 Entity is in full
force and effect and each C1 Entity is in compliance with the terms and
conditions of all such Environmental Permits and with all applicable
Environmental Laws, except for such failures to be in effect or compliance
which, individually or in the aggregate, could not reasonably be expected to
have a material adverse effect on the C1/C2 Entities taken as a whole.
(b) To the knowledge of C1, as of the date hereof, no site or
facility now or previously owned, operated or leased by any C1 Entity is listed
or proposed for listing on the National Priorities List promulgated pursuant to
CERCLA or on any similar state or local list of sites requiring investigation or
clean-up.
(c) No Liens have arisen under or pursuant to any Environmental Law
on any site or facility owned, operated or leased by any C1 Entity, other than
Liens not individually or in the aggregate material to the C1/C2 Entities taken
as a whole, and no action of any Governmental or Regulatory Authority has been
taken or, to the knowledge of C1, is in process which could subject any of such
properties to such Liens, except for such Liens which, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the C1/C2 Entities taken as a whole, and no C1 Entity is required to place any
notice or restriction relating to the presence of Hazardous Materials at any
such site or facility owned by it in any deed to the real property on which such
site or facility is located, except for such notices or restrictions which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the C1/C2 Entities taken as a whole.
<PAGE> 56
45
(d) As of the date hereof, there have been no written reports,
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by, or which are in the possession of, any C1 Entity in relation to
any site or facility now or previously owned, operated or leased by any C1
Entity that both (i) conclude that any C1 Entity could have liability under
Environmental Laws that, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole, and (ii) have not been delivered to A1 prior to the execution of this
Agreement.
4.1.16. Intellectual Property Rights. Each C1 Entity has all right,
title and interest in, or a valid and binding license to use, all Intellectual
Property individually or in the aggregate material to the conduct of the
businesses of the C1/C2 Entities taken as a whole. No C1 Entity is in default
(or with the giving of notice or lapse of time or both, would be in default)
under any license to use such Intellectual Property, such Intellectual Property
is not, to the knowledge of C1, being infringed by any third party, and no C1
Entity is infringing any Intellectual Property of any third party, except for
such defaults and infringements which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the C1/C2 Entities taken as a whole.
4.1.17. Real Property. Section 4.1.17 of the C1 Disclosure Letter
sets forth a list of all principal properties owned or leased by the C1 Entities
or the C2 Entities (the "Principal Properties") and the department stores that
own or lease space in such Principal Properties (the "Department Stores"), in
each case, as of the date hereof. As of the date hereof, (i) there are no
conditions or events relating to (x) the ability of C1 or C2 to continue to own,
lease or operate any Principal Property and (y) the value of any Principal
Property, in each case, that is not a result of forces beyond the control of C1
and C2, (ii) C1 and C2 have made available to A1 (A) the leases and all
amendments or modifications thereto pursuant to which the applicable C1 Entities
leases the land on which the Haywood mall and Highland mall are located, (B) all
reciprocal easement agreements, construction, operating and reciprocal easement
agreements, operating agreements, development agreements, leases with Department
Stores and similar agreements and all amendments and modifications thereto
between any C1 Entity and a Department Store operating at the Principal
Properties identified in Section 4.1.17 of the C1 Disclosure Letter
(collectively,
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46
"REAs") and (C) Contracts evidencing, securing or guaranteeing or otherwise
relating to indebtedness that is secured by an interest in any of the Principal
Properties identified in Section 4.1.17 of the C1 Disclosure Letter and (iii) no
party to any REA has given written notice that it has ceased, or that it intends
to cease, operating the Department Store that such REA contemplates that it will
operate that, in the case of (i), (ii) or (iii) above, would, or would
reasonably be expected to, have a material adverse effect on (1) the ability of
C1, C2 or A1 to consummate the transactions contemplated hereby or (2) C1 and C2
taken as a whole.
4.1.18. Vote Required. The affirmative vote of the holders of record
of at least a majority of the outstanding C1 Common Shares and the outstanding
C1 Preference Shares, voting together as a single class with respect to the
approval of the C1 Delaware Reorganization, the affirmative vote of the holders
of record of at least a majority of the outstanding C1 Common Shares and the
outstanding C1 Preference Shares, voting together as a single class, with
respect to this Agreement and the issuance of C1 Common Shares pursuant to this
Agreement, and the affirmative vote of at least two-thirds of the outstanding C1
6.50% Preference Shares, voting separately as a class, with respect to the
matters set forth in Section 1.1.2(v) of this Agreement are the only votes of
the holders of any class or series of the beneficial interests of C1 or capital
stock of C1 Delaware required to approve the C1 Delaware Reorganization, the
Merger and the other transactions contemplated hereby.
4.1.19. Opinion of Financial Advisor. C1 has received the opinions
of J.P. Morgan Securities Inc. and Lazard Freres & Co. LLC, to the effect that,
as of the date hereof, the consideration to be received by the holders of C1
Common Stock pursuant to the Merger Agreement is fair from a financial point of
view to such holders.
4.1.20. Ownership of A1 Common Stock. No C1 Entity beneficially owns
any shares of A1 Common Stock.
SECTION 4.2. Representations and Warranties of C2. C2 represents and
warrants to A1 as follows:
4.2.1. Organization and Qualification. Each of C2 and the
Subsidiaries of C2 is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to conduct its business as and
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47
to the extent now conducted and to own, use and lease its assets and properties,
except for such failures to be so incorporated, existing and in good standing or
to have such power and authority which, individually or in the aggregate, are
not having and could not be reasonably expected to have a material adverse
effect on the C1/C2 Entities taken as a whole. Each Consolidated Non-Corporate
Affiliate of C2 is a trust, limited liability company or partnership duly
organized, validly existing and, if applicable, is in good standing under the
laws of its jurisdiction of organization and has all requisite power and
authority to conduct its business as and to the extent conducted and to own, use
and lease its assets and properties, except for such failures to be so
organized, existing or in good standing or to have such power and authority
which, individually or in the aggregate, are not having and could not reasonably
be expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. Each C2 Entity is duly qualified, licensed or admitted to do business and
is in good standing in each jurisdiction in which the ownership, use or leasing
of its assets and properties, or the conduct or nature of its business, makes
such qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. Section 4.2.1 of the letter dated the date hereof and delivered by C2 to
A1 concurrently with the execution and delivery of this Agreement (the "C2
Disclosure Letter") sets forth, as of the date hereof, (i) with respect to each
Subsidiary of C2, (A) the name and jurisdiction of incorporation of such
Subsidiary and (B) if such Subsidiary is not wholly owned, directly or
indirectly, by C2, (1) its authorized capital stock, (2) the number of issued
and outstanding shares of its capital stock and (3) the record and beneficial
owners of outstanding shares of its capital stock and (ii) with respect to each
Consolidated Non-Corporate Affiliate of C2, (A) the name, type of entity and
jurisdiction of organization of such Consolidated Non-Corporate Affiliate, (B)
the names of all parties that own equity interests therein and (C) the method of
consolidation employed with respect to the consolidation of the accounts of such
Consolidated Non-Corporate Affiliate in the financial statements of C2,
including the percentage(s) employed in the case of proportional consolidation.
Except for interests in the C2 Entities and as disclosed in Section 4.2.1 of the
C2 Disclosure Letter, as of the date hereof, neither C2 nor any other C2 Entity
directly or indirectly owns any equity or similar interest in, or any
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48
interest convertible into or exchangeable or exercisable for any equity or
similar interest in, any corporation, trust, limited liability company,
partnership, joint venture or other business association or entity (other than
investments in such entities that as in the aggregate are reflected in the
latest C2 Financial Statements (as defined herein) as having a value not
exceeding $20,000,000, (ii) by operation of law (including the interposition of
a C2 Entity holding only such investments) expose no C2 Entity (other than such
an interposed C2 Entity) to any liability with respect to the obligations of
such entities, whether as a controlling person, partner, guarantor, surety or
otherwise and (iii) do not and could not reasonably be expected to cause C1 to
fail to meet any REIT Requirement (the exceptions to the general representation
set forth in this sentence, the "C2 Permitted Minority Investments")). C2 has
previously delivered to A1 correct and complete copies of the Charter Documents
of C2.
4.2.2. Capital Stock. (a) As of the date of this Agreement, the
authorized capital stock of C2 consists solely of 3,542,767.5 shares of common
stock, par value $.10 per share, of C2 ("C2 Common Stock"). As of February 17,
1998, 2,683,888.9 shares of C2 Common Stock were issued and outstanding, no
shares were held in the treasury of C2 and 858,878.6 shares were reserved for
issuance. Since such date, except as set forth in Section 4.2.2 of the C2
Disclosure Letter, there has been no change in the number of issued and
outstanding shares of C2 Common Stock, or the number of shares of C2 Common
Stock held in treasury or reserved for issuance, other than as a result of the
stock dividend described in Section 1.1.2 and shares issuable in connection with
the issuance of C1 Common Shares pursuant to the C1 Permissible Issuance
Arrangements. All of the issued and outstanding shares of C2 Common Stock are,
and all shares of C2 Common Stock reserved for issuance will be, upon issuance
in accordance with the terms specified in the instruments or agreements pursuant
to which they are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as set forth in
Section 4.2.2 of the C2 Disclosure Letter, as of the date hereof, there are no
outstanding Options obligating any C1/C2 Entity to issue or sell any equity
interest in C2 or to grant, extend or enter into any Option with respect
thereto, other than in connection with the issuance of C1 Common Shares pursuant
to C1 Permissible Issuance Arrangements. Except pursuant to this Agreement and
except as set forth in Section 4.2.2 of the C2 Disclosure Letter, as of the date
hereof, there are no outstanding contractual obligations of any C1/C2 Entity to
repurchase, redeem or otherwise acquire any equity interest
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49
in C2 other than in connection with the redemption, repurchase or other
acquisition of C1 Common Shares pursuant to C1 Permissible Redemption
Arrangements.
(b) Except as disclosed in Section 4.2.2 of the C2 Disclosure
Letter, all of the outstanding shares of capital stock of each Subsidiary of C2
are duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by C2 or another C2 Entity wholly owned, directly or
indirectly, by C2, free and clear of any Liens. Except as disclosed in Section
4.2.2 of the C2 Disclosure Letter, all equity interests in the Consolidated
Non-Corporate Affiliates of C2 that are not owned by third parties (as disclosed
in Section 4.2.1 of the C2 Disclosure Letter) are owned by other C2 Entities,
free and clear of any Liens. Except as disclosed in Section 4.2.2 of the C2
Disclosure Letter, as of the date hereof, there are no (i) outstanding Options
(other than Options in favor of C2 or a C2 Entity wholly owned, directly or
indirectly, by C2) obligating any C2 Entity to issue or sell any shares of
capital stock of, or other equity interest in, any Subsidiary or Consolidated
Non-Corporate Affiliate of C2 or to grant, extend or enter into any such Option
or (ii) voting trusts, proxies or other commitments, understandings,
restrictions or arrangements in favor of any person (other than C2 or another C2
Entity wholly owned, directly or indirectly, by C2) with respect to the voting
of or the right to participate in dividends or other earnings on any capital
stock of any Subsidiary of C2 or an any equity interest in any Consolidated
Non-Corporate Affiliate of C2, other than as set forth in such C2 Entity's
Charter Documents.
(c) Except as disclosed in Section 4.2.2 of the C2 Disclosure
Letter, as of the date hereof, there are no outstanding contractual obligations
(other than Options in favor of C2 or a C2 Entity wholly owned, directly or
indirectly, by C2) of any C2 Entity to repurchase, redeem or otherwise acquire
any shares of capital stock of, or other equity interest in, any Subsidiary or
Consolidated Non-Corporate Affiliate of C2. Except as disclosed in Section 4.2.2
of the C2 Disclosure Letter, as of the date hereof, there are no outstanding
contractual obligations of any C2 Entity to provide funds to, or to make any
investment (in the form of a loan, capital contribution or otherwise) in, any C2
Entity or other person (except for C2 and C2 Entities wholly owned, directly or
indirectly, by C2), other than in connection with C2 Permitted Minority
Investments.
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50
(d) As of the date hereof, substantially all the issued and
outstanding shares of C2 Common Stock are held by a corporate trustee as trustee
under two trust agreements (the "C2 Trust Agreements"), correct and complete
copies of which have been delivered to A1 on or before the date hereof, for the
ratable benefit of the holders of substantially all the issued and outstanding
C1 Common Shares and C1 Preference Shares, respectively. The C2 Trust Agreements
have been duly executed and delivered by C2 and the trustees thereunder, are
legal, valid and binding obligations of C2 and such trustees, enforceable
against C2 and such trustees, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law). The shares of C2 Common Stock held pursuant
to the C2 Trust Agreements are owned of record by the trustees thereunder free
and clear of any Liens (other than Liens in favor of such trustees related to
their performance of their duties under the C2 Trust Agreements).
4.2.3. Authority Relative to this Agreement. C2 has all requisite
power and authority to enter into this Agreement and, subject to obtaining the
C2 Stockholders' Approval (as defined in Section 6.3.2), to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by C2, and the
consummation by C2 of the transactions contemplated hereby, have been duly and
validly approved by its Board of Directors, the Board of Directors of C2 has
recommended adoption of this Agreement by the stockholders of C2 and directed
that this Agreement and the issuance of C2 Common Stock in connection with the
Merger be submitted to the stockholders of C2 for their consideration, and no
other corporate proceedings on the part of either of C2 or its stockholders are
necessary to authorize the execution, delivery and performance of this Agreement
by C2 and the consummation by C2 of the transactions contemplated hereby, other
than the C2 Stockholders' Approval. This Agreement has been duly and validly
executed and delivered by C2 and constitutes a legal, valid and binding
obligation of C2 enforceable against C2 in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (regardless of whether such
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51
enforceability is considered in a proceeding in equity or at law).
4.2.4. Non-Contravention; Approvals and Consents. (a) The execution
and delivery of this Agreement by C2 do not, and the performance by C2 of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of, constitute
(with or without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancelation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of any C2 Entity
under, any of the terms, conditions or provisions of (x) the Charter Documents
of any C2 Entity, or (y) subject to the obtaining of the C2 Stockholders'
Approval and the taking of the actions described in paragraph (b) of this
Section and the obtaining of the consents and approvals, the making of the
filings and the giving of the notices described in Section 4.2.4 of the C2
Disclosure Letter, (1) any laws or orders of any Governmental or Regulatory
Authority applicable to any C2 Entity or any of its assets or properties, or (2)
any Contracts to which any C2 Entity is a party (including, without limitation,
any Charter Document of any C1 Consolidated Non-Corporate Affiliate) or by which
any C2 Entity or any of its assets or properties is bound, excluding from the
foregoing clauses (1) and (2) conflicts, violations, breaches, defaults, rights
of payment or reimbursement, terminations, cancelations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not be reasonably expected to have a material adverse
effect on the C1/C2 Entities taken as a whole or on the ability of C2 to
consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of the Proxy Statement and the
Registration Statement with the SEC pursuant to the Exchange Act and the
Securities Act, the declaration of the effectiveness of the Registration
Statement by the SEC and filings with various state securities authorities that
are required in connection with the transactions contemplated by this Agreement,
(ii) for the filing by C2 of a Certificate of Merger and other appropriate
merger documents required by the DGCL with the Delaware Secretary of State and
any local recording office in connection with the C2 Merger, (iii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under (A) the laws of any foreign country in which
any C2 Entity conducts
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any business or owns any property or assets or (B) any federal, state, local or
foreign Environmental Law and (iv) as disclosed in Section 4.2.4 of the C2
Disclosure Letter, no consent, approval or action of, filing with or notice to
any Governmental or Regulatory Authority or other public or private third party
is necessary or required under any of the terms, conditions or provisions of any
law or order of any Governmental or Regulatory Authority or any Contract to
which any C2 Entity is a party or by which any C2 Entity or any of its assets or
properties is bound for the execution and delivery of this Agreement by C2, the
performance by C2 of its obligations hereunder or the consummation of the
transactions contemplated hereby, other than such consents, approvals, actions,
filings and notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, could not be reasonably expected to have a
material adverse effect on the C1/C2 Entities taken as a whole or on the ability
of C2 to consummate the transactions contemplated by this Agreement.
4.2.5. C2 Financial Statements and Stockholder Reports. (a) Prior to
the execution of this Agreement, C2 has delivered to A1 true and complete copies
of the condensed balance sheets of C2 and its subsidiaries as of December 31,
1995, 1996 and 1997, and the related condensed consolidated statements of
operations for each of the fiscal years then ended, together with the notes
thereto, all such financial statements being in the form appearing in notes to
the C1 Financial Statements (such financial statements, including the notes, if
any, thereto, being referred to herein as the "C2 Financial Statements"). The C2
Financial Statements were condensed from financial statements that were prepared
in accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved. Except as set forth in Section
4.2.1 of the C2 Disclosure Letter, each Subsidiary and Consolidated
Non-Corporate Affiliate of C2 in existence on the date hereof is fully
consolidated with C2 in the C2 Financial Statements for all periods covered
thereby.
(b) C2 has not delivered any letter, proxy or other document to the
beneficiaries under the Trust Agreements between December 31, 1996 and the date
hereof, other than as part of the C1 Reports.
4.2.6. Absence of Certain Changes or Events. Except as disclosed in
Section 4.2.6 of the C2 Disclosure Letter, (a) between December 31, 1997 and the
date hereof there has not been any change, event or development having, or that
could be reasonably expected to have, individually
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53
or in the aggregate, a material adverse effect on the C1/C2 Entities taken as a
whole, (b) between December 31, 1997 and the date hereof, no party to any
Charter Document or co-tenancy agreement of any C2 Entity has exercised any
Charter Document Right pursuant to such Charter Document or co-tenancy agreement
and (c) between December 31, 1997 and the date hereof no C2 Entity has taken any
action which, if taken after the date hereof, would constitute a breach of any
provision of paragraphs (c), (d), (e), (f), (g), (h), (j), (k) or, solely with
respect to the foregoing paragraphs, (l) of Section 5.1.2.
4.2.7. [Intentionally Omitted].
4.2.8. Legal Proceedings. Except as disclosed in the C1 Financial
Statements or C2 Financial Statements or in Section 4.2.8 of the C2 Disclosure
Letter, as of the date hereof (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of C2, threatened against, relating to
or affecting, nor to the knowledge of C2 are there any Governmental or
Regulatory Authority investigations or audits pending or threatened against,
relating to or affecting any C2 Entity or any of its assets and properties
which, individually or in the aggregate, could be reasonably expected to have a
material adverse effect on the C1/C2 Entities taken as a whole or on the ability
of C2 to consummate the transactions contemplated by this Agreement, and (ii) no
C2 Entity is subject to any order of any Governmental or Regulatory Authority
which, individually or in the aggregate, is having or could be reasonably
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole or on the ability of C2 to consummate the transactions contemplated by
this Agreement.
4.2.9. Information Supplied. The Registration Statement, and any
other documents to be filed by C2 with the SEC or any other Governmental or
Regulatory Authority in connection with the Merger and the other transactions
contemplated hereby, will (in the case of the Registration Statement and any
such other documents filed with the SEC under the Securities Act or the Exchange
Act) comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, and will not, on the date of
its filing or, in the case of the Registration Statement, at the time it becomes
effective under the Securities Act, at the date the Proxy Statement is first
mailed to stockholders of C1 and C2 and at the times of the Stockholders'
Meetings, 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
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54
the statements therein, in light of the circumstances under which they are made,
not misleading, except that no representation is made by C2 with respect to
information supplied by or on behalf of A1 or any of its Subsidiaries expressly
for inclusion therein and information incorporated by reference therein from
documents filed with the SEC by any A1 Entity.
4.2.10. Compliance with Laws and Orders. The C2 Entities hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "C2 Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which,
individually or in the aggregate, are not having and could not be reasonably
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. The C2 Entities are in compliance with the terms of the C2 Permits,
except failures so to comply which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the C1/C2 Entities taken as a whole. Except as disclosed in Section 4.2.10 of
the C2 Disclosure Letter, the C2 Entities are not in violation of or default
under any law or order of any Governmental or Regulatory Authority, except for
such violations or defaults which, individually or in the aggregate, are not
having and could not be reasonably expected to have a material adverse effect on
the C1/C2 Entities taken as a whole.
4.2.11. Compliance with Agreements; Certain Agreements. (a) Except
as disclosed in Section 4.2.11 of the C2 Disclosure Letter, neither any C2
Entity nor, to the knowledge of C2, any other party thereto is in breach or
violation of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice or lapse of time or
both, could be reasonably expected to result in a default under, (i) the Charter
Documents of any C2 Entity that is a corporation or (ii) any Contract to which
any C2 Entity is a party or by which any C2 Entity or any of its assets or
properties is bound or any Charter Document of any C1 Entity that is not a
corporation, except in the case of this clause (ii) for breaches, violations and
defaults which, individually or in the aggregate, are not having and could not
be reasonably expected to have a material adverse effect on the C1/C2 Entities
taken as a whole. Each Charter Document of each C2 Consolidated Non-Corporate
Affiliate and, to the knowledge of C2, each material Contract to which any C2
Entity is a party or by which any of its assets or property is bound, is
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in full force and effect, other than invalidities and other defects (x) due to
the actions of other parties to any such Charter Document or Contract or (y)
that have not had, and would not reasonably be expected to have, a material
adverse effect on C1 and C2 taken as a whole. C2 has made available to A1
correct and complete copies of all Charter Documents of the C2 Entities, except
as would not, and would not reasonably be expected to, have a material adverse
effect on the ability of C1, C2 or A1 to consummate the transactions
contemplated hereby.
(b) Since January 1, 1988, neither C2 nor any other C2 Entity has
employed any individual, retained any current or former employees of C1 as
consultants or reimbursed any current or former employees of C1 for any
business-related or other expenses (provided, however, that C2 and the other C2
Entities may have reimbursed C1 for payments of such nature). No C2 Entity has,
since January 1, 1988, paid any directors' or similar fees to any directors of
any C2 Entity other than C2.
4.2.12. Taxes. (a) Each C2 Entity has timely filed all material tax
returns and reports required to be filed by it, or requests for extensions to
file such returns or reports have been timely filed or granted and have not
expired, and all such tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to timely file or failures to
be complete and accurate in all respects, as applicable, individually or in the
aggregate, would not have a material adverse effect on the C1/C2 Entities taken
as a whole. Each C2 Entity has paid (or C2 has paid on its behalf) all taxes
shown as due on such tax returns and reports and all material taxes otherwise
due. The most recent C2 Financial Statements reflect an adequate reserve for all
taxes payable by the C2 Entities for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies for
any taxes have been proposed, asserted or assessed against any C2 Entity that
are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a material adverse effect on the C1/C2 Entities taken as a
whole. Except as set forth in Section 4.2.12 of the C2 Disclosure Letter, as of
the date hereof, no requests for waivers of the time to assess or collect any
taxes against any C2 Entity have been granted or are pending, and no audits or
examinations of any C2 Entity are being conducted or, to the knowledge of C2,
threatened by any taxing authority.
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56
(b) No C2 Entity has taken any action that would create a material
risk that the Merger would not qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code.
(c) Except as set forth in Section 4.2.12 of the C2 Disclosure
Letter, no C2 Entity is bound by any effective private letter ruling, closing
agreement or similar agreement with any taxing authority (a "C2 Tax Ruling"), no
C2 Entity has any applications or requests outstanding for any such rulings or
agreements and no C2 Tax Ruling has been revoked or modified in any manner.
4.2.13. Employee Benefit Plans; ERISA. (a) No C2 Employee Benefit
Plans are in effect and no C2 Entity has any present or contingent liability
with respect to any Plan.
(b) As used herein "C2 Employee Benefit Plan" means any Plan entered
into, established, maintained, sponsored, contributed to or required to be
contributed to by any C2 Entity for the benefit of the current or former
employees or directors of any C2 Entity and existing on the date of this
Agreement or at any time subsequent thereto and on or prior to the Effective
Time and, in the case of a Plan which is subject to Part 3 of Title I of ERISA,
Section 412 of the Code or Title IV of ERISA, at any time during the five-year
period preceding the date of this Agreement.
4.2.14. [Intentionally Omitted].
4.2.15. Environmental Matters. (a) Each C2 Entity has obtained or
submitted timely applications for all Environmental Permits which are required
under any applicable Environmental Law in respect of its business or operations,
except for such failures to have Environmental Permits and to submit timely
applications which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole. Each of such Environmental Permits obtained by such C2 Entity is in full
force and effect and each C2 Entity is in compliance with the terms and
conditions of all such Environmental Permits and with all applicable
Environmental Laws, except for such failures to be in full force and effect or
compliance which, individually or in the aggregate, could not reasonably be
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole.
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57
(b) To the knowledge of C2, as of the date hereof, no site or
facility now or previously owned, operated or leased by any C2 Entity is listed
or proposed for listing on the National Priorities List promulgated pursuant to
CERCLA or on any similar state or local list of sites requiring investigation or
cleanup.
(c) No Liens have arisen under or pursuant to any Environmental Law
on any site or facility owned, operated or leased by any C2 Entity, other than
Liens not individually or in the aggregate material to the C1/C2 Entities taken
as a whole, and no action of any Governmental or Regulatory Authority has been
taken or, to the knowledge of C2, is in process which could subject any of such
properties to such Liens, except for such Liens which, individually or in the
aggregate, could not reasonably be expected to have a material adverse effect on
the C1/C2 Entities taken as a whole, and no C2 Entity would be required to place
any notice or restriction relating to the presence of Hazardous Materials at any
such site or facility owned by it in any deed to the real property on which such
site or facility is located, except for such notices or restrictions which,
individually or in the aggregate, could not reasonably be expected to have a
material adverse effect on the C1/C2 Entities taken as a whole.
(d) As of the date hereof, there have been no written reports,
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by, or which are in the possession of, any C2 Entity in relation to
any site or facility now or previously owned, operated or leased by any C2
Entity that both (i) conclude that any C2 Entity could have liability under
Environmental Laws that, individually or in the aggregate, would reasonably be
expected to have a material adverse effect on the C1/C2 Entities taken as a
whole, and (ii) have not been delivered to A1 prior to the execution of this
Agreement.
4.2.16. Intellectual Property Rights. Each C2 Entity has all right,
title and interest in, or a valid and binding license to use, all Intellectual
Property individually or in the aggregate material to the conduct of the
businesses of the C1/C2 Entities taken as a whole. No C2 Entity is in default
(or with the giving of notice or lapse of time or both, would be in default)
under any license to use such Intellectual Property, such Intellectual Property
is not, to the knowledge of C2, being infringed by any third party, and no C2
Entity is infringing any Intellectual Property of any third party, except for
such defaults and infringements which, individually or in the
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58
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the C1/C2 Entities taken as a whole.
4.2.17. [Intentionally Omitted.]
4.2.18. Vote Required. The affirmative vote of the holders of record
of at least a majority of the outstanding shares of C2 Common Stock with respect
to the C2 Merger, this Agreement and the issuance of C2 Common Stock pursuant to
this Agreement is the only vote of the holders of any class or series of the
capital stock of C2 required to approve the Merger and the other transactions
contemplated hereby.
4.2.19. Ownership of A1 Common Stock. No C2 Entity beneficially owns
any shares of A1 Common Stock.
ARTICLE V
Covenants
SECTION 5.1. Conduct Pending the Closing. At all times from and
after the date hereof until the Effective Time, each party hereto covenants and
agrees as follows:
5.1.1. Preservation of REIT Status. No party hereto shall take any
action or omit to take any action reasonably within its power to take that (i)
would cause A1 to be disqualified as a REIT, (ii) would cause C1 to be
disqualified as a REIT or (iii) would result in a loss of the status of C1 and
C2 (prior to the Merger) or the Surviving Corporation and C2 (from and after the
Merger) as grandfathered from the application of Section 269B(a)(3) of the Code
pursuant to Section 136(c)(3) of the Deficit Reduction Act of 1984.
5.1.2. Conduct of Business by C1 and C2 Pending the Closing. Each of
C1 and C2 and its Subsidiaries and Consolidated Non-Corporate Affiliates (such
party's "Entities") shall use all commercially reasonable efforts to preserve
intact in all material respects its present business organizations and
reputation, to keep available the services of its key officers and employees, to
maintain its assets and properties in good working order and condition, ordinary
wear and tear excepted, to maintain insurance on its tangible assets and
businesses in such amounts and against such risks and losses as are currently in
effect, to preserve its relationships with tenants and other occupiers
<PAGE> 70
59
of properties, customers, suppliers, lenders, partners and others having
significant business dealings with them and to comply in all material respects
with all laws and orders of all Governmental or Regulatory Authorities
applicable to them, and neither C1 nor C2 shall, except as otherwise expressly
provided for in this Agreement, as contemplated by the "C1/C2 Business Plan,"
which is identified in Section 5.1.2 of the C1 Disclosure Letter, or as
otherwise described in Section 5.1.2 of the C1 Disclosure Letter, as applicable,
or with the prior written consent of A1:
(a) incorporate or organize any new Entity of such party, unless
such Entity shall be wholly owned, directly or indirectly, by C1 or C2 and
A1 shall receive prompt notice of such incorporation or organization,
including the information that would have been disclosed pursuant to
Articles III and IV hereof had such Entity been in existence on the date
hereof;
(b) amend or propose to amend its Charter Documents or permit the
amendment of the Charter Documents of the Entities of C1 or C2, except, in
the case of Entities of C1 or C2, for the amendment of the Charter
Documents of such Entities as are wholly owned, directly or indirectly, by
C1 or C2, so long as such action shall be promptly disclosed to A1;
(c) (w) declare, set aside or pay any dividends on or make other
distributions in respect of any of the beneficial interests or capital
stock of such party, except that C1 and C2 each may declare and pay (1)
quarterly cash dividends on C1 Common Stock and C2 Common Stock in an
amount not to exceed $1.95 per C1 Common Share and related beneficial
interest in shares of C2 Common Stock, with usual record and payment dates
for such dividends in accordance with past dividend practice, (2) cash
dividends on C1 Common Stock and C2 Common Stock in amounts proportional
to the dividends paid on C1 Common Stock and C2 Common Stock for the last
full quarter preceding the Effective Time prorated over the number of days
elapsed in the quarter in which the Effective Time occurs from the
beginning of such quarter to the Effective Time and (3) cash dividends on
C1 Preference Shares in the amounts, and with the record and payment
dates, required in accordance with the terms thereof, (x) split, combine,
reclassify or take similar action with respect to any of its beneficial
interests or capital stock or issue or authorize or propose the issuance
of any other securities in respect of, in lieu
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of or in substitution for shares of its beneficial interest or capital
stock, or permit any of its Entities (other than Entities wholly owned,
directly or indirectly, by C1 or C2) to split, combine, reclassify or take
similar action with respect to such Entities' capital stock or equity
interests or issue or authorize or propose the issuance of any other
securities or equity interests in respect of, in lieu of, or in
substitution for such capital stock or equity interests, (y) adopt a plan
of complete or partial liquidation or resolutions providing for or
authorizing such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or permit any of
such party's Entities (other than Entities wholly owned, directly or
indirectly, by C1 or C2) to take any such action, or (z) directly or
indirectly redeem, repurchase or otherwise acquire, or permit any Entity
of C1 or C2 to redeem, repurchase or otherwise acquire, directly or
indirectly, any shares of capital stock of, or beneficial or other equity
interests in, C1 or C2 or any of their Entities, or any Option with
respect thereto (other than in transactions solely involving C1 or C2 and
their Entities that are wholly owned, directly or indirectly, by C1 or C2)
and other than pursuant to C1 Permissible Redemption Arrangements;
(d) issue, deliver, sell or otherwise transfer, or authorize or
propose the issuance, delivery, sale or other transfer of, or permit any
of its Entities to issue, deliver, sell, or otherwise transfer or
authorize or propose the issuance, delivery or sale of, any shares of
capital stock of, or beneficial or other equity interests in, it or any of
its Entities or any Option with respect thereto (other than (x) issuances
of C1 Common Shares or beneficial interests in C2 Common Stock in
connection with C1 Permissible Issuance Arrangements; provided that
management of C1 shall use its best efforts to suspend sales of C1 Common
Shares under the C1 QSPP from the date hereof until the Effective Time or
(y) the issuance, sale or transfer by an Entity that is wholly owned,
directly or indirectly, by C1 or C2 of such Entity's capital stock or
other equity interests, or Options with respect thereto, to C1 or C2 or
other Entities wholly owned, directly or indirectly, by C1 or C2), or
modify or amend any right of any holder of outstanding Options with
respect thereto (other than the modification or amendment of the rights of
C1 or C2 or an Entity wholly owned, directly or indirectly, by C1 or C2
under an
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Option issued by C1 or C2 or an Entity wholly owned, directly or
indirectly, by C1 or C2);
(e) except, with respect to loans or capital contributions to any of
C1's or C2's Entities, to the extent required under the express terms of
any applicable Charter Document, provide funds to, or make any investment
(in the form of a loan, capital contribution or otherwise) in (or permit
any of C1's or C2's Entities to take any such action with respect to), any
Entity of C1 or C2 or other person (except for such Entities as shall be
wholly owned, directly or indirectly, by C1 or C2), other than C1
Permitted Minority Investments, C2 Permitted Minority Investments and
investments of the type described in Section 4.2.1 of the C1 Disclosure
Letter or the C2 Disclosure Letter;
(f) in the case of C2, amend, modify or terminate the C2 Trust
Agreements or propose such amendment, modification or termination;
(g)(x) acquire (by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of,
or by any other manner) or permitting any of its Entities to acquire any
business or any corporation, partnership, association or other business
organization or division thereof or any significant assets, (y) mortgage
or otherwise encumber or subject to any Lien or sell, lease or otherwise
dispose of, or permit any of its Entities to do any of the foregoing with
respect to, any significant portion of its interest in one or more of the
properties or interests identified in Section 4.1.17 of the C1 Disclosure
Letter or assign or encumber the right to receive income, dividends or
distributions with respect thereto or (z) make or agree to make any new
capital expenditures;
(h)(x) incur (which shall not be deemed to include entering into
credit agreements, lines of credit or similar arrangements until
borrowings are made or committed to be borrowed under such arrangements)
any indebtedness for borrowed money or guarantee any such indebtedness, or
permit any of its Entities to take any such action, other than to meet the
current cash needs of its and its Entities' business in an aggregate
amount not to exceed that which is contemplated by the C1/C2 Business
Plan, to permit it to perform its obligations hereunder or to effect a
redemption of
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indebtedness permitted by clause (y), or (y) voluntarily purchase, cancel,
prepay or otherwise provide for a complete or partial discharge in advance
of a scheduled repayment date with respect to, or waive any right under,
or otherwise modify the provisions of, any indebtedness, or guarantee of
indebtedness, for borrowed money, or permit any of its Entities to take
any of such actions;
(i) enter into, adopt, amend in any material respect (except as may
be required by applicable law) or terminate any C1 Employee Benefit Plan
or grant any Options, awards or other benefits or increase compensation,
except for increases in benefits and compensation to employees other than
executive officers having a value in the aggregate of not greater than
$250,000 and except for changes therein contemplated by Section 6.8 and
6.9 of this Agreement;
(j) enter into any Contract, or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's-length basis, or
permit any of its Entities to take such actions, with any affiliate of C1
or C2 other than transactions among C1 or C2 and Entities that are wholly
owned, directly or indirectly, by C1 or C2;
(k) make any change in the lines of business in which it and its
Entities participate or are engaged; or
(l) enter into any Contract, commitment or arrangement to do or
engage in any action the consummation of which would be prohibited by the
foregoing.
SECTION 5.1.3. Conduct of Business by A1 Pending the Closing. Except
as set forth in Section 5.1.3 of the A1 Disclosure Letter, during the period
from the date of this Agreement to the Effective Time, A1 shall, and shall cause
each of the A1 Entities to, use all commercially reasonable efforts to preserve
intact in all material respects its present business organizations and
reputation, to keep available the services of its key officers and employees, to
maintain its assets and properties in good working order and condition, ordinary
wear and tear excepted, to maintain insurance on its tangible assets and
businesses in such amounts and against such risks and losses as are currently in
effect, to preserve its relationships with tenants and
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other occupiers of properties, customers, suppliers, lenders, partners and
others having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or Regulatory
Authorities applicable to them, and A1 shall not, except as otherwise expressly
provided for in this Agreement, as set forth in Section 5.1.3 of the A1
Disclosure Letter or with the prior written consent of C1:
(a) declare, set aside or pay any dividends on or make other
distributions, except that A1 may declare and pay (1) quarterly cash
dividends on A1 Common Stock in an amount not to exceed $0.505 per share
of A1 Common Stock, with usual record and payment dates for such dividends
in accordance with past dividend practice, (2) cash dividends on A1 Common
Stock in amounts proportional to the dividends paid on A1 Common Stock in
the last full quarter preceding the Effective Time prorated over the
number of days elapsed in the quarter in which the Effective Time occurs
from the beginning of such quarter to the Effective Time and (3) cash
dividends on A1 Preferred Stock in the amounts, and with the record and
payment dates, required in accordance with the terms thereof;
(b) enter into any Contract, or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis, or
permit any A1 Entity to take such actions, with any affiliate of such
party other than transactions among A1 and Entities of A1 that are wholly
owned, directly or indirectly, by A1 or any A1 Entity;
(c) make any change in the lines of business in which it and its
Entities participate or are engaged; or
(d) enter into any Contract, commitment or arrangement to do or
engage in any action the consummation of which would be prohibited by the
foregoing.
5.1.4. Advice of Changes. Each party shall confer on a regular and
frequent basis with the others with respect to its business and operations and
other matters relevant to the Merger, and shall promptly advise the others,
orally and in writing, of any change or event, including, without limitation,
any complaint, investigation or hearing by any Governmental or Regulatory
Authority (or
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communication indicating the same may be contemplated) or the institution or
threat of litigation, having, or which, insofar as can be reasonably foreseen,
could have, a material adverse effect on the A1 Entities taken as a whole or on
the C1/C2 Entities taken as a whole, as the case may be, or on the ability of
any party to consummate the transactions contemplated hereby; provided that no
party shall be required to make any disclosure to the extent such disclosure
would constitute a violation of any applicable law.
5.1.5. Notice and Cure. Each party will notify the others of, and
will use all commercially reasonable efforts to cure before the Closing, any
event, transaction or circumstance, as soon as practical after it becomes known
to such party, that causes or will cause any covenant or agreement of such party
under this Agreement to be breached or that renders or will render untrue any
representation or warranty of such party contained in this Agreement. Each party
also will notify the others in writing of, and will use all commercially
reasonable efforts to cure, before the Closing, any violation or breach, as soon
as practical after it becomes known to such party, of any representation,
warranty, covenant or agreement made by such party. No notice given pursuant to
this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
5.1.6. Fulfillment of Conditions. Subject to the terms and
conditions of this Agreement, each party will take or cause to be taken all
commercially reasonable steps necessary or desirable and proceed diligently and
in good faith to satisfy each condition to the other's obligations contained in
this Agreement and to consummate and make effective the transactions
contemplated by this Agreement.
SECTION 5.2. No Solicitations by C1 and C2. (a) Prior to the
Effective Time, each of C1 and C2 agree (i) that it shall, and shall direct and
use its best efforts to cause its Entities, controlled affiliates and
Representatives to, immediately cease any discussion or negotiations with any
parties that may be ongoing with respect to an Alternative Proposal for C1 and
C2 (as defined below); (ii) that it shall not, and it shall use its best efforts
to cause its Entities, controlled affiliates and Representatives not to,
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders or
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shareholders) with respect to a merger, consolidation or other business
combination transaction involving it or any acquisition or similar transaction
(including, without limitation, a tender or exchange offer) involving (i) the
purchase of all or substantially all of the assets of the C1/C2 Entities taken
as a whole or (ii) the purchase, acquisition or issuance of shares of beneficial
interest in C1 representing at least a majority of the voting power of all the
outstanding shares of beneficial interest in C1 (for purposes hereof, any such
proposal or offer with respect to such merger, consolidation, other business
combination, acquisition or similar transaction is hereinafter referred to as an
"Alternative Proposal for C1 or C2"), or engage in any negotiations with or
provide any confidential information or data to, any person or group relating to
an Alternative Proposal for C1 or C2 (excluding the transactions contemplated by
this Agreement), or otherwise knowingly facilitate any effort or attempt to make
or implement an Alternative Proposal for C1 or C2, and (b) that it will notify
A1 promptly if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it or any of such persons.
ARTICLE VI
Additional Agreements
SECTION 6.1. Access to Information; Confidentiality. Each party
shall, and shall cause each of its Entities to, throughout the period from the
date hereof to the Effective Time, (i) provide the other parties and their
Representatives with full access, upon reasonable prior notice and during normal
business hours, to all officers, employees, agents and accountants of such party
and its Entities and their respective assets, properties and material books and
records, but only to the extent that such access does not unreasonably interfere
with the business and operations of such party and its Entities, and (ii)
furnish promptly to such persons (x) a copy of each report, statement, schedule
and other document filed or received by such party or any of its Entities
pursuant to the requirements of Federal or state securities laws and each
material report, statement, schedule and other document filed with any other
Governmental or Regulatory Authority and (y) all other information and data
(including, without limitation, copies of Contracts, A1 Employee Benefit Plans
or C1 Employee Benefit Plans, as the case may be, and material other books and
records and environmental
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assessments, investigations or studies concerning the properties of such party
or the business or operations conducted thereon) concerning the business and
operations of such party and its Entities as the other party or any of such
other persons reasonably may request. No investigation pursuant to this
paragraph or otherwise shall affect any representation or warranty contained in
this Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this Section 6.1 that
constitutes "Evaluation Material" (as such term is defined in the letter
agreement dated January 21, 1998 between A1 and C1 (the "Confidentiality
Agreement")) shall be governed by the terms of the Confidentiality Agreement.
SECTION 6.2. Preparation of Registration Statement and Proxy
Statement. A1, C1 and C2 shall prepare and file with the SEC as soon as
reasonably practicable after the date hereof the Proxy Statement and C1 and C2
shall prepare and file with the SEC as soon as reasonably practicable after the
date hereof the Registration Statement, in which the Proxy Statement will be
included as the prospectus. A1, C1 and C2 shall use their best efforts to have
the Registration Statement declared effective by the SEC as promptly as
practicable after such filing. C1 and C2 shall also take any action (other than
qualifying as a foreign corporation or taking any action which would subject it
to service of process in any jurisdiction where A1 is not now so qualified or
subject) required to be taken under applicable state blue sky or securities laws
in connection with the issuance of the C1 Common Shares and C2 Common Stock (or
beneficial interests therein) pursuant to this Agreement. If at any time prior
to the Effective Time any event shall occur that should be set forth in an
amendment of or a supplement to the Registration Statement, C1 and C2 shall
prepare and file with the SEC such amendment or supplement as soon thereafter as
is reasonably practicable. A1, C1 and C2 shall cooperate with each other in the
preparation of the Registration Statement and the Proxy Statement and any
amendment or supplement thereto, and each shall notify the others of the receipt
of any comments of the SEC with respect to the Registration Statement or the
Proxy Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall provide to the other promptly
copies of all correspondence between the SEC and A1, C1 or C2, as the case may
be, or any of their Representatives with respect to the Registration Statement
or the Proxy Statement. C1 and C2 shall give A1 and its counsel the opportunity
to review the Registration Statement and all
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responses to requests for additional information by and replies to comments of
the SEC before such registration statement is filed with, or sent to, the SEC.
Each of A1, C1 and C2 agrees to use its best efforts, after consultation with
the other parties hereto, to respond promptly to all such comments of and
requests by the SEC and to cause (x) the Registration Statement to be declared
effective by the SEC at the earliest practicable time and to be kept effective
as long as is necessary to consummate the Merger, and (y) the Proxy Statement to
be mailed to the holders entitled to vote at the Stockholders Meetings at the
earliest practicable time.
SECTION 6.3. Approvals of Stockholders.
6.3.1. A1 Stockholder Approval. Subject to the exercise of fiduciary
obligations under applicable law as advised by outside counsel, A1 shall,
through its Board of Directors, duly call, give notice of, convene and hold a
meeting of its stockholders (the "A1 Stockholders' Meeting") for the purpose of
voting on the adoption of this Agreement (the "A1 Stockholders' Approval").
Subject to the exercise of fiduciary obligations under applicable law as advised
by outside counsel, A1 shall, through its Board of Directors, include in the
Proxy Statement the recommendation of the Board of Directors of A1 that the
stockholders of A1 adopt this Agreement and shall use its best efforts to obtain
such adoption.
6.3.2. C1 and C2 Stockholders' Approvals. Subject to the exercise of
fiduciary obligations under applicable law as advised by outside counsel, each
of C1 and C2 shall, through its Board of Directors, duly call, give notice of,
convene and hold a meeting of its stockholders (collectively, the "C1 and C2
Stockholders' Meeting" and, together with the A1 Stockholders' Meeting, the
"Stockholders' Meetings") for the purpose of voting on the adoption of this
Agreement and the issuance of C1 Common Shares and C2 Common Stock pursuant to
this Agreement and under the C1 Option Plan, as in effect following the Merger
after the Merger in accordance with this Agreement (the "C1 Stockholders'
Approval" and the "C2 Stockholders' Approval", respectively) as soon as
reasonably practicable after the date hereof. Subject to the exercise of
fiduciary obligations under applicable law as advised by outside counsel, each
of C1 and C2 shall, through its Board of Directors, include in the Proxy
Statement the recommendation of its Board of Directors that its stockholders
adopt this Agreement and approve such issuances, as applicable, and
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shall use its best efforts to obtain such adoption and approval.
6.3.3. Cooperation for Stockholders' Meetings. A1, C1 and C2 shall
coordinate and cooperate with respect to the timing of the Stockholders'
Meetings and shall use their best efforts to cause the Stockholders' Meetings to
be held on the same day and as soon as practicable after the date hereof.
SECTION 6.4. Affiliates. At least 30 days prior to the Closing Date,
A1 shall deliver a letter to C1 and C2 identifying all persons who, at the time
of the A1 Stock holders' Meetings, may, in A1's reasonable judgment, be deemed
to be "affiliates" (as such term is used in Rule 145 under the Securities Act)
of A1 ("A1 Affiliates"). A1 shall use its best efforts to cause each A1
Affiliate to deliver to C1 and C2 on or prior to the Closing Date a written
agreement substantially in the form and to the effect of Exhibit H hereto (an
"Affiliate Agreement"). C1 shall be entitled to place legends as specified in
such Affiliate Agreement on the certificates evidencing C1 Common Shares to be
received by such A1 Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the C1
Common Shares consistent with the terms of such Affiliate Agreements.
SECTION 6.5. Stock Exchange Listing. C1 and C2 shall use their best
efforts to cause C1 Common Shares and the related beneficial interests in the
shares of C2 Common Stock and the shares of C1 Series A Preferred Stock to be
issued pursuant to this Agreement or retained by C1 shareholders, and the C1
Common Shares and the paired interests in the C2 Common Stock issuable under the
Option Plans or upon conversion of the C1 6.50% First Series Preferred Stock
after the Merger, to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the Closing Date.
SECTION 6.6. Certain Tax Matters. None of A1, C1 or C2 shall take or
fail to take any action which would cause A1, C1 or C2 or their respective
stockholders to recognize gain or loss for Federal income tax purposes as a
result of the consummation of the Merger, except (i) to the extent that any
stockholder may receive cash, interests in shares of C2 Common Stock or cash in
lieu of fractional shares, (ii) to the extent attributable to any action
described or referred to in Section 6.15 or (iii) to the extent described in
Section 7.1.7.
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SECTION 6.7. Regulatory and Other Approvals. Subject to the terms
and conditions of this Agreement and without limiting the provisions of Sections
6.2 and 6.3, each of A1, C1 and C2 will proceed diligently and in good faith to,
as promptly as practicable, (a) obtain all consents, approvals or actions of,
make all filings with and give all notices to Governmental or Regulatory
Authorities or any other public or private third parties required of A1, C1 and
C2 or any of their Entities to consummate the Merger and the other matters
contemplated hereby and (b) provide such other information and communications to
such Governmental or Regulatory Authorities or other public or private third
parties as the other party or such Governmental or Regulatory Authorities or
other public or private third parties may reasonably request in connection
therewith.
SECTION 6.8. Employee Benefit Plans. (a) The Surviving Corporation
shall succeed to the rights and obligations of A1 under the A1 Employee Benefit
Plans and C1 shall retain its rights and obligations under the C1 Employee
Benefit Plans in accordance with their respective terms.
(b) The Surviving Corporation and C1 shall honor without
modification all employee severance plans (or policies) and employment and
severance agreements of A1, C1 and C2 and any of their respective Entities in
existence on the date hereof as such agreements shall be in effect in accordance
with the terms of this Agreement at the Effective Time, including, without
limitation, the plans and agreements specified in Section 6.8 of the A1
Disclosure Letter, the C1 Disclosure Letter or the C2 Disclosure Letter.
SECTION 6.9. Stock Plans.
6.9.1. Treatment of A1 Stock Plans. Effective as of the Effective
Time, each outstanding option to purchase a share of A1 Common Stock and related
interests (an "A1 Stock Option") under any of the A1 Stock Plans, whether
theretofore vested or unvested, shall constitute an option to acquire one C1
Common Share, together with the related beneficial interest in C2 Common Stock
which shall be paired with the C1 Common Share pursuant to the C2 Trust
Agreements, and shall otherwise have the same terms and provisions as such A1
Stock Option (subject to the next sentence). The price per C1 Common Share at
which each such option is exercisable shall be the option exercise price per
share of the A1 Common Stock at which such option is
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exercisable pursuant to the applicable A1 Stock Plan immediately prior to the
Effective Time; provided, however, that, in the case of an incentive stock
option under Section 422 of the Code, the option exercise price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code and the regulations relating thereto. In addition, each
outstanding right to earn shares of A1 Common Stock shall constitute a right to
earn C1 Common Shares (together with the related beneficial interest in C2
Common Stock) determined in accordance with the terms of the applicable A1 Stock
Plans.
6.9.2. Treatment of C1 Stock Plan. (a) Effective as of the Effective
Time, each outstanding option to purchase a C1 Common Share and related
interests in C2 Common Stock (a "C1 Stock Option") under the C1 Option Plan,
whether theretofore vested or unvested, shall become immediately exercisable.
The price per C1 Common Share and the related beneficial interest in C2 Common
Stock at which each such option is exercisable shall be the exercise price per
share at which the C1 Stock Option is exercisable pursuant to the C1 Option Plan
immediately prior to the Effective Time but after adjustment for the
transactions described in Section 1.1.2 pursuant to the terms of the C1 Option
Plan; provided, however, that, in the case of an incentive stock option under
Section 422 of the Code, the option exercise price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
Code and the regulations relating thereto.
(b) As soon as practicable after the Effective Time, C1 Delaware
shall file a registration statement on Form S-8 promulgated by the SEC under the
Securities Act (or any successor or other appropriate form) with respect to the
Paired Shares subject to A1 and C1 Stock Options and shall use its best efforts
to maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Options remain outstanding. C1 shall
comply with the terms of A1 Stock Plans and the C1 Option Plan (collectively,
the "Option Plans") and ensure, to the extent required by, and subject to the
provisions of, the Option Plans, that the A1 Stock Options which qualified as
qualified stock options prior to the Effective Time continue to qualify as
qualified stock options after the Effective Time.
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(c) C1 Delaware shall take all corporate action necessary to reserve
for issuance a sufficient number of Paired Shares for delivery under the Option
Plans as adjusted in accordance with this Section 6.9. With respect to those
individuals who, subsequent to the Merger, will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, C1 shall
administer the Option Plans in a manner that complies with Rule 16b-3
promulgated under the Exchange Act so that grants thereunder shall be exempt
acquisitions under Section 16(b) of the Exchange Act.
6.9.3. Restricted Stock. Prior to the Effective Time, (i) C1 shall
offer to the other party under each C1 ESPP Contract, and shall use its
reasonable best efforts (it being understood that such efforts shall not require
the expenditure of cash) to obtain the agreement of such party, to amend such C1
ESPP Contract (x) to release the transfer restrictions on the securities issued
pursuant thereto and remove any associated legends from the certificates
evidencing such securities, (y) to eliminate the right of such party to cause C1
to repurchase such securities and (z) to provide that upon any transfer of such
securities, the transferor shall either pay to C1 the applicable portion of the
"Permanent Restriction" thereunder or obtain an undertaking of the transferee
thereof to pay such amount or obtain a comparable undertaking upon any
subsequent transfer by such transferee and (ii) C1 may pay to such party
(through forgiveness of indebtedness or otherwise) an amount equal to the
principal of the indebtedness initially incurred, and any accrued interest
subsequently added to the principal of such indebtedness, to purchase the
securities purchased thereunder, but only if the per-unit purchase price thereof
exceeded $150 (before deduction for any Permanent Restriction).
SECTION 6.10. Trustees', Directors' and Officers' Indemnification
and Insurance. (a) From and after the Effective Time and until the sixth
anniversary of the Effective Time and for so long thereafter as any claim for
indemnification asserted on or prior to such date has not been fully
adjudicated, C1 (each, an "Indemnifying Party") shall 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 trustee, director or
officer of A1, C1 or C2 or any of their respective Entities (the "Indemnified
Parties") against (i) all losses, claims, damages, costs and expenses (including
reasonable attorneys' fees), liabilities, judgments and settlement amounts that
are paid or incurred in connection with any claim, action,
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suit, proceeding or investigation (whether civil, criminal, administrative or
investigative and whether asserted or claimed prior to, at or after the
Effective Time) that is based on, or arises out of, the fact that such
Indemnified Party is or was a trustee, director or officer of A1, C1 or C2 or
any of their respective Entities and relates to or arises out of any action or
omission occurring at or prior to the Effective Time ("Indemnified
Liabilities"), and (ii) all Indemnified Liabilities based on, or arising out of,
or pertaining to this Agreement or the transactions contemplated hereby, in each
case to the full extent a corporation is permitted under applicable law to
indemnify its own trustees, directors or officers, as the case may be; provided
that no Indemnifying Party shall be liable for any settlement of any claim
effected without its written consent, which consent shall not be unreasonably
withheld; and provided further that no Indemnifying Party shall be liable to an
Indemnified Party for any Indemnified Liabilities which occur as a result of the
gross negligence or wilful misconduct of such Indemnified Party. If any such
action is brought against any of the Indemnified Parties and such Indemnified
Parties notify the Indemnifying Parties of its commencement, the Indemnifying
Parties will be entitled to participate in and, to the extent that they elect by
delivering written notice to such Indemnified Parties promptly after receiving
notice of the commencement of the action from the Indemnified Parties, to assume
the defense of the action and after notice from the Indemnifying Parties to the
Indemnified Parties of their election to assume the defense, the Indemnifying
Parties will not be liable to the Indemnified Parties for any legal or other
expenses except for the reasonable costs of investigation subsequently incurred
by the Indemnified Parties in connection with the defense. Subject to the
foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any Indemnified Party (whether arising prior to
or after the Effective Time), (w) the Indemnifying Parties will pay expenses in
advance of the final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law; provided that the person to whom expenses are advanced provides
any undertaking required by applicable law to repay such advance if it is
ultimately determined that such person is not entitled to indemnifi cation; (x)
the Indemnified Parties shall retain counsel reasonably satisfactory to the
Indemnifying Parties; (y) the Indemnifying Parties shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties (subject to the final
sentence of this paragraph) promptly as statements therefor are received; and
(z) the
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Indemnifying Parties shall use all commercially reasonable efforts to assist in
the defense of any such matter. Any Indemnified Party wishing to claim
indemnification under this Section, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify the applicable Indemnifying
Party, but the failure so to notify an Indemnifying Party shall not relieve such
Indemnifying Party from any liability which it may have under this paragraph
except to the extent such failure materially prejudices such Indemnifying Party.
The Indemnified Parties, as a group, may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties, in which case the
Indemnified Parties may retain more than one law firm.
(b) Except to the extent required by law, until the sixth
anniversary of the Effective Time, C1 shall not amend, modify or repeal the
provisions for indemnification of trustees, directors, officers or employees
contained in the certificates or articles of incorporation or by-laws (or other
comparable Charter Documents) of such corporation and its Entities in such a
manner as would adversely affect the rights of any individual who shall have
served as a trustee, director, officer or employee of any of A1, C1 or C2 or any
of their respective Entities prior to the Effective Time to be indemnified by
such corporations in respect of their serving in such capacities prior to the
Effective Time.
(c) C1 shall, until the sixth anniversary of the Effective Time and
for so long thereafter as any claim for insurance coverage asserted on or prior
to such date has not been fully adjudicated, cause to be maintained in effect,
to the extent commercially available, the policies of trustees', directors' and
officers' liability insurance maintained by A1, C1 and C2, respectively, as of
the date hereof (or policies of at least the same coverage and amounts
containing terms that are no less advantageous to the insured parties) with
respect to claims arising from facts or events that occurred on or prior to the
Effective Time; provided that C1 shall not be obligated to expend in order to
maintain or procure insurance coverage pursuant to this paragraph any amount per
annum in excess of 150 percent of the aggregate of the last annual premiums paid
by A1, C1 and C2 for such policies prior to the date hereof, but if the cost of
maintaining such insurance (or providing such new policies) would but for this
proviso exceed such aggregate amount, then C1 shall purchase as much coverage as
possible for such amount.
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(d) The provisions of this Section are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and each party
entitled to insurance coverage under paragraph (c) above, respectively, and his
or her heirs and legal representatives, and shall be in addition to any other
rights an Indemnified Party may have under the certificate or articles of
incorporation or bylaws of C1, C2 or either Constituent Corporation or any of
its Entities, under the Massachusetts Business Corporation Law, the DGCL, the
MGCL or otherwise.
SECTION 6.11. Expenses. Whether or not the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such cost
or expense, except that expenses incurred in connection with printing and
mailing the Proxy Statement and the Registration Statement, as well as any
filing fees relating thereto, shall be shared equally by A1 and C1.
SECTION 6.12. Brokers or Finders. Each party represents, as to
itself and its affiliates, that no agent, broker, investment banker, financial
advisor or other firm or person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement, except Merrill Lynch, whose
fees and expenses will be paid by A1 in accordance with A1's agreement with such
firm (a true and complete copy of which has been delivered by A1 to C1 prior to
the execution of this Agreement), and Lazard Freres & Co. LLC and J.P. Morgan
Securities Inc., whose fees and expenses will be paid by C1 in accordance with
C1's agreements with such firms (a true and complete copy of which has been
delivered by C1 to A1 prior to the execution of this Agreement), and each party
shall indemnify and hold the others harmless from and against any and all
claims, liabilities or obligations with respect to any other such fee or
commission or expenses related thereto asserted by any person on the basis of
any act or statement alleged to have been made by such party or its affiliate.
SECTION 6.13. Takeover Statutes. If any "fair price", "moratorium",
"control share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, each party and
the members of the Board of Directors of such party shall grant such approvals
and take such actions as are reasonably necessary so that the transactions
contemplated hereby may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise
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act to eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and thereby.
SECTION 6.14. Conveyance Taxes. A1, C1 and C2 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, and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
SECTION 6.15. Transfer Tax. Each of A1, C1 and C2 shall pay, without
deduction or withholding from any amount payable to any stockholders of A1, C1
or C2, any New York State Real Estate Transfer Tax, New York City Real Property
Transfer Tax and New York State Stock Transfer Tax (the "Transfer Taxes") and
any similar taxes imposed by any other State of the United States (and any
penalties and interest with respect to such taxes), which become payable in
connection with the transactions contemplated by this Agreement, on behalf of
the stockholders of A1, C1 or C2, respectively. Each of A1, C1 and C2 shall
cooperate in the preparation, execution and filing of any required returns with
respect to such taxes (including returns on behalf of any stockholders) and in
the determination of the portion of the consideration allocable to real property
of A1, C1 or C2 and its Entities in New York State and City (or in any other
jurisdiction, if applicable). The terms of the Proxy Statement shall provide
that the stockholders of A1, C1 or C2 shall be deemed to have agreed to be bound
by the allocation established in this Section in the preparation of any return
with respect to the Transfer Taxes and any similar taxes, if applicable.
SECTION 6.16. Post-Closing Asset Sales. During the period commencing
at the Effective Time and ending on December 31, 1998, the Surviving Corporation
shall not assign, sell or otherwise transfer to an unaffiliated third party any
asset owned by A1 prior to the Effective Time if, as a result of such
assignment, sale or other transfer, the Surviving Corporation would recognize a
gain, unless directors representing two-thirds of the entire Board of Directors
of the Surviving Corporation have duly adopted a resolution authorizing such
assignment, sale or other transfer.
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SECTION 6.17. Merger Sub. C1 will use commercially reasonable
efforts to ensure that Merger Sub will be formed solely for the purpose of
engaging in the transactions contemplated by this Agreement and that, prior to
the Closing Date, it will not engage in any business activities or conduct any
operations other than in connec tion with the transactions contemplated by this
Agreement.
SECTION 6.18. Transfer of Assets. (a) At the direction of Al, C1
shall cause the applicable C1 Entity to enter into an agreement to sell the
General Motors Building, located at 767 Fifth Avenue, New York, New York, and
any property related thereto (collectively the "GM Building") to one or more
parties designated by A1. Under such agreement, the sale of the GM Building will
be scheduled to close (with "time being of the essence" with respect to such
closing) immediately prior to the consummation of the Merger or at such later
date as A1 may agree to in writing. C1 shall, and shall cause the applicable C1
Entities to, use its and their reasonable best efforts to consummate the sale of
the GM Building in accordance with the terms and conditions of such agreement.
C1 shall cooperate with A1 in the negotiation and consummation of any agreement
relating to the sale of the GM Building, including, without limitation, granting
any potential buyer permission to conduct usual and customary due diligence in
connection with such sale. The applicable C1 Entity shall enter into any
agreement relating to the sale of the GM Building as A1 shall in good faith
direct; provided, however, that, at the option of such C1 Entity, such agreement
shall provide that (i) such C1 Entity shall not be obligated to consummate such
sale unless the Merger will be consummated immediately thereafter and (ii) that
in the event this Agreement is terminated such C1 Entity shall have the right to
terminate such agreement without any cost, penalty or liability to the other
parties thereto. Except as contemplated by the preceding sentence, neither C1
nor any C1 Entity shall make any decision it is entitled to make under, or
relating to, any such agreement, or exercise any remedy in connection with any
such agreement, without the prior written consent of A1.
(b) The parties hereto agree to use their best efforts (it being
understood that such efforts shall not require the expenditure of other than a
nominal amount of cash) to obtain all necessary consents of third parties to
permit the contribution at or, at A1's request, promptly following the Effective
Time of substantially all the assets of C1 and its Subsidiaries to Simon
DeBartolo Group, L.P. ("A1 Operating Partnership") and/or to limited liability
companies and/or limited partnerships, all the beneficial
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interests of which will be held by A1 Operating Partnership, or, at A1's
request, to effectuate the transfer, effective as of the Effective Time or
promptly following the Effective Time, of all or substantially all the economic
benefits of such assets to A1 Operating Partnership and/or such limited
liability companies and/or such limited partnerships.
SECTION 6.19. Existing Agreements. (a) The parties hereto
acknowledge and agree that all contractual rights to registration of C1 Common
Shares and beneficial interests in shares of C2 Common Stock under the
Securities Act in existence at the Effective Time shall continue in effect after
the Effective Time without being affected by the Merger in accordance with their
terms; provided that in the event the Merger is restructured pursuant to Section
1.2(b), shareholders of CPI having such contractual rights shall have
substantially similar rights with respect to the securities received in the
Merger as so restructured. The parties also agree to negotiate in good faith
with the holders of C1 Common Shares and beneficial interests in shares of C2
Common Stock to modify such registration rights to appropriately reflect the
nature of the transactions contemplated hereby.
(b) By approving this Agreement the shareholders of C1 and C2 having
contractual rights to representation on the Board of Trustees of C1 or the Board
of Directors of C2 shall irrevocably waive, effective as of the Effective Time,
all such rights. C1 acknowledges that each shareholder of C1 and C2 having such
contractual representation rights is entering into a Stockholder Agreement.
ARTICLE VII
Conditions
SECTION 7.1. Conditions to Each Party's Obliga tion To Effect the
Merger. The respective obligation of each party to effect the Merger and the
other transactions contemplated hereby is subject to the fulfillment, at or
prior to the Closing, of each of the following conditions:
7.1.1. Stockholder Approvals. This Agreement shall have been adopted
by the requisite vote of the stock holders of A1 under the MGCL and the Articles
of Incorporation and By-laws of A1. The issuance of C1 Common Shares and the
related beneficial interests in C2 Common Stock pursuant to this Agreement and
under the Option Plans after the Merger in accordance with this Agreement shall
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been approved by the requisite vote of the stockholders of C1 and C2 under the
DGCL and the Certificates of Incorporation and By-laws of C1 and C2.
7.1.2. Registration Statement; State Securities Laws. The
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding
seeking such an order shall be pending or threatened. C1 and C2 shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the C1 Common Shares and C2 Common Stock pursuant to this
Agreement, under the Option Plans after the Merger and to issue the C1 Common
Shares and C2 Common Stock upon conversion of the C1 6.50% First Series
Preferred Stock.
7.1.3. Exchange Listing. The C1 Common Shares, the related
beneficial interests in shares of C2 Common Stock to be paired with the C1
Common Shares and the C1 Series A Preferred Stock to be issued pursuant to this
Agreement, and the C1 Common Shares and the paired interests in the C2 Common
Stock previously outstanding and issuable under the Option Plans or upon
conversion of the C1 6.50% First Series Preferred Stock and the C1 Series A
Preferred Stock after the Merger, shall have been authorized for listing on the
New York Stock Exchange (the "NYSE"), upon official notice of issuance.
7.1.4. No Injunctions or Restraints. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall have
enacted, issued, promul gated, enforced or entered any law or order (whether
temp orary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
7.1.5. Tax Opinions. (a) A1 shall have received the opinion, based
on appropriate representations of A1, C1 and C2, and applicable to the A1
stockholders referred to therein, of Willkie Farr & Gallagher, special tax
counsel to A1, dated on or about the date on which the Registration Statement
shall have become effective, which opinion shall have been confirmed in writing
on and as of the Closing Date, generally to the effect that:
(i) The Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code;
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(ii) A1 will not recognize gain or loss as a result of the Merger;
(iii) the holders of shares of A1 Common Stock will recognize gain,
but not loss, upon the exchange of each share of A1 Common Stock for C1
Common Shares and C2 Common Stock in the Merger, but only to the extent of
the fair market value of the beneficial interest in shares of C2 Common
Stock received;
(iv) a holder's tax basis in each C1 Common Shares received in the
Merger will be the same as the tax basis of the shares of A1 Common Stock
exchanged therefor, decreased by the fair market value of the beneficial
interest in shares of C2 Common Stock also received in part exchange
therefor in the Merger, and increased by the amount of gain recognized by
the holder in respect of the exchanged share of A1 Common Stock;
(v) a holder's tax basis in the beneficial interest in C2 Common
Stock received in exchange for a portion of a share of A1 Common Stock in
the Merger will be the fair market value of such beneficial interest in C2
Common Stock at the Effective Time;
(vi) a holder's holding period for each C1 Common Share received in
exchange for shares of A1 Common Stock in the Merger will include that
holder's holding period of the share exchanged therefor at the Effective
Time; and
(vii) a holder's holding period for the beneficial interest in C2
Common Stock received in exchange for shares of A1 Common Stock in the
Merger will commence at the Effective Time.
(b) C1 and C2 shall have received the opinion, based on appropriate
representations of A1, C1 and C2 and in form and substance reasonably
satisfactory to C1 and C2, of Cravath, Swaine & Moore, special tax counsel to C1
and C2, dated as of the Closing Date, which opinion shall have been confirmed in
writing on and as of the Closing Date, generally to the effect that:
(i) the Merger will constitute a "reorganization" within the meaning
of Section 368(a) of the Code;
(ii) C1 will not recognize gain or loss as a result of the Merger;
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(iii) neither the consummation of the C1 Delaware Reorganization nor
the consummation of the Merger and the other transactions contemplated by
this Agreement (x) will adversely affect the qualification of C1 or the
Surviving Corporation as a REIT or (y) will adversely affect the status of
C1 Delaware and C2 as grandfathered from the application of Section
269B(a)(3) of the Code pursuant to Section 136(c)(3) of the Deficit
Reduction Act of 1984;
(iv) the distribution of stock made to C1 shareholders pursuant to
Section 1.1.2 of this Agreement will be treated as a tax-free distribution
under Section 305(a) of the Code;
(v) the distribution of cash made to C1 shareholders pursuant to
Section 1.1.2 of this Agreement will be treated as a distribution of
property to which Section 301 of the Code applies; and
(vi) as of December 31, 1997, C1 qualified as a REIT, and if C1
continues its operations in the same manner as the operations of C1 since
January 1, 1997, C1 will continue to qualify as a REIT.
(c) A1, C1 and C2 shall have received the opinion, based on
appropriate representations of A1 and in form and substance reasonably
satisfactory to C1 and C2, of Baker & Daniels, special counsel to A1, dated on
or about the date on which the Registration Statement (or the last amendment
thereto) shall have become effective, which opinion shall have been confirmed in
writing on and as of the Closing Date to the effect that:
(i) At all times from and after December 31, 1993, A1 has qualified
as a REIT, and if A1 continues its operations in the same manner as the
operations of A1 since the beginning of such period, A1 will continue to
so qualify; and
(ii) the consummation of the Merger and the other transactions
contemplated by this Agreement will not adversely affect the ability of A1
or the Surviving Corporation to qualify as a REIT.
7.1.6. C1 Delaware Reorganization. The C1 Delaware Reorganization
shall have occurred.
SECTION 7.2. Conditions to Obligation of C1 and C2 To Effect the
Merger. The obligation of C1 and C2 to
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effect the Merger and the other transactions contemplated hereby is further
subject to the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in part by
C1 and C2 in their sole discretion):
7.2.1. Representations and Warranties. The rep resentations and
warranties made by A1 in this Agreement that are qualified as to materiality
shall be true and correct, and those not so qualified shall be true and correct
in all material respects, as of the Closing Date as though made on and as of the
Closing Date or, in the case of representations and warranties made as of a
specified date earlier than the Closing Date, on and as of such earlier date,
except as affected by the transactions contemplated by this Agreement, and A1
shall have delivered to C1 and C2 a certificate, dated the Closing Date and
executed in the name and on behalf of it by its Chairman of the Board, President
or any Vice President, to such effect.
7.2.2. Performance of Obligations. A1 shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by it at or prior
to the Closing, and A1 shall have delivered to C1 and C2 a certificate, dated
the Closing Date and executed in the name and on behalf of it by its Chairman of
the Board, President or any Vice President, to such effect.
7.2.3. Comfort Letters. C1 and C2 shall have received "cold comfort
letters" in customary form from Arthur Andersen LLP, A1's accountants, the first
dated within five days prior to the date the Proxy Statement is mailed to A1
stockholders and the second dated the Effective Date, in substantially the form
and substance as is customarily given in a similar merger transaction.
7.2.4. No Material Adverse Change. Since the date of the
Stockholders' Meetings, there shall not have been any change, event or
occurrence which, individually or in the aggregate, has had or could reasonably
be expected to have a material adverse effect on the A1 Entities taken as a
whole.
7.2.5. Proceedings. All proceedings to be taken on the part of A1 in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to C1 and C2, and C1 and C2 shall have received copies of all such
documents and other evidences as C1 or C2
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may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
7.2.6. Governmental and Regulatory and Other Consents and Approvals.
Other than the filings provided for by Section 1.4, all consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
or any other public or private third parties required of A1, C1 or C2 or any of
their respective Entities to consummate the Merger and the other matters
contemplated hereby, the failure of which to be obtained or taken could
reasonably be expected to result in personal liability for any Representative of
C1 or C2 or any Representative of their respective Entities shall have been
obtained, all in form and substance reasonably satisfactory to C1.
SECTION 7.3. Conditions to Obligation of A1 To Effect the Merger.
The obligations of A1 to effect the Merger and the other transactions
contemplated hereby is further subject to the fulfillment, at or prior to the
Closing, of each of the following additional conditions (all or any of which may
be waived in whole or in part by A1 in their sole discretion):
7.3.1. Representations and Warranties. The representations and
warranties made by C1 and C2 in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be true
and correct in all material respects, as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, except as affected by the transactions contemplated by this
Agreement, and C1 and C2 shall each have delivered to A1 a certificate, dated
the Closing Date and executed in the name and on behalf of it by its Chairman of
the Board, President or any Vice President, to such effect.
7.3.2. Performance of Obligations. C1 and C2 shall have performed
and complied with, in all material respects, each agreement, covenant and
obligation required by this Agreement to be so performed or complied with by C1
or C2 at or prior to the Closing, and C1 and C2 shall each have delivered to A1
a certificate, dated the Closing Date and executed in the name and on behalf of
it by its Chairman of the Board, President or any Vice President, to such
effect.
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7.3.3. Comfort Letters. A1 shall have received "cold comfort
letters" in customary form from Ernst & Young LLP, C1's and C2's accountants,
the first dated within five days prior to the date the Proxy Statement is mailed
to C1 and C2 stockholders and the second dated the Effective Date, in
substantially the form and substance as is customarily given in a similar merger
transaction.
7.3.4. No Material Adverse Change. Since the date of the
Stockholders' Meetings, there shall not have been any change, event or
occurrence which, individually or in the aggregate, has had or could reasonably
be expected to have a material adverse effect on the C1/C2 Entities taken as a
whole.
7.3.5. Proceedings. All proceedings to be taken on the part of C1 or
C2 in connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be reasonably satisfactory in form and
substance to A1, and A1 shall have received copies of all such documents and
other evidences as A1 may reasonably request in order to establish the
consummation of such transactions and the taking of all proceedings in
connection therewith.
7.3.6. Related Agreements. Stockholder Agreements shall have been
duly executed by the holders of (i) at least a majority of the total voting
power of all the outstanding C1 Common Shares and C1 Preference Shares and (ii)
at least two thirds of the total voting power of all the outstanding C1
Preference Shares and each such agreement shall be in full force and effect.
7.3.7. Governmental and Regulatory and Other Consents and Approvals.
Other than the filings provided for by Section 1.4, all consents, approvals and
actions of, filings with and notices to any Governmental or Regulatory Authority
or any other public or private third parties required of A1, C1 or C2 or any of
their respective Entities to consummate the Merger and the other matters
contemplated hereby, the failure of which to be obtained or taken could
reasonably be expected to have a material adverse effect on C1, C2 and their
respective Entities, taken as a whole, or on the ability of A1, C1 or C2 to
consummate the transactions contemplated hereby shall have been obtained, all in
form and substance reasonably satisfactory to A1.
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ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1. Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after the A1 Stockholders' Approval or the
C1 Stockholders' Approval and the C2 Stockholders' Approval:
(a) by mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards;
(b) by either A1 or C1 upon notification to the nonterminating party
by the terminating party:
(i) at any time after November 30, 1998, if the Merger shall
not have been consummated on or prior to such date and such failure
to consummate the Merger is not caused by a breach of this Agreement
by the terminating party or any of its Affiliates;
(ii) if the A1 Stockholders' Approval or the C1 Stockholders'
Approval and C2 Stockholders' Approval shall not be obtained by
reason of the failure to obtain the requisite vote upon a vote held
at a meeting of such stockholders, or any adjournment thereof,
called therefor;
(iii) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
nonterminating party set forth in this Agreement, which breach is
not curable or, if curable, has not been cured within 30 days
following receipt by the nonterminating party of notice of such
breach from the terminating party; or
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order
making illegal or otherwise restricting, preventing or prohibiting
either of the Merger and such order shall have become final and
nonappealable;
SECTION 8.2. Effect of Termination. (a) If this Agreement is validly
terminated by either A1 or C1 pursuant to Section 8.1, this Agreement will
forthwith become null
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and void and there will be no liability or obligation on the part of either A1,
C1 or C2 (or any of their respective Representatives or affiliates), except (i)
that the provisions of Sections 6.11, 6.12 and this Section 8.2 will continue to
apply following any such termination, (ii) that nothing contained herein shall
relieve any party hereto from liability for wilful breach of its
representations, warranties, covenants or agreements contained in this Agreement
and (iii) as provided in paragraph (b) or (c) below.
(b) (i) In the event that this Agreement is terminated (x) by C1
pursuant to Section 8.1(b)(iii) due to a willful breach by A1 or (y) at any time
on or prior to November 30, 1998 by either party pursuant to Section 8.1 b(ii)
as a result of the A1 Stockholders' Approval not being obtained, then C1 shall
become entitled to receive from A1 a termination fee of $50,000,000 (the "C1
Termination Fee"), payable annually in installments over a two-year period. The
portion of the C1 Termination Fee that shall be payable each year shall equal
the amount that C1 may receive in such taxable year without violating the REIT
Requirements minus $1,000,000 (the "C1 Payment Amount"). On December 20 of each
year in such two-year period C1's independent public accountants shall certify
to A1 the C1 Payment Amount for such year, and A1 shall pay such C1 Payment
Amount to C1 by December 31 of such year by wire transfer to an account
specified by C1. Any portion of the C1 Termination Fee that is not paid to C1 by
the end of the second year shall be forfeited and A1 will have no further
obligation to make any C1 Termination Fee payments.
(ii) A1 acknowledges that the agreements contained in the preceding
paragraph are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, C1 and C2 would not enter into
this Agreement; accordingly, if A1 fails promptly to pay the amounts due in
accordance with the terms of such paragraph, and in order to obtain any such
payment, C1 commences a suit which results in a judgment against A1 for any such
payment, A1 shall pay to C1 its cost and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit.
(c) (i) In the event that this Agreement is terminated by A1
pursuant to Section 8.1(b)(iii) due to a willful breach by C1, then A1 shall
become entitled to receive from C1 a termination fee of $50,000,000 (the "A1
Termination Fee"), payable annually in installments over a two-year period. The
portion of the A1 Termination Fee that
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shall be payable each year shall equal the amount that A1 may receive in such
taxable year without violating the REIT Requirements minus $1,000,000 (the "A1
Payment Amount"). On December 20 of each year in such two-year period A1's
independent public accountants shall certify to A1 the A1 Payment Amount for
such year, and C1 shall pay such A1 Payment Amount to A1 by December 31 of such
year by wire transfer to an account specified by A1. Any portion of the A1
Termination Fee that is not paid to A1 by the end of the second year shall be
forfeited and C1 will have no further obligation to make any A1 Termination Fee
payments.
(ii) C1 acknowledges that the agreements contained in the preceding
paragraph are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, A1 would not enter into this
Agreement; accordingly, if C1 fails promptly to pay the amounts due in
accordance with the terms of such paragraph, and in order to obtain any such
payment, A1 commences a suit which results in a judgment against A1 for any such
payment, C1 shall pay to A1 its cost and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit.
SECTION 8.3. Amendment. This Agreement may be amended, supplemented
or modified by action taken by or on behalf of the respective Boards of
Directors of the parties hereto at any time prior to the Effective Time, whether
prior to or after the A1 Stockholders' Approval or the C1 Stockholders' Approval
and C2 Stockholders' Approval shall have been obtained, but after such adoption
and approval only to the extent permitted by applicable law. No such amendment,
supplement or modification shall be effective unless set forth in a written
instrument duly executed by or on behalf of each party hereto.
SECTION 8.4. Waiver. At any time prior to the Effective Time any
party hereto, by action taken by or on behalf of its Board of Directors, may to
the extent permitted by applicable law (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties of the other parties
hereto contained herein or in any document delivered pursuant hereto or (iii)
waive compliance with any of the covenants, agreements or conditions of the
other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party extending the time of performance or waiving any such inaccuracy or
noncompliance.
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No waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.
ARTICLE IX
General Provisions
SECTION 9.1. Non-Survival of Representations, Warranties, Covenants
and Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article I and Article II, in
Sections 6.6, 6.8, 6.9, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.16, 6.17 and 6.18,
this Article IX and the agreements of the "affiliates" of A1 delivered pursuant
to Section 6.4, which shall survive the Effective Time.
SECTION 9.2. Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally, by overnight courier, by facsimile transmission or mailed
(first-class postage prepaid) to the parties at the following addresses or
facsimile numbers:
If to C1 or C2, to:
Corporate Property Investors
Three Dag Hammarskjold Plaza
305 East 47th Street
New York, New York 10017
Facsimile No.: (212) 319-9845
Attn: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Facsimile No.: (212) 474-3700
Attn: Samuel C. Butler
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If to A1, to:
Simon DeBartolo Group, Inc.
115 West Washington Street
Indianapolis, Indiana 46204
Facsimile No.: (317) 685-7377
Attn: General Counsel
with a copy to:
Willkie Farr & Gallagher
153 East 53rd Street
New York, New York 10022
Facsimile No.: (212) 821-8111
Attn: Richard L. Posen
All such notices, requests and other communications will (i) if delivered
personally or by reputable overnight courier to the address as provided in this
Section, be deemed given upon delivery, (ii) if delivered by facsimile
transmission to the facsimile number as provided in this Section, be deemed
given when confirmation is received, and (iii) if delivered by mail in the
manner described above to the address as provided in this Section, be deemed
given upon receipt (in each case regardless of whether such notice, request or
other communication is received by any other person to whom a copy of such
notice, request or other communication is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
SECTION 9.3. Entire Agreement; Incorporation of Exhibits;
Construction. (a) This Agreement supersedes all prior discussions and agreements
among the parties hereto with respect to the subject matter hereof, other than
the Confidentiality Agreement, which shall survive the execution and delivery of
this Agreement, and contains, together with the Confidentiality Agreement, the
sole and entire agreement among the parties hereto with respect to the subject
matter hereof.
(b) The A1 Disclosure Letter, the C1 Disclosure Letter and any
Exhibit attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
(c) The parties hereby acknowledge that this Agreement has been the
subject of active and complete
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negotiations among the parties and represents the parties' agreement. The
parties agree that the terms and conditions of this Agreement shall not be
construed in favor of or against any party by reason of the extent to which any
party or its professional advisors participated in the preparation of this
Agreement.
SECTION 9.4. Public Announcements. Except as otherwise required by
law or the rules of any applicable securities exchange or national market
system, so long as this Agreement is in effect, A1, C1 and C2 will not, and will
not permit any of their respective Representatives to, issue or cause the
publication of any press release or make any other public announcement with
respect to the transactions contemplated by this Agreement without the consent
of the other party, which consent shall not be unreasonably withheld. A1, C1 and
C2 will cooperate with each other in the development and distribution of all
press releases and other public announcements with respect to this Agreement and
the transactions contemplated hereby, and will furnish the other with drafts of
any such releases and announcements as far in advance as practicable.
SECTION 9.5. No Third-Party Beneficiary. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and except as provided in
Sections 6.9 and 6.10 (which are intended to be for the benefit of the persons
entitled to therein, and may be enforced by any of such persons), it is not the
intention of the parties to confer third-party beneficiary rights upon any other
person.
SECTION 9.6. No Assignment; Binding Effect. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned by any party
hereto without the prior written consent of the other parties hereto and any
attempt to do so will be void. Subject to the preceding sentence, this Agreement
is binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
SECTION 9.7. Headings. The table of contents and headings used in
this Agreement have been inserted for convenience of reference only and do not
define, modify or limit the provisions hereof.
SECTION 9.8. Invalid Provisions. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future law
or order,
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and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
SECTION 9.9. Governing Law. Except to the extent that the
Massachusetts Business Corporation Law, the DGCL or the MGCL is mandatorily
applicable to the Merger and the rights of the stockholders of the Constituent
Corporations, this Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State, without giving effect to the conflicts of laws
principles thereof.
SECTION 9.10. Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
SECTION 9.11. Certain Definitions. As used in this Agreement:
(a) except as provided in Section 6.4, the term "affiliate", as
applied to any person, shall mean any other person directly or indirectly
controlling, controlled by, or under common control with, that person; for
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of that person, whether through the ownership of
voting securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities if such
person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the
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right to acquire (whether such right is exercisable immediately or only
after the passage of time);
(c) the term "business day" means a day other than Saturday, Sunday
or any day on which banks located in the States of Maryland or New York
are authorized or obligated to be closed;
(d) the term "Consolidated Non-Corporate Affiliate" means, with
respect to any party, any trust, limited liability company or partnership,
the accounts of which would be consolidated (including through a
proportional consolidation of assets, liabilities, revenues and expenses)
with those of such party in its consolidated financial statements in
accordance with the principles of consolidation employed by C1 and C2 (if
such party is an affiliate of C1 or C2) or A1 (if such party is an
affiliate of A1);
(e) the term "knowledge" or any similar formulation of "knowledge"
shall mean, with respect to A1, the knowledge of its Chairman, President
or Chief Financial Officer, and with respect to C1 or C2, the knowledge of
its Chairman, President or Chief Financial Officer;
(f) any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with
respect to an entity (or group of entities taken as a whole) means such
event, change or effect is material or materially adverse, as the case may
be, to the business, properties, assets, liabilities, condition financial
or otherwise or results of operations of such entity (or of such group of
entities taken as a whole); provided, however, that a downgrade in the
credit rating of C1 shall be deemed materially adverse to the C1/C2
Entities taken as a whole if, and only if, such downgrade shall be to a
level below a rating of Baa3 (or the equivalent) by Moody's Investors
Services, Inc. and BBB- (or the equivalent) by Standard & Poor's Rating
Services;
(g) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include
a "group" as such term is defined in Section 13(d)(3) of the Exchange
Act);
(h) the "Representatives" of any entity means such entity's
trustees, directors, officers, employees,
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legal, investment banking and financial advisors, accountants and any
other agents and representatives, in each case to the extent acting in
such capacity;
(i) the term "Significant Entities" means, with respect to A1, the
Entities of A1 which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act and, in the case of C1 or
C2, the Entities of either C1 or C2 which constitute "significant
subsidiaries" of C1 and C2 taken as a whole under Rule 405 promulgated by
the SEC under the Securities Act;
(j) the term "Subsidiary" means, with respect to any party, any
corporation of which more than 50 percent of either the equity interests
in, or the voting control of, such corporation is, directly or indirectly
through Entities or otherwise, beneficially owned by such party; and
(k) following the C1 Delaware Reorganization, (i) all references to
"Cl" shall be deemed to refer to C1 Delaware, (ii) all references to C1
Common Shares shall be deemed to refer to shares of C1 Delaware Common
Stock, (iii) all references to any other shares of any class of beneficial
interest in or of C1 shall be deemed to refer to shares of capital stock
of equivalent class of C1 Delaware, (iv) all references to shareholders of
C1 shall be deemed to refer to stockholders of C1 Delaware and (v) all
references to the Board of Trustees of C1 shall be deemed to refer to the
Board of Directors of C1 Delaware.
SECTION 9.12. Waiver of Jury Trial. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, FOR
ITSELF AND FOR THE THIRD- PARTY BENEFICIARIES HEREUNDER, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to
be signed by its officer thereunto duly authorized as of the date first above
written.
Attest: SIMON DEBARTOLO GROUP, INC.,
/s/ James M. Barkley By /s/ Richard S. Sokolov
- ------------------------------ -----------------------------------
Secretary Name: Richard S. Sokolov
Title: President and Chief
Operating Officer
Attest: CORPORATE PROPERTY INVESTORS,*
By /s/ Hans C. Mautner
- ------------------------------ -----------------------------------
Secretary Name: Hans C. Mautner
Title: Chairman and Chief Executive
Officer
Attest: CORPORATE REALTY CONSULTANTS,
INC.,
By /s/ Hans C. Mautner
- ------------------------------ -----------------------------------
Secretary Name: Hans C. Mautner
Title: Chairman and Chief Executive
Officer
- ----------
* Corporate Property Investors is the designation of the Trustees under a
Declaration of Trust, as amended and restated, on file with the Secretary of the
Commonwealth of Massachusetts, and neither the shareholders nor the Trustees,
officers, employees or agents of the Trust created thereby, nor any of their
personal assets, shall be liable hereunder, and all persons dealing with the
Trust shall look solely to the Trust estate for the payment of any claims
hereunder or for the performance thereof.
<PAGE> 1
Exhibit 99.1 Press Release issued by Simon DeBartolo Group, Inc.,
dated February 19, 1998.
CONTACTS:
Shelly Doran 317.685.7330 Investors
Billie Scott 317.263.7148 Media
FOR IMMEDIATE RELEASE
SIMON DeBARTOLO GROUP ANNOUNCES MERGER WITH
CORPORATE PROPERTY INVESTORS
Transaction Creates $17 Billion Real Estate Investment Trust
Indianapolis, Indiana - February 19, 1998... Simon DeBartolo
Group, Inc. (NYSE:SPG) today announced that it signed a definitive agreement to
merge with Corporate Property Investors (CPI), a privately held real estate
investment trust, and Corporate Realty Consultants, Inc., its "paired share"
affiliate. The transaction has been approved by both companies' Boards of
Directors.
Once the acquisition is completed, Simon will own 222 retail
properties and 8 office buildings comprising total GLA of 175 million square
feet. The acquisition is expected to generate meaningful and additional revenue,
and achieve significant cost savings and operational synergies from the
combination of the two companies' operations.
The transaction values CPI at approximately $5.781 billion,
including the assumption of debt. Under the terms of the merger agreement, CPI
shareholders will receive consideration of $179 per share, or $4.803 billion,
consisting of $90 in cash, $70 of common stock and $19 in 6.5% convertible
preferred stock. The common stock component of the consideration is based on a
fixed exchange ratio using Simon's February 17, 1998, closing price of $33 5/8,
and is subject to a 15% symmetrical collar based upon the price of Simon common
stock determined at closing. The transaction is expected to be completed during
the third quarter of 1998 and is subject to the approval of Simon's
shareholders, as well as customary regulatory and other conditions. A majority
of CPI's shareholders have already approved the transaction. Hans Mautner, CPI's
Chairman and Chief Executive Officer, will become the combined company's Vice
Chairman and will serve on the board of the combined company along with two
other CPI designees. Mark Ticotin, CPI's President, will become a Senior
Executive Vice President of the combined company. Messrs. Mautner and Ticotin
will also serve on the combined company's six-member Executive Committee.
"We are extremely excited to combine CPI with our company,"
said David Simon, Simon's Chief Executive Officer. "CPI owns the most
outstanding collection of premier retail real estate in the United States. With
1997 sales per square foot in excess of $385 and occupancy of 90.8%, it is the
country's most productive aggregation of retail real estate assets."
<PAGE> 2
"We have realized significant value for our shareholders,"
said Mr. Mautner. "We recognize the many strategic benefits of a combination
with the Simon organization, and our shareholders are enthusiastic about holding
a substantial ownership stake in the combined company."
"These two companies are a perfect fit for each other," stated
Richard S. Sokolov, Simon's President and Chief Operating Officer. "The CPI
portfolio adds a significant presence in the Boston and Atlanta markets to the
Simon portfolio, and adds to the existing Simon presence in such markets as the
New York metropolitan area, California and Florida. Additionally, the preeminent
CPI assets will fuel the already substantial revenue growth being realized by
Simon's newly created Simon Brand Ventures consumer marketing division."
Merrill Lynch & Co. was the financial advisor for Simon and
Lazard Freres & Co. LLC and J.P. Morgan & Co. were the advisors for CPI.
Simon DeBartolo Group, Inc. is a self-administered and
self-managed real estate investment trust which, through its subsidiary
partnerships, is engaged in the ownership, development, management, leasing,
acquisition and expansion of income-producing properties. It currently owns or
has an interest in 202 properties which consist of existing regional malls,
community shopping centers and specialty and mixed-use properties and, together
with its affiliated management company, owns or manages approximately 145
million square feet of gross leasable area in 34 states.
-end-
Note: Statements in this press release which are not
historical may be deemed forward-looking statements within the meaning of the
federal securities laws. Although Simon believes the expectations reflected in
any forward-looking statements are based on reasonable assumptions, it can give
no assurance that its expectations will be attained. The reader is directed to
the Company's various filings with the Securities and Exchange Commission,
including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports
on Form 10-K for a discussion of such risks and uncertainties.
Additional Simon DeBartolo Group information is available on
the Company's website at www.simon.com.
<PAGE> 3
Table A
CPI Retail Properties:
<TABLE>
<CAPTION>
Property Name Location GLA Department Stores
(in 000's)
<S> <C> <C> <C>
Aurora Mall Aurora, CA 950 JCPenney, Foley's and Sears
Brea Mall Brea, CA 1,250 JCPenney, Macy's, Nordstrom,
Robinson's-May and Sears
Burlington Mall Burlington, MA 1,255 Filene's, Lord & Taylor, Macy's
and Sears
Crystal Mall Waterford, CT 790 Filene's, JCPenney, Macy's and
Sears
Gwinnett Place Atlanta, GA 1,240 Macy's, JCPenney, Parisian,
Rich's and Sears
Haywood Mall Greenville, SC 1,255 Belk-Simpson, Dillard's,
JCPenney, Rich's and Sears
Highland Mall Austin, TX 1,100 Dillard's, Foley's and JCPenney
Lenox Square Atlanta, GA 1,450 Macy's, Neiman Marcus and Rich's
Livingston Mall Livingston, NJ 990 Lord & Taylor, Macy's and Sears
Metrocenter Phoenix, AZ 1,350 Dillard's, JCPenney, Macy's,
Sears and Robinson's-May
Nanuet Mall Nanuet, NY 910 Macy's, Sears and Stern's
Northlake Mall Atlanta, GA 950 JCPenney, Macy's, Parisian and
Sears
Ocean County Mall Toms River, NJ 870 JCPenney, Macy's, Sears and
Stern's
Palm Beach Mall West Palm Beach, FL 1,200 Burdine's, JCPenney, Lord &
Taylor, Dillard's(1) and Sears
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
Phipps Plaza Atlanta, GA 820 Saks, Parisian and Lord & Taylor
Rockaway Townsquare Rockaway, NJ 1,210 JCPenney, Lord & Taylor, Macy's
and Sears
Roosevelt Field Mall Garden City, NY 2,260 Bloomingdale's, JCPenney, Macy's,
Nordstrom and Stern's
Santa Rosa Plaza Santa Rosa, CA 695 Macy's, Mervyn's and Sears
South Shore Plaza Braintree, MA 1,595 Filene's, Lord & Taylor, Macy's
and Sears
Town Center at Boca Raton Boca Raton, FL 1,320 Bloomingdale's, Burdine's, Lord &
Taylor, Saks Fifth Ave. and Sears
Town Center at Cobb Atlanta, GA 1,275 Macy's, JCPenney, Parisian,
Rich's and Sears
Walt Whitman Mall Huntington, NY 965 Macy's, Bloomingdale's(1),
Saks(1) and Lord & Taylor(1)
Westminster Mall Westminster, CA 1,095 JCPenney, Robinson's-May,
Robinson's-May Home Store and
Sears
</TABLE>
(1) Under construction
CPI Office Properties:
<TABLE>
<CAPTION>
Property Name Location Description
<S> <C> <C>
General Motors Building New York City, NY 1.6 million square foot
building
The Lenox Building Atlanta, GA 350,000 square foot
building
Rockaway Office Building Rockaway, NJ 90,000 square foot building
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Three Dag Hammarskjold Plaza New York City, NY 120,000 square foot
building
</TABLE>
