EXHIBIT 1
THIRD AMENDED AND RESTATED INVESTOR AGREEMENT
THIS THIRD AMENDED AND RESTATED INVESTOR AGREEMENT (this "Agreement"),
dated as of September 9, 1997, is by and between Security Capital Pacific Trust,
a Maryland real estate investment trust (the "Company"), and Security Capital
Group Incorporated, a Maryland corporation ("SCG").
W I T N E S S E T H
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WHEREAS, the Company and SCG have entered into that certain Merger and
Issuance Agreement, dated as of March 24, 1997, as amended (the "Merger
Agreement"), pursuant to which, among other things, SCG will cause certain of
its subsidiaries to be merged into a subsidiary of the Company in exchange for
the Company's common shares of beneficial interest, $0.01 par value per share
(the "Common Shares");
WHEREAS, the Company and SCG are parties to that certain Investor
Agreement, dated and amended and restated as of February 23, 1990, which was
further amended by that certain Amended and Restated Investor Agreement dated as
of May 14, 1991, by that certain Supplemental Agreement dated as of May 14,
1991, and by that certain Second Amended and Restated Investor Agreement dated
as of July 11, 1994 (as so amended and restated and further amended, the
"Original Agreement");
WHEREAS, the Company and SCG have also entered into that certain
Supplemental Investment Agreement, dated as of October 1, 1991, that certain
Second Supplemental Investment Agreement dated as of December 7, 1993, and that
certain Third Supplemental Investment Agreement dated as of December 6, 1994
(collectively the "Investment Agreements");
WHEREAS, the Company and SCG desire to amend and restate the Original
Agreement to clarify certain ambiguities and update the Original Agreement, to
consolidate the provisions of the Investment Agreements with the provisions of
the Original Agreement and thereby terminate the Investment Agreements, and to
reflect the continuing relationship between the Company and SCG after
consummation of the transactions contemplated by the Merger Agreement (the
"Transaction"); and
WHEREAS, the execution and delivery of this Agreement is a condition to the
consummation of the Transaction.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. In addition to the terms defined elsewhere herein, the
following terms shall have the following meanings:
"Affiliate" shall have the meaning ascribed thereto in Rule 12b-2 under the
Exchange Act as in effect on the date hereof; provided, that neither party
hereto shall be deemed to be an Affiliate of the other party hereto for purposes
of this Agreement unless otherwise stated herein.
"Approval Rights" shall have the meaning set forth in Section 5(d) of this
Agreement.
"Beneficial Owner" shall mean any Person deemed to be a "Beneficial Owner"
of or to "Beneficially Own" any Common Shares in accordance with the term
"beneficial ownership" as defined in Rule 13d-3 under the Exchange Act.
"Board" shall mean the Board of Trustees of the Company.
"Bylaws" shall mean the Company's Amended and Restated Bylaws, as now in
effect or as amended from time to time.
"Capital Expenditures" shall mean, on an annual basis, an amount equal to
the product of (a) the sum of the total square footage with respect to all
completed properties of the Company and its consolidated subsidiaries as of the
last day of each of the immediately preceding five calendar quarters, divided by
five, and (b) $0.15.
"Commission" shall mean the Securities and Exchange Commission or any
successor agency or entity thereto.
"Common Shares" shall have the meaning set forth in the preamble of this
Agreement.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Declaration of Trust" shall mean the Company's Restated Declaration of
Trust, as amended and supplemented, as now in effect or as amended from time to
time.
"Disqualified Shares" shall mean any of the Company's shares of beneficial
interest which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) (a) matures or is
subject to mandatory redemption, pursuant to a sinking fund obligation or
otherwise, (b) is convertible into or exchangeable or exercisable for a
Liability or Disqualified Shares during the term of this Agreement, (c) is
redeemable during the term of this Agreement at the option of the holder of such
security or (d) otherwise requires any payments by the Company during the term
of this Agreement.
"Distribution" shall mean, with respect to any shares of beneficial
interest or other equity security of the Company, (a) the retirement,
redemption, purchase or other acquisition for value of those securities by the
Company, (b) the declaration or payment of any dividend on or with respect to
those securities by the Company, (c) any loan or advance by the Company to, or
other investment by the Company in, the holder of any of those securities and
(d) any other payment by the Company with respect to those securities.
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"Fixed Charge Coverage Ratio" shall mean, as of any date, the ratio of
(a)(i) Funds from Operations, plus (ii) Interest Expense, minus (iii) Capital
Expenditures, to (b) the sum of (i) Interest Expense, plus (ii) Distributions of
any kind or character or other proceeds paid or payable with respect to
Disqualified Shares, plus (iii) any regularly scheduled principal payments on
Total Indebtedness (excluding (1) any regularly scheduled principal payments on
Company's revolving line of credit with Texas Commerce Bank National Association
and ▇▇▇▇▇ Fargo Realty Advisors Funding, Incorporated, or any renewals,
extensions or replacements thereof, and (2) any regularly scheduled principal
payments on any Total Indebtedness which pays such Total Indebtedness in full,
but only to the extent that the amount of such final payment is greater than the
scheduled principal payment immediately preceding such final payment), in each
case for the four fiscal quarters ending on the date of determination.
"Funds from Operations" shall mean for the Company and its consolidated
subsidiaries, net income plus depreciation and amortization (exclusive of
amortization of financing costs), all as determined in accordance with generally
accepted accounting principles; provided, that there shall not be included in
such calculation (a) any proceeds of any insurance policy other than rental or
business interruption insurance received by the Company, (b) any gain or loss
which is classified as "extraordinary" in accordance with generally accepted
accounting principles or (c) capital gains and taxes on capital gains (in each
case exclusive of such amounts that are attributable to PTR Development Services
Incorporated). Funds from Operations shall be calculated as if all minority
interests in the Company's consolidated subsidiaries have been converted into
capital securities of the Company. Funds from Operations shall not be increased
or decreased by gains or losses from sales of properties (in each case exclusive
of amounts that are attributable to PTR Development Services Incorporated).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Group" shall have the meaning assigned thereto in Section 13(d)(3) of the
Exchange Act.
"Interest Expense" shall mean all of the Company's paid, accrued or
capitalized interest expense on it Total Indebtedness (whether direct, indirect,
or contingent, and including interest on all convertible liabilities), but
excluding Interest Expense that is not paid or payable in cash and excluding
Interest Expense for the construction of Company projects which is capitalized
in accordance with generally accepted accounting principles.
"Interest Expense Coverage Ratio" shall mean, as of any date, the ratio of
(a) the sum of (i) the Company's Funds from Operations and (ii) the Company's
Interest Expense to (b) the sum of (i) Interest Expense and (ii) Distributions
of any kind or character or other proceeds paid or payable with respect to
Disqualified Shares, of the Company and is consolidated subsidiaries for the
four fiscal quarters ending on the date of determination.
"Liabilities" shall mean, without duplication, (a) any obligations required
by generally accepted accounting principles to be classified upon the Company's
balance sheet as liabilities, (b) any liabilities secured (or for which the
holder of the Liability has an existing right, remedy, power or privilege,
contingent or otherwise, to be so secured) by any Lien existing on property
owned or acquired by the Company, (c) any obligations that have been (or under
generally
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accepted accounting principles should be) capitalized for financial reporting
purposes and (d) any guaranties, endorsements and other contingent obligations
with respect to Liabilities or obligations of others.
"Lien" shall mean any lien, mortgage, security interest, pledge,
assignment, charge, title retention, agreement or encumbrance of any kind and
any other substantially similar arrangement for a creditor's claim to be
satisfied from assets or proceeds prior to the claims of other creditors or the
owners.
"Lender" shall have the meaning set forth in Section 7(i) of this
Agreement.
"Member" shall have the meaning set forth in Section 4 of this Agreement.
"Nominee" shall have the meaning set forth in Section 5(a) of this
Agreement.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint stock company, trust,
unincorporated organization, or other entity.
"Registrable Securities" shall have the meaning set forth in Section 7(h)
of this Agreement.
"SCG" shall have the meaning set forth in the first paragraph of this
Agreement.
"SCG Group" shall have the meaning set forth in Section 4 of this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Officer" shall mean any Senior Vice President, Managing Director,
President, Chairman or Co-Chairman of the Company.
"Total Indebtedness" shall mean all Liabilities of the Company that are (a)
a Liability for borrowed money, (b) evidenced by bonds, debentures, notes or
similar instruments, (c) an obligation to pay the deferred purchase price of
property or services, except trade payables arising in the ordinary course of
business, (d) secured by a Lien existing on any property or any interest
therein, whether or not such Liability shall have been assumed by the Company,
(e) any capital lease or sublease that has been (or under generally accepted
accounting principles should be) capitalized on a balance sheet, (f) a guaranty,
endorsement or other contingent obligation (other than endorsements in the
ordinary course of business of negotiable or documents for deposit or
collection) and (g) accounts payable, dividends of any kind or character or
other proceeds payable with respect to any shares, accrued expenses and other
liabilities which in the aggregate are in excess of 5% of the amount of the
Company's total assets (determined in accordance with generally accepted
accounting principles) plus the amount of any accumulated depreciation with
respect to such assets, as of the date of determination.
"Transaction" shall have the meaning set forth in the preamble of this
Agreement.
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"Value" shall mean the reported last sale price of a unit of security
regular way on a given day or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in each case
on the New York Stock Exchange Composite Tape, or, if such securities are not
listed or admitted to trading on such exchange, on the principal national
securities exchange on which such securities are listed or admitted to trading;
or, if such securities are not listed or admitted to trading on any national
securities exchange, the closing sales price, or, if there is no closing sales
price, the average of the closing bid and asked prices, in the over-the-counter
market as reported by the National Association of Securities Dealers Automated
Quotation System, or, if not so reported, as reported by the National Quotation
Bureau, Incorporated, or any successor thereof; or, if not so reported, the
average of the closing bid and asked prices as furnished by any member of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose; or, if no such prices are furnished, the fair
market value of such security as estimated by a nationally recognized investment
banking firm selected by SCG (subject to the Company's approval, which will not
be unreasonably withheld), which estimate shall be prepared at the expense of
the Company; provided, however, that any determination of the "Value" of a
security hereunder shall be based on the assumption that such security is freely
transferable without registration under the Securities Act.
"Violation" shall have the meaning set forth in Section 7(f)(i) of this
Agreement.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to SCG as follows:
(a) Organization and Standing. The Company has been duly organized
and is validly existing as a real estate investment trust in good standing
under the laws of the State of Maryland, with full power and authority to
own its properties and conduct its business as now conducted and as
proposed by it to be conducted.
(b) No Defaults. The performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict with
the Declaration of Trust, Bylaws or other governing documents of the
Company.
(c) Authority. The Company has full right, power and authority to
enter into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by the Company
and constitutes a valid and binding agreement of the Company enforceable
against it in accordance with its terms, except to the extent that its
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other laws affecting the enforcement of creditors' rights
generally and judicial limitations on the right of specific performance or
by general equitable principles, and except as enforceability of
indemnification provisions hereof may be limited by federal securities
laws.
(d) Investment Company Act. The Company is not required to be
registered under the Investment Company Act of 1940, as amended.
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3. Representations and Warranties of SCG. SCG hereby represents and
warrants to the Company as follows:
(a) Organization and Standing. SCG has been duly organized and is
validly existing as a corporation in good standing under the laws of the
State of Maryland, with corporate power and authority to own its properties
and conduct its business as now conducted.
(b) Authorization. SCG has full right, power and authority to enter
into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly authorized, executed and delivered by SCG and
constitutes a valid and binding agreement of SCG enforceable against it in
accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other
laws affecting the enforcement of creditors' rights generally and judicial
limitations on the right of specific performance or by general equitable
principles. The performance by SCG of all of its obligations under this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other material agreement or instrument to which SCG is a
party or by which SCG is bound or to which any of the property or assets of
SCG is subject, nor will any such action result in any violation of the
provisions of the Articles of Incorporation or the By-Laws of SCG or any
applicable law or statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over SCG or any of its
properties.
(c) Investment Company Act. SCG is not required to be registered
under the Investment Company Act of 1940, as amended.
4. Corporate Configuration. SCG and its affiliates, including the
Company (collectively, the "SCG Group and each, a "Member"), constitute a group
of businesses engaged in real estate research, investment and management. Since
inception, the SCG Group has compiled an excellent record of growth in its
business. The parties recognize that the SCG Group has a distinct character
that is reflected in its objectives, principles, operating policies and
management style and that the SCG Group's overall objective is to create the
maximum value for Members and the shareholders thereof. The parties further
recognize that an important element of the SCG Group's success has been its
ability to attract, motivate, develop and retain talented individuals.
Historically, this has been accomplished by combining the operational aspects of
a Member with the organizational, management, technical and financial strengths
of SCG. Following the consummation of the Transaction, the parties desire that
the distinctive character of the SCG Group continue as between the Company, SCG
and the other Members and, accordingly, agree to the following provisions of
this Section 4.
(a) Statement of Purpose and Objectives. The parties believe that the
creation of value for the shareholders of the Company and the other Members
is dependent in large part on the ability of the Members to attract,
motivate, develop and retain talented individuals. The parties further
recognize that each Member enjoys the benefits and support derived from its
affiliates within the SCG Group and that these benefits and
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support are important for the continued success of each of the Members. In
that regard, the Company and SCG agree that the provisions of this Section
4 are necessary to continue the development of a corporate structure and
depth of management capable of sustaining a high rate of value-creation
over a long period of time. Further, the Company and SCG agree that it is
critical to the accomplishment of its goals to (i) recognize the intrinsic
value of each employee as an individual, (ii) treat each employee and
applicant for employment without discrimination as to race, creed, color,
sex, age, orientation or national origin, (iii) maintain an atmosphere that
combines professional achievement with personal enjoyment, (iv) provide
training opportunities that permit employees to perform their jobs in a
better and more meaningful manner, (v) provide each employee with
opportunity for career growth and advancement within the SCG Group based
upon individual ability and performance, (v) recognize the value and
potential of self-motivation of people who thoroughly understand their jobs
so that individual initiative and thought will be encouraged in the
accomplishment of all tasks, (vi) compensate employees fairly and
competitively and (vii) maintain and enhance the strengths of each Member.
(b) Transferability of Employees. To accomplish the foregoing
objectives, each of the parties hereto agrees that SCG may notify the
Company's officers and employees of employment opportunities with other
Members of the SCG Group (including SCG) and may make such opportunities
available to such officers and employees; provided, that prior to making
any such opportunity available to any Senior Officer, SCG shall first give
the Board written notice of its intention to make any such opportunity
available to a Senior Officer at least 14 days prior to any discussions
with a Senior Officer regarding such opportunity. No Member (or any
director, trustee, officer, employee or shareholder of such Member) shall
have any liability to any other Member (or any director, trustee, officer,
employee or shareholder of such Member) as a result of the compliance by
such Member with the provisions of this Section 4. In the event that any
claims are made by any Person as a result of the compliance by a Member
with the provisions of this Section 4, each Member shall be responsible for
its own costs of defending against such claim.
(c) Termination. The provisions of this Section 4 shall continue and
remain in full force and effect until such time as the Company shall cease
to be a Member.
5. Covenants of the Company. The Company covenants and agrees with SCG
as follows:
(a) Board Representation. From and after the date hereof and for so
long thereafter as SCG Beneficially Owns 10% or more of the outstanding
Common Shares, the Company shall not increase the number of members of its
Board to more than eight (8), and SCG shall be entitled to designate one or
more Persons for nomination to the Board (such Person, a "Nominee") as
follows and the Company will use its best efforts to cause the election of
such Nominee or Nominees:
(i) So long as SCG Beneficially Owns at least 10% but less than
25% of the outstanding Common Shares, one (1) Nominee;
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(ii) So long as SCG Beneficially Owns 25% or more of the
outstanding Common Shares, that number of Nominees as shall bear
approximately the same ratio (rounded down to the nearest whole
number) to the total number of members of the Board as the number of
Common Shares Beneficially Owned by SCG bears to the total number of
outstanding Common Shares, provided, that (A) SCG shall be entitled to
designate not more than three (3) Nominees so long as the Board
consists of not more than eight (8) members; and (B) any Person who is
employed by SCG or who is an employee or a director of any corporation
of which SCG is a 25% shareholder (except for the Company) shall be
deemed to be a designee of SCG.
(b) File Reports. For as long as SCG shall continue to Beneficially
Own any Common Shares, the Company shall file on a timely basis all annual,
quarterly and other reports required to be filed by it under Sections 13
and 15(d) of the Exchange Act, and the Rules and Regulations of the
Commission thereunder, as amended from time to time.
(c) Advice of Actions. Without first having consulted with the
Nominee or Nominees of SCG designated by SCG in writing, the Company will
not seek approval by the Board of any proposal relating to:
(i) Budget. The Company's annual budget.
(ii) Expenses. Incurring expenses in any year exceeding (A) any
line item in the annual budget by the greater of $500,000 or 20% or
and (B) the total expenses set forth in the annual budget by 15%.
(iii) Assets. The acquisition or sale of any assets in any
single transaction or any series of related transactions in the
ordinary course of the Company's business where the aggregate purchase
price paid or received by the Company exceeds $25,000,000.
(iv) Contracts. Entering into any new contract with a service
provider (A) for investment management, property management, or
leasing services or (B) that reasonably contemplates annual contract
payments by the Company in excess of $1,000,000.
Notwithstanding the foregoing, the Company shall have no obligation to
accept or comply with any advice offered by SCG or its designated Nominees
in any consultation pursuant to this Section 5(c).
(d) Approval Rights. So long as SCG Beneficially Owns 25% or more of
the Common Shares outstanding, SCG shall have the right (each, an "Approval
Right") to approve the following matters as proposed by the Company:
(i) Equity Securities. The (A) issuance or sale of any Common
Shares, (B) grant of any rights, options or warrants to subscribe for
or purchase Common
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Shares or any security convertible into or exchangeable for Common
Shares or (C) the issuance or sale of any security convertible into or
exchangeable for Common Shares, in any such case, at a price per share
less than the Value of a Common Share on the date of such issuance,
sale or grant. For purposes of the preceding sentence Common Shares
shall be deemed to be issued at less than Value if the price per share
for which Common Shares issuable upon exercise of rights, options or
warrants or upon conversion or exchange of convertible or exchangeable
securities is less than the Value on the date of issuance. The
provisions of this Section 5(d)(i) shall not apply to (A) the sale or
grant of any options to purchase shares of beneficial interest of the
Company pursuant to the provisions of any benefit plan approved by the
shareholders of the Company, (B) the issuance or sale of shares of
beneficial interest upon the exercise of any rights, options or
warrants granted, or upon the conversion or exchange of any
convertible or exchangeable security issued or sold, prior to the date
of this Agreement or in accordance with the provisions of this Section
5, (C) the issuance and sale of any shares of beneficial interest of
the Company pursuant to any dividend reinvestment and share purchase
plan approved by the Board or (D) the issuance, grant of distribution
of rights, options or warrants to all holders of Common Shares
entitling them to subscribe for or purchase shares of beneficial
interest of the Company or securities convertible into or exercisable
for shares of beneficial interest.
(ii) Fixed Charges. The issuance and sale of any Disqualified
Shares if, as a result thereof, the Company's Fixed Charge Coverage
Ratio would be less than 1.4 to 1.0.
(iii) Benefit Plans and Compensation. The adoption of any
employee benefit plan pursuant to which shares of beneficial interest
of the Company or any securities convertible into shares of beneficial
interest of the Company may be issued and any action with respect to
the compensation of the Senior Officers (including the granting or
award of any bonuses or share-based incentive awards); provided,
however, that SCG will not have an Approval Right as to any action
with respect to the compensation of a Senior Officer as to whom SCG
has delivered a notice under Section 4, for so long as the employment
opportunity that is the subject of such notice is available to such
Senior Officer.
(iv) Indebtedness. The incurrence of any additional indebtedness
(including guarantees and including renegotiations and restructurings
of existing indebtedness) if, as a result thereof, the Company's
Interest Expense Coverage Ratio would be less than 2.0 to 1.0.
Notwithstanding anything to the contrary contained herein, the Approval Rights
of SCG shall terminate and be of no further force or effect at such time as SCG
Beneficially Owns less than 25% of the Common Shares outstanding.
(e) Approval Right Procedures. The Company shall submit any proposed
action with respect to any Approval Right for consideration by SCG,
together with
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information which sets forth in reasonable detail the background and
reasons for such action, reasonably in advance of the date any action would
be required to be taken by or on behalf of the Company to permit SCG to
review the information and make an informed decision. The approval of SCG
pursuant to Section 5(d), other than where written approval is expressly
required, shall be deemed to have been received if SCG does not communicate
otherwise to the Company by the fifteenth day after SCG shall have received
a written request for such approval.
(f) Company Support. If there is a final judicial determination
before any court of competent jurisdiction that any or all of the Approval
Rights are not enforceable or exercisable in any manner by SCG, whether by
reason of Maryland statutory or common law or otherwise, the Company agrees
to defer any action proposed by the Company which is the subject of any of
the Approval Right which was so determined not to be enforceable or
exercisable and SCG shall have the right to cause the Company to call a
special meeting of shareholders at which meeting SCG may present an
alternative slate of trustees for election (which slate may include some of
the same nominees as the then current Board). The Company and SCG agree
that they will each use their best efforts to prepare and file with the
Commission definitive proxy material, to have such material cleared by the
Commission and to mail such material to the Company's shareholders, as soon
as practicable. The Company shall in any event provide SCG with a list of
the shareholders of record for such meeting and a complete list of non-
objecting beneficial holders and deposits in securities positions listings
as of such date. The Company and SCG shall not, and their respective
directors, trustees, officers, employees and agents shall not, take any
action that would have the effect of delaying, preventing or impeding the
special meeting of shareholders or the mailing of proxy materials in
respect of such meeting, including the commencement of any action, suit or
proceeding at law or in equity seeking to enjoin, delay or impede the
special meeting or the mailing of proxy materials in respect of such
meeting. The parties shall each bear their own costs in connection with
any special meeting of shareholders pursuant to this Section 5(f);
provided, that the Company shall bear all costs typically borne by
companies in connection with annual meetings of shareholders.
(g) Non-interference. The Company shall not provide any Person with
rights which are similar or more extensive than the Approval Rights
provided to SCG hereunder and shall not grant to any Person or Group the
right to nominate a greater number of members to the Company's Board than
the number SCG is entitled to designate pursuant to Section 5(a), in each
case, without the prior approval of SCG, which may be withheld in SCG's
sole and absolute discretion; the Company shall not enter into any
agreement or arrangement with any Person which shall impede or impair the
Approval Rights in any manner.
(h) Inspection. At any time during regular business hours and as
often as reasonably requested of the Company's officers, the Company will
permit SCG or any authorized employee, agent or representative of SCG to
examine and make copies and abstracts from the records and books of account
of, and to visit the properties of, the Company and to discuss the affairs,
finances, and accounts of the Company with any of
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its officers or directors; provided, that all costs and expenses of such
inspection shall be borne by SCG.
(i) Continuing Exemption. The Company hereby covenants and agrees
that (i) the Board resolution exempting SCG from the application of the
provisions of Article 2, Section 7(c) of the Declaration of Trust to the
extent that SCG acquires or shall have acquired securities of the Company
giving it Beneficial Ownership of an aggregate of not more than 49% of the
outstanding Common Shares, (ii) the Board resolution irrevocably exempting
SCG from the application of Title 3, Subtitle 6 of the Corporations and
Associations Article of the Annotated Code of Maryland entitled "Special
Voting Requirements" (Section 3-601 through and including Section 3-604) so
long as SCG Beneficially Owns 49% or less of the outstanding Common Shares,
and (iii) the Bylaw amendment exempting SCG from the application of the
provisions of Title 3, Subtitle 7 of the Corporations and Associations
Article of the Annotated Code of Maryland entitled "Voting Rights of
Certain Control Shares" (Section 3-701 through and including Section 3-709)
with respect to any Common Shares acquired in connection with the Original
Agreement, will not be rendered ineffective, and will continue to exempt
the transactions contemplated hereby from the application of the provisions
of Article 2, Section 7(c) of the Declaration of Trust, and Title 3,
Subtitles 6 and 7 of the Corporations and Associations Article of the
Annotated Code of Maryland, notwithstanding the Beneficial Ownership of SCG
of more than 49% of the outstanding Common Shares, when such ownership
results solely from (i) a reduction in the number of outstanding Common
Shares as a result of acquisitions of Common Shares by the Company, or (ii)
any other action taken solely by the Company or any Person other than SCG
or its Affiliates.
6. Covenants of SCG.
(a) During the term of this Agreement, neither (x) SCG nor (y) any
person acting in concert with SCG pursuant to a written or oral agreement
to acquire Beneficial Ownership of more than 49% of the outstanding Common
Shares, will, directly or indirectly (including through the acquisition of
ownership of more than 25% of the interest in a Person owning Common Shares
or securities convertible or exchangeable into or exercisable for Common
Shares) (it being understood that SCG shall not structure its shareholder
interests or its ownership interests in other entities so as to
intentionally circumvent the provisions of this Section 6(a)), acquire any
Common Shares or securities convertible or exchangeable into or exercisable
for Common Shares if the effect of such acquisition would be to increase
the Beneficial Ownership of all Common Shares then owned by the Persons
included within clauses (x) and (y) of this Section 6(a) to greater than
49% of the outstanding Common Shares; provided that, such Persons or SCG
may acquire Common Shares or securities convertible or exchangeable into or
exercisable for Common Shares without regard to the foregoing limitation
pursuant to a tender offer for Company securities that meets the following
conditions:
(i) the tender offer is made for all Company securities not held
by SCG;
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(ii) the consideration offered is all cash and is offered equally
to all holders; and
(iii) the tender offer is held open for at least 90 days.
(b) The Board shall have no restrictions on its ability to oppose any
such tender offer, including the activation of its shareholder defenses and
attempting to find better offers.
(c) Notwithstanding anything in this Agreement to the contrary, SCG
may make a tender offer for Common Shares at any time and having whatever
terms that SCG deems appropriate (including terms inconsistent with (i) -
(iii), inclusive, of Section 6(a)), and purchase any Common Shares
tendered, if such tender offer is made in response to a tender offer made
by a party which is not an Affiliate of SCG and is not instigated by SCG
for the purpose of avoiding its obligations under this Agreement.
(d) During the term of this Agreement, neither SCG, any officer or
director of SCG nor any Person that owns, directly or indirectly, more than
20% of SCG's then outstanding voting securities will, directly or
indirectly, act in concert with any other Person or Persons or form a Group
for the purpose of acquiring Common Shares or securities convertible or
exchangeable into or exercisable for Common Shares; provided, however,
nothing in this Section 6(d) shall prohibit SCG from acquiring Common
Shares or securities convertible or exchangeable into or exercisable for
Common Shares pursuant to Section 6(a) of this Agreement.
7. Registration Rights.
(a) Demand. At any time after the date hereof and for so long
thereafter as SCG shall continue to own any Registrable Securities, SCG may
request registration of all or any part of its Registrable Securities
pursuant to Rule 415 under the Securities Act by delivering written notice
to the Company specifying the number of Registrable Securities that SCG
desires to sell, and the Company shall use its reasonable efforts to effect
the registration of such Registrable Securities under the Securities Act.
(b) Registration Procedures. If and whenever the Company is required
by any of the provisions of this Section 7 to use its reasonable efforts to
effect the registration of any of the Registrable Securities under the
Securities Act, the Company shall:
(i) prepare and file with the Commission a registration statement
with respect to such securities and use its reasonable efforts to
cause such registration statement to become effective and remain
effective for as long as shall be necessary to complete the
distribution of at least 90% of the Registrable Securities so
registered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement, and the prospectus used in
connection
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therewith, as may be necessary to keep such registration statement
effective for so long as shall be necessary to complete the
distribution of at least 90% of the Registrable Securities so
registered and to comply with the provisions of the Securities Act
with respect to the sale or other disposition of all securities
covered by such registration statement whenever SCG shall desire to
sell or otherwise dispose of the same within such period;
(iii) furnish to SCG such numbers of copies of such registration
statement, each amendment and supplement thereto, the prospectus
included in such registration statement, including any preliminary
prospectus, and any amendment or supplement thereto, and such other
documents, as may be reasonably requested in order to facilitate the
sale or other disposition of the Registrable Securities owned by SCG;
(iv) use its reasonable efforts to register and qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as SCG shall
reasonably request, and do any and all other acts and things
reasonably requested by SCG to assist the public sale or other
disposition by SCG in such jurisdictions of the securities owned by
SCG, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any
general consent to service of process;
(v) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months,
beginning with the first fiscal quarter beginning after the effective
date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act;
(vi) use its reasonable efforts to list such securities on any
securities exchange or quotation system on which any securities of the
Company are then listed, if the listing of such securities is then
permitted under the rules of such exchange or quotation system; and
(vii) notify SCG, at any time when a prospectus relating to the
Registrable Securities is required to be delivered under the
Securities Act, of the happening of any event of which it has
knowledge as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing.
(c) Number of Registrations. SCG shall be entitled to request one
registration of its Registrable Securities pursuant to Section 7(a) for
each $100 million in Value of Registrable Securities Beneficially Owned by
SCG on the date of such request.
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(d) Company's Ability to Postpone. The Company shall have the right
to postpone the filing of a registration statement under this Section 7 for
a reasonable period of time (not exceeding 60 days) if the Company
furnishes SCG with a certificate signed by any Senior Officer stating that,
in its good faith judgment, the Board has determined that effecting the
registration at such time would adversely affect a material financing,
acquisition, disposition of assets or shares, merger or other comparable
transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse
effect upon the Company.
(e) Expenses. All expenses incurred in the registration of
Registrable Securities under this Agreement shall be paid by the Company.
The expenses shall include, without limitation, the expenses of preparing
the registration statement and the prospectus used in connection therewith
and any amendment or supplement thereto, printing and photocopying
expenses, all registration and filing fees under Federal and state
securities laws, and expenses of complying with the securities or blue sky
laws of any jurisdictions; provided, however, that SCG shall be responsible
for paying the fees and disbursements of its own counsel and any
underwriting discounts, commissions and fees.
(f) Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 7:
(i) Indemnity by Company. Without limitation of any other
indemnity provided to SCG, to the extent permitted by law, the Company
will indemnify and hold harmless SCG and its officers, directors and
each Person, if any, who controls SCG (within the meaning of the
Securities Act or the Exchange Act), against any losses, claims,
damages, liabilities and expenses (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages,
liabilities and expenses (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or
alleged untrue statement of a material fact contained in any
registration statement (including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements
thereto), (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the
Securities Act, the Exchange Act or any state securities law, and the
Company will reimburse SCG and its officers, directors and any
controlling person thereof for any reasonable legal or other expenses
incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, expense or action; provided,
however, that the Company shall not be liable in any such case for any
such loss, claim, damage, liability, expense or action to the extent
that it arises out of or is based upon a Violation that occurs in
reliance upon and in conformity with written information furnished
expressly for
-14-
use in connection with such registration by SCG or any officer,
director or controlling person thereof.
(ii) Indemnity by SCG. In connection with any registration
statement in which SCG is participating, SCG will furnish to the
Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will
indemnify the Company, its trustees and officers and each Person who
controls the Company (within the meaning of the Securities Act or
Exchange Act) against any losses, claims, damages, liabilities and
expenses resulting from any Violation, but only to the extent that
such Violation is contained in any information or affidavit so
furnished in writing by SCG; provided, that the obligation to
indemnify will be several and not joint and several with any other
Person and will be limited to the net amount received by SCG from the
sale of Registrable Securities pursuant to such registration
statement.
(iii) Notice; Right to Defend. Promptly after receipt by an
indemnified party under this Section 7(f) of notice of the
commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 7(f), deliver to the
indemnifying party a written notice of the commencement thereof and
the indemnifying party shall have the right to participate in, and, if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by the
indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof
with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party shall have the right to retain its own
counsel, with the fees and expenses to be paid by the indemnifying
party, if the indemnified party reasonably believes that
representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The
failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Section 7(f) only if and to the extent that such failure is
prejudicial to its ability to defend such action, and the omission to
deliver written notice to the indemnifying party will not relieve it
of any liability that it may have to any indemnified party other than
under this Section 7(f).
(iv) Contribution. If the indemnification provided for in this
Section 7(f) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying
-15-
party on the one hand and of the indemnified party on the other hand
in connection with the statements or omissions which resulted in such
loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relevant fault of the
indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the
indemnified party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. Notwithstanding the foregoing, the amount SCG shall be
obligated to contribute pursuant to this Section 7(f)(iv) shall be
limited to an amount equal to the proceeds to SCG of the Registrable
Securities sold pursuant to the registration statement which gives
rise to such obligation to contribute (less the aggregate amount of
any damages which SCG has otherwise been required to pay in respect of
such loss, claim, damage, liability or action or any substantially
similar loss, claim, damage, liability or action arising from the sale
of such Registrable Securities).
(v) Survival of Indemnity. The indemnification provided by this
Section 7(f) shall be a continuing right to indemnification and shall
survive the registration and sale of any securities by any Person
entitled to indemnification hereunder and the expiration or
termination of this Agreement.
(g) Limitations on Registration Rights.
(i) The Company shall not, without the prior written consent of
SCG, include in any registration in which SCG has a right to
participate pursuant to this Agreement any securities of any Person
other than SCG.
(ii) SCG shall not, without the prior written consent of the
Company, effect any public sale or distribution (including sales
pursuant to Rule 144 under the Securities Act) of securities of the
Company during any period commencing 30 days prior to and ending 60
days after the effective date of any registration statement filed by
the Company on behalf of any Person (including the Company), other
than a registration statement on Form S-8 or any successor form.
(h) Registrable Securities. The term "Registrable Securities" means
(i) any Common Shares now owned or hereafter acquired by SCG and (ii) any
Common Shares or other securities that may subsequently be issued with
respect to such Common Shares as a result of a share split or dividend or
any sale, transfer, assignment or other transaction by the Company
involving the Common Shares and any securities into which the Common Shares
may thereafter be changed as a result of merger, consolidation,
recapitalization or otherwise. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when
they have been distributed to the public pursuant to an offering registered
under the Securities Act. All Registrable Securities shall cease to be
Registrable Securities when all such securities may be sold in any three-
month period pursuant to Rule 144, or any successor to such rule, under the
Securities Act.
-16-
(i) Assignment. SCG may assign without the consent of the Company its
rights under this Section 7 with respect to any Registrable Securities to
any party (a "Lender") to whom it provides a bona fide pledge, assignment
or hypothecation of such Registrable Securities. If (i) SCG assigns its
rights under this Section 7 with respect to Registrable Securities having
an aggregate offering value of at least $100,000,000 to a Lender and (ii)
any Event of Default occurs and is continuing under the related loan
agreement between SCG (or one of its subsidiaries) and the Lender, the
Lender may request one registration of all or part of its Registrable
Securities having an aggregate offering value of at least $100,000,000 on
Form S-3 (or any successor form) under the Securities Act by delivering
written notice to the Company specifying the number of Registrable
Securities that the Lender desires to sell and the Company shall use its
reasonable efforts to effect the registration of such Registrable
Securities under the Securities Act in accordance with and subject to the
provisions of this Section 7.
8. Miscellaneous.
(a) Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants contained herein shall survive
the execution of this Agreement and shall remain in full force and effect
until terminated in accordance with the provisions of this Agreement.
(b) Successors and Assigns. This Agreement shall be binding upon, and
inure to the benefit of, the parties hereto and their respective heirs,
personal representatives, successors, assigns and affiliates, but (except
as provided in Section 7(i)) shall not be assignable by any party hereto
without the prior written consent of the other party hereto.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, sent via a
recognized overnight courier with delivery confirmed in writing or sent via
facsimile to the parties at the following addresses (or such other address
for a party as shall be specified by like notice):
If to the Company:
Security Capital Pacific Trust
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to SCG:
Security Capital Group Incorporated
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
-17-
(d) Waiver. No party may waive any of the terms or conditions of this
Agreement, except by a duly executed writing referring to the specific
provision to be waived.
(e) Amendment. This Agreement may be amended only by a writing duly
executed by both the Company and SCG.
(f) Severability. Insofar as is possible, each provision of this
Agreement shall be interpreted so as to render it valid and enforceable
under applicable law and severable from the remainder of this Agreement.
A finding that any such provision is invalid or unenforceable in any
jurisdiction shall not affect the validity or enforceability of any other
provision or the validity or enforceability of such provision under the
laws of any other jurisdiction.
(g) Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all other prior agreements and understandings,
both written and oral, among the parties hereto and their affiliates, with
respect to the subject matter hereof.
(h) Expenses. Except as otherwise expressly contemplated herein to
the contrary, regardless of whether the transactions contemplated hereby
are consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
(i) Captions. The Section and Paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions
hereof.
(j) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument.
(k) Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Maryland.
(l) Specific Performance. Each of the parties hereto acknowledges
that the obligations undertaken by it pursuant to this Agreement are unique
and that the other party will not have an adequate remedy at law if it
shall fail to perform any of its obligations hereunder, and each of the
parties hereto therefore confirms that the right of the other party to
specific performance of the terms of this Agreement is essential to protect
the rights and interests of such party. Accordingly, in addition to any
other remedies that either party hereto may have at law or in equity, SCG
shall have the right to have all obligations, covenants, agreements and
other provisions of this Agreement specifically performed by the other
party, and each party shall have the right to obtain preliminary and
permanent injunctive relief to secure specific performance and to prevent a
breach or contemplated breach of this Agreement by the other party.
-18-
(m) Limitation of Liability. Any obligation or liability whatsoever
of the Company which may arise at any time under this Agreement or any
obligation or liability which may be incurred by it pursuant to any other
instrument, transaction or undertaking contemplated hereby shall be
satisfied, if at all, out of the Company's assets only. No such obligation
or liability shall be personally binding upon, nor shall resort for the
enforcement thereof be had to, the property of any of its shareholders,
trustees, officers, employees or agents, regardless of whether such
obligation or liability is in the nature of contract, tort or otherwise.
* * * * *
-19-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.
SECURITY CAPITAL PACIFIC TRUST
By: /s/ R. ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------------
R. ▇▇▇▇ ▇▇▇▇▇▇▇
President and Chief Executive Officer
SECURITY CAPITAL GROUP INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President and Secretary