Amendment No. 2 to
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Section 240.14a-12
JP REALTY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Section 14(g)(1)(A) (set forth the amount
on which the filing fee is calculated and state how it was
determined): In accordance with Exchange Act Section 14(g)(1)(A) and
Rule 0-11, the fee is equal to $92 per $1,000,000 of the proposed
cash payment to be distributed to the stockholders of JP Realty,
Inc, which is $26.10 cash per share.
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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REVISED PRELIMINARY COPIES
JP REALTY, INC.
35 Century Park-Way
Salt Lake City, UT 84115
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held [July __ ], 2002
To our Stockholders:
A special meeting of our stockholders will be held at our main office,
located at 2970 South Main Street, Suite 100, Salt Lake City, Utah, on [___],
2002, at 8:30 a.m., MST. At the meeting, stockholders will act on the following
matters:
(1) To consider and vote upon a proposal to approve the merger of JP
Realty, Inc. with and into GGP Acquisition, L.L.C., a Delaware
limited liability company and an indirect subsidiary of General
Growth Properties, Inc., substantially on the terms set forth in the
Agreement and Plan of Merger, dated as of March 3, 2002, among
General Growth Properties, Inc., GGP Limited Partnership, GGP
Acquisition, L.L.C., GGP Acquisition II, L.L.C., JP Realty, Inc.,
and Price Development Company, Limited Partnership; and
(2) To consider and vote upon any other matters that properly come
before the meeting and any adjournments or postponements of that
meeting.
All holders of record of shares at the close of business on June 5, 2002
are entitled to notice of, and to vote at, the meeting or any postponements or
adjournments of the meeting.
We encourage you to read this proxy statement carefully. In addition, you
may obtain information about us from the documents that we have filed with the
SEC.
This notice and proxy statement was first mailed to stockholders on or
about June [ __ ], 2002.
By order of the Board of Directors,
Paul K. Mendenhall
Secretary
June [ __ ], 2002
Salt Lake City, Utah
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YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY MARK, DATE, SIGN AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
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TABLE OF CONTENTS
Page
PROXY STATEMENT................................................................1
SUMMARY TERM SHEET.............................................................1
SUMMARY OF THE PROXY STATEMENT.................................................5
THE PARTIES....................................................................5
THE MEETING....................................................................7
THE MERGER AND THE MERGER AGREEMENT............................................8
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION...................17
THE PARTIES...................................................................18
JP Realty, Inc.......................................................18
Price Development Company, Limited Partnership.......................18
General Growth Properties, Inc.......................................18
GGP Limited Partnership..............................................18
GGP Acquisition, L.L.C...............................................18
GGP Acquisition II, L.L.C............................................19
ABOUT THE MEETING.............................................................19
PROPOSAL TO APPROVE THE MERGER................................................22
General ............................................................22
Background of the Merger.............................................23
Recommendation of our Board of Directors and Reasons for the Merger..31
Opinion of UBS Warburg...............................................35
Interests of Directors and Officers in the Merger....................41
The Merger Agreement.................................................43
FEDERAL INCOME TAX CONSIDERATIONS.............................................54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................57
2002 ANNUAL MEETING...........................................................58
OTHER MATTERS.................................................................58
WHERE YOU CAN FIND MORE INFORMATION...........................................58
EXHIBITS
Exhibit A - Agreement and Plan of Merger
Exhibit B - Opinion of UBS Warburg
-i-
PRELIMINARY COPIES
JP REALTY, INC.
35 Century Park-Way
Salt Lake City, Utah 84115
PROXY STATEMENT
This proxy statement contains information related to the special meeting
of stockholders of JP Realty, Inc., to be held at our main office, located at
2970 South Main Street, Suite 100, Salt Lake City, Utah, on [___], 2002, at 8:30
a.m., MST, and any postponements or adjournments thereof.
SUMMARY TERM SHEET
The following is a summary of the material terms of the merger which is
described in this proxy statement. You should carefully read this entire
document as well as the additional documents to which it refers, including the
merger agreement attached to this proxy as Exhibit A, for a more complete
description of the merger.
o The Meeting
o General-- This proxy statement is being furnished to holders of
shares of our common stock and Price Group stock for use at the
special meeting, and at any adjournments or postponements thereof,
in connection with the approval of the merger of JP Realty, Inc.
with and into GGP Acquisition, L.L.C., an indirect subsidiary of
General Growth Properties, Inc., substantially on the terms set
forth in the Agreement and Plan of Merger, dated as of March 3,
2002, among General Growth Properties, Inc., GGP Limited
Partnership, GGP Acquisition, L.L.C., GGP Acquisition II, L.L.C., JP
Realty, Inc., and Price Development Company, Limited Partnership.
The special meeting will be held at our main office, located at 2970
South Main Street, Suite 100, Salt Lake City, Utah, on [___], 2002,
at 8:30 a.m., MST. See page 7.
o Vote required -- The proposal for the approval of the merger
substantially on the terms set forth in the merger agreement
requires the affirmative vote of the holders of a majority of the
outstanding shares of our common stock and Price Group stock, voting
together as a single class. If you do not vote your shares, the
effect will be a vote against the approval of the merger. See page
20.
The "Price Group stock" refers to a class of 200,000 shares of
capital stock held by Fairfax Holding, L.L.C., a limited liability
company in which Mr. John Price, our former Chairman and Chief
Executive Officer, holds an approximate 85% direct and indirect
interest. The Price Group stock is voted together with our common
stock as a single class on all matters submitted for a vote of our
stockholders (with the Price Group stock representing approximately
1.2% of such single class), but has certain special voting rights
relating to the election of directors.
o Record date -- We have set the close of business on June 5, 2002 as
the record date for determining those stockholders who are entitled
to notice of and to vote at the special meeting. See page 19.
o The Merger
At the special meeting, our stockholders will be asked to approve the
merger substantially on the terms set forth in the merger agreement.
o The Parties-- See page 18.
o JP Realty, Inc. -- We are a real estate investment trust or REIT. We
conduct substantially all of our business operations through and
hold a controlling interest in Price Development Company, Limited
Partnership, our operating partnership. Our headquarters is located
at 35 Century Park-Way, Salt Lake City, Utah 84115 and our telephone
number is (801) 486-3911.
o Price Development Company, Limited Partnership -- Price Development
Company, Limited Partnership is a Maryland limited partnership, of
which we are the sole general partner. Price Development Company's
properties, consisting of 18 enclosed regional malls, 26 anchored
community centers, one free-standing retail property and six
mixed-use commercial/business properties, contain an aggregate of
over 15.2 million square feet of gross leasable area in ten western
states. Price Development Company owns 47 of these properties and
has a controlling interest in the remaining 4 properties.
o General Growth Properties, Inc. -- General Growth Properties, Inc.
is a REIT and the second largest regional shopping mall owner on the
basis of market capitalization in the United States. It conducts
substantially all of its business operations through and holds a
controlling interest in GGP Limited Partnership, its operating
partnership. Its headquarters is located at 110 North Wacker Drive,
Chicago, IL 60606 and its telephone number is (312) 960-5000.
o GGP Limited Partnership-- GGP Limited Partnership is a Delaware
limited partnership, in which General Growth Properties owns an
approximate 76% general partnership interest, with the remaining
approximate 24% interest being held by limited partners which
include a partnership, the partners of which are various trusts for
the benefit of the Bucksbaum family, and others who have contributed
properties to GGP Limited Partnership. GGP Limited Partnership
presently owns interests in and/or manages 143 regional malls and
mixed use properties, containing an aggregate of over 126 million
square feet of gross leasable area in 39 states. GGP Limited
Partnership and its subsidiaries own 100% of 55 of such properties,
51% of 10 of such properties, 50% of 29 of such properties, 25% of
two of such properties and 16.67% of two of such properties. GGP
Limited Partnership and its subsidiaries manage the remainder of
such properties for third party owners and have no ownership
interest therein.
o GGP Acquisition, L.L.C. -- GGP Acquisition, L.L.C. is a Delaware
limited liability company and an indirect subsidiary of General
Growth Properties, Inc. GGP Acquisition was formed solely for the
purposes of the merger and has carried on no independent business
activities to date.
o GGP Acquisition II, L.L.C.-- GGP Acquisition II, L.L.C. is a
Maryland limited liability company and an indirect subsidiary of
General Growth Properties, Inc. GGP Acquisition II was formed solely
for the purposes of the partnership merger described below and has
carried on no independent business activities to date.
o What you will receive in the merger-- Each share of our common stock and
Price Group stock will be converted into the right to receive $26.10 in
cash without interest. The merger consideration is fixed and will not be
adjusted based on fluctuations in the price of our common stock prior to
the closing date of the merger. In addition, the merger agreement
authorizes the payment of regular quarterly dividends to our common
stockholders and Price Group stockholders, pro rated up to the closing
date of the merger. Our board declared a quarterly dividend in the amount
of $0.51 per share on April 16, 2002, payable to stockholders of record on
2
April 4, 2002. Based on an anticipated special meeting and closing date of
[__], 2002, we expect to declare an additional dividend of $[ ] per share
on our common stock prior to the closing of the merger. See page 43.
o Conditions to the merger -- The merger is subject to our stockholder
approval, as well as other customary conditions. However, the merger is
not subject to any financing contingency and is not conditional on General
Growth Properties obtaining financing for the merger. See page 47.
o Our board of directors recommends that you vote for the merger -- After an
evaluation of a variety of business, financial and other factors and
consultation with our legal and financial advisors, at a meeting on March
3, 2002, our board of directors determined that the merger was advisable,
fair to, and in the best interests of, JP Realty, Inc. and our
stockholders, unanimously approved the merger and the merger agreement,
and unanimously voted to recommend that our stockholders approve the
merger. See page 31.
o Opinion of financial advisor -- In deciding to approve the merger and
adopt the merger agreement, our board of directors considered the opinion
of UBS Warburg LLC that, as of the date of the opinion, and subject to and
based on the assumptions made, procedures followed, matters considered and
limitations of the review undertaken in its opinion, the per share cash
consideration to be received by holders of our outstanding common stock
(other than by holders of Price Group stock) pursuant to the merger
agreement was fair from a financial point of view to such holders. The UBS
Warburg opinion, which sets forth the assumptions made, procedures
followed, matters considered and limitations on the review undertaken by
UBS Warburg in connection with its opinion, is attached as Exhibit B to
the proxy statement. We encourage you to read this opinion carefully.
o Interests of directors and officers -- Some of our officers and directors
have interests and arrangements that may be different from, or in addition
to, your interests as our stockholders, including:
o Under the terms of our employee stock option award agreements, all
outstanding, unvested stock options held by our directors and
officers will become fully vested and exercisable as of the delivery
of this proxy statement. In accordance with the terms of the merger
agreement, any unexercised options held by our directors and
officers as of the merger closing will be exchanged for cash in an
amount equal to (i) the excess of the merger consideration payable
with respect to a share of our common stock over the stock option
exercise price multiplied by (ii) the number of shares subject to
the stock option. As a result, our directors and officers will be
entitled to receive an aggregate amount of $2,917,167 with respect
to all of their existing stock options. See page 41.
o Although we do not currently have any severance arrangements with
our directors or officers, severance payments will be offered by
General Growth Properties to any full-time employee in our Salt Lake
City, Utah, corporate office who is terminated within one year of
the consummation of the mergers under certain conditions or who is
not offered continued employment following the mergers at
substantially the same salary as that being paid currently to the
employee, based on that employee's current compensation and
proportional to his or her length of employment with our company. In
addition to the severance payments, certain of our executive
officers will also be offered supplemental severance pay. The
maximum amount of severance payments and supplemental severance pay
that our executive officers as a group (which includes Messrs. Terry
Bybee, M. Scott Collins, Greg Curtis, G. Rex Frazier, Paul
Mendenhall, Martin Peterson and David Sabey) may be entitled to
receive pursuant to the severance arrangements contemplated pursuant
to the merger agreement is $1,015,819. See page 41.
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o Certain of our directors and officers (including Mr. Price (who
beneficially owns 2,755,051 of our common operating partnership
units), Mr. King (who beneficially owns 138,984 of our common
operating partnership units), Mr. Frazier (who beneficially owns
31,840 of our common operating partnership units), and Mr. Souvall
(who beneficially owns 23,371 of our common operating partnership
units)) will have the option of deferring their tax liability with
regard to their common operating partnership units in the proposed
transaction by exchanging their units for Series B Preferred Units
in GGP Limited Partnership. As a group, it is expected that our
directors and officers will hold Series B Preferred Units that will
amount to an approximate 2% equity stake in GGP Limited Partnership
(on a fully diluted basis). See page 42.
o The merger will have tax consequences for you -- The receipt of cash in
exchange for your shares of our common stock will have tax consequences.
See page 54.
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SUMMARY OF THE PROXY STATEMENT
The following is a summary of the terms of the proposed merger and other
information relating to the special meeting.
This summary may not contain all of the information that is important to
you. For a more complete understanding of the merger and the other information
contained in this proxy statement, you should read this entire proxy statement
carefully, as well as the additional documents to which it refers. For
instructions on obtaining more information, see "Where You Can Find More
Information" on page 58.
THE PARTIES
JP Realty, Inc. We are a real estate investment trust or
REIT. We conduct substantially all of
our business operations through and hold
a controlling interest in Price
Development Company, Limited
Partnership, our operating partnership.
We are headquartered in Salt Lake City,
Utah. Our address and telephone number
are:
JP Realty, Inc.
35 Century Park-Way
Salt Lake City, UT 84115
(801) 486-3911
Our common stock is listed on the New
York Stock Exchange under the symbol
"JPR."
Price Development Company, Limited Price Development Company, Limited
Partnership Partnership is a Maryland limited
partnership, of which we are the sole
general partner. Price Development
Company's properties, consisting of 18
enclosed regional malls, 26 anchored
community centers, one free-standing
retail property and six mixed-use
commercial/business properties, contain
an aggregate of over 15.2 million square
feet of gross leasable area in ten
western states. Price Development
Company owns 47 of these properties and
has a controlling interest in the
remaining 4 properties.
General Growth Properties, Inc. General Growth Properties, Inc. is a
REIT and the second largest regional
shopping mall owner on the basis of
market capitalization in the United
States. It conducts substantially all of
its business operations through and
holds a controlling interest in GGP
Limited Partnership, its operating
partnership.
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Its headquarters are located in Chicago,
Illinois. Its address and telephone
number are:
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, IL 60606
(312) 960-5000
General Growth Properties' common stock
is listed on the New York Stock Exchange
under the symbol "GGP."
GGP Limited Partnership GGP Limited Partnership is a Delaware
limited partnership, in which General
Growth Properties owns an approximate
76% general partnership interest, with
the remaining approximate 24% interest
being held by limited partners which
include a partnership, the partners of
which are various trusts for the benefit
of the Bucksbaum family, and others who
have contributed properties to GGP
Limited Partnership. Brothers Martin
Bucksbaum (now deceased) and Matthew
Bucksbaum founded General Growth
Properties in 1986 to continue expanding
the Bucksbaum family business, which has
been engaged in the shopping center
business since 1954. Matthew Bucksbaum
is currently a director and the Chairman
of the Board of General Growth
Properties and his son, John Bucksbaum,
is currently a director and the Chief
Executive Officer of General Growth
Properties.
GGP Limited Partnership presently owns
interests in and/or manages 143 regional
malls and mixed use properties,
containing an aggregate of over 126
million square feet of gross leasable
area in 39 states. GGP Limited
Partnership and its subsidiaries own
100% of 55 of such properties, 51% of 10
of such properties, 50% of 29 of such
properties, 25% of two of such
properties and 16.67% of two of such
properties. GGP Limited Partnership and
its subsidiaries manage the remainder of
such properties for third party owners
and have no ownership interest therein.
GGP Acquisition, L.L.C. GGP Acquisition, L.L.C. is a Delaware
limited liability company and an
indirect subsidiary of General Growth
Properties, Inc. GGP Acquisition was
formed solely for the purposes of the
merger and has carried on no independent
business
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activities to date.
GGP Acquisition II, L.L.C. GGP Acquisition II, L.L.C. is a Maryland
limited liability company and an
indirect subsidiary of General Growth
Properties, Inc. GGP Acquisition II was
formed solely for the purposes of the
partnership merger described below and
has carried on no independent business
activities to date.
THE MEETING
General This proxy statement is being furnished
to holders of shares of our common stock
and Price Group stock for use at the
special meeting, and at any adjournments
and postponements thereof, in connection
with the approval of the merger
substantially on the terms set forth in
the merger agreement. The special
meeting will be held at our main office,
located at 2970 South Main Street, Suite
100, Salt Lake City, Utah, on [___],
2002, at 8:30 a.m., MST.
Vote Required to Approve the Merger The proposal for the approval of the
merger requires the affirmative vote of
the holders of a majority of the
outstanding shares of our common stock
and Price Group stock, voting together
as a single class. If you do not vote
your shares, the effect will be a vote
against the approval of the merger.
Pursuant to a separate voting agreement
among General Growth Properties, GGP
Limited Partnership, GGP Acquisition,
GGP Acquisition II, Mr. John Price, our
former Chairman and Chief Executive
Officer, and certain of his named
affiliates, Mr. Price and such
affiliates agreed to vote all shares of
common stock and Price Group stock which
he or such affiliates own as of the
record date in favor of the merger and
granted GGP Limited Partnership a proxy
to vote all such shares. As of the
record date, Mr. Price and such
affiliates owned in the aggregate
299,000 shares of common stock and Price
Group stock, representing approximately
1.8% of the combined issued and
outstanding shares of these classes. The
voting agreement terminates on the
earlier to occur of the termination of
the merger agreement in accordance with
its terms or the consummation of the
merger
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and the partnership merger. Other than
these 299,000 shares of common stock and
Price Group stock, General Growth
Properties and its affiliates do not
currently own, or have the right to
vote, any other shares of our common
stock or Price Group stock.
Record Date and Quorum We have set the close of business on
Requirement June 5, 2002 as the record date for
determining those stockholders who are
entitled to notice of and to vote at the
special meeting.
The presence at the meeting, in person
or by proxy, of the holders of a
majority of the aggregate number of
shares of our common stock and Price
Group stock outstanding on the record
date will constitute a quorum, allowing
us to conduct the business of the
meeting.
Revocation of Proxies Even after you have submitted your proxy
card, you may change your vote at any
time before the proxy is exercised by
delivering to our Secretary either a
notice of revocation, or a duly executed
proxy bearing a later date. The powers
of the proxy holders will be suspended
with respect to your proxy if you attend
the meeting in person and so request,
although attendance at the meeting will
not by itself revoke a previously
granted proxy.
Who Can Help Answer Other If you have more questions about the
Questions merger or would like additional copies
of this proxy statement, you should
contact our proxy solicitor:
Mellon Investor Services LLC
44 Wall Street, 7th Floor
New York, New York 10005
(888) 468-9726
THE MERGER AND THE MERGER AGREEMENT
The Merger Agreement On March 3, 2002, we entered into an
Agreement and Plan of Merger by and
among General Growth Properties, Inc.,
GGP Limited Partnership, GGP
Acquisition, L.L.C., GGP Acquisition II,
L.L.C., JP Realty, Inc., and Price
Development Company, Limited
Partnership, attached to this proxy
statement as Exhibit A.
At the special meeting, our stockholders
will be asked to approve the merger
substantially on the
8
terms set forth in the merger agreement.
What You Will Receive in Under the merger agreement, JP Realty,
the Merger Inc. will be merged with and into GGP
Acquisition, L.L.C. In the merger, each
share of our common stock and Price
Group stock will be converted into the
right to receive $26.10 in cash without
interest. As of May 31, 2002, 16,511,033
shares of our common stock and Price
Group stock were outstanding, entitling
the holders of such shares to an
aggregate amount of merger consideration
of $430,937,961. As of March 31, 2002,
our net book value was $301,889,000
($789,429,000 of total assets less
$487,540,000 in total liabilities).
In addition, the merger agreement
authorizes the payment of regular
quarterly dividends to our common
stockholders and Price Group
stockholders, pro rated up to the
closing date of the merger. Our board
declared a quarterly dividend in the
amount of $0.51 per share on April 16,
2002 payable to stockholders of record
on April 4, 2002. Based on an
anticipated special meeting and closing
date of [__], 2002, we expect to declare
an additional dividend of $[ ] per share
on our common stock prior to the closing
of the merger.
If our stockholders do not approve the
merger or the merger is otherwise
abandoned, then the proposed merger will
not occur. If our stockholders approve
the merger and the conditions to the
merger agreement are satisfied or
waived, then we intend to consummate the
merger as soon as practicable following
the special meeting.
Our Board of Directors After an evaluation of a variety of
That You Vote For the Approval of the business, financial and other factors
Merger and consultation with our legal and
financial advisors, at a meeting on
March 3, 2002 our board of directors
unanimously determined that the merger
was advisable, fair to, and in the best
interests of, our company and our
stockholders, Recommends unanimously
approved the merger and the merger
agreement, and unanimously voted to
recommend that our stockholders approve
the merger.
Opinion of Financial Advisor In deciding to approve the merger and
adopt the merger agreement, our board of
directors considered the opinion of UBS
Warburg LLC that, as of the date of the
opinion, and subject to and based on the
assumptions made, procedures
9
followed, matters considered and
limitations of the review undertaken in
its opinion, the per share cash
consideration to be received by holders
of our outstanding common stock (other
than by holders of Price Group stock)
pursuant to the merger agreement was
fair from a financial point of view to
such holders. The UBS Warburg opinion,
which sets forth the assumptions made,
procedures followed, matters considered
and limitations on the review undertaken
by UBS Warburg in connection with its
opinion, is attached as Exhibit B to the
proxy statement. We encourage you to
read this opinion carefully.
Reasons for the Merger As described further in "Recommendation
of our Board of Directors and Reasons
for the Merger" on page 31, in deciding
to approve the merger as contemplated by
the merger agreement, our board
considered a number of other factors,
both positive and negative, with respect
to the merger.
Some of the Positive Factors Considered
Include:
o the merger consideration represents
a significant premium to the
historical and recent market price
of our common stock, representing:
o a $1.67, or 6.8%, premium over
the closing price of our
common stock on the trading
day prior to the merger
announcement,
o a $3.03, or 13.1%, premium
over the closing price of our
common stock one month prior
to the merger announcement,
o a $3.50, or 15.5%, premium
over the closing price of our
common stock six months prior
to the merger announcement,
and
o a $7.13, or 37.6%, premium
over the closing price of our
common stock one year prior to
the merger announcement;
o our board believes that the merger
represents a more desirable
alternative for our stockholders
than continuing to operate as an
independent public company under
our current business plan;
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o our board determined that the
transactions described in the
merger agreement represents the
alternative that is in the best
interests of, and creates the most
strategic value for, us, our
stockholders and our common
operating partnership unitholders,
as described further under
"Recommendation of our Board of
Directors and Reasons for the
Merger--Other Available Strategic
Alternatives We Could Pursue";
o there is a high probability of
completion of the proposed
transaction; and
o the merger agreement permits our
board to receive unsolicited
inquiries and proposals regarding
other potential business
combinations and, subject to the
satisfaction of certain conditions
and the payment of a $19 million
break-up fee, to enter into an
agreement with respect to a
superior competing transaction with
a third party.
Some of the Negative Factors Considered
Include:
o upon completion of the merger, our
common stockholders and Price Group
stockholders will no longer share
in the future growth of our company
or receive quarterly dividends; our
common stockholders received
quarterly dividends of $0.495,
$0.495, $0.51 and $0.51 per share
for the quarters ended on June 30,
2001, September 30, 2001, December
31, 2001 and March 31, 2002,
respectively;
o the merger will be a taxable
transaction for our common
stockholders and Price Group
stockholders;
o there are significant costs to our
company involved in connection with
completing the merger, which our
company may be required to bear in
the event that the merger is not
consummated;
o our company is prohibited from
soliciting alternative proposals
from other potential purchasers of
our company; and
o certain of our directors and
executive officers
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have interests in the merger that
differ from your interests as a
stockholder, as discussed in the
section entitled "Interests of
Directors and Officers in the
Merger" on page 41.
In view of the wide variety of factors
considered by our board, our board did
not find it practicable to, and did not,
quantify or otherwise attempt to assign
relative weights to the specific factors
considered. Our board viewed its
position and recommendation as being
based on the totality of the information
presented to, and considered by, it.
After taking into consideration all the
factors set forth above, the board
determined that the potential benefits
of the merger substantially outweighed
the potential detriments associated with
the merger.
Interest of Directors and Officers Certain of our directors and executive
in the Merger officers have interests in the merger
that differ from your interests as a
stockholder. Our board of directors was
aware of these interests and considered
them, among other matters, in approving
the merger and the merger agreement.
These interests include:
o Under the terms of our employee
stock option award agreements, all
outstanding, unvested stock options
held by our directors and officers
will become fully vested and
exercisable as of the delivery of
this proxy statement. In accordance
with the terms of the merger
agreement, any unexercised options
held by our directors and officers
as of the merger closing will be
exchanged for cash in an amount
equal to (i) the excess of the
merger consideration payable with
respect to a share of our common
stock over the stock option
exercise price multiplied by (ii)
the number of shares subject to the
stock option. As a result, our
directors and officers will be
entitled to receive an aggregate
amount of $2,917,167 with respect
to all of their existing stock
options. See page 41.
o Although we do not currently have
any severance arrangements with our
directors or officers, severance
payments will be offered by General
Growth Properties to any full-time
employee in our Salt Lake City,
Utah, corporate office who is
terminated within one year of the
consummation of the mergers under
certain conditions or who is not
offered continued employment
following the mergers
12
at substantially the same salary as
that being paid currently to the
employee, based on that employee's
current compensation and
proportional to his or her length
of employment with our company. In
addition to the severance payments,
certain of our executive officers
will also be offered supplemental
severance pay. The maximum amount
of severance payments and
supplemental severance pay that our
executive officers as a group
(which includes Messrs. Bybee,
Collins, Curtis, Frazier,
Mendenhall, Peterson and Sabey) may
be entitled to receive pursuant to
the arrangements contemplated by
the merger agreement is $1,015,819.
See page 41.
o Certain of our directors and
officers (including Mr. Price (who
beneficially owns 2,755,051 of our
common operating partnership
units), Mr. King (who beneficially
owns 138,984 of our common
operating partnership units), Mr.
Frazier (who beneficially owns
31,840 of our common operating
partnership units), and Mr. Souvall
(who beneficially owns 23,371 of
our common operating partnership
units)) will have the option of
deferring their tax liability with
regard to their common operating
partnership units in the proposed
transaction by exchanging their
units for Series B Preferred Units
in GGP Limited Partnership. As a
group, it is expected that our
directors and officers will hold
Series B Preferred Units that will
amount to an approximate 2% equity
stake in GGP Limited Partnership
(on a fully diluted basis). See
page 42.
Dissenters' Rights Under Maryland law, because our common
stock is listed on the New York Stock
Exchange, dissenters' rights are not
available to holders of our common stock
in connection with the merger.
Federal Income Tax Considerations The merger will be a taxable transaction
to our stockholders. If the aggregate
cash consideration you receive in the
merger is greater than your basis in
your shares, the difference should
constitute a capital gain if you hold
your shares as capital assets. If the
aggregate cash consideration you receive
in the merger is less than your basis in
your shares, the difference should
constitute a capital loss if you hold
your shares as capital assets.
13
Merger of Price Development Company Immediately prior to, and as a condition
to the consummation of, the merger,
Price Development Company will merge
with GGP Acquisition II, L.L.C., an
indirect subsidiary of General Growth
Properties. Price Development Company
will survive the merger and all of its
subsidiaries will remain unchanged. In
connection with the partnership merger,
the holders of common operating
partnership units will exchange their
common operating partnership units for
$26.10 in cash without interest per
common operating partnership unit.
Alternatively, because many holders of
common operating partnership units face
substantial tax recapture in the event
that their units were converted into
cash, the merger agreement provides
those holders who are "accredited
investors" under the Securities Act of
1933 with an option to defer their
substantial tax liabilities by
exchanging their units for preferred
operating partnership units in GGP
Limited Partnership. Specifically, they
can elect to receive for each common
operating partnership unit they hold
.522 8.5% Series B Cumulative
Convertible Preferred Units of GGP
Limited Partnership (referred to in this
proxy statement as Series B Preferred
Units). As of May 31, 2002, there were
20,149,595 common operating partnership
units outstanding, including the
16,511,033 units held by us, as general
partner. We believe that in excess of
99.9% of the common operating
partnership units are held by accredited
investors. If all accredited investor
unitholders, other than the general
partner, elected to receive Series B
Preferred Units, a maximum of 1,896,905
Series B Preferred Units would be issued
in the partnership merger.
The Series B Preferred Units have, in
part, the following terms:
o each Series B Preferred Unit
carries a liquidation preference of
$50 per unit plus accrued and
unpaid distributions;
o each Series B Preferred Unit will
be convertible, until the 15th
anniversary of the closing of the
merger, into GGP Limited
Partnership common operating
partnership units based on an
initial conversion price of $50 per
unit; based on the maximum number
of Series B Preferred Units
issuable in the merger, such Series
B Preferred Units will initially be
14
convertible into an aggregate of
1,896,905 common operating
partnership units of GGP Limited
Partnership (representing an
approximate 2% equity interest in
GGP Limited Partnership upon
completion of the merger (on a
fully diluted basis));
o each Series B Preferred Unit will
be exchangeable, at General Growth
Properties' option, for either cash
or shares of General Growth
Properties 8.5% Series C Cumulative
Convertible Preferred Stock, which
is a series of preferred stock
having substantially the same
rights, preferences and privileges
as the Series B Preferred Units;
and
o each Series B Preferred Unit is
entitled to a preferential
quarterly distribution in an amount
equal to the greater of (i)
$1.0625, which is 8.5% of $50
divided by four, and (ii) the
regular quarterly cash distribution
(which was $0.53, $0.65, $0.65 and
$0.65 per unit for the quarters
ended June 30, 2001, September 30,
2001, December 31, 2001 and March
31, 2002, respectively) upon the
number of GGP Limited Partnership
common operating partnership units
into which such Series B Preferred
Unit is then convertible, initially
on a one to one basis, with the
amount under clause (ii) being
potentially payable until the 15th
anniversary of the closing of the
merger.
Partner Vote Requirement The consent of the holders of a majority
of the outstanding common operating
partnership units in Price Development
Company is required to approve certain
amendments to the partnership agreement
of Price Development Company and to
approve the partnership merger. As of
the date of this proxy statement, Mr.
Price and such affiliates own in the
aggregate 2,755,051 common operating
partnership units of Price Development
Company, which, together with the units
owned by us as general partner,
represents approximately 95.6% of the
issued and outstanding common operating
partnership units and 75.7% of the units
that may be voted in regard to the
partnership merger. They thus control
sufficient votes to ensure the approval
of the amendments and the partnership
merger. In addition, they have agreed in
the voting agreement to vote their
common operating partnership units in
favor of such amendments and the
partnership
15
merger and granted GGP Limited
Partnership a proxy covering all such
common operating partnership units. As
described above in "--Merger of Price
Development Company," the remaining
holders of common operating partnership
units (other than us) who are accredited
investors will have the right to elect
either cash or Series B Preferred Units
as merger consideration.
Determination of Merger and The merger consideration offered to our
Partnership Merger Consideration stockholders and our common operating
partnership unitholders was determined
based on arm's-length negotiations
between our company and General Growth
Properties. Our acceptance of the
determination of the merger
consideration was based, in part, on the
funds from operations (FFO) multiples
represented by the per share merger
consideration of $26.10, which is 9.78
times our per share FFO for the year
2000 and 9.19 times our per share FFO
for the year 2001.
16
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This proxy statement contains certain forward-looking statements. Those
statements include statements regarding the intent, belief or current
expectations of us and General Growth Properties and members of our respective
management teams, as well as the assumptions on which those statements are
based. Those forward-looking statements are not guarantees of future performance
and involve certain risks and uncertainties, and actual events and results may
differ materially from those contemplated by the forward-looking statements. We
and General Growth Properties undertake no obligation to update or revise
forward-looking statements in this proxy statement to reflect changes in
assumptions, the occurrence of unanticipated events, or changes in future
operating results over time.
17
THE PARTIES
JP Realty, Inc.
JP Realty, Inc., a Maryland corporation is a fully integrated,
self-administered and self-managed real estate investment trust or REIT. We
conduct substantially all of our business operations through and hold a
controlling interest in Price Development Company, Limited Partnership, our
operating partnership. We were formed on September 8, 1993 to continue and
expand the business, commenced in 1957, of certain companies affiliated with Mr.
John Price, our former Chairman and Chief Executive Officer. Our common stock is
listed on the New York Stock Exchange under the symbol "JPR."
Price Development Company, Limited Partnership
Price Development Company, Limited Partnership is a Maryland limited
partnership, of which we are the sole general partner. Price Development
Company's properties, consisting of 18 enclosed regional malls, 26 anchored
community centers, one free-standing retail property and six mixed-use
commercial/business properties, contain an aggregate of over 15.2 million square
feet of gross leasable area in ten western states. Price Development Company
owns 47 of these properties and has a controlling interest in the remaining 4
properties. Since 1976, Price Development Company has been responsible for
developing more retail malls in the region covered by Utah, Idaho, Colorado,
Nevada, New Mexico and Wyoming than any other developer, having constructed,
developed or redeveloped 12 malls in this region (as well as four other malls in
Arizona, Oregon and Washington).
General Growth Properties, Inc.
General Growth Properties, Inc., a Delaware corporation, is a
self-administered and self-managed real estate investment trust or REIT. It
conducts substantially all of its business operations through and holds a
controlling interest in GGP Limited Partnership, its operating partnership.
Brothers Martin Bucksbaum (now deceased) and Matthew Bucksbaum founded General
Growth Properties in 1986 to continue expanding the Bucksbaum family business,
which has been engaged in the shopping center business since 1954. Matthew
Bucksbaum is currently a director and the Chairman of the Board of General
Growth Properties and his son, John Bucksbaum, is currently a director and the
Chief Executive Officer of General Growth Properties. General Growth Properties'
common stock is listed on the New York Stock Exchange under the symbol "GGP."
GGP Limited Partnership
GGP Limited Partnership is a Delaware limited partnership, in which
General Growth Properties owns an approximate 76% general partnership interest,
with the remaining approximate 24% interest being held by limited partners which
include a partnership, the partners of which are various trusts for the benefit
of the Bucksbaum family, and others who have contributed properties to GGP
Limited Partnership. GGP Limited Partnership presently owns interests in and/or
manages 143 regional malls and mixed use properties, containing an aggregate of
over 126 million square feet of gross leasable area in 39 states. GGP Limited
Partnership and its subsidiaries own 100% of 55 such properties, 51% of 10 of
such properties, 50% of 29 of such properties, 25% of two of such properties and
16.67% of two of such properties. GGP Limited Partnership and its subsidiaries
manage the remainder of such properties for third party owners and have no
ownership interest therein.
GGP Acquisition, L.L.C.
GGP Acquisition, L.L.C. is a Delaware limited liability company and an
indirect subsidiary of General Growth Properties, Inc. GGP Acquisition was
formed solely for the purposes of this merger and has carried on no independent
business activities to date.
GGP Acquisition II, L.L.C.
GGP Acquisition II, L.L.C. is a Maryland limited liability company and an
indirect subsidiary of General Growth Properties, Inc. GGP Acquisition II was
formed solely for the purposes of the partnership merger and has carried on no
independent business activities to date.
18
ABOUT THE MEETING
What is the purpose of the special meeting?
At our special meeting, stockholders will act upon the matters outlined in
the notice of meeting on the cover page of this proxy statement, specifically,
the approval of the merger substantially on the terms set forth in the merger
agreement.
How should I send in my stock certificates?
Do not send your stock certificates with your proxy card. You must keep
your stock certificates until after the closing, when you will receive a letter
of transmittal describing how you may exchange your certificates for the merger
consideration. At that time, you must send in your stock certificates with your
completed letter of transmittal to the paying agent.
What do I need to do now?
After you read and consider the information in this proxy statement, just
mail your signed proxy card in the enclosed return envelope as soon as possible,
so that your shares may be represented at the special meeting. You should return
your proxy card whether or not you plan to attend the special meeting. If you
attend the special meeting, you may revoke your proxy at any time before it is
voted and vote in person if you wish.
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on the record date,
June 5, 2002, are entitled to receive notice of the special meeting and to vote
the shares of common stock and Price Group stock that they held on that date at
the meeting, and any postponements or adjournments of the meeting. Each
outstanding share of common stock and Price Group stock is entitled to one vote
on each matter to be presented at the meeting.
Who can attend the meeting?
All stockholders of record on the record date, or their duly appointed
proxies, may attend the meeting. Registration will begin at 9:30 a.m., and the
meeting will begin at 10:00 a.m. Please note that if you hold your shares in
"street name" (that is, through a broker or other nominee), you will need to
bring a copy of a brokerage statement reflecting your stock ownership as of the
record date and check in at the registration desk at the meeting.
What constitutes a quorum?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the aggregate number of shares of common stock and Price Group stock
outstanding on the record date, meaning at least [ ________ ] shares, will
constitute a quorum, allowing us to conduct the business of the meeting. As of
the record date, [ ________ ] shares of our common stock and 200,000 shares of
Price Group stock were outstanding. Proxies received but marked as abstentions
will be included in the calculation of the number of shares considered to be
present at the meeting.
19
How do I vote?
If you complete and properly sign the accompanying proxy card and return
it to us prior to the meeting, it will be voted as you direct. If you are a
registered stockholder and attend the meeting, you may deliver your completed
proxy card in person. "Street name" stockholders who wish to vote at the meeting
will need to obtain a proxy form from the institution that holds their shares.
Can I change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by delivering to our Secretary
either a notice of revocation or a duly executed proxy bearing a later date. The
powers of the proxy holders will be suspended with respect to your proxy if you
attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
What is the board's recommendation?
Our board's recommendation is set forth together with the description of
the proposal in this proxy statement. In summary, our board recommends a vote:
o For the approval of the merger (see page 31).
Unless you give other instructions on your proxy card, the persons named
as proxy holders on the proxy card will vote in accordance with the
recommendations of our board of directors. With respect to any other matter that
properly comes before the meeting, the proxy holders will, in their discretion,
vote thereon in accordance with their best judgment.
What vote is required to approve the proposal?
The proposal for approval of the merger requires the affirmative vote of
the holders of a majority of the outstanding shares of our common stock and
Price Group stock, voting together as a single class. A properly executed proxy
marked "ABSTAIN" with respect to such matter will not be voted, although it will
be counted for purposes of determining whether there is a quorum. Accordingly,
an abstention will have the effect of a vote against the merger.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to the proposal. Your broker will not vote your shares
of common stock unless you provide instructions on how to vote. You should
instruct your broker how to vote your shares of common stock by following the
directions your broker provides. If you do not provide instructions to your
broker, your shares of common stock will not be voted and this will have the
same effect as a vote against the proposal to approve the merger.
We will bear the cost of soliciting proxies. In addition to solicitation
by mail, and without additional compensation for such services, proxies may be
solicited personally, or by telephone or telecopy, by our officers or employees.
In addition, we will pay approximately $12,500 to our proxy solicitor mentioned
below. We will also request that banking institutions, brokerage firms,
custodians, trustees, nominees, fiduciaries and other like parties forward the
solicitation materials to the beneficial owners of common stock held of record
by such persons, and we will upon request of such record holders reimburse
forwarding charges and expenses.
20
Whom can I call with questions?
We have selected Mellon Investor Services as our proxy solicitor. They may
be contacted as follows:
Mellon Investor Services LLC
44 Wall Street, 7th Floor
New York, New York 10005
(888) 468-9726
21
PROPOSAL TO APPROVE THE MERGER
General
The merger agreement provides for our merger with and into GGP
Acquisition, L.L.C., with GGP Acquisition being the surviving company in the
merger. The merger will be completed when the articles of merger have been
accepted for record by the State Department of Assessments and Taxation of the
State of Maryland in accordance with the Maryland General Corporation Law, and
the certificate of merger is accepted for record by the Secretary of State of
the State of Delaware in accordance with the Delaware Limited Liability Company
Act, which is expected to occur as soon as practicable after the stockholder
approval of the merger and the satisfaction or waiver of all other conditions to
closing under the merger agreement.
As of the effective time of the merger, holders of shares of our common
stock and Price Group stock will have no further ownership interest in the
surviving company. Instead, each holder of our common stock and Price Group
stock outstanding immediately prior to the effective time of the merger will be
entitled to receive $26.10 in cash without interest per share. In addition, the
merger agreement authorizes the payment of regular quarterly dividends to our
common stockholders and Price Group stockholders, pro rated up to the closing
date of the merger. Upon completion of the merger, all of our outstanding stock
options will be canceled and, in full settlement of these options, General
Growth Properties will pay each option holder an amount of cash equal to $26.10
less the exercise price per share multiplied by the number of shares of common
stock underlying those options which remain subject to exercise. All payments
will be made net of any taxes required to be withheld by us or General Growth
Properties.
Immediately prior to, and as a condition to the consummation of, the
merger, Price Development Company will merge with GGP Acquisition II, L.L.C., an
indirect subsidiary of General Growth Properties. Price Development Company will
be the surviving entity.
In connection with the partnership merger, the holders of common operating
partnership units in our operating partnership will exchange their common
operating partnership units for $26.10 in cash without interest per common
operating partnership unit. Alternatively, because many holders of common
operating partnership units face substantial tax recapture in the event that
their units were converted into cash, the merger agreement provides those
holders who are "accredited investors" under the Securities Act of 1933 with an
option to defer their substantial tax liabilities by exchanging their units for
preferred operating partnership units in GGP Limited Partnership. Specifically,
they can elect to receive for each common operating partnership unit they hold
...522 Series B Preferred Units of GGP Limited Partnership. The Series B Preferred
Units will be issued in a private placement and have not and will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exception from
registration requirements. The Series B Preferred Units have, in part, the
following terms:
o each Series B Preferred Unit carries a liquidation preference of $50
per unit plus accrued and unpaid distributions;
o each Series B Preferred Unit will be convertible, until the 15th
anniversary of the closing of the merger, into GGP Limited
Partnership common operating partnership units based on an initial
conversion price of $50 per unit;
o each Series B Preferred Unit will be exchangeable, at General Growth
Properties' option, for either cash or shares of General Growth
Properties 8.5% Series C Cumulative Convertible Preferred Stock,
which is a series of preferred stock having substantially the same
rights, preferences and privileges as the Series B Preferred Units;
and
22
o each Series B Preferred Unit is entitled to a preferential quarterly
distribution in an amount equal to the greater of (i) $1.0625, which
is 8.5% of $50 divided by four, and (ii) the regular quarterly cash
distribution (which was $0.53, $0.65, $0.65 and $0.65 per unit for
the quarters ended June 30, 2001, September 30, 2001, December 31,
2001 and March 31, 2002, respectively) upon the number of GGP
Limited Partnership common operating partnership units into which
such Series B Preferred Unit is then convertible, initially on a one
to one basis, with the amount under clause (ii) being potentially
payable until the 15th anniversary of the closing of the merger.
The consent of the holders of a majority of the outstanding common
operating partnership units in Price Development Company is required to approve
certain amendments to the partnership agreement of Price Development Company and
to approve the partnership merger. As of the date of this proxy statement, Mr.
Price and such affiliates own in the aggregate 2,755,051 common operating
partnership units of Price Development Company, which, together with the units
owned by us as general partner, represents approximately 95.6% of the issued and
outstanding common operating partnership units and 75.7% of the units that may
be voted in regard to the partnership merger. They thus control sufficient votes
to ensure the approval of the amendments and the partnership merger. In
addition, they have agreed in the voting agreement to vote their common
operating partnership units in favor of such amendments and the partnership
merger and granted GGP Limited Partnership a proxy covering all such common
operating partnership units. For a more complete description of the voting
agreement, see "The Merger Agreement -- Voting Agreement" on page 52.
Background of the Merger
On January 8, 2002, Mr. John Bucksbaum, the Chief Executive Officer of
General Growth Properties, contacted Mr. John Price, our former Chairman and
Chief Executive Officer, to discuss whether our company would be interested in a
business combination transaction with General Growth Properties. At the time of
this telephone call, our board of directors had not authorized and our company
was not pursuing any sale or other business combination transaction. Since our
initial public offering in January of 1994, our company has been a successful
REIT dedicated to the ownership and operation of retail properties, delivering a
compound annual return to our common stockholders (including dividends) of
approximately 12.5% through January 8, 2002. Our management team was actively
focused on building on this performance by pursuing our strategic business plan
intended to deliver further sustainable growth in funds from operations and
enhanced value for our stockholders over time. At the same time, in spite of
this record, our management team was also fully aware of the serious challenges
facing our company as well as other owners of retail properties in view of the
deteriorating economic conditions in the United States, and other circumstances
discussed in more detail under "Recommendation of our Board of Directors and
Reasons for the Merger -- Our Prospects."
Soon thereafter, Mr. Price contacted Mr. Warren P. ("Pat") King, who was
then Vice Chairman and is now Chairman of our Board of Directors, to discuss Mr.
Bucksbaum's telephone call. Even though our company was not then seeking a
business combination transaction, Messrs. Price and King determined that it
might be desirable for our company to engage in preliminary discussions with
General Growth Properties. This determination was based in part on their
awareness that in December of 2001, General Growth Properties had raised
approximately $345 million through a common stock offering in order to finance a
potential acquisition for which General Growth Properties was not the successful
bidder. Although this was not stated by General Growth Properties, they surmised
that General Growth Properties was thus highly motivated to apply these proceeds
to an alternative transaction, which could be attractive to our stockholders.
On January 10, 2002, Mr. Bucksbaum and Mr. Bernard Freibaum, the Executive
Vice President and Chief Financial Officer of General Growth Properties,
contacted our company and spoke with Messrs. Price and King to reiterate their
interest in pursuing a business combination transaction with our
23
company. They indicated that our company's portfolio represents an excellent
strategic fit for General Growth Properties and, while they were not then in a
position to discuss financial terms for a transaction, they stated that they
thought General Growth Properties was in a position to offer a substantial
premium to the current market price of our common stock, which closed at $22.77
per share on that day. Messrs. Bucksbaum and Freibaum then requested to meet
Messrs. Price and King in person on January 14, 2002 to continue discussions.
Messrs. Price and King agreed to meet and continue discussions due to their
belief that the discussions might lead to an attractive transaction being
offered to our stockholders. At the request of Messrs. Bucksbaum and Freibaum,
our company provided General Growth Properties with summary budget information
and organizational data.
On January 14, 2002, Messrs. Bucksbaum and Freibaum traveled to Salt Lake
City, Utah, to meet with Messrs. Price and King. At this meeting, Mr. Bucksbaum
indicated that General Growth Properties was prepared, subject to completion of
confirmatory due diligence, to make a cash offer for the shares of our common
stock and common operating partnership units in our operating partnership. In
addition, in recognition that many of the holders of our common operating
partnership units likely faced substantial tax recapture in the event that their
units were converted into cash, Mr. Bucksbaum raised as an issue that General
Growth Properties would be willing to offer to allow these holders the option to
participate in a tax deferred transaction by converting their existing common
operating partnership units into partnership interests in GGP Limited
Partnership. Mr. Bucksbaum further indicated that General Growth Properties
preferred not to issue its common operating partnership units in the proposed
transaction at their then current value of approximately $39.50 per unit, based
on the closing price of General Growth Properties' common stock on the New York
Stock Exchange as of the previous closing date.
Over the next two days, several conversations took place between Messrs.
Freibaum and King. During these conversations, Mr. Freibaum indicated that
General Growth Properties was prepared to offer two alternative transactions for
the purchase of our company. In the first alternative, General Growth Properties
would offer to purchase our company for $25.25 in cash per share of our common
stock and our Price Group stock and per common operating partnership unit,
assuming the holders of our common operating partnership units desiring tax
deferral would receive common limited partnership units in GGP Limited
Partnership at an exchange ratio determined by dividing $25.25 by $40.00, which
was the approximate market price of its common stock at that time. In the second
alternative, General Growth Properties would be willing to increase the cash
offer to $25.80 per share of our common stock and our Price Group stock and per
common operating partnership unit, but only if the holders of our common
operating partnership units desiring tax deferral would receive, in lieu of
common operating partnership units in GGP Limited Partnership, convertible
preferred partnership units on substantially the same terms as the Series B
Preferred Units described elsewhere in this proxy statement, which would be
convertible, until the 15th anniversary of the closing of the merger, into GGP
Limited Partnership common operating partnership units based on an initial
conversion price of $50 per unit. The $50 conversion price was more than 25%
above the then-market price for General Growth Properties common stock. Mr.
Freibaum indicated that General Growth Properties would expect to hold this
conversion price regardless of whether the value of the related common stock
went up or down, and that the inclusion in the transaction of convertible
preferred partnership units on substantially the same terms as the Series B
Preferred Units described elsewhere in this proxy statement would allow General
Growth Properties to pay the maximum possible price to our common stockholders.
He also stated that, in view of the substantial cash General Growth Properties
held from its December 2001 public offering, the offer would not be subject to
any financing contingencies. He further stated that the offer was conditioned
upon General Growth Properties being able to negotiate exclusively with our
company and that General Growth Properties would withdraw its offer if our
company entered into negotiations with other parties relating to a possible sale
or business combination transaction.
Over the course of these discussions on January 15 and 16, General Growth
Properties first raised its offer to either $25.45 in cash per share and per
common operating partnership unit, provided the
24
security offered to holders of our common operating partnership units desiring
tax deferral would be common operating partnership units in GGP Limited
Partnership, or $26.00 in cash per share and per common operating partnership
unit, provided the security offered to the holders of our common operating
partnership units desiring tax deferral would have the same basic terms as the
Series B Preferred Units described herein. Through additional discussions,
General Growth Properties finally expressed as its best and final offer a
proposal to offer either $25.55 in cash per share and per common operating
partnership unit, provided the security offered to holders of our common
operating partnership units desiring tax deferral would be common operating
partnership units in GGP Limited Partnership, or $26.10 in cash per share and
per common operating partnership unit, provided the security offered to the
holders of our common operating partnership units desiring tax deferral would
have the same basic terms as the Series B Preferred Units described elsewhere in
this proxy statement. General Growth Properties also agreed to allow the payment
of our regular quarterly dividends to our common stockholders and common
operating partnership unitholders up to the closing date of the transaction.
This last offer from General Growth Properties represented an 11.5% premium to
the closing price of our common stock on January 15, 2002, before factoring in
the value of the final dividend payment.
On January 17, 2002, Messrs. Price, King and G. Rex Frazier, our
then-President and Chief Operating Officer and now our Chief Executive Officer,
held additional discussions with Mr. Freibaum, who reiterated that we had
received General Growth Properties' best and final proposal the previous day.
Mr. Freibaum also indicated that since General Growth Properties viewed the
value of the convertible preferred security which would be offered in exchange
for each of our common operating partnership units as equivalent to $26.10 in
cash, no further price concessions would be available even if the convertible
preferred securities were eliminated from the terms of the proposal. Following
this conversation, Messrs. Price, King and Frazier indicated to Mr. Freibaum
that they would be willing to bring the $26.10/convertible preferred unit
proposal to our board of directors at its next meeting, which was then scheduled
for January 30, 2002. They requested that General Growth Properties submit to
them a written proposal outlining the terms of its offer in advance of that next
meeting. At this time, Mr. Freibaum requested that General Growth Properties be
given access to confidential information concerning our company and our
properties to enable General Growth Properties to continue its due diligence
investigation of our company. Messrs. Price, King and Frazier agreed to discuss
that request with our board of directors at the January 30th meeting.
On January 18, 2002, a telephone discussion took place involving Messrs.
Freibaum, King and Frazier, as well as Mr. Paul Mendenhall, our Vice President
and Chief Investment Officer. During that telephone discussion, Messrs. King,
Frazier and Mendenhall authorized limited visits by representatives of General
Growth Properties to several of our properties. These visits were then completed
from January 22 through January 26, 2002.
On January 29, 2002, Mr. Bucksbaum sent a letter to Mr. Price setting
forth the terms of General Growth Properties' proposal. The January 29, 2002
letter outlined the following terms:
o The acquisition of our company in a merger transaction in which each
outstanding share of our common stock and Price Group stock would be
converted into the right to receive $26.10 per share in cash;
o The acquisition of the common operating partnership units not held
by our company for $26.10 per unit in cash (up to a maximum
1,200,000 units) with the remaining common units being converted
into the Series B Preferred Units of GGP Limited Partnership;
o The redemption for cash of all of our options outstanding at the
closing for $26.10 per share less the exercise price per share;
o A target closing date of not later than March 31, 2002;
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o A commitment by our company to agree to a customary "no-shop" clause
to be set forth in the definitive agreements;
o A commitment by General Growth Properties to proceed with the
closing of the transaction unless following the execution of the
definitive agreements our company experienced a material adverse
change in its business;
o The payment to General Growth Properties of a reasonable break-up
fee in certain circumstances should we fail to close the
transaction;
o Reasonable tax protection arrangements for the holders of our common
operating partnership units;
o Fair and reasonable severance payments for employees not offered
positions with General Growth Properties following the merger; and
o Provision for the payment of our regular dividends to our common
stockholders and common operating partnership unitholders for the
first quarter of 2002 and a partial dividend for the second quarter
of 2002.
At the regular meeting of our board on January 30, 2002, Messrs. Price,
King and Frazier informed the board of the proposal received from General Growth
Properties. All of our directors were present at this meeting. Also present was
a representative of Clifford Chance Rogers & Wells LLP, our outside legal
counsel. At this meeting, the representative from Clifford Chance Rogers & Wells
LLP discussed with our board the nature and scope of its fiduciary duties in
considering a transaction of the type proposed by General Growth Properties. The
board then discussed the strategic alternatives available to our company,
including remaining as an independent company, diversifying our business into
new geographical markets or property types, pursuing other business combination
transactions such as a merger-of-equals or a large acquisition in which our
company would be the surviving entity, and pursuing business combination
transactions with other bidders in which our company would not be the surviving
entity, and whether to pursue the proposed transaction offered by General Growth
Properties. The advantages of remaining an independent company identified by our
board included the ability to continue developing our business plan and the
ability of our stockholders to continue participating in the future results of
operations of our company in the form of dividends and potentially enjoying
further appreciation in the price of our common stock. These advantages were
considered in light of the challenges facing our company, including tenant
occupancy rates below the industry average, increasing tenant allowances, recent
static rent growth, rising costs and the difficult economic environment during
2001.
Messrs. Price, King and Frazier pointed out that the offer represented an
attractive premium for our common stockholders and common operating partnership
unitholders. Although this was not stated by General Growth Properties, they
also stated that they believed that General Growth Properties was able to make
such an attractive offer because it wanted to apply the proceeds from its
December 2001 common stock offering. They expressed a concern that if the
circumstances surrounding the use of proceeds from that December 2001 common
stock offering had been different, we would not have received any proposal from
General Growth Properties or if such a proposal had been received, the pricing
offered by General Growth Properties would have been less attractive for our
company. The board next discussed the advantages and disadvantages in the
current environment of remaining an independent company. At this meeting, our
board decided to continue discussions with General Growth Properties, but
believed it needed more information before reaching any decision with respect to
its proposal.
The board also determined that it would not be in the best interests of
our company to pursue alternative sale transactions at the current time due to
the position of General Growth Properties that its offer was conditioned upon it
being able to negotiate exclusively with our company and that General
26
Growth Properties would withdraw its offer if our company entered into
negotiations with other parties relating to a possible sale or business
combination transaction. Our board also assessed potential business combination
transactions with other REITs which are focused on owning and managing regional
malls. The board considered each of the major regional mall REITs and
determined, after an analysis of the circumstances and strategic considerations
relating to each, that entering into alternative discussions with any of such
other parties was unlikely to lead to a superior transaction for our company and
our stockholders. At the same time, our board determined that, because it had
not yet determined whether to proceed with the proposed transaction or whether
to seek any sale or other business combination transaction for the company,
entering into such discussions with third parties posed serious risks for our
company by potentially disrupting relationships with our tenants, financial and
strategic partners and employees if it became generally known that the company
was seeking a sale or other business combination transaction.
The board then determined to authorize Messrs. Price, King, Frazier and
Mendenhall to provide confidential information concerning our company to General
Growth Properties, subject to the execution by General Growth Properties of a
customary confidentiality and standstill agreement, and, further, to seek to
engage a financial advisor to assist our board with its analysis of and in the
negotiations concerning the proposal submitted by General Growth Properties.
Over the next 48 hours, we completed the negotiation of a confidentiality
and standstill agreement with General Growth Properties. This agreement, which
is dated January 31, 2002, obligates General Growth Properties to keep the
proprietary information we provide to it confidential and to use that
information only for purposes of considering a transaction between our
companies. The agreement also obligates General Growth Properties to refrain for
a period of 18 months following the date of the agreement from purchasing our
common stock or from pursuing or encouraging any business combination or change
of control transaction involving our company other than discussions regarding
the proposed transaction or transactions approved by our board of directors.
Following the execution of this agreement, we provided General Growth Properties
with confidential information concerning our company. Prior to receiving this
information, Mr. Freibaum contacted Mr. Frazier to indicate that he expected
that General Growth Properties would be able to complete its due diligence over
the next one to two weeks, at which time he would be in a position to reconfirm
General Growth Properties' offer for our company.
General Growth Properties' legal counsel, Neal, Gerber & Eisenberg,
distributed a draft of the merger agreement on January 31, 2002. Throughout
February, we continued to provide General Growth Properties with additional
information and materials.
On February 6, 2002, our board again met to discuss the proposal from
General Growth Properties. At this meeting, our board again considered the
advantages and disadvantages of the proposal. The board then authorized Messrs.
Price, King, Frazier and Mendenhall to continue discussions with General Growth
Properties, but again reserved taking any formal action on the proposal. At this
meeting, our board met with representatives of UBS Warburg and discussed UBS
Warburg's qualifications and experience. After these discussions, our board
authorized our outside legal counsel to negotiate the scope and terms of UBS
Warburg's engagement. Over the next nine days, Messrs. King and Frazier,
assisted by our outside legal counsel, negotiated the terms of our board's
engagement of UBS Warburg. This engagement was subsequently confirmed in writing
by an engagement letter dated February 19, 2002.
On February 11, 2002, our board met again to consider the General Growth
Properties proposal. At this meeting, representatives from our legal counsel
informed our board of the status of the negotiations and the issues raised by
the draft agreements distributed to us by General Growth Properties' legal
counsel on January 31, 2002. At this meeting, our board also discussed the fact
that certain members of our board of directors (Messrs. Price, King, Frazier and
Souvall) beneficially owned common operating partnership units in our operating
partnership and faced substantial tax liabilities if their
27
interests in our operating partnership were converted to cash in the proposed
transaction. It was thus determined by our board of directors at this meeting
that it would be appropriate for a committee of directors who did not hold
operating partnership units to review separately the aspects of the proposal
relating to the holders of our common operating partnership units. This
committee, consisting of Messrs. Martindale, Huntsman and Anderson, was
thereafter constituted.
On or about February 14, 2002, Mr. Freibaum informed Mr. King that, based
on the diligence investigation and document review conducted by General Growth
Properties to date, General Growth Properties was in a position to reconfirm its
proposal to acquire the company on substantially the same terms outlined in the
January 29, 2002 letter.
Our legal advisors submitted their initial proposed changes to the draft
agreements to General Growth Properties' legal counsel on February 15, 2002.
Over the next week, the parties held various discussions concerning the terms of
the proposed transaction.
On February 23, 2002, our negotiating team, consisting of Messrs. King and
Frazier and representatives of our outside legal counsel, traveled to Chicago,
Illinois to meet with Mr. Freibaum, Mr. Joel Bayer, General Growth Properties'
Senior Vice President and Chief Investment Officer, and representatives of
General Growth Properties' outside legal counsel. At this meeting, the parties
discussed the open issues raised in the draft response to the definitive
agreements submitted by our counsel. The issues included the scope of the
representations and warranties, the terms of the "no-shop" clause, the
pre-closing covenants, the size of the break-up fee and the circumstances under
which it would be payable. The parties also discussed the terms of the tax
protection agreements for our common operating partnership unitholders described
in the proxy statement under "Interests of Directors and Officers in the Merger"
below.
On February 26, 2002, a representative of another publicly traded real
estate investment trust ("Company B") placed an unsolicited telephone call to
Mr. King. In July of 2001, we had held preliminary discussions relating to a
possible strategic combination involving our two companies. The July 2001
discussions did not go beyond the preliminary stages. This February 26, 2002
call was placed to follow-up on an earlier unsolicited call placed by this
representative of Company B to Mr. King on February 14, 2002, during which this
representative indicated that if our two companies would consider engaging in
discussions relating to a business combination between our two companies,
Company B might be able to increase its value estimates (which would involve
consideration consisting of either stock of Company B or cash) for our company
to near the valuation levels that we were suggesting as part of our earlier
preliminary discussions. Because this higher valuation level for our company was
materially below the consideration being proposed by General Growth Properties
in the merger transaction, we did not solicit and Company B did not make or
deliver any proposal for a business combination transaction with our company.
Since February 26, 2002, none of our representatives has had any further
discussions with Company B.
From February 28, 2002 through March 2, 2002, the two negotiating teams
and their legal counsel met to finalize the terms of the definitive agreements
relating to the proposed transaction.
On March 2, 2002, our board of directors, joined by representatives of our
outside legal counsel, met in Chicago to discuss the status and to review the
history of the negotiations of the proposed transaction. At this meeting our
board also reviewed the strategic rationales for the proposed transaction that
had been previously discussed at the meeting on January 30, 2002. In addition,
Mr. King informed our board of, and our board considered and discussed, the
unsolicited telephone call placed by the representative of Company B.
On March 3, 2002, our board of directors met again in Chicago. Joining our
board at this meeting were representatives of our outside legal counsel and
representatives of UBS Warburg. At this meeting,
28
our legal counsel again addressed the board on the nature and scope of its
fiduciary duties in considering the proposal offered by General Growth
Properties. Our legal counsel also summarized the definitive agreements that had
been negotiated by the parties. This summary covered the structure of the
proposed transaction and the consideration offered to our stockholders and our
common operating partnership unitholders, including
o the fact that the merger consideration is fixed and will not be
adjusted for changes in the market price of our common stock or
General Growth Properties' common stock that occur prior to the
closing of the merger,
o the terms of the Series B Preferred Units of GGP Limited
Partnership,
o the conversion of outstanding stock options to cash net of their
exercise price in the merger,
o the pre-closing covenants applicable to the two companies,
o the scope of the representations and warranties,
o the conditions to the merger,
o the tax consequences of the merger,
o the "no-shop" clause,
o the nature and scope of the break-up fee and expense reimbursement
obligations,
o the termination rights of the parties,
o the severance arrangements offered to our employees,
o the absence of any financing contingency in the definitive
agreements, and
o the fact that General Growth Properties and GGP Limited Partnership
would be liable to our company for damages in the event that they
fail or refuse to proceed with the closing of the transaction in
circumstances in which they are otherwise obligated to do so.
Our board then held a lengthy discussion, which was joined by its legal
and financial advisors, relating to the terms of the proposed transaction.
Messrs. Price, King and Frazier then reiterated that they believed that our
company is the beneficiary of a confluence of events that led General Growth
Properties to approach our company with its unsolicited bid in the first place.
Although this was not stated by General Growth Properties, they mentioned that
they believed that General Growth Properties was in a position to make such an
attractive offer because it wanted to apply the proceeds from its December 2001
common stock offering. They also stated that if circumstances were different or
if we delayed in accepting or moving ahead with General Growth Properties'
proposal, they believed that the pricing of any offer in the future would not
likely be as attractive as the current proposal.
Our board then discussed other strategic rationales for pursuing the
proposed transaction with General Growth Properties, the alternatives available
for our company, including remaining as an independent company, diversifying our
business into new geographical markets or property types, pursuing other
business combination transactions such as a merger-of-equals or a large
acquisition in which our company would be the surviving entity, and pursuing
business combination transactions with other bidders in which our company would
not be the surviving entity. Our company was not presented with, and therefore
our board did not consider, an alternative liquidation of our company involving
the sale of groups of assets over time. It is possible that a break-up fee might
not have been part of the terms of one or more of the transactions involved in
such an alternative liquidation. Our board also discussed
29
the positive and negative factors in the proposed transaction. The factors
considered are discussed below under "Recommendation of Our Board of Directors
and Reasons for the Merger."
UBS Warburg discussed with our board the amount of the break-up fee in the
proposed transaction in comparison with break-up fees in other comparable
transactions. UBS Warburg previously had provided our outside legal counsel with
a summary of break-up fees for 27 comparable transactions, which indicated a
range of break-up fees from of 1.6% to 6.5%, a mean of 3.6% and a median of
3.5%, measured in each case as a percentage of the transaction's equity value,
in comparison to our break-up fee, which is approximately 3.6% of this
transaction's equity value. In addition, our board discussed with UBS Warburg
the financial ability of General Growth Properties to consummate the proposed
transaction.
UBS Warburg then made a presentation to our board with respect to the
financial terms of the proposed merger. This presentation included a discussion
of our company's position in the industry, its current net asset value,
financial performance and the current state of the retail real estate market,
and a comparison of the financial terms of the proposed transaction with other
relevant mergers and acquisitions. At the conclusion of this presentation, UBS
Warburg delivered its oral opinion that, as of the date of the opinion, and
subject to and based on the assumptions made, procedures followed, matters
considered and limitations of the review undertaken in its opinion, the per
share cash consideration to be received by holders of our outstanding common
stock (other than by holders of Price Group stock) pursuant to the proposed
merger agreement was fair from a financial point of view to such holders. The
written opinion of UBS Warburg, dated as of March 3, 2002, and attached as
Exhibit B to this proxy statement, subsequently confirmed its oral opinion of
the same date.
Our board next considered the terms of the partnership merger. During this
discussion, Messrs. Price, King, Frazier and Souvall (our board members who own
common operating partnership units) described the number of units each of them
holds and their intentions with respect to the consideration offered in the
partnership merger. Each of these persons indicated that he, depending upon his
individual exposure to tax liabilities, expects to take a mix of cash and Series
B Preferred Units in the partnership merger. Mr. Price beneficially owns or
controls 2,755,051 units and has advised us that he plans to accept cash
consideration for 351,969 of those units; Mr. King beneficially owns 138,984
units and has advised us that he plans to accept cash consideration for 61,339
of those units; Mr. Frazier beneficially owns 31,840 units and has advised us
that he does not plan to accept any cash consideration; and Mr. Souvall
beneficially owns 23,271 units and has advised us that he plans to accept cash
consideration for all of his units.
Following this discussion, the committee of directors consisting of those
directors who do not own any of our operating partnership units met separately
to review the terms of the transaction relating to the partnership merger. Our
legal counsel and UBS Warburg were present during the committee's deliberations.
At this meeting, the committee discussed the terms of the partnership merger,
including the consideration offered to the holders of our common operating
partnership units. The committee also reviewed the history of the negotiations
relating to the partnership merger and discussed the fact that the transaction
proposed by General Growth Properties requires, under the partnership agreement
of our operating partnership, the separate approval of the holders of our common
operating partnership units and that unitholders representing enough units to
approve the partnership merger had entered into the voting agreement, thereby
ensuring its approval. The committee also considered the terms of the tax
protection agreements described below under "Interests of Directors and Officers
in the Merger." Based on these discussions, the committee determined to
recommend that our company, as general partner of our operating partnership,
approve the partnership merger and the other terms of the partnership merger
transaction.
This committee then reported to our full board its findings and
recommendations. Thereafter, our board of directors unanimously declared the
merger and the partnership merger advisable and unanimously voted to approve the
merger and to adopt the merger agreement on the terms presented to
30
the board, to cause our company as general partner of our operating partnership
to approve the partnership merger and to recommend that our stockholders and
common operating partnership unitholders approve the merger and the partnership
merger, respectively, substantially on the terms set forth in the merger
agreement.
We entered into the merger agreement on the evening of March 3, 2002.
We have been advised by General Growth Properties that on April 6, 2002,
General Growth Properties executed an agreement to acquire Victoria Ward,
Limited, a privately held real estate corporation located in Hawaii, in an all
cash transaction and that such transaction closed on May 28, 2002. The total
acquisition price was approximately $250 million, including the assumption of
approximately $50 million of existing short-term debt. We have been further
advised by General Growth Properties that the acquisition of Victoria Ward,
Limited will not impact General Growth Properties' ability to consummate the
merger or the partnership merger.
Recommendation of our Board of Directors and Reasons for the Merger
As described above in the section entitled "Background of the Merger," our
board declared the merger and the partnership merger advisable and unanimously
voted to approve the merger and the partnership merger at a meeting held on
March 3, 2002. Our board believes that the terms of the merger, the partnership
merger, the merger agreement and the other transactions contemplated by that
agreement are advisable, fair to, and in the best interests of, our company and
our stockholders and common operating partnership unitholders. Accordingly, our
board recommends approval of the merger substantially on the terms set forth in
the merger agreement by our stockholders. In reaching its conclusions, our board
consulted with members of our management team who are also directors, as well as
our legal counsel and accountants, and was advised by UBS Warburg, its financial
advisor in this transaction. The board considered our short-term and long-term
interests and those of our stockholders and unitholders. In particular, our
board considered the following factors, which in the aggregate it deemed
favorable, in reaching its decision to approve the merger and the merger
agreement:
Value of Merger Consideration. The consideration to be received by holders
of our common stock and Price Group stock in the merger represents a premium to
our common stock of approximately:
o 6.8% over the closing price of our common stock of $24.43 on March
1, 2002, which was the last trading day prior to the public
announcement of the merger;
o 13.1% over the closing price of our common stock of $23.07 on
February 1, 2002, which was one month before the announcement of the
merger;
o 15.5% over the closing price of our common stock of $22.60 on
September 4, 2001, which was six months before the announcement of
the merger; and
o 37.6% over the closing price of our common stock of $18.97 on March
2, 2001, which was one year before the announcement of the merger.
Our Prospects. Our board believes that the merger represents a more
desirable alternative for our stockholders than continuing to operate as an
independent public company under our current business plan. Although our company
maintains a strong balance sheet and has been a successful REIT dedicated to the
ownership and operation of retail properties since its initial public offering
in January of 1994, our board is and, prior to General Growth Properties' offer,
has been aware of serious challenges facing our company in the future,
including:
o During 2001, retail sales at our malls and community centers were
flat compared with prior year revenues, making rental rate increases
more difficult;
31
o Our company is faced with rising costs fueled by substantially
higher insurance costs and the possibility of higher interest rates
on its credit facilities in the future:
o Our company's aggregate insurance costs were approximately
$2,340,000 for the premium year ended October 2001, and we
estimate that our company's aggregate insurance costs will be
approximately $2,838,000 for the premium year ending October
2002, and
o Our company's credit facility is a floating rate facility with
an annual interest rate of LIBOR plus 1.10%. The three-month
LIBOR rate has averaged 5.74%, 5.56%, 5.42%, 6.54% and 3.78%,
respectively, for each of the preceding five calendar years
ended December 31, 2001, compared with the three-month LIBOR
rate on May 31, 2002, of 1.90%. If the LIBOR rate were to
increase, the cost of our borrowing under our credit facility
would also increase, resulting in higher interest expenses to
our company.
o Some of our properties are struggling with modestly declining
occupancy rates;
o Although none of our major tenants have experienced any
bankruptcies, major bankruptcies have affected the other
participants in the retail industry, and our major tenants may be
affected in the future;
o The proposed transaction settles management succession issues at our
company. Since January of 2002, our board has been aware of, and has
fully considered that, Mr. Price, our then current and now former
Chairman and Chief Executive Officer, would soon need to announce
his retirement from our company in order to accept an appointment as
United States Ambassador to the three African island nations of
Mauritius, Seychelles and the Comoros, which announcement he
eventually made on March 20, 2002;
o We are a smaller company than some of our competitors in the retail
mall sector, which makes our bargaining position weaker in
comparison with some of our larger competitors when negotiating
leases with national tenants. National tenants prefer to negotiate
lease transactions with fewer companies owning or managing multiple
properties rather than negotiate with smaller companies with regard
to a lesser number of properties. Retail mall management companies
that have the capacity to negotiate lease terms with national
tenants for a substantial number of properties are therefore able to
negotiate more favorable lease terms than are smaller companies
which have less leverage with national tenants; and
o Both the quantity of our common stock held by institutional
investors and the number of institutional investors which hold our
common stock have decreased over the past four years. In addition,
we may be potentially less attractive to institutional investors who
prefer to invest in companies with larger market capitalizations
that offer greater liquidity to stockholders.
Other Available Strategic Alternatives We Could Pursue. Our board also
considered other strategic alternatives to the merger that might be available to
us, including:
o Diversifying our business into new geographical markets or property
types. Our board has discussed the possibility of entering new
geographical markets or investing in new property types. Through a
more diversified portfolio of properties, our company would have a
greater ability to hedge its exposure to economic risk should there
be a downturn in retail property sectors. Our board, however,
concluded that this strategy would be unlikely to create a benefit
to our stockholders from the returns on their
32
investments greater than the benefit represented by the premium for
their stock offered through the merger proposal, because, in part, a
strategy of diversifying our portfolio would not have addressed the
challenges facing our company described above. In addition, our
board was not presented with, nor was it aware of, any specific
proposal or investment opportunity that the board felt would
increase the value of our company for our stockholders in the near
term at the time it was evaluating General Growth Properties' offer.
o Pursuing other business combination transactions, such as a
merger-of-equals or a large acquisition in which we would be the
surviving entity. Our board discussed the possibility of pursuing
business combinations with other retail mall REITs, such as a
merger-of-equals or a large acquisition in which we would be the
surviving entity. However, our board was not presented with, nor was
it aware of, any specific proposal or investment opportunity of this
nature. The board identified retail mall REITs with which we might
consider negotiating a merger-of-equals or which might be the target
of a large acquisition to be pursued by us. However, our board was
not presented with, nor was it aware of, any specific proposal or
investment opportunity of this nature. Potential benefits to our
company and stockholders with respect to either a merger-of-equals
or a large acquisition include an expanded portfolio of properties,
potential for increased leverage when negotiating with national
tenants, the possible creation of operational synergies and a
greater ability to hedge our exposure to economic risk should there
be a downturn in the commercial real estate or retail mall sectors
(to the extent that the merger resulted in a diversification of our
property portfolio), the possibility of structuring such a
transaction in a tax deferred format and continued stockholder
participation in the company going forward (which would include
future quarterly dividends received by our stockholders). Potential
risks and difficulties with respect to either a merger-of-equals or
a large acquisition include the perceived inability of the
identified merger candidates to improve on our company's current
profitability and manage our properties more efficiently, thereby
increasing the value of our stockholders' investments, the fact that
our company may have to compete for the acquisition of retail mall
REITs with other prospective purchasers, some of whom have greater
financial resources than us, that there can be no assurances that
our company could successfully manage the difficulties associated
with integrating any acquired businesses and managing such
acquisition-fueled growth, and the fact that making a large
acquisition may require that we either issue additional equity,
which may be dilutive to our stockholders, or leverage our existing
portfolios to a greater extent, which could negatively impact
short-term stockholder value should our cost of borrowings increase
proportionally with rising interest rates or a reduced bond rating.
After analyzing the potential candidates and reviewing the potential
benefits and risks involved with entering into a merger-of-equals or
making a large acquisition with another company in which we would be
the surviving entity, our board determined that none of the
alternatives discussed would offer a return to our stockholders as
attractive as the offer presented by the merger with General Growth
Properties.
o Pursuing business combination transactions with other bidders in
which we would not be the surviving entity. Our board also discussed
the potential of entering into a business combination in which we
would not be the surviving entity, and identified certain retail
mall REITs that may be in a position to propose such a transaction.
However, our board was not presented with, nor was it aware of, any
specific proposal or investment opportunity of this nature.
Potential benefits to our stockholders with respect to the
possibility of a business combination in which they might be offered
an option to
33
receive equity securities as merger consideration include the
possibility that such a transaction might be structured in a tax
deferred format, as well as the opportunity to continue to have an
interest in the surviving entity going forward (which may include
future quarterly dividends) and the opportunity to become
stockholders in a larger and more diversified company. Further,
after analyzing the identified retail mall REIT candidates and
reviewing the potential benefits and risks to our stockholders
involved with such a business combination transaction, our board
believed that each such candidate was unable to offer our
stockholders merger consideration as attractive as that offered by
General Growth Properties, whether such consideration were to be
paid in cash or securities, or a combination of both.
After considering the potential benefits and risks to us, our stockholders and
our common operating partnership unitholders associated with each of these
alternatives, our board determined that the transactions described in the merger
agreement represented the alternative that is in the best interests of our
common stockholders and unitholders.
UBS Warburg Analysis and Fairness Opinion. Our board considered as
favorable to its determination the opinion, analyses and presentations of UBS
Warburg described in "Opinion of UBS Warburg" below, including the opinion of
UBS Warburg to the effect that, as of the date of its opinion, and subject to
and based on the assumptions made, procedures followed, matters considered and
limitations of the review undertaken in its opinion, the per share cash
consideration to be received by holders of our outstanding common stock (other
than by holders of Price Group stock) pursuant to the proposed merger agreement
was fair from a financial point of view to such holders. A copy of the fairness
opinion is attached as Exhibit B to this proxy statement.
The High Probability of Transaction Completion. Our board considered as
favorable that in its judgment there is a high probability of completing the
proposed transaction with General Growth Properties. In particular, the merger
agreement does not contain any financing contingency and General Growth
Properties and GGP Limited Partnership would be liable to our company for
damages in the event that they fail or refuse to proceed with the closing of the
transaction in circumstances in which they are otherwise obligated to do so. In
addition, based on our discussions with and analysis of General Growth
Properties and discussions with our financial advisor, our board has concluded
that General Growth Properties has the financial capacity to complete the
proposed transaction.
Our Termination Rights in the Event of a Superior Competing Transaction
and Break-Up Fee. The merger agreement permits our board to receive unsolicited
inquiries and proposals regarding other potential business combinations and, to
the extent required by its fiduciary obligations, to negotiate and provide
information to third parties with respect to any such proposals that a majority
of our entire board determines after consultation with its financial advisor, in
good faith, taking into account financial considerations and other relevant
factors, including relevant legal, financial, tax, regulatory and other aspects
of such proposal, and the conditions, prospects and time required for completion
of such proposal, to be more favorable than the merger and the partnership
merger to our stockholders and unitholders and, subject to the satisfaction of
certain conditions, to enter into an agreement with respect to a superior
competing transaction with a third party, subject to the payment of a $19
million break-up fee to General Growth Properties.
Our board also considered the following potentially negative factors in
its deliberations concerning the merger and the merger agreement:
Holders of Our Common Stock Unable to Receive Future Dividend Payments and
Unable to Share in Our Future Growth and Stock Price Appreciation. Our board
acknowledged that the merger would preclude the holders of our common stock from
having the opportunity to participate in the future growth of our assets and any
future appreciation in the value of our common stock. The holders of our
34
common stock will no longer share in the future growth of our company or receive
quarterly dividends. Our common stockholders received quarterly dividends of
$0.495, $0.495, $0.51 and $0.51 per share for the quarters ended on June 30,
2001, September 30, 2001, December 31, 2001 and March 31, 2002, respectively.
The Tax Consequences to Our Stockholders. Our board acknowledged that the
merger is a taxable transaction and, as a result, holders of our common stock
will be required to pay taxes on gains that result from their receipt of the
cash consideration in the merger. In contrast, the holders of common operating
partnership units in Price Development Company, many of whom, unlike our common
stockholders, will face substantial tax recapture if they participate in a
taxable transaction involving their investments in our company, will have the
option to defer their taxable gains by electing to receive Series B Preferred
Units of GGP Limited Partnership, if they are accredited investors.
Significant Costs Involved. Our board considered the significant costs
involved in connection with completing the merger, the substantial management
time and effort required to effectuate the merger and integrate our business
with General Growth Properties' business and the related disruption to our
operations. If the merger is not approved, or is not consummated, then our
company may be required to bear these expenses and the costs of these
disruptions.
Prohibition against Soliciting other Offers. Even though the merger
agreement permits our board to receive unsolicited inquiries and proposals
regarding other potential business combinations, it also prohibits our company
from soliciting alternative proposals from other potential purchasers of our
company.
Potential Benefits to Certain Directors and Officers. Our board also
considered the potential benefits to certain directors and officers discussed in
the section entitled "Interests of Directors and Officers in the Merger,"
including the acceleration of the vesting of stock options, the additional
severance payments to be received by our executive officers under certain
circumstances, and the tax protection agreements provided to holders of common
operating partnership units who elect to exchange their common operating
partnership units for Series B Preferred Units of GGP Limited Partnership.
In the opinion of our board, the above factors represent the material
potential adverse consequences which could occur as a result of the merger. In
considering the merger, our board considered the impact of these factors on our
stockholders.
In view of the wide variety of factors considered by our board, our board
did not find it practicable to, and did not, quantify or otherwise attempt to
assign relative weights to the specific factors considered. Our board viewed its
position and recommendation as being based on the totality of the information
presented to, and considered by, it. After taking into consideration all the
factors set forth above, the board determined that the potential benefits of the
merger substantially outweighed the potential detriments associated with the
merger.
In the event the merger is not completed for any reason, we will continue
to pursue our strategic business plan intended to deliver further sustainable
growth in funds from operations and enhanced value for our stockholders over
time. In addition, in such event, we may seek to enter into other acquisition or
business combination opportunities or to issue additional debt or equity.
Opinion of UBS Warburg
Our board retained UBS Warburg to act as its financial advisor in
connection with the merger. The board selected UBS Warburg to act as financial
advisor based on UBS Warburg's qualifications, expertise and reputation and its
knowledge of our business and affairs. At the meeting of our board on March 3,
2002, UBS Warburg rendered its oral opinion, subsequently confirmed in writing
as of that date, that as of March 3, 2002, and subject to and based on the
assumptions made, procedures followed, matters
35
considered and limitations of the review undertaken in its opinion, the per
share cash consideration to be received by holders of our outstanding common
stock (other than by holders of Price Group stock) pursuant to the merger
agreement was fair from a financial point of view to such holders.
The full text of UBS Warburg's opinion, dated as of March 3, 2002, which
sets forth, among other things, the assumptions made, procedures followed,
matters considered and limitations on the review undertaken by UBS Warburg, is
attached as Exhibit B to this proxy statement. We urge you to read this opinion
carefully and in its entirety. This summary is qualified in its entirety by
reference to the full text of the opinion.
UBS Warburg's opinion, which was directed to our board, addressed only the
fairness, as of the date of the opinion, and subject to and based on the
assumptions made, procedures followed, matters considered and limitations of the
review undertaken in its opinion, from a financial point of view to holders of
our outstanding common stock (other than to holders of Price Group stock) of the
per share cash consideration to be received by such holders in the merger, and
did not address any other aspect of the merger. The board did not request, and
the opinion of UBS Warburg does not in any manner address, (1) the fairness of
the merger to the holders of Price Group stock, (2) the fairness of the merger
to the holders of common operating partnership units of Price Development
Company, or (3) the value of the per share cash consideration to be received by
the common stockholders relative to the value available to the holders of common
operating partnership units of Price Development Company.
At our board's direction, UBS Warburg's opinion did not address our
underlying business decision to proceed with or effect the merger, nor did it
constitute a recommendation to any stockholder of our common stock as to how
such stockholder should vote with respect to the merger. UBS Warburg was neither
asked to, nor did it, offer any opinion as to any term of the merger agreement
or the form of the merger, other than as to the fairness, from a financial point
of view, as of the date of the opinion, and subject to and based on the
assumptions made, procedures followed, matters considered and limitations of the
review undertaken in its opinion, of the per share cash consideration to be
received by holders of our outstanding common stock (other than by holders of
Price Group stock), to such holders. In rendering its opinion, UBS Warburg
assumed, with our board's consent, that each party to the merger agreement would
comply with all the material terms of the merger agreement. UBS Warburg was not
authorized to and did not solicit indications of interest in or engage in any
discussions with any party with respect to an alternative business combination
with us.
In arriving at its opinion, UBS Warburg, among other things:
o reviewed certain publicly available business and historical financial
information relating to us;
o reviewed certain internal financial information and other data relating to
our business, operations and financial prospects, including estimates and
financial forecasts prepared by our management, that were provided to UBS
Warburg by us and were not publicly available;
o conducted discussions with members of our senior management concerning our
business, operations and financial prospects;
o reviewed publicly available financial and stock market data with respect
to us and certain other companies in lines of business UBS Warburg
believed to be generally comparable to ours;
o compared the financial terms of the merger with the publicly available
financial terms of certain other transactions which UBS Warburg believed
to be generally relevant;
o reviewed the merger agreement; and
o conducted such other financial studies, site visits, analyses and
investigations, and considered such other information, as UBS Warburg
deemed necessary or appropriate.
36
In connection with its review, with our board's consent, UBS Warburg did
not assume any responsibility for independent verification of any of the
information reviewed by UBS Warburg for the purpose of this opinion and has,
with our board's consent, relied on such information being complete and accurate
in all material respects. UBS Warburg further relied upon assurances of our
management that management was not aware of any facts or circumstances that
would make such information inaccurate or misleading. In addition, at our
direction, UBS Warburg did not make any independent evaluation or appraisal of
any of our assets or liabilities (contingent or otherwise), nor was UBS Warburg
furnished with any such evaluation or appraisal. With respect to the financial
forecasts and estimates referred to above, UBS Warburg assumed, at our board's
direction, that they had been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of our management as to our future
financial performance. UBS Warburg assumed that all governmental, regulatory or
other consents and approvals necessary for the consummation of the merger would
be obtained without any material adverse effect on us or the merger. UBS
Warburg's opinion was necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available to UBS Warburg as
of, March 3, 2002.
The following summaries of UBS Warburg's financial analyses present some
information in tabular format. In order to fully understand the financial
analyses used by UBS Warburg, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete description of the
financial analyses. Accordingly, the analyses listed in the tables and described
below must be considered as a whole. Considering any portion of such analyses
and the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying UBS Warburg's
opinion.
In connection with the preparation and delivery of its opinion, UBS
Warburg performed a variety of financial and comparative analyses. All material
analyses performed by UBS Warburg are described below.
In arriving at its opinion, UBS Warburg did not ascribe a specific range
of value to us, but rather made its determination as to the fairness, from a
financial point of view, as of the date of the opinion, and subject to and based
on the assumptions made, procedures followed, matters considered and limitations
of the review undertaken in its opinion, of the per share cash consideration to
be received by holders of our outstanding common stock (other than by holders of
Price Group stock) pursuant to the merger agreement, to such holders, on the
basis of the multiple financial and comparative analyses described below.
Historical Stock Price Analysis. UBS Warburg reviewed the performance of
the per share market price and trading volume of our common stock for the period
from January 17, 1994 (the initial public offering date) to February 27, 2002.
The analysis indicated that during the 52-week period ended February 27, 2002,
the highest closing market price per share was $24.50, the average closing
market price per share was $21.87 and the lowest closing market price per share
was $18.20. As of March 3, 2002, our stock had not traded at or above the
offered price per share of $26.10 since December 31, 1997. The offered price per
share of $26.10 represents a 7.0% premium over the price of our common stock as
of the closing price on February 27, 2002 and an 8.5% premium over the price of
our common stock one day prior to that date.
Net Asset Valuation Analysis. Using information provided by us, UBS
Warburg calculated our net asset value. For this calculation, UBS Warburg
applied a range of capitalization rates from 9.25% to 10.75%, which resulted in
an implied blended capitalization rate range of 9.46% to 9.96%, to our in-place
net operating income.
The resulting gross real estate value was added to the gross value of our
other assets, including developments in progress, land, cash, and certain other
assets, less our outstanding debt, adjustments for
37
insurance recoveries and management fees and certain other liabilities, to
arrive at an equity net asset value. This analysis indicated a net asset value
range as of February 27, 2002 of between $450.6 million and $503.6 million, or
$22.45 and $25.09 per share.
Comparable Companies Analysis. UBS Warburg compared selected publicly
available information of us with the corresponding data of certain publicly
traded companies that UBS Warburg considered to be comparable to us. These
companies included:
Crown American Realty Trust CBL & Associates Properties, Inc.
General Growth Properties, Inc. Glimcher Realty Trust
The Macerich Company The Rouse Company
Simon Property Group, Inc.
The comparable company trading analysis provided a market valuation
benchmark based on the common stock trading multiples of the above selected
comparable companies. UBS Warburg calculated and analyzed each company's trading
premium/discount to consensus net asset value ("NAV"); 2001, 2002 and 2003 funds
from operations ("FFO") multiples; and enterprise value to prior four quarters
reported EBITDA multiples, all as of February 27, 2002. This information is
summarized in the table below:
Comparable Companies JP Realty, Inc.
------------------------------- ---------------------------
Feb. 27, 2002 Transaction
High Mean Median Low Market Price Price
---- ---- ------ ----- ------------ -----------
Premium/(Discount) to NAV(1)(%) 17.4 2.3 2.9 (10.7) 2.4 9.6
2001 FFO multiple (x)(2) 9.2 8.0 8.5 6.4 8.6 9.2
Multiple of 2002 estimated FFO (x)(3) 8.7 7.5 7.7 6.2 8.1 8.7
Multiple of 2003 estimated FFO (x)(3) 8.2 7.1 7.2 6.1 7.7 8.2
Prior four quarters EBITDA multiple(x)(4) 14.4 11.9 12.2 9.9 10.7 11.1
- ----------
(1) Consensus NAV obtained from Realty Stock Review as of November 28, 2001.
(2) Derived by dividing a company's share price (as of the close on February
27, 2002) by its reported per share FFO for 2001 (defined by the National
Association of Real Estate Investment Trusts as "net income" computed in
accordance with GAAP, excluding gains or losses from debt restructuring
and sales of property, plus depreciation of real property, and after
adjustments for unconsolidated entities in which the subject REIT holds an
interest).
(3) The 2002 and 2003 FFO multiples were derived by dividing a company's share
price (as of the close on February 27, 2002) by its respective 2002 and
2003 consensus per share FFO estimates, as provided by First Call
Corporation as of February 27, 2002.
(4) EBITDA multiple was calculated by dividing a company's enterprise value
("Enterprise Value"), defined as total market equity value as of February
27, 2002, assuming the conversion of all of the operating partnership's
common units, plus total debt, preferred units and preferred stock, if
any, less cash on hand, by its reported EBITDA (earnings before interest,
taxes, depreciation and amortization) for the period from fourth quarter
2000 through third quarter 2001.
Because of the inherent differences between the businesses, operations and
prospects of us and the businesses, operations and prospects of the selected
comparable companies, UBS Warburg believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis.
Accordingly, UBS Warburg also made qualitative judgments concerning differences
between our financial and operating characteristics and those of the selected
comparable companies that would affect our public trading values and such
comparable companies.
Comparable Transactions Analysis. UBS Warburg reviewed transactions
involving REITs announced from January 1, 2000 to the date of its opinion. Six
transactions with equity values in excess of $200 million that were somewhat
comparable were selected. All of the comparable transactions had closed except
the Rodamco transaction with Westfield, Simon & Rouse announced on January 13,
2002, which was pending as of the date of UBS Warburg's opinion and has since
closed. These transactions included:
Target Acquirer
- ---------------------------------- ----------------------------------------------------------
Bradley Real Estate, Inc. Heritage Properties Investment Trust, Inc.
Western Properties Trust Pan Pacific Retail Properties, Inc.
First Washington Realty Trust Inc. California Public Employees' Retirement System ("CalPERS")
Urban Shopping Centers Rodamco North America NV
Westfield America, Inc. Westfield America Trust
Rodamco North America NV Westfield America Trust, Simon Property Group, Inc. and
The Rouse Company
38
For each comparable transaction, UBS Warburg calculated the funds from
operations multiple and EBITDA multiple of the respective transaction at the
time of announcement of each transaction. This information is summarized in the
table below:
Comparable Transactions JP Realty, Inc.
------------------------------- -----------------
High Mean Median Low Transaction Price
---- ---- ------ ---- -----------------
Transaction FFO multiple (x)(1) 11.4 8.0 8.7 5.9 9.4
Transaction EBITDA multiple (x)(2) 15.3 11.7 11.1 10.0 11.1
- ----------
(1) Derived by dividing the Target Company's total market equity value, based
on the offer price per share for the Target Company and assuming the
conversion of all of the operating partnership's common units, by the
reported funds from operations for the four quarters immediately preceding
the announcement of the transaction. Our Transaction FFO multiple was
based on a price of $26.10 for our common stock pursuant to the terms of
the merger agreement over reported funds from operations per share for the
period from fourth quarter 2000 through third quarter 2001.
(2) Calculated by dividing the Enterprise Value at the offer price by EBITDA
reported by the Target Company over the four quarters immediately
preceding the announcement of the transaction. Our Transaction EBITDA
multiple was calculated by dividing Enterprise Value based on a price of
$26.10 for our common stock pursuant to the terms of the merger agreement
by our reported EBITDA for the period from fourth quarter 2000 through
third quarter 2001.
Because the market conditions, rationale and circumstances surrounding
each of the transactions analyzed were specific to each transaction and because
of the inherent differences between our businesses, operations and prospects and
those of the comparable acquired companies, UBS Warburg believed that it was
inappropriate to, and therefore did not, rely solely on the quantitative results
of the analysis. Accordingly, UBS Warburg also made qualitative judgments
concerning differences between the characteristics of these transactions and the
proposed merger that would affect our acquisition values and those of such
acquired companies.
Premiums Paid Analysis. UBS Warburg reviewed 18 selected transactions
involving REITs from January 1, 2000, to the date of its opinion. For each
transaction, premiums paid over market price of the acquired company's common
shares one day, one week and four weeks prior to the announcement of the
respective transaction were analyzed, and were found to range from a 2.0%
discount to a 39.4% premium (with a mean of 11.9% and median of 8.6%), a 3.2%
discount to a 38.9% premium (with a mean of 14.2% and a median of 12.0%), and a
1.7% discount to a 38.4% premium (with a mean of 13.1% and a median of 10.6%)
for each of the time periods, respectively. As of February 27, 2002, and using
$26.10 per common share, pursuant to the terms of the merger agreement, the
premiums paid to our common stockholders would be 8.5%, 11.2% and 14.8% to the
closing prices of our common stock one day, one week and four weeks prior to
that date, respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to a partial analysis or summary description. In
arriving at its opinion, UBS Warburg considered the results of all of its
analyses as a whole and did not attribute any particular weight to any analysis
or factor considered by it. UBS Warburg believes that the summary provided and
the analyses described above
39
must be considered as a whole and that selecting portions of these analyses,
without considering all of them, would create an incomplete view of the process
underlying its analyses and opinion.
In performing its analyses, UBS Warburg made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond our control. No company, transaction or
business used in the analyses described above is identical to us or the proposed
merger. Any estimates contained in UBS Warburg's analysis are not necessarily
indicative of future results or actual values, which may be significantly more
or less favorable than those suggested by these estimates. The analyses
performed were prepared solely as a part of UBS Warburg's analysis of the
fairness from a financial point of view, as of the date of the opinion, and
subject to and based on the assumptions made, procedures followed, matters
considered and limitations of the review undertaken in its opinion, of the per
share cash consideration to be received by holders of our outstanding common
stock (other than by holders of Price Group stock) pursuant to the merger
agreement to such holders and were conducted in connection with the delivery by
UBS Warburg of its opinion dated March 3, 2002, to our board. UBS Warburg's
analyses do not purport to be appraisals or to reflect the prices at which
shares of our common stock might actually trade. The consideration to be paid to
holders of our common stock in the merger agreement was determined through
negotiations between us and General Growth Properties and was approved by our
board. UBS Warburg did not recommend any specific consideration to us or that
any given consideration constituted the only appropriate consideration for the
merger.
UBS Warburg's opinion was one of the many factors taken into consideration
by our board in making its determination to approve the merger. UBS Warburg's
analyses summarized above should not be viewed as determinative of the opinion
of our board with respect to our value or of whether the board would have been
willing to agree to a different form of consideration.
UBS Warburg is an internationally recognized investment banking and
advisory firm. UBS Warburg, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the past, UBS Warburg and its affiliates have provided financial
advisory and financing services to us and our affiliates and have received
customary fees for the rendering of these services. In the ordinary course of
business, UBS Warburg and its affiliates have and may from time to time invest,
underwrite or trade in our securities or our indebtedness or those of General
Growth Properties for its own account, the accounts of investment funds and
other clients under the management of UBS Warburg and for the accounts of its
customers and, accordingly, may at any time hold a long or short position in
these securities or indebtedness. During the past two years, UBS Warburg and its
affiliates have participated as lenders in bank syndicates for Price Development
Company's revolving credit facility and for two construction loans with our
subsidiaries. As bank syndicate participants, UBS Warburg and its affiliates
have received customary administration fees, credit fees and a percentage of the
interest payments on the loans in proportion to their participation in the
syndicate. These loans were described previously in our Annual Report on Form
10-K/A for the year ended December 31, 2001.
We have agreed to pay UBS Warburg a fee of $500,000 in connection with the
issuance of its fairness opinion and a fee of $1,000,000 for its financial
advisory services. The fee with respect to the fairness opinion became fully
earned and payable at the time UBS Warburg rendered its fairness opinion, and no
part of such fee was contingent upon the approval or consummation of the
transaction. The fee payable with respect to UBS Warburg's financial advisory
services, however, is contingent upon consummation of the transactions. We have
also agreed to reimburse UBS Warburg for its expenses incurred in performing its
services and to indemnify UBS Warburg and its affiliates, their respective
directors, officers, agents and employees and each person, if any, controlling
UBS Warburg or any of its
40
affiliates against certain liabilities and expenses, including certain
liabilities under federal securities laws, related to or arising out of UBS
Warburg's engagement and any related transactions.
Interests of Directors and Officers in the Merger
In considering the recommendation of our board of directors in connection
with the merger, stockholders should be aware that, as described below, some of
our directors and executive officers have interests in, and will receive
benefits from, the mergers that differ from, or are in addition to, and
therefore may conflict with, the interests of our stockholders generally.
Indemnification and Insurance. The merger agreement provides that General
Growth Properties and GGP Limited Partnership will provide indemnification for
each person who has been or who becomes before the completion of the mergers, a
director or officer of our company or its subsidiaries to the maximum extent
permitted by applicable law. In addition, General Growth Properties and GGP
Limited Partnership will indemnify and hold harmless those persons against any
losses, claims, damages, liabilities, costs, expenses, judgments, fines and
amounts paid in settlement arising out of the fact that the person is or was an
officer or director of our company or any of its subsidiaries or out of the
merger agreement or the transactions contemplated by the merger agreement to the
fullest extent permitted by law. Further, General Growth Properties has agreed
to purchase directors' and officers' liability insurance coverage for the
benefit of those individuals currently covered by our insurance for a period of
six years following the mergers. For a more complete discussion of these
provisions of the merger agreement, see "The Merger Agreement --
Indemnification" on page 51.
Acceleration of Stock Options. Under the terms of our employee stock
option award agreements, all outstanding, unvested stock options will vest and
become immediately exercisable upon the delivery of a written notice to our
stockholders of a stockholders' meeting at which the stockholders will consider
a proposed acquisition of our company by merger. Accordingly, the outstanding,
unvested stock options held by our directors and officers will become fully
vested and exercisable as of the date of this proxy statement. In accordance
with the terms of the merger agreement, any unexercised options held by our
directors and officers as of the merger closing will be exchanged for cash and
the directors and officers will receive a single-sum payment in an amount equal
to (i) the excess of the merger consideration payable with respect to a share of
our common stock ($26.10) over the stock option exercise price multiplied by
(ii) the number of shares subject to the stock options owned by the director or
officer which remain subject to exercise. As a result, our directors and
officers will be entitled to receive the following amounts with respect to all
of their existing stock options, including those whose vesting has accelerated
as of the date of this proxy statement: James Anderson, $83,397; Terry Bybee,
$850; M. Scott Collins, $4,250; Greg Curtis, $1,275; G. Rex Frazier, $550,079;
Blaine Huntsman, $12,870; Pat King, $250,192; Allen Martindale, $21,857; Paul K.
Mendenhall, $1,700; Martin Peterson, $850; John Price, $1,905,600; David Sabey,
$850; and Sam Souvall, $83,397. The aggregate amount for all directors and
officers is $2,917,167.
Severance Arrangements. We do not currently have any severance
arrangements with our directors or officers. Pursuant to the merger agreement,
all of our directors and officers, as well as the directors and officers of our
subsidiaries, will submit their resignations (as officers and directors) as of
the effective time of the mergers.
A severance payment will, however, be offered by General Growth Properties
to all full-time employees in our Salt Lake City, Utah, corporate office in
accordance with the terms of an agreed-upon severance plan. Each employee's
severance payment will be an amount, based on that employee's current base
salary plus the 2001 incentive bonus included in the annual salary computation
and proportional to his or her length of employment with our company. General
Growth Properties will notify each employee within six months of the closing
date of the merger whether he or she will receive an offer of full-time regular
employment with General Growth Properties or one of its subsidiaries. A
41
severance payment will be available to each employee who is terminated within
one year of the consummation of the mergers under certain conditions or who is
not offered continued employment following the mergers at substantially the same
salary as that being paid currently to the employee.
In addition to the severance plan payments described above, certain
executive officers will be offered supplemental severance pay. General Growth
Properties will offer an additional severance amount equal to 26 weeks of
current base salary plus the 2001 incentive bonus included in the annual salary
computation for each of those officers, as an incentive to stay through and
assist with any requested transition period.
The maximum amount of severance payments and supplemental severance pay
that our executive officers as a group (which includes Messrs. Bybee, Collins,
Curtis, Frazier, Mendenhall, Peterson and Sabey) may be entitled to receive
pursuant to the severance arrangements contemplated pursuant to the merger
agreement is $1,015,819.
Tax Deferral Option for Unitholders. In connection with the partnership
merger, the holders of common operating partnership units in our operating
partnership will exchange their common operating partnership units for $26.10 in
cash without interest per common operating partnership unit. Alternatively,
because many holders of common operating partnership units face substantial tax
recapture in the event that their units were converted into cash, the merger
agreement provides those holders who are "accredited investors" under the
Securities Act of 1933 with an option to defer their substantial tax liabilities
by exchanging their units for Series B Preferred Units in GGP Limited
Partnership. This aspect of the transaction allows Mr. Price (who beneficially
owns 2,755,051 of our common operating partnership units), Mr. King (who
beneficially owns 138,984 of our common operating partnership units), Mr.
Frazier (who beneficially owns 31,840 of our common operating partnership
units), and Mr. Souvall (who beneficially owns 23,371 of our common operating
partnership units) (as well as other holders of our common operating partnership
units) the opportunity to defer the otherwise substantial taxable gain they
would face in an all cash transaction. Upon completion of the merger, it is
expected that our directors and officers, as a group, will hold Series B
Preferred Units that will amount to an approximate 2% equity stake in GGP
Limited Partnership (on a fully diluted basis).
Tax Related Undertakings of GGP Limited Partnership. Under the tax matters
agreement contemplated by the merger agreement, General Growth Properties and
GGP Limited Partnership have agreed not to voluntarily sell, exchange or
otherwise dispose of, except in wholly tax-free transactions, certain specified
properties for specified periods of time. These provisions are intended to
ensure that Messrs. Price, King, Frazier and Souvall, as well as other holders
of our common operating partnership units who elect to receive Series B
Preferred Units, who originally contributed such properties to our operating
partnership in exchange for common operating partnership units in our operating
partnership, will be able to continue to defer for specified periods of time the
otherwise substantial gain that would be recognized by them for tax purposes
upon a taxable sale, exchange or other disposition of any one or more of such
properties. The tax matters agreement also provides, as part of its tax deferral
undertakings, for minimum levels of liabilities to be allocated to these
holders. See "The Merger Agreement -- Tax Related Undertakings of GGP Limited
Partnership" on page 50.
Non-competition Agreement. Our former Chairman and Chief Executive
Officer, Mr. John Price, will not enter into a severance agreement, and instead
will enter into a standard, five-year, non-competition agreement with General
Growth Properties immediately prior to the consummation of the merger. As
partial consideration for entering into this non-competition agreement, Mr.
Price will be granted an option to purchase two small buildings from Price
Development Company for an aggregate purchase price of $300,000, which Mr. Price
will pay from his own funds. One building houses Mr. Price's automotive
memorabilia and the other is a small office building which Mr. Price will use as
an office, each consisting of approximately 6,000 square feet, located in the
Price Business Center - South
42
Main in Salt Lake City, Utah. Our board estimated that the approximate market
value of these buildings is $600,000.
The Merger Agreement
This is a description of the terms of the merger agreement that we believe
are important. However, the description does not contain all the terms of the
merger agreement. A copy of the merger agreement is attached as Exhibit A to
this proxy statement and is incorporated herein by reference. We encourage you
to read the entire merger agreement.
Closing. Under the merger agreement, we will merge with and into GGP
Acquisition, L.L.C., with GGP Acquisition, L.L.C. as the surviving entity. The
closing date of the merger will be no later than the third business day after
the mutual closing conditions to the merger are satisfied or waived by us and
General Growth Properties. The merger shall become effective on the later (i) of
the date and time at which the articles of merger have been duly filed with and
accepted for record by the State Department of Assessments and Taxation of the
State of Maryland and the certificate of merger has been duly filed with the
Secretary of State of the State of Delaware; or (ii) at such other date and time
as is agreed between the parties and specified in the articles and certificate
of merger.
Merger of our Operating Partnership with Another Subsidiary of General
Growth Properties. Immediately prior to, and as a condition to the consummation
of, the merger, our operating partnership will merge with an indirect subsidiary
of General Growth Properties, GGP Acquisition II, L.L.C. Our operating
partnership will survive the merger and all of its subsidiaries will remain
unchanged.
Consideration to be Received for Our Common Stock and Price Group Stock in
the Merger. At the effective time, each share of our common stock and Price
Group stock will be converted into the right to receive a cash payment of $26.10
without interest. The merger consideration is fixed and will not be adjusted
based on fluctuations in the price of our common stock or that of General Growth
Properties prior to the closing date of the merger. In addition, the merger
agreement authorizes the payment of regular quarterly dividends to our common
stockholders, pro rated up to the closing date of the merger.
Treatment of Stock Options. The merger agreement provides that each stock
option under our 1993 Stock Option Plan which is outstanding immediately prior
to the effective time of the merger and which has not been exercised or canceled
prior to that time, will be treated as follows: At the effective time of the
merger, in full settlement of all remaining outstanding options, General Growth
Properties will pay to each holder of an option $26.10 less the exercise price
per share of common stock provided for in that stock option multiplied by the
number of common shares underlying that option which remain subject to exercise.
The cash payment will be net of any applicable withholding tax. If, however, the
exercise price of any stock option equals or exceeds $26.10, no cash will be
paid to the holder. Following the effective time of the merger, all outstanding
options to purchase our common stock will automatically be redeemed and
canceled.
Procedures for Exchange of Our Common Stock. General Growth Properties
will deposit with the paying agent cash in the amount of the aggregate merger
consideration. Each letter of transmittal which will be sent to our stockholders
following closing will include detailed instructions on how our stockholders may
exchange their JP Realty, Inc. common stock for the cash consideration they will
receive in the merger. The paying agent will send to our former stockholders who
submit their duly completed letters of transmittal and their JP Realty, Inc.
share certificates a check for payment of the merger consideration the
stockholder is entitled to receive, net of any applicable withholding tax. No
interest will be paid on any cash paid pursuant to the merger.
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Representations and Warranties. We and Price Development Company have made
certain customary representations and warranties to General Growth Properties,
GGP Limited Partnership, GGP Acquisition, L.L.C. and GGP Acquisition II, L.L.C.,
including representations that:
o we are a validly existing corporation and have the requisite power
to carry on our business;
o we have the requisite corporate authority to enter into the
contemplated transactions;
o the consummation of these transactions will not place us in material
violation of any laws or material contracts which, individually or
in the aggregate, would have a material adverse effect;
o our capitalization is as disclosed to General Growth Properties;
o our corporate structure is as disclosed to General Growth
Properties;
o we have filed all required reports with the SEC and complied in all
material respects with the applicable requirements of the securities
laws;
o there is no litigation or legal proceeding pending that,
individually or in the aggregate, would be reasonably expected to
have a material adverse effect on our business or prevent the
consummation of the mergers;
o we have conducted our business only in the ordinary course, and
there are no undisclosed changes in material liabilities;
o we qualify for tax treatment as a REIT and have paid all taxes which
are due and payable and filed all necessary tax returns;
o our real properties are not subject to undisclosed liens; and no
properties are in material violation of the law;
o we have complied with environmental matters, except to the extent
that any failures to comply, individually or in the aggregate, would
not have a material adverse effect;
o our employee benefit plans are in material compliance with the law;
o we are not a party to any agreements with labor unions, and there
are no labor proceedings against us;
o we have received a fairness opinion from our financial advisor;
o we have disclosed certain contracts and arrangements and are in
material compliance with such contracts;
o we are not an investment company for purposes of the securities
laws; and
o we have taken all necessary actions to exempt the contemplated
transactions from state takeover statutes, certain limitations in
our articles of incorporation and the operation of our rights plan.
General Growth Properties, together with GGP Limited Partnership, GGP
Acquisition, L.L.C. and GGP Acquisition II, L.L.C., has made certain customary
representations and warranties to us, including representations that:
o it is a validly existing corporation and has the requisite power to
carry on its business;
o it has the requisite corporate authority to enter into the
contemplated transactions;
o its capitalization is as disclosed to us;
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o the consummation of these transactions will not place it in material
violation of any laws or material contracts which, individually or
in the aggregate, would have a material adverse effect;
o there is no litigation or legal proceeding pending to which it is a
party that would be reasonably likely to prevent the consummation of
the mergers;
o it has filed all required reports with the SEC and has complied in
all material respects with the applicable requirements of the
securities laws;
o it qualifies for tax treatment as a REIT; and
o it will have the necessary financing to consummate the contemplated
transactions (the merger agreement does not impose any restrictions
on General Growth Properties' methods for obtaining financing of the
merger consideration).
The representations and warranties contained in the merger agreement will
not survive beyond the effective time of the merger.
Covenants Regarding General Matters. We and General Growth Properties have
agreed to perform various covenants regarding general matters. Some of these
covenants are mutual while others have been made by only one of the parties.
o The mutual covenants regarding general matters include:
o using commercially reasonable efforts to satisfy conditions for
effecting the mergers;
o consulting with each other on publicity regarding the mergers;
o agreeing to the tax treatment of the mergers and to making certain
tax filings;
o each agreeing to notify the other party of any material breach of or
material failure to satisfy any covenants, conditions, agreements,
representations or warranties;
o cooperating in the preparation of the partner solicitation materials
to the common operating partnership unitholders of Price Development
Company; and
o at closing, our assigning and General Growth Properties' assuming
the registration rights agreements granted to holders of the
preferred units of Price Development Company.
o The covenants regarding general matters that we have made include:
o preparing and filing with the SEC this proxy statement and holding a
meeting of our stockholders to vote on the merger;
o seeking, subject to our fiduciary duties under applicable law, the
approval of the holders of common operating partnership units of
Price Development Company to the partnership merger and amendment of
the partnership agreement;
o causing our officers and directors to resign at the closing of the
merger agreement; and
o refraining from making any dividends or distributions to
stockholders or unitholders without General Growth Properties'
written consent, except for regular quarterly dividends to common
stockholders (and corresponding distributions to common operating
partnership unitholders and required quarterly dividends to
preferred operating partnership unitholders) and regular
distributions to holders of Price Group stock for the quarter ended
March 31, 2002, and for each full and pro rated quarter thereafter
up to the
45
closing date of the merger, and any other distributions contemplated
by the merger agreement as may be necessary for us to maintain our
REIT status or avoid the imposition of excise or other taxes.
o The covenants regarding general matters that General Growth Properties has
made include:
o maintaining the provisions of our corporate governance documents
that pertain to rights to indemnification of certain former and
current officers and directors after the merger;
o maintaining a directors and officers liability insurance policy
covering, for six years after the merger, our directors and officers
who were covered by our policy on March 3, 2002; and
o entering into severance arrangements with certain employees.
Covenants Regarding Conduct of Our Business Before the Merger. We have
agreed to conduct our business and that of our subsidiaries from March 3, 2002
to the effective time of the merger in the ordinary course of business
consistent with past practice and use our commercially reasonable efforts to
preserve intact our current business organizations and to keep available the
services of our present officers and employees. In particular, we have agreed,
subject to enumerated exceptions:
o to not acquire additional real property, encumber existing real
property assets or enter into any agreement to develop or construct
real estate projects, except in accordance with our current year
operating budget;
o to not amend our charter or bylaws and to not amend any material
contracts or commitments;
o to keep General Growth Properties informed as to material
operational matters and as to any change in circumstances affecting
our business that would have a material adverse effect on us or our
subsidiaries;
o to not make any change in the number of issued and outstanding
shares of our capital stock;
o to not grant any rights to acquire any shares of our capital stock;
o to not increase or amend any compensation or severance benefits with
employees earning more than $50,000 annually;
o to not adopt any new or amend any existing employee benefit plan;
o to not change the ownership of any subsidiary (other than pursuant
to the Price Development Company partnership agreement), and to not
sell, lease, mortgage or otherwise encumber or otherwise dispose of
any real property or other assets;
o to not incur, discharge or satisfy certain indebtedness; or make any
loans, advances or capital contributions to, or investments in, any
other person;
o to make all required tax and other governmental filings, and not
make or rescind any tax elections;
o to not materially change any of our methods, principles or practices
of accounting; or settle any claims arising out of or in connection
with the transactions contemplated by the merger agreement;
o to provide General Growth Properties with copies of any SEC filings
we make; and
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o to preserve our status as a REIT.
Covenants Regarding Conduct of General Growth Properties' Business Before
the Merger. General Growth Properties has agreed for the period from March 3,
2002 to the effective time of the merger, subject to enumerated exceptions:
o not to take any action that would materially delay the closing of
the transactions contemplated by the merger agreement;
o to provide us with copies of any SEC filings General Growth
Properties makes; and
o not to amend any charter or organizational document of General
Growth Properties or GGP Limited Partnership in a manner which would
require the consent of the contributing holders of our common
operating partnership units (i.e., those duly electing to receive
Series B Preferred Units of GGP Limited Partnership) if the
amendment were effected after the closing of the merger.
Covenant Regarding No Solicitation; Covenant to Recommend. The merger
agreement prevents us from soliciting, negotiating or otherwise engaging in
discussions with, or furnishing information to, a third party regarding a
merger, consolidation, business combination transaction or sale of 20% or more
of either the assets or outstanding equity securities of our company, Price
Development Company, or any of our other subsidiaries, except that we may
negotiate or engage in discussions with or furnish information to a third party
if:
o we receive an unsolicited bona fide proposal from that third party;
and
o our board determines in good faith (after consulting with its
outside counsel and its financial advisor) that the proposal is
reasonably likely to lead to a superior competing transaction, which
the merger agreement defines as a competing transaction which a
majority of our entire board determines after consultation with its
financial advisor, in good faith, taking into account financial
considerations and other relevant factors, including relevant legal,
financial, tax, regulatory and other aspects of such proposal, and
the conditions, prospects and time required for completion of such
proposal, to be more favorable than the merger and the partnership
merger to our stockholders and common operating partnership
unitholders.
Subject to fiduciary duties under applicable law, our board of directors
has agreed to recommend to our stockholders the approval of the merger
substantially on the terms set forth in the merger agreement. However, if the
board determines that an unsolicited bona fide proposal is a superior competing
transaction, the board can modify or withdraw its recommendation of the merger
with General Growth Properties and instead approve or recommend to our
stockholders the superior competing transaction, subject to paying the break-up
fee described below under the heading "Break-up Fees and Expenses."
Conditions to the Completion of the Merger. We will complete the merger
with General Growth Properties only if the conditions specified in the merger
agreement are either satisfied or waived. Some of the conditions are mutual,
meaning that if the condition is not satisfied, neither party would be obligated
to close the merger. Most of the conditions are in favor of only one of the
parties, meaning that if the condition is not satisfied that party could waive
the condition and the other party would remain obligated to close.
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o The mutual conditions include:
o approval of the merger by our stockholders and the approval of the
partnership merger and the amendment to the Price Development
Company partnership agreement by our common unitholders; and
o there being no court order preventing consummation of the
transactions contemplated by the merger agreement.
o We will not be obligated to close the merger if the following conditions
are not satisfied or waived:
o General Growth Properties performing, in all material respects, its
agreements in the merger agreement that are to be performed as of
closing;
o General Growth Properties' representations and warranties being true
and correct, in all material respects, as of the closing (we have
agreed with General Growth Properties that this condition will be
satisfied in full as long as the aggregate of any and all breaches
of their representations do not result in a material adverse effect
on General Growth Properties);
o General Growth Properties delivering certificates as to the
satisfaction of the two conditions above; and
o General Growth Properties delivering to contributing holders of
Price Development Company common units a favorable legal opinion
from its legal counsel with respect to (i) its REIT status and (ii)
GGP Limited Partnership's tax status as a partnership.
o General Growth Properties will not be obligated to close the merger if the
following conditions are not satisfied or waived:
o our performing, in all material respects, our agreements in the
merger agreement that are to be performed as of closing;
o our representations and warranties being true and correct, in all
material respects, as of the closing (we have agreed with General
Growth Properties that this condition will be satisfied in full as
long as the aggregate of any and all breaches of our representations
do not result in a material adverse effect on us);
o our delivering certificates as to the satisfaction of the two
conditions above;
o the absence of a material adverse effect occurring with respect to
us, from the date of the merger agreement to the closing;
o receipt of required third party consents by us; and
o receipt of a favorable legal opinion from our legal counsel with
respect to (i) our REIT status and (ii) Price Development Company's
tax status as a partnership.
Certain of the above conditions, such as the requirement for stockholder
and unitholder approvals and the absence of a court order preventing
consummation of the transactions contemplated by the merger agreement cannot be
waived under applicable law. We or General Growth Properties reserve the right
to waive any of our or their respective other conditions to the merger
agreement. However, if we intend to waive one or more conditions to the closing
of the merger in a manner or under circumstances that would make the information
set forth in this proxy statement materially misleading or inaccurate, we would
distribute to our stockholders an updated proxy statement and re-solicit the
approval of our stockholders.
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Termination of the Merger Agreement. The merger agreement may be
terminated under the following circumstances:
o by mutual written consent;
o by either General Growth Properties or us (i) if the merger has not
been consummated by July 31, 2002 (or such later mutually agreed
upon date) and the party seeking termination has not materially
breached its obligations under the merger agreement, (ii) if
stockholder or common operating partnership unitholder approvals are
not obtained, (iii) if a governmental entity shall have issued a
final and non-appealable order, decree or ruling or taken any other
action restraining, enjoining or otherwise preventing the
consummation of the transactions contemplated by the merger
agreement and the party seeking termination has not materially
breached its obligations under the merger agreement, or (iv) if the
other party to the merger agreement breaches any representation,
warranty, covenant, obligation, or agreement set forth in the merger
agreement or the representations and warranties of such other party
become untrue such that the conditions to the terminating party's
obligation to close would be incapable of being satisfied by July
31, 2002 (or such later mutually agreed upon date).
o by us if our board has withdrawn, modified, amended or qualified in
any manner adverse to General Growth Properties or GGP Limited
Partnership its approval or recommendation of either of the mergers
or the merger agreement in connection with, or approved or
recommended, any superior competing transaction.
o by General Growth Properties if (i) prior to our special meeting of
stockholders, our board or any committee thereof shall have failed
to recommend or withdrawn, modified, amended or qualified in any
manner adverse to General Growth Properties or GGP Limited
Partnership its approval or recommendation of the mergers or the
merger agreement, or approved or recommended any superior competing
transaction, (ii) we or Price Development Company shall have entered
into any agreement with respect to any competing transaction or
(iii) our board or any committee thereof shall have resolved or
publicly disclosed its intent to do any of the foregoing.
Break-up Fees and Expenses. We have agreed to pay General Growth
Properties a break-up fee of $19 million, less any break-up expenses paid, if:
o either (1) either party terminates the merger agreement because of
failure to obtain the necessary stockholder or common operating
partnership unitholder approvals; or (2) we terminate the merger
agreement because the merger has not been consummated by July 31,
2002 (or such later mutually agreed upon date), and within one year
of either such termination, we consummate, or execute a definitive
agreement to consummate, a transaction based on a proposal for a
competing transaction received by us at any time from January 31,
2002 until such termination;
o General Growth Properties terminates the merger agreement because of
our breach of any representation, warranty, covenant, obligation, or
agreement set forth in the merger agreement, or our representations
and warranties become untrue such that the conditions to General
Growth Properties' obligations are incapable of being satisfied by
July 31, 2002 (or such later mutually agreed upon date), and within
one year of either such termination, we consummate, or execute a
definitive agreement to consummate, a transaction based on a
proposal for a competing transaction received by us at any time from
January 31, 2002 until such termination;
49
o we terminate the merger agreement because our board has withdrawn,
modified, amended or qualified in any manner adverse to General
Growth Properties or GGP Limited Partnership its approval or
recommendation of either of the mergers or the merger agreement in
connection with, or approved or recommended, any superior competing
transaction; or
o General Growth Properties terminates the merger agreement because
(i) prior to our special meeting of stockholders, our board or any
committee thereof shall have failed to recommend or withdrawn,
modified, amended or qualified in any manner adverse to General
Growth Properties or GGP Limited Partnership its approval or
recommendation of the mergers or the merger agreement, or approved
or recommended any superior competing transaction, (ii) we or Price
Development Company shall have entered into any agreement with
respect to any competing transaction or (iii) our board or any
committee thereof shall have resolved or publicly disclosed its
intent to do any of the foregoing.
We have agreed to reimburse break-up expenses to General Growth Properties
for its out-of-pocket fees and expenses incurred in connection with the merger
agreement in an amount not to exceed $2,000,000 if General Growth Properties
terminates the merger agreement because the representations and warranties made
by us in the merger agreement become untrue, or we have breached our
representations, warranties, covenants, obligations or agreements under the
merger agreement such that the conditions to General Growth Properties'
obligations are incapable of being satisfied by July 31, 2002 (or such later
mutually agreed upon date). In addition, we will be liable to General Growth
Properties for damages if we or Price Development Company has willfully breached
its representations, warranties, covenants, obligations or agreements, or if we
or Price Development Company is obligated to consummate the transactions
contemplated by the merger agreement but fails or refuses to do so.
General Growth Properties has agreed to pay break-up expenses to us for
our out-of-pocket fees and expenses incurred in connection with the merger
agreement in an amount not to exceed $2,000,000 if we terminate the merger
agreement because the representations and warranties made by General Growth
Properties in the merger agreement become untrue, or General Growth Properties
has breached its representations, warranties, covenants, obligations or
agreements under the merger agreement such that the conditions to our
obligations are incapable of being satisfied by July 31, 2002 (or such later
mutually agreed upon date). In addition, General Growth Properties will be
liable to us for damages if General Growth Properties or GGP Limited Partnership
has willfully breached its representations, warranties, covenants, obligations
or agreements, or either of them is obligated to consummate the transactions
contemplated by the merger agreement but fails or refuses to do so.
Amendment or Waiver of the Merger Agreement. The parties may amend the
merger agreement or waive its terms and conditions before the effective time,
but, after our stockholders have approved the merger and adopted the merger
agreement and the holders of Price Development Company common operating
partnership units have approved the partnership merger and the amendment to the
Price Development Company partnership agreement, no such amendment shall be made
except as allowed under applicable law.
Tax Related Undertakings of GGP Limited Partnership. Pursuant to the tax
matters agreement which will be entered into upon closing, a form of which is
attached as an exhibit to the merger agreement, General Growth Properties and
GGP Limited Partnership have agreed, for the benefit of certain holders of
common operating partnership units, including certain officers and directors,
and in certain circumstances (generally excluding transfers as a result of
either death or taxable sales of their partnership units in GGP Limited
Partnership) their transferees, not to voluntarily sell, exchange or otherwise
dispose of, except in wholly tax-free transactions, certain specified
properties. These restrictions generally will have a minimum duration of nine
years, subject to extension for up to an
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additional six years if the holders retain at least 51% of the units issued in
the partnership merger. In addition, General Growth Properties and GGP Limited
Partnership have agreed for tax purposes to make available to certain holders of
common operating partnership units, and in certain circumstances (generally
excluding transfers as a result of either death or taxable sales of Series B
Preferred Units of GGP Limited Partnership) their transferees, the opportunity
to enter into certain arrangements with GGP Limited Partnership to allow minimum
levels of liabilities to be allocated to these holders and has made certain
other undertakings. These provisions are intended to enable these holders of our
common operating partnership units, who originally contributed properties to us
in exchange for our common operating partnership units, to be able to continue
to defer the otherwise substantial gain that would be recognized by them for tax
purposes upon a sale of one or more of our operating partnership's specified
properties or of GGP Limited Partnership's interest in Price Development Company
after consummation of the merger, or upon a reduction of the liabilities of GGP
Limited Partnership (either directly or through Price Development Company) that
are allocated to such holders for tax purposes. To the extent that General
Growth Properties or GGP Limited Partnership breaches an obligation under this
agreement, a protected holder will be entitled to an indemnification payment
that is designed generally to equal the amount of additional taxes that will be
owed by that protected holder as a result of such breach.
Employee Severance Plan. A severance payment will be offered by General
Growth Properties to all full-time employees in our Salt Lake City, Utah,
corporate office in accordance with the terms of an agreed upon severance plan.
Each employee's severance payment will be an amount, based on that employee's
current base salary plus the 2001 incentive bonus included in the annual salary
computation and proportional to his or her length of employment with our
company. General Growth Properties will notify each employee within six months
of the closing date of the merger whether he or she will receive an offer of
full-time regular employment with General Growth Properties or one of its
subsidiaries. A severance payment will be available to each employee who is
terminated within one year of the consummation of the mergers under certain
conditions or who is not offered continued employment following the mergers at
substantially the same salary as that being paid currently to the employee. In
addition to the severance plan payments described above, certain executive
officers will be offered supplemental severance pay. General Growth Properties
will offer this additional severance amount equal to 26 weeks of current base
salary plus the 2001 incentive bonus included in the annual salary computation
to each of those officers, as an incentive to stay through and assist with any
requested transition period.
Non-competition Agreement. Our former Chairman and Chief Executive
Officer, Mr. John Price, will not enter into a severance agreement, and instead
will enter into a standard, five-year, non-competition agreement with General
Growth Properties immediately prior to the consummation of the merger. As
partial consideration for entering into this non-competition agreement, Mr.
Price will be granted an option to purchase two small buildings from Price
Development Company for an aggregate purchase price of $300,000, which Mr. Price
will pay from his own funds. One building houses Mr. Price's automotive
memorabilia and the other is a small office building which Mr. Price will use as
an office, each consisting of approximately 6,000 square feet, located in the
Price Business Center - South Main in Salt Lake City, Utah. Our board estimates
that the approximate market value of these buildings is $600,000.
Indemnification. The merger agreement provides that, in the event of any
threatened or actual claim or proceeding, whether civil, criminal or
administrative, in which any person who is or has been a director or officer of
us or any of our subsidiaries is, or is threatened to be, made a party
pertaining to the fact that the person was a director or officer of us or any of
our subsidiaries, or pertaining to the negotiation, execution or performance of
the merger agreement or the transactions contemplated by that agreement, General
Growth Properties will indemnify and hold harmless that person to the full
extent permitted by applicable law against any liability or expense incurred in
connection with any of these claims or proceedings. The merger agreement further
provides that General Growth Properties will cause
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the persons serving as our officers and directors on March 3, 2002 to be covered
for a period of six years following the closing by our directors' and officers'
liability insurance policy, or any substitute for that policy with terms that
are no less favorable subject to certain limitations.
Financing Arrangements. The merger is not subject to any financing
contingency and is not conditional on General Growth Properties obtaining
financing of the merger. The merger agreement does not impose any restrictions
on General Growth Properties' methods for obtaining financing of the merger
consideration. General Growth Properties has advised us that it intends to fund
the merger consideration through a combination of available cash, unsecured
short-term loans from commercial banks and mortgage indebtedness on certain
unencumbered assets.
Delisting and Deregistration of Our Common Stock. Our common stock is
currently listed on the New York Stock Exchange under the symbol "JPR." If the
merger is completed, holders of shares of our common stock will not have an
opportunity to continue their equity interest in the surviving corporation as an
ongoing corporation and, therefore, will not have the opportunity to share in
our future earnings, dividends or growth, if any. In addition, upon completion
of the merger, our common stock will no longer be listed on the New York Stock
Exchange and will cease to be registered with the Securities and Exchange
Commission, and we will no longer be a reporting company under Sections 13 and
15(d) of the Securities and Exchange Act of 1934.
Regulatory and Other Approvals. There are no federal or state regulatory
requirements which remain to be complied with in order to consummate the merger,
other than the filing and acceptance for record of the Articles of Merger and
Articles of Partnership Merger with the State Department of Assessments and
Taxation of the State of Maryland and the filing of the certificate of merger
with the Secretary of State of the State of Delaware.
State Takeover Statutes; Rights Plan; Ownership Limits. Our board has
taken all actions necessary to exempt the merger and the other transactions
contemplated by the merger agreement from the operation of any anti-takeover
statute enacted under the laws of the State of Maryland, the State of Delaware
or the federal laws of the United States. The board has approved the exemption
of General Growth Properties and its affiliates from the applicable ownership
and control share limits in our charter. Our board has also resolved to render
the rights issued and outstanding under the terms of our January 13, 2001
Amended and Restated Rights Agreement inapplicable to the merger and the other
transactions contemplated by the merger agreement.
Method of Accounting. The merger will be accounted for using the purchase
method of accounting.
Dissenters' Rights. The merger agreement is governed by Maryland law.
Under Maryland law, because our common stock is listed on the New York Stock
Exchange, dissenters' rights are not available to holders of our common stock in
connection with the merger.
Voting Agreement. General Growth Properties, GGP Limited Partnership, GGP
Acquisition and GGP Acquisition II have entered into a separate agreement with
Mr. John Price, our former Chairman and Chief Executive Officer, and certain of
his affiliates. As of the record date, Mr. Price and such affiliates owned in
the aggregate 299,000 shares of common stock and Price Group stock, representing
approximately 1.8% of the combined issued and outstanding shares of these
classes. Other than these 299,000 shares of common stock and Price Group stock,
General Growth Properties and its affiliates do not currently own, or have the
right to vote, any other shares of our common stock or Price Group stock.
Pursuant to the voting agreement, Mr. Price and such affiliates agreed to
vote all shares of common stock and Price Group stock which he or such
affiliates own (i) in favor of the merger at any annual or special meeting of
our stockholders, (ii) against any action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation of
ours under the merger
52
agreement and (iii) against any action or agreement (other than the merger
agreement) that would impede, interfere with, delay, postpone, adversely affect
or attempt to discourage the merger. In furtherance of the voting agreement, Mr.
Price and such affiliates appointed GGP Limited Partnership as their attorney
and proxy to vote all of their beneficially owned shares on matters as to which
such shares are entitled to (i) vote at a meeting of our stockholders or (ii)
express consent or dissent to corporate action in writing without a meeting, in
each case, in GGP Limited Partnership's discretion as to the matters described
in the voting agreement. In respect of the matters described above, Mr. Price
and such affiliates agreed to refrain from (a) voting at any annual or special
meeting of our stockholders, (b) executing any written consent in lieu of any
such meetings, and (c) granting any proxy or authorization to any person with
respect to voting his beneficially owned shares, except pursuant to the voting
agreement. Mr. Price and such affiliates also agreed that they will not dispose
of, permit any lien to attach to, or grant any options, proxies, powers of
attorney or other rights with respect to their beneficially owned shares.
Further, Mr. Price and such affiliates agreed not to take any action which would
have the effect of preventing them from performing their respective obligations
under the voting agreement.
The voting agreement extends the same rights and privileges to GGP Limited
Partnership with respect to the common operating partnership units of Price
Development Company beneficially owned by Mr. Price and such affiliates. As of
the date of this proxy statement, Mr. Price and such affiliates own in the
aggregate 2,755,051 common operating partnership units of Price Development
Company, which, together with the units owned by us as general partner,
represents approximately 95.6% of the issued and outstanding common operating
partnership units and 75.7% of the units that may be voted in regard to the
partnership merger. They thus control sufficient votes to ensure the approval of
the partnership merger and the amendment of the Price Development Company
partnership agreement.
The voting agreement terminates on the earlier to occur of (i) the
termination of the merger agreement in accordance with its terms and (ii)
consummation of the merger and the partnership merger.
53
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material federal income tax
considerations that you should take into account in determining whether to vote
for or against the proposal. This summary is based upon interpretations of the
Internal Revenue Code, Treasury regulations promulgated under the Internal
Revenue Code, judicial decisions and administrative rulings as of the date of
this proxy statement, all of which are subject to change or differing
interpretations, including changes and interpretations with retroactive effect.
The discussion below does not address all federal income tax considerations, or
any state, local or foreign tax consequences of the merger. Your tax treatment
may vary depending upon your particular situation. Also, the discussion does not
address various tax rules that may apply if you are a stockholder subject to
special treatment under the Internal Revenue Code, such as a dealer, financial
institution, insurance company, tax-exempt entity, non-U.S. stockholder (except
as discussed below), a person who holds common shares as part of a "straddle", a
"hedge", a "constructive sale" transaction or a "conversion" transaction, a
person that has a functional currency other than the U.S. dollar, a person who
is subject to the alternative minimum tax, an investor in a pass-through entity,
or if you do not hold our common shares as a capital asset.
A U.S. stockholder is a U.S. citizen or resident as it is defined in the
Internal Revenue Code, a domestic corporation, an estate the income from which
is includable in its gross income for federal income tax purposes without regard
to its source, or a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust, and one or more U.S. persons
have the authority to control all of the substantial decisions of the trust. A
non-U.S. stockholder is any stockholder that is not a U.S. stockholder.
THIS FEDERAL INCOME TAX DISCUSSION IS FOR GENERAL INFORMATION PURPOSES
ONLY AND MAY NOT ADDRESS ALL TAX CONSIDERATIONS THAT MAY BE SIGNIFICANT TO YOU.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX
CONSEQUENCES TO YOU OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN LAWS.
Consequences to Us of the Merger. We will treat the merger as if we had
sold all of our assets to General Growth Properties in exchange for the merger
consideration and then made a liquidating distribution of the merger
consideration to our stockholders in exchange for our common shares, which we
refer to as our shares. Since we anticipate that our deemed liquidating
distribution will exceed our taxable income recognized as a result of the
merger, we anticipate that we will not be subject to federal income tax on any
gain recognized in connection with the merger.
Consequences to You of the Merger - U.S. Stockholders. The merger will be
treated as a taxable sale by you of your shares in exchange for the merger
consideration. As a result, if you are a U.S. stockholder, you will recognize
capital gain or loss with respect to your shares, measured by the difference
between your tax basis in the shares exchanged and the amount of cash received
for those shares. Your gain or loss will constitute long-term capital gain or
loss if you held your shares for more than one year as of the effective time of
the merger. If you hold blocks of shares which were acquired separately at
different times and/or prices, you must calculate separately your gain or loss
and its character for each block of shares.
If you are an individual, your net long-term capital gain generally will
be subject to a preferential tax rate of 20% (10% if you are an individual in
the 10% or 15% tax bracket, and 8% if you are an individual in the 10% or 15%
tax bracket and have held your shares for more than 5 years).
Consequences to You of the Merger - Non-U.S. Stockholders. If you are a
non-U.S. stockholder, generally you will recognize capital gain or loss with
respect to your shares calculated in the same manner as for U.S. stockholders
above. The manner in which you will be subject to tax on your
54
capital gain or loss will depend on various factors, including the treatment of
the merger for purposes of the Foreign Investment in Real Property Act of 1980,
or FIRPTA.
Taxable Sale of Shares
Subject to the discussion of backup withholding below, if the merger is
treated as a taxable sale of shares, then you should not be subject to federal
income taxation on any gain or loss from the merger unless, (a) the gain is
effectively connected with a trade or business that you conduct in the United
States, (b) you are an individual who has been present in the United States for
183 days or more during the taxable year of the merger and certain other
conditions are satisfied, or (c) your shares constitute a "U.S. real property
interest" under FIRPTA.
If your gain is effectively connected with a U.S. trade or business, then
you will be subject to federal income tax on your gain on a net basis in the
same manner as U.S. stockholders. In addition, if you are a non-U.S.
corporation, you will be subject to the 30% branch profits tax.
If you are a non-U.S. stockholder who is an individual and has been
present in the United States for 183 days or more during the taxable year of the
merger and certain other conditions are satisfied, you will be subject to a 30%
tax on the gross amount of your capital gains.
If your shares constitute a "U.S. real property interest" under FIRPTA,
you will be subject to federal income tax on your gain on a net basis in the
same manner as U.S. stockholders. In addition, if you are a non-U.S.
corporation, you may be subject to the 30% branch profits tax. Your shares
generally will constitute a "U.S. real property interest" if either (a) we are
not a "domestically-controlled REIT" at the effective time of the merger, or (b)
you hold more than 5% of the total fair market value of our shares at any time
during the shorter of (x) the five-year period ending with the effective date of
the merger or (y) your holding period for your shares. We will be a
"domestically-controlled REIT" at the effective time of the merger if non-U.S.
stockholders held less than 50% of the value of our stock at all times during
the five-year period ending with the effective time of the merger. Based on the
record ownership of our shares, we believe we are a domestically-controlled
REIT, but no assurances can be given that the actual ownership of our shares has
been or will be sufficient for us to qualify as a domestically-controlled REIT
at the effective time of the merger.
Distribution of Gain from the Disposition of U.S. Real Property Interests
The tax treatment described above assumes that the receipt of the merger
consideration in the deemed liquidating distribution will be treated as a sale
of our shares for purposes of FIRPTA, which is consistent with the general
treatment of the merger for other federal income tax purposes. It is possible,
however, that the Internal Revenue Service (or IRS) may assert that the merger
consideration you receive is subject to tax as a distribution from us, and not
as a sale of our shares. If the IRS were successful in making this assertion,
you generally would be subject to federal income tax on your gain on a net basis
in the same manner as U.S. stockholders, to the extent your merger consideration
is attributable to gain from the deemed sale by us to General Growth Properties
of "U.S. real property interests."
Income Tax Treaties
If you are eligible for treaty benefits under an income tax treaty with
the United States, you may be able to reduce or eliminate certain of the federal
income tax consequences discussed above. You should consult your tax advisor
regarding possible relief under an applicable income tax treaty.
U.S. Withholding Tax Under FIRPTA
You will be subject to withholding tax if the merger consideration you
receive is considered attributable to the sale of "U.S. real property
interests." As discussed above, because of the uncertainty regarding the
treatment of your shares under FIRPTA, we may be required to withhold either (1)
at a rate
55
of 10% of the merger consideration received by you or (2) at a rate of 35% of
our deemed liquidating distribution to you that is attributable to gains from
the deemed sale of our U.S. real property interests. Accordingly, non-U.S.
stockholders should expect withholding at the higher of the amounts set forth in
(1) and (2) of the preceding sentence. You may be entitled to a refund or credit
against your U.S. tax liability, if any, with respect to the amount withheld,
provided that the required information is furnished to the IRS on a timely
basis. You should consult your tax advisor regarding withholding tax
considerations.
Information Reporting and Backup Withholding. Under certain circumstances
you may be subject to information reporting and backup withholding at a 30%
rate, with respect to your merger consideration. Backup withholding generally
will not apply if you are a corporation or other exempt entity, or you furnish a
correct taxpayer identification number and certify that you are not subject to
backup withholding on IRS Form W-9 if you are a U.S. stockholder, or on the
applicable Form(s) W-8 if you are a non-U.S. stockholder, or an appropriate
substitute form. If you are subject to backup withholding, the amount withheld
is not an additional tax, but rather is credited against your federal income tax
liability. You should consult your tax advisor to ensure compliance with the
procedures for exemption from backup withholding.
56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 31, 2002,
regarding the beneficial ownership of our common stock and Price Group stock
with respect to (i) each person known to us to be the beneficial owner of 5% or
more of our outstanding shares of common stock and Price Group stock; (ii) the
named executive officers; (iii) our directors; and (iv) all of our directors and
executive officers as a group.
BENEFICIAL OWNERSHIP TABLE(1)
Shares Beneficially
Name and Address of Beneficial Owner(2) Owned Percent of Shares
- --------------------------------------------------------------------- -------------------- -------------------
John Price(3) 3,287,551 16.86%
Warren P. King(4) 207,984 1.25%
G. Rex Frazier(5) 117,374 *
Paul K. Mendenhall(6) 11,019 *
David R. Sabey(7) 2,961 *
Sam W. Souvall(8) 59,261 *
Allen P. Martindale(9) 32,000 *
A. Blaine Huntsman(10) 27,010 *
M. Scott Collins(11) 5,000 *
James A. Anderson(12) 13,000 *
All of our directors and executive officers as a group (13 Persons) 3,789,743 19.05%
Fairfax Realty, Inc.(13)
35 Century Park-Way Salt Lake City, UT 84115 2,966,313 15.43%
Fairfax Holding, L.L.C.(14)
35 Century Park-Way Salt Lake City, UT 84115 2,966,313 15.43%
Cohen & Steers Capital Management, Inc.(15)
757 Third Avenue New York, NY 10017 1,119,335 6.78%
* An asterisk indicates ownership of less than 1%.
- ----------
(1) For purposes of this table, a person is deemed to be the beneficial owner
of shares of common stock if that person has the right to acquire such
shares within 60 days of the record date, by the exercise of any stock
option or any other right to convert or exchange outstanding securities.
We are the sole general partner of, and own the controlling general
partner interest in, Price Development Company. Common operating
partnership units in Price Development Company are exchangeable, at the
option of the holders thereof, for shares of common stock on a one-for-one
basis (subject to adjustment in the event of stock splits, dividends,
combinations or reclassifications). Common operating partnership units and
stock options held by a person are deemed to have been exchanged or
exercised for the purpose of computing the percentage of outstanding
shares of common stock beneficially owned by such person, but shall not be
deemed to have been exchanged or exercised for the purpose of computing
the percentage of outstanding shares of common stock beneficially owned by
any other person. We have the right to convert any outstanding shares of
Price Group stock on a one-for-one basis into shares of common stock, in
the event that the combined direct or indirect economic interest held by
the holders of Price Group stock in Price Development Company falls below
10%. Even though such economic interest held by the holders of Price Group
stock is not below the 10% level, for purposes of this table, shares of
Price Group stock are deemed to be converted into an equivalent number of
shares of common stock. Additionally, for the purposes of this table, a
person or entity shall be deemed to be a beneficial owner of shares of
common stock if such person or entity has or shares either investment or
voting power with respect to such shares.
(2) The business address of each officer and director named herein is JP
Realty, Inc., 35 Century Park-Way, Salt Lake City, UT 84115.
(3) Includes (i) 13,841 common operating partnership units held by Mr. Price,
(ii) 2,713,313 common operating partnership units, 53,000 shares of common
stock and 200,000 shares of Price Group stock held by Fairfax Holding,
L.L.C., a limited liability company in which Mr. Price holds an
approximate 85% direct and indirect interest, (iii) 27,897 common
operating partnership units held by JPET II, (iv) options to purchase
231,000 shares of common stock, and (v) options to purchase 2,500 shares
of common stock vesting as of the delivery of this proxy statement. Mr.
Price, through his control of Fairfax Holding and JPET II, exercises sole
investment and voting power over the common operating partnership units,
shares of common stock and shares of Price Group stock held by such
entities and disclaims beneficial ownership of the common operating
partnership units, shares of common stock and shares of Price Group stock
held by Fairfax Holding and JPET II, except to the extent of his
approximate 85% interest in Fairfax Holding and his approximate 1%
interest in JPET II. In connection with the execution of the merger
agreement, Mr. Price and certain of his affiliates have entered into a
voting agreement, as discussed herein under the section entitled "Voting
Agreement," pursuant to which General Growth Properties has voting control
over the shares of common stock, Price Group stock and common operating
partnership units which Mr. Price and certain of his affiliates
beneficially own as of the record date.
57
(4) Includes (i) 81,178 common operating partnership units held by Mr. King
either directly or through other partnership interests, (ii) 16,218 common
operating partnership units held by Mr. King's wife, Florence K. King
through another partnership interest, (iii) 12,685 common operating
partnership units held by Mr. King's son, Michael T. King through a
partnership interest of which Mr. King disclaims an ownership interest,
(iv) 28,903 common operating partnership units held by W. P. King and
Company, a family partnership, through ownership of other partnership
interests, for the benefit of Mr. and Mrs. King's children and
grandchildren of which Mr. and Mrs. King have a 2.34% ownership interest
and (v) options to purchase 39,000 shares of our common stock.
(5) Includes (i) 31,840 common operating partnership units, (ii) options to
purchase 77,015 shares of common stock, and (iii) options to purchase
2,500 shares of common stock vesting as of the delivery of this proxy
statement.
(6) Includes (i) 7,189 common operating partnership units and (ii) options to
purchase 2,000 shares of common stock vesting as of the delivery of this
proxy statement.
(7) Includes (i) 1,595 common operating partnership units and (ii) options to
purchase 1,000 shares of common stock vesting as of the delivery of this
proxy statement.
(8) Includes (i) 23,371 common operating partnership units held by S.W.
Souvall Trust and (ii) options to purchase 13,000 shares of common stock.
Of the shares of common stock reported in the table, 11,300 shares are
owned of record by S.W. Souvall Company, a limited liability company in
which Mr. Souvall has no ownership but over which Mr. Souvall maintains
managerial and voting rights and 2,300 shares are owned by Sary
Enterprises, a limited liability company in which Mr. Souvall and his wife
have a 2.2% ownership interest.
(9) Includes options to purchase 5,000 shares of common stock.
(10) Includes (i) 25,010 shares of common stock held by certain retirement
plans beneficially owned by Mr. Huntsman and (ii) options to purchase
2,000 shares of common stock.
(11) Includes options to purchase 5,000 shares of common stock vesting as of
the delivery of this proxy statement.
(12) Includes options to purchase 13,000 shares of common stock.
(13) Includes 2,713,313 common operating partnership units, 53,000 shares of
common stock and 200,000 shares of Price Group stock held by Fairfax
Holding. Fairfax Holding exercises shared investment and voting power with
respect to the common operating partnership units, shares of common stock
and shares of Price Group stock held by Fairfax Holding and disclaims
beneficial ownership of such common operating partnership units, shares of
common stock and shares of Price Group stock, except to the extent of its
approximate 44% interest in Fairfax Holding. All securities beneficially
owned by Fairfax Holding are additionally identified as being beneficially
owned by Mr. Price and Fairfax Holding and, further, are subject to the
terms of the voting agreement described herein.
(14) Includes 2,713,313 common operating partnership units, 53,000 shares of
common stock and 200,000 shares of Price Group stock. All securities
beneficially owned by Fairfax Holding are additionally identified as being
beneficially owned by Mr. Price and Fairfax Holding and, further, are
subject to the terms of the voting agreement described herein.
(15) On its Schedule 13G filed with the SEC on February 13, 2002, Cohen &
Steers Capital Management, Inc. reported sole voting power with respect to
1,503,235 shares of common Stock beneficially owned by them and sole
dispositive power with respect to 1,119,335 shares of common stock
beneficially owned by them.
2002 ANNUAL MEETING
WE WILL HAVE AN ANNUAL MEETING IN 2002 ONLY IF THE MERGER IS NOT
COMPLETED.
OTHER MATTERS
We are not aware of any business or matter other than as indicated above,
which may be properly presented at the special meeting. If, however, any other
matter properly comes before the special meeting, proxy holders will, in their
discretion, vote thereon in accordance with their best judgment.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC under
the Securities Exchange Act. You may obtain copies of this information in person
or by mail from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Room 1024, Washington, DC 20549, at prescribed rates. You may obtain information
on the operation of the public reference room by calling the SEC at (800)
SEC-0330.
The SEC also maintains an Internet web site that contains reports, proxy
statements and other information about issuers like JP Realty, Inc., which file
electronically with the SEC. The address of that site is http://www.sec.gov.
58
The SEC allows us to "incorporate by reference" information into this
proxy statement, which means that important information may be disclosed to you
by referring you to another document filed separately with the SEC. Our
information incorporated by reference is deemed to be part of this proxy
statement, except for information superseded by information in, or incorporated
by reference in, this proxy statement. This proxy statement incorporates by
reference the documents set forth below that have been previously filed with the
SEC. The following documents contain important information about us and our
financial condition and operating results, and are hereby incorporated by
reference:
o Quarterly Report on Form 10-Q for the quarter ended March 31, 2002;
o Current Report on Form 8-K, dated March 4, 2002; and
o Annual Report on Form 10-K/A for the year ended December 31, 2001.
We are also incorporating by reference additional documents that we may
file with the SEC under the Exchange Act, between the date of this proxy
statement and the date of our special meeting of stockholders.
You may have been sent some of the documents incorporated by reference,
but you can obtain any of them through us or the SEC. A copy of any and all of
the information that has been incorporated by reference is available from us,
excluding any exhibits which are not specifically incorporated by reference as
exhibits to this proxy statement, without charge to each person to whom a proxy
statement is delivered, upon written or oral request of such person, and by
first class mail or other equally prompt means within one business day of
receipt of such request, at the following address:
JP Realty, Inc.
35 Century Park-Way,
Salt Lake City, UT 84115
(801) 486-3911
Attention: Paul Mendenhall, Secretary
If you would like to request documents from us, please do so immediately
to receive them before the special meeting.
You should rely only on the information in this document or to which we
have referred you. We have not authorized anyone to provide you with information
that is different. The information contained in this document speaks only as of
the date of this document, unless the information specifically indicates that
another date applies.
By order of the Board of Directors,
Paul K. Mendenhall
Secretary
June [ __ ], 2002
Salt Lake City, UT
59
Exhibit A
AGREEMENT AND PLAN OF MERGER
AMONG
GENERAL GROWTH PROPERTIES, INC.
GGP LIMITED PARTNERSHIP
GGP ACQUISITION, L.L.C.
GGP ACQUISITION II, L.L.C.
JP REALTY, INC.
AND
PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP
DATED AS OF MARCH 3, 2002
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGERS...................................................2
1.1 The Merger.......................................................2
1.2 The Partnership Merger...........................................2
1.3 Closing..........................................................2
1.4 Effective Time...................................................2
1.5 Effect on Acquisition Operating Agreement and Certificate
of Formation.....................................................3
1.6 Effect of Partnership Merger on Agreement of Limited
Partnership and Certificate of Limited Partnership...............3
1.7 Conversion of Equity Securities in the Merger; Creation of
New Series of GGP Preferred Stock................................3
1.8 Surrender of Certificates........................................4
1.9 Conversion of Equity Securities in the Partnership Merger........7
1.10 Procedures for Exchange of PDC Common OP Units in the
Partnership Merger...............................................8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF JP..........................9
2.1 Organization, Standing and Power.................................9
2.2 JP Subsidiaries..................................................9
2.3 Capital Structure...............................................10
2.4 Other Interests.................................................12
2.5 Authority; Noncontravention; Consents...........................12
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities....13
2.7 Absence of Certain Changes or Events............................14
2.8 Litigation......................................................14
2.9 Properties......................................................15
2.10 Environmental Matters...........................................17
2.11 Related Party Transactions......................................18
2.12 Employee Benefits...............................................18
2.13 Employees; Employee Policies....................................20
2.14 Taxes...........................................................20
2.15 No Payments to Employees, Officers or Directors.................22
2.16 Broker..........................................................22
2.17 Compliance with Laws............................................22
2.18 Contracts; Debt Instruments.....................................22
2.19 Opinion of Financial Advisor....................................24
-i-
TABLE OF CONTENTS
(continued)
Page
2.20 State Takeover Statutes; JP Rights Plan; Ownership Limits.......24
2.21 Investment Company Act of 1940..................................24
2.22 Definition of Knowledge of JP...................................24
2.23 Required Stockholder Approvals and Partner Approvals............24
2.24 Intellectual Property...........................................25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF GGP, GGP PARTNERSHIP
AND ACQUISITION..............................................25
3.1 Organization, Standing and Power of GGP, GGP Partnership,
Acquisition and Partnership Acquisition.........................25
3.2 Capital Stock...................................................26
3.3 Authority; Noncontravention; Consents...........................27
3.4 Litigation......................................................28
3.5 Interim Operations of Acquisition and Partnership
Acquisition.....................................................28
3.6 Capital Resources...............................................28
3.7 GGP SEC Documents; Information Supplied.........................29
3.8 Taxes...........................................................29
3.9 Definition of Knowledge of GGP..................................30
3.10 Broker..........................................................30
ARTICLE 4 COVENANTS....................................................30
4.1 Conduct of JP's and PDC LP's Business Pending Mergers...........30
4.2 No Solicitation.................................................33
4.3 Board Actions...................................................34
4.4 Conduct of GGP's and GGP Partnership's Business Pending
Mergers.........................................................34
4.5 Other Actions...................................................34
ARTICLE 5 ADDITIONAL COVENANTS.........................................35
5.1 Preparation of the Proxy Statement; Stockholders Meeting;
Partner Solicitation; Partner Approvals.........................35
5.2 Access to Information; Confidentiality..........................37
5.3 Commercially Reasonable Efforts; Notification...................37
5.4 Tax Matters.....................................................38
5.5 Public Announcements............................................38
5.6 Transfer and Gains Taxes........................................39
5.7 Benefit Plans and Other Employee Arrangements...................39
-ii-
TABLE OF CONTENTS
(continued)
Page
5.8 Indemnification; Exculpation; Insurance.........................40
5.9 Declaration of Dividends and Distributions......................42
5.10 Resignations....................................................42
5.11 Registration Rights Agreements..................................42
5.12 Information Supplied............................................43
5.13 The JP Rights Plan..............................................43
5.14 Noncompetition Agreements.......................................43
ARTICLE 6 CONDITIONS...................................................43
6.1 Conditions to Each Party's Obligation to Effect the Merger......43
6.2 Conditions to Obligations of GGP, GGP Partnership,
Acquisition and Partnership Acquisition.........................43
6.3 Conditions to Obligations of JP and PDC LP......................44
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER; BOARD ACTIONS.............45
7.1 Termination.....................................................45
7.2 Certain Fees, Expenses and Rights...............................46
7.3 Effect of Termination...........................................48
7.4 Amendment.......................................................48
7.5 Extension; Waiver...............................................48
ARTICLE 8 GENERAL PROVISIONS...........................................49
8.1 Nonsurvival of Representations and Warranties...................49
8.2 Notices.........................................................49
8.3 Interpretation..................................................49
8.4 Counterparts....................................................50
8.5 Entire Agreement; No Third-Party Beneficiaries..................50
8.6 Governing Law...................................................50
8.7 Assignment......................................................50
8.8 Enforcement.....................................................50
8.9 Severability....................................................51
8.10 Exculpation.....................................................51
8.11 Joint and Several Obligations...................................51
8.12 Waiver of Jury Trial............................................51
8.13 Knowledge of GGP................................................51
-iii-
EXHIBITS
Exhibit A -.Form of Maryland Articles of Merger
Exhibit B -.Form of Delaware Certificate of Merger
Exhibit C - Form of Maryland Articles of Partnership Merger
Exhibit D - Form of Voting Agreement
Exhibit E - Form of Amendment to GGP Partnership Agreement providing for the
creation of the GGP Series B Preferred OP Units
Exhibit F - Form of Redemption Rights Agreement relating to the GGP Series B
Preferred OP Units
Exhibit G - Form of Redemption Rights Agreement relating to the GGP Common
OP Units
Exhibit H - Form of Certificate of Designations providing for the creation
of GGP Series C Preferred Stock
Exhibit I - Tax Matters Agreement
Exhibit J - Severance Matters
Exhibit K - Form of Noncompetition and Confidentiality Agreement
-iv-
INDEX OF DEFINED TERMS
1940 Act..................................................................2.21
Acquisition...........................................................Preamble
Affiliate.................................................................2.11
Agreement.............................................................Preamble
Allocable Consideration.................................................5.4(a)
Base Amount................................................................7.2
CERCLA.................................................................2.10(a)
Certificate.........................................................1.7(c)(iv)
Closing....................................................................1.3
Closing Date...............................................................1.3
Code...................................................................2.12(a)
Commitment..............................................................4.1(j)
Competing Transaction...................................................4.2(c)
Confidentiality Agreement..............................................2.18(i)
Contributing Holders of PDC Common OP Units .........................Recital B
Controlled Group Member...................................................2.12
Delaware Certificate of Merger.......................................Recital D
Department.................................................................1.4
DGCL................................................................1.7(c)(ii)
DLLCA......................................................................1.1
Effective Time.............................................................1.4
Employee Plan.............................................................2.12
Encumbrances............................................................2.9(a)
Environmental Law......................................................2.10(a)
Environmental Permits..............................................2.10(b)(iv)
ERISA.....................................................................2.12
ERISA Affiliate........................................................2.12(d)
Excess Stock............................................................2.3(a)
Exchange Act...............................................................2.6
Exchange Fund...........................................................1.8(a)
Existing Title Policies.................................................2.9(b)
Final JP Dividend....................................................1.8(d)(i)
Final PDC LP Distribution............................................1.8(d)(i)
Form of Election....................................................5.1(c)(iv)
Former JP Properties...............................................2.10(b)(ii)
GAAP.......................................................................2.6
GGP...................................................................Preamble
GGP Break-Up Expenses......................................................7.2
GGP Break-Up Expenses Tax Opinion..........................................7.2
GGP Break-Up Fee...........................................................7.2
GGP Break-Up Fee Tax Opinion...............................................7.2
GGP By-Laws.............................................................3.1(a)
GGP Charter.............................................................3.1(a)
GGP Common OP Units.....................................................3.2(b)
GGP Common OP Units Redemption Agreement............................1.9(b)(ii)
GGP Common Stock........................................................3.2(a)
GGP Disclosure Letter..................................................Art. 3
GGP Material Adverse Effect.............................................3.1(b)
GGP OP Units............................................................3.2(b)
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GGP Partnership.......................................................Preamble
GGP Partnership Agreement...............................................3.1(b)
GGP Preferred Stock.....................................................3.2(a)
GGP SEC Documents.......................................................3.7(a)
GGP Series A Junior Preferred Stock.....................................3.2(a)
GGP Series A Preferred OP Units.........................................3.2(b)
GGP Series A Preferred Stock............................................3.2(a)
GGP Series B Preferred OP Units......................................1.9(b)(i)
GGP Series B Preferred OP Units Redemption Agreement................1.9(b)(ii)
GGP Series B Preferred Stock............................................3.2(a)
GGP Series C Preferred Stock........................................1.9(b)(ii)
GGP Series D Preferred Stock........................................1.7(c)(ii)
GGP Series E Preferred Stock........................................1.7(c)(ii)
GGP Series F Preferred Stock........................................1.7(c)(ii)
GGP Stockholders Meeting................................................5.1(b)
GGP Subsidiaries........................................................3.1(b)
Governmental Entity.....................................................2.2(a)
Ground Lease............................................................2.9(f)
Hazardous Materials....................................................2.10(a)
HSR Act.................................................................2.5(b)
Indebtedness...........................................................2.18(a)
Indemnified Parties..................................................5.8(a)(i)
Indemnifying Parties.................................................5.8(a)(i)
IRS GGP Break-Up Expenses Ruling...........................................7.2
IRS GGP Partnership Break-Up Fee Ruling....................................7.2
JP....................................................................Preamble
JP Acquisition Agreement...................................................7.2
JP Articles................................................................2.1
JP Break-Up Expenses.......................................................7.2
JP Budget...............................................................4.1(j)
JP Bylaws..................................................................2.1
JP Common Stock.........................................................2.3(a)
JP Disclosure Letter...................................................Art. 2
JP Financial Statement Date................................................2.7
JP Junior Preferred Stock...............................................2.3(a)
JP Material Adverse Effect.................................................2.1
JP Other Interests.........................................................2.4
JP Partner Approvals....................................................2.5(a)
JP Preferred Stock......................................................1.7(b)
JP Properties...........................................................2.9(a)
JP Rent Roll............................................................2.9(e)
JP Representative.......................................................4.2(a)
JP Rights.................................................................2.20
JP Rights Agreement.......................................................2.20
JP SEC Documents...........................................................2.6
JP Series A Preferred Stock.............................................2.3(a)
JP Series B Preferred Stock.............................................2.3(a)
JP Series C Preferred Stock.............................................2.3(a)
JP Space Lease..........................................................2.9(e)
JP Stock Options........................................................2.3(b)
JP Stock Rights.........................................................2.3(b)
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JP Stockholder Approval.................................................2.5(a)
JP Stockholders Meeting.................................................5.1(b)
JP Subsidiaries.........................................................2.2(a)
Knowledge of GGP...........................................................3.9
Knowledge of JP...........................................................2.22
Laws....................................................................2.5(b)
Liens...................................................................2.2(b)
Maryland Articles of Merger..........................................Recital C
Maryland Articles of Partnership Merger..............................Recital E
Material Contract......................................................2.18(a)
Maximum Amount.............................................................7.2
Merger...............................................................Recital A
Merger Consideration....................................................1.7(c)
Mergers..............................................................Recital I
MRULPA.....................................................................1.2
Partner Solicitation Materials.......................................5.1(c)(i)
Partnership Acquisition...............................................Preamble
Partnership Merger...................................................Recital B
Partnership Merger Consideration........................................1.9(b)
Paying Agent............................................................1.8(a)
PDC Common OP Units.....................................................2.3(d)
PDC LP................................................................Preamble
PDC LP Agreement...........................................................1.6
PDC LP Amendment..........................................................1.11
PDC OP Units............................................................2.3(e)
PDC Preferred OP Units..................................................2.3(d)
PDC Series A OP Units...................................................2.3(d)
PDC Series B OP Units...................................................2.3(d)
PDC Series C OP Units...................................................2.3(d)
Pension Plan..............................................................2.12
Permitted Title Exceptions..............................................2.9(a)
Person..................................................................2.2(a)
Price Group Stock.......................................................2.3(a)
Property Permits........................................................2.9(h)
Property Restrictions...................................................2.9(a)
Proxy Statement.........................................................5.1(a)
Qualified Pension Plan.................................................2.12(b)
Qualifying Income..........................................................7.2
REA.....................................................................2.9(g)
REIT...................................................................2.14(b)
REIT Requirements..........................................................7.2
Related Agreements..................................................5.1(c)(iv)
Release................................................................2.10(a)
Required Funding...........................................................3.6
SEC.....................................................................2.5(b)
Secretary of State.........................................................1.4
Securities Act..........................................................2.3(g)
Selling Holders of PDC Common OP Units...............................Recital B
Subsidiary..............................................................2.2(a)
Superior Competing Transaction..........................................4.2(d)
Surviving Company..........................................................1.1
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Surviving Partnership......................................................1.2
Takeover Statute..........................................................2.20
Taxes..................................................................2.14(a)
Tax Protection Agreement...............................................2.18(h)
Title 3....................................................................1.1
Transfer and Gains Taxes...................................................5.6
Voting Agreement.....................................................Recital J
Welfare Plan..............................................................2.12
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 3,
2002, by and among GENERAL GROWTH PROPERTIES, INC., a Delaware corporation
("GGP"), GGP LIMITED PARTNERSHIP, a Delaware limited partnership ("GGP
Partnership"), GGP ACQUISITION, L.L.C., a Delaware limited liability company and
a wholly-owned subsidiary of GGP Partnership ("Acquisition"), GGP ACQUISITION
II, L.L.C., a Maryland limited liability company and a wholly-owned subsidiary
of GGP Partnership ("Partnership Acquisition"), JP REALTY, INC., a Maryland
corporation ("JP"), and PRICE DEVELOPMENT COMPANY, LIMITED PARTNERSHIP, a
Maryland limited partnership ("PDC LP").
RECITALS:
A. The Board of Directors of GGP and the Board of Directors of JP deem it
advisable and in the best interests of their respective stockholders, upon the
terms and subject to the conditions contained herein, that JP shall merge with
and into Acquisition (the "Merger"), with each issued and outstanding share of
JP Common Stock and Price Group Stock, each as defined herein, to be converted
into the right to receive $26.10 in cash without interest.
B. GGP Partnership, as the sole member of Partnership Acquisition, and JP,
as the sole general partner of PDC LP, deem it advisable and in the best
interests of their respective member and limited partners, upon the terms and
subject to the conditions contained herein, that, immediately prior to the
Merger, Partnership Acquisition shall merge with and into PDC LP (the
"Partnership Merger"), with the holders of PDC Common OP Units (as defined
herein) in PDC LP at the time of the Partnership Merger receiving (except as
otherwise provided herein) GGP Series B Preferred OP Units (as defined herein)
(such holders being the "Contributing Holders of PDC Common OP Units"), as set
forth herein, or $26.10 cash without interest (such holders being the "Selling
Holders of PDC Common OP Units").
C. Upon the terms and subject to the conditions set forth herein,
Acquisition and JP shall execute Articles of Merger (the "Maryland Articles of
Merger") in substantially the form attached hereto as Exhibit A and shall file
such Maryland Articles of Merger in accordance with Maryland law to effectuate
the Merger.
D. Upon the terms and subject to the conditions set forth herein,
Acquisition and JP shall execute a Certificate of Merger (the "Delaware
Certificate of Merger") in substantially the form attached hereto as Exhibit B
and, concurrently with the filing of the Maryland Articles of Merger, shall file
such Delaware Certificate of Merger in accordance with Delaware law to
effectuate the Merger.
E. Upon the terms and subject to the conditions set forth herein,
immediately prior to the Merger, PDC LP and Partnership Acquisition shall
execute Articles of Merger (the "Maryland Articles of Partnership Merger") in
substantially the form attached hereto as Exhibit C and shall file such Maryland
Articles of Partnership Merger in accordance with Maryland law to effectuate the
Partnership Merger.
F. JP has received a fairness opinion relating to the Merger contemplated
hereby as more fully described herein.
G. For federal income tax purposes, it is intended that the Merger will be
treated as a taxable sale of assets by JP in exchange for cash and the
assumption of liabilities and a distribution of such cash to the JP stockholders
in liquidation of JP.
H. For federal income tax purposes, it is intended that the Partnership
Merger, regardless of form, be treated as a tax-free contribution by the
Contributing Holders of PDC Common OP Units of their PDC Common OP Units to GGP
Partnership in exchange for GGP Series B Preferred OP Units, under Section 721
of the Code, and a sale by the Selling Holders of PDC Common OP Units of their
PDC Common OP Units to GGP Partnership in exchange for cash.
I. GGP, GGP Partnership, Acquisition, Partnership Acquisition, JP and PDC
LP desire to make certain representations, warranties and agreements in
connection with the Merger and the Partnership Merger (collectively, the
"Mergers").
J. As an inducement to GGP and GGP Partnership to enter into this
Agreement, certain stockholders of JP and certain holders of PDC Common OP Units
have entered into a voting agreement (the "Voting Agreement"), in substantially
the form attached hereto as Exhibit D, pursuant to which each such Person (as
defined herein) has agreed, among other things, to vote his or its shares of JP
Common Stock, Price Group Stock and PDC Common OP Units to approve, as
applicable, this Agreement, the Mergers, the PDC LP Amendment (as defined
herein) and any other matter which requires his or its vote in connection with
the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1.
THE MERGERS
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with Title 3 of the Corporations and
Associations Article of the Annotated Code of Maryland, as amended ("Title 3"),
and the Delaware Limited Liability Company Act, as amended (the "DLLCA"), JP
shall be merged with and into Acquisition, with Acquisition being the surviving
entity (the "Surviving Company").
1.2 The Partnership Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Title 10 of the Annotated
Code of Maryland, as amended (the "MRULPA"), immediately prior to the
consummation of the Merger, Partnership Acquisition shall be merged with and
into PDC LP, with PDC LP being the surviving limited partnership (the "Surviving
Partnership").
1.3 Closing. The closing of the Mergers (the "Closing") will take place
commencing at 9:00 a.m., local time, on the date to be specified by the parties,
which (subject to satisfaction or waiver of the conditions set forth in Article
6) shall be no later than the third business day after satisfaction or waiver of
the conditions set forth in Section 6.1 (the "Closing Date"), at the offices of
Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite 2200, Chicago, IL
60602, unless another date or place is agreed to in writing by the parties.
1.4 Effective Time. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article 6, (a) Acquisition and/or JP, as
applicable, shall execute and file the Maryland Articles of Merger, executed in
accordance with Title 3, with the State Department of Assessments and Taxation
of Maryland (the "Department"), and the Delaware Certificate of Merger, executed
in accordance with the DLLCA, with the Secretary of State of the State of
Delaware (the "Secretary of State"), and shall make all other filings and
recordings required, with respect to the Merger, under such statutes, and (b)
Partnership Acquisition and/or PDC LP, as applicable, shall execute and file
2
the Maryland Articles of Partnership Merger, executed in accordance with Title
10 of the MRULPA, with the Department, and shall make all other filings and
recordings required, with respect to the Partnership Merger, under such
statutes. The Mergers shall become effective (each, an "Effective Time," and
collectively, the "Effective Times") at such times as (i) Acquisition and JP
shall agree should be specified in the Maryland Articles of Merger and the
Delaware Certificate of Merger and (ii) Partnership Acquisition and PDC LP shall
agree should be specified in the Maryland Articles of Partnership Merger. Unless
otherwise agreed, the parties shall cause the Effective Times to occur on the
Closing Date with the Effective Time of the Partnership Merger occurring before
the Effective Time of the Merger.
1.5 Effect on Acquisition Operating Agreement and Certificate of Formation.
The Operating Agreement of Acquisition, as in effect immediately prior to the
Effective Time of the Merger, shall continue in full force and effect after the
Merger as the Operating Agreement of the Surviving Company, until further
amended in accordance with the terms of such Operating Agreement and Delaware
law. Except as contemplated by the Certificate of Merger, the Certificate of
Formation of Acquisition, as in effect immediately prior to the Effective Time,
shall continue in full force and effect after the Merger as the Certificate of
Formation of the Surviving Company, until further amended in accordance with
Delaware law.
1.6 Effect of Partnership Merger on Agreement of Limited Partnership and
Certificate of Limited Partnership. The Certificate of Limited Partnership of
PDC LP and the Second Amended and Restated Partnership Agreement of PDC LP, as
amended (the "PDC LP Agreement"), as in effect as of the Effective Time of the
Partnership Merger, shall continue in full force and effect after the
Partnership Merger as the Certificate of Limited Partnership and the Partnership
Agreement, respectively, of the Surviving Partnership until further amended in
accordance with applicable Maryland law.
1.7 Conversion of Equity Securities in the Merger; Creation of New Series
of GGP Preferred Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any shares of capital stock or
limited liability company interests of JP or Acquisition:
(a) Ownership Interests of Acquisition. The issued and outstanding
ownership interests in Acquisition immediately prior to the Effective Time shall
remain outstanding as the issued and outstanding ownership interests of the
Surviving Company.
(b) Cancellation of Treasury Stock and GGP Partnership-Owned Stock. Each
share of JP Common Stock, Price Group Stock, JP Series A Preferred Stock, JP
Series B Preferred Stock or JP Series C Preferred Stock (collectively with the
JP Series A Preferred Stock and the JP Series B Preferred Stock, the "JP
Preferred Stock") that is owned by JP, as treasury stock, or by GGP, GGP
Partnership, Acquisition or Partnership Acquisition immediately prior to the
Effective Time shall automatically be canceled and shall cease to exist and no
consideration shall be delivered or deliverable in exchange therefor.
(c) Merger Consideration. The consideration to be paid to the holders of
capital stock of JP in the Merger (collectively, the "Merger Consideration") is
as follows:
(i) Each share of JP Common Stock and Price Group Stock issued and
outstanding immediately prior to the Effective Time (other than shares to
be canceled in accordance with Section 1.7(b)), shall be converted into the
right to receive $26.10 in cash without interest.
(ii) Each share, if any, of JP Series A Preferred Stock, JP Series B
Preferred Stock and JP Series C Preferred Stock issued and outstanding
immediately prior to the Effective
3
Time (other than shares to be canceled in accordance with Section 1.7(b))
shall be converted into the right to receive 0.025 shares of GGP Series D
Preferred Stock, $100 par value per share ("GGP Series D Preferred Stock"),
GGP Series E Preferred Stock, $100 par value per share ("GGP Series E
Preferred Stock") and GGP Series F Preferred Stock, $100 par value per
share ("GGP Series F Preferred Stock"), respectively. Prior to or as of the
Effective Time, the GGP Charter shall be amended in accordance with the
Delaware General Corporation Law, as amended (the "DGCL") in order to
create the GGP Series D Preferred Stock, GGP Series E Preferred Stock and
the GGP Series F Preferred Stock, each series of which will have
substantially the same terms and rights as the JP Series A Preferred Stock,
JP Series B Preferred Stock and JP Series C Preferred Stock, respectively,
including with respect to distribution, voting rights and rights upon
liquidation, dissolution or winding-up.
(iii) Each share, if any, of Excess Stock (as defined herein) which is
not redeemed by JP prior to the Effective Time and remains issued and
outstanding immediately prior to the Effective Time shall be converted into
the right to receive $26.10 in cash without interest.
(iv) At the Effective Time all such shares shall no longer be
outstanding and shall automatically be canceled and shall cease to exist,
and each holder of a certificate that immediately prior to the Effective
Time represented any such shares (a "Certificate"), shall cease to have any
rights with respect thereto, except the right to receive the applicable
Merger Consideration described above and any dividends declared and unpaid
thereon payable to holders of record thereof as of a record date preceding
the Effective Time. Following the Effective Time, upon surrender of
Certificates representing shares of JP Common Stock, Price Group Stock or
JP Preferred Stock in accordance with Section 1.8, the Surviving Company
shall pay to the holders of such Certificates as of the Effective Time any
unpaid dividends declared in respect of the JP Common Stock, the Price
Group Stock and JP Preferred Stock with a record date prior to the
Effective Time and which remain unpaid at the Effective Time.
(d) Stock Options. Each JP Stock Option outstanding immediately prior to
the Effective Time (whether vested or unvested) shall be converted at the
Effective Time into the right to receive an amount of cash equal to (i) the
excess, if any, of $26.10 over the exercise price of such JP Stock Option,
multiplied by (ii) the number of shares of JP Common Stock subject thereto which
have not theretofore been exercised.
(e) No Appraisal Rights. The holders of JP Common Stock, Price Group Stock
and JP Preferred Stock are not entitled under applicable law to appraisal,
dissenters' or similar rights as a result of the Mergers.
(f) Adjustments to Merger Consideration. The Merger Consideration payable
upon the conversion of JP Common Stock, Price Group Stock or JP Preferred Stock,
as applicable, shall be adjusted to reflect fully the effect of any
reclassification, combination, subdivision, stock split, reverse split, stock
dividend (including any stock dividend or distribution of securities convertible
into JP Common Stock, Price Group Stock or JP Preferred Stock, as applicable),
reorganization, recapitalization or other like change with respect to JP Common
Stock, Price Group Stock or JP Preferred Stock, as applicable, occurring (or for
which a record date is established) after the date hereof and prior to the
Effective Time.
1.8 Surrender of Certificates.
(a) Paying Agent. Prior to the Effective Time, GGP shall designate a bank
or trust company reasonably acceptable to JP to act as agent for the payment of
the Merger Consideration upon
4
surrender of Certificates evidencing JP Common Stock and Price Group Stock (the
"Paying Agent"). GGP shall take all steps necessary to enable, and shall cause,
the Surviving Company to provide to the Paying Agent immediately following the
Effective Time the Merger Consideration issuable in exchange for the shares of
JP Common Stock and Price Group Stock pursuant to Section 1.7(c), plus any
amounts payable in respect of unpaid dividends declared in respect of the JP
Common Stock and Price Group Stock with a record date prior to the Effective
Time and which remain unpaid at the Effective Time (such consideration being
hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates held
by such Person shall pass, only upon proper delivery of the Certificates to the
Paying Agent and shall be in customary form and have such other provisions as
GGP may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by GGP, together with such letter of
transmittal, duly completed and validly executed, and such other documents as
may reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the applicable Merger
Consideration in respect of the shares formerly represented by such Certificate
pursuant to Section 1.7(c), and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of JP Common Stock or Price
Group Stock that is not registered in the stock transfer books of JP, payment
may be paid in exchange therefor to a Person other than the Person in whose name
the Certificate so surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer, and the Person
requesting such payment shall pay any transfer or other Taxes required by reason
of the payment to a Person other than the registered holder of such Certificate
or establish to the satisfaction of GGP that such Tax has been paid or is not
applicable. No interest shall be paid or shall accrue on the Merger
Consideration, or unpaid dividends declared in respect of the JP Common Stock or
Price Group Stock with a record date prior to the Effective Time and which
remain unpaid at the Effective Time, payable upon surrender of any Certificate.
(c) No Further Ownership Rights. All cash and securities paid upon the
surrender of a Certificate in accordance with the terms of this Article I shall
be deemed to have been paid in full satisfaction of all rights pertaining to the
shares of JP Common Stock or Price Group Stock formerly represented by such
Certificate. At the close of business on the day on which the Effective Time
occurs the stock transfer books of JP shall be closed, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Company of the shares of JP Common Stock or Price Group Stock that were
outstanding, immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Company or the Paying Agent
for transfer or any other reason, they shall be canceled and exchanged as
provided in this Article I.
(d) Record Dates for Final Dividends; Distributions with Respect to
Unexchanged Shares.
(i) If and to the extent necessary for JP to satisfy the requirements
of Section 857(a)(1) of the Code (as defined herein) for the taxable year
of JP ending at the Effective Time of the Merger (and to avoid the payment
of any tax with respect to undistributed income or gain), JP shall declare
a dividend (the "Final JP Dividend") to holders of shares of JP Common
Stock and Price Group Stock, if and to the extent required by the terms
thereof the record date for which shall be the close of business on the
last business day prior to the Effective Time of the Merger, in an amount
equal to the minimum dividend sufficient to permit JP to satisfy such
requirements. Any dividends payable hereunder to holders of JP Common Stock
or
5
Price Group Stock shall be paid on the last business day immediately
preceding the Closing Date. In the event that JP is required to declare a
Final JP Dividend with respect to the JP Common Stock and/or Price Group
Stock, PDC LP shall simultaneously declare a distribution (the "Final PDC
LP Distribution") to holders of PDC OP Units in an amount per JP Common OP
Unit equal to the Final JP Dividend payable on each share of JP Common
Stock. The record date for the payment of the Final PDC LP Distribution
shall be the close of business on the last business day prior to the
Effective Time of the Partnership Merger. The distribution payable
hereunder to holders of PDC Common OP Units shall be paid on the last
business day immediately preceding the Closing Date.
(ii) If JP determines that it is necessary to declare the Final JP
Dividend, JP shall notify GGP at least 20 days prior to the date for the JP
Stockholders Meeting.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of JP Common Stock and Price Group Stock
for one year after the Effective Time shall be delivered to the Surviving
Company, upon demand, and any holder of JP Common Stock or Price Group Stock who
has not theretofore complied with this Article I shall thereafter look only to
the Surviving Company for payment of its claim for Merger Consideration.
(f) No Liability. None of GGP, GGP Partnership, the Surviving Company or
the Paying Agent shall be liable to any Person in respect of any cash delivered
to a public official pursuant to any applicable abandoned property, escheat, or
similar law. If any Certificates shall not have been surrendered prior to three
years after the Effective Time (or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any Governmental Entity(as defined herein)), any such Merger Consideration in
respect thereof shall, to the extent permitted by applicable law, become the
property of the Surviving Company, free and clear of all claims or interest of
any Person previously entitled thereto.
(g) Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund, as directed by GGP, on a daily basis; provided,
however, that such investments shall be in (i) obligations of or guaranteed by
the United States of America and backed by the full faith and credit of the
United States of America, (ii) commercial paper obligations rated A-1 or P-1 or
better by Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively, (iii) certificates of deposit maturing not more than 180 days
after the date of purchase issued by a bank organized under the laws of the
United States or any state thereof having a combined capital and surplus of at
least $500,000,000 or (iv) a money market fund having assets of at least
$3,000,000,000. Any interest and other income resulting from such investments
shall be paid to GGP Partnership.
(h) Lost Certificates. If any Certificate shall have been lost, stolen,
defaced or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen, defaced or destroyed and, if
required by the Surviving Company, the posting by such Person of a bond in such
reasonable amount as the Surviving Company may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Paying
Agent shall pay in respect of such lost, stolen, defaced or destroyed
Certificate the Merger Consideration.
(i) Withholding Rights. GGP, GGP Partnership, the Surviving Company or the
Paying Agent, as applicable, shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of JP Common Stock, Price Group Stock and JP Preferred Stock such amounts
as it is required to withhold with respect to such payments under the Code or
any other provision of state, local or foreign tax law.
6
(j) JP Preferred Stock. In the event that any Shares of JP Preferred Stock
are outstanding prior to the Effective Time of the Merger, GGP and JP shall
mutually agree upon and establish procedures to be applicable to the exchange of
certificates evidencing JP Preferred Stock for the applicable Merger
Consideration.
1.9 Conversion of Equity Securities in the Partnership Merger. At the
Effective Time, by virtue of the Partnership Merger and without any action on
the part of any holder of partnership interests or limited liability company
interests of PDC LP or Partnership Acquisition:
(a) Ownership Interests of Partnership Acquisition. The issued and
outstanding ownership interests in Partnership Acquisition immediately prior to
the Effective Time shall be converted into the number of PDC Common OP Units
held by holders of PDC Common OP Units other than JP as of such time.
(b) Partnership Merger Consideration. The consideration to be paid to
holders of partnership interests in PDC LP in the Partnership Merger
(collectively, the "Partnership Merger Consideration") is as follows:
(i) Each JP Common OP Unit outstanding immediately prior to the
Effective Time of the Partnership Merger (other than PDC Common OP Units
held by JP) shall be exchanged for $26.10 per JP Common OP Unit in cash
without interest, provided that if the holder of a JP Common OP Unit is an
"accredited investor" (as defined in Rule 501, promulgated under the
Securities Act (as defined herein)), and submits to GGP Partnership a Form
of Election (as defined herein) in accordance with the procedures and time
periods specified in Section 5.1(c) hereof, such holder shall have the
right to receive for each JP Common OP Unit then held by it .522 8.5%
Series B Cumulative Preferred Units of limited partnership of GGP
Partnership (the "GGP Series B Preferred OP Units").
(ii) Prior to or as of the Effective Time, the GGP Partnership
Agreement shall be amended by the adoption of an amendment in substantially
the form attached hereto as Exhibit E providing for the creation of the GGP
Series B Preferred OP Units. The holders of the GGP Series B Preferred OP
Units issued in the Partnership Merger shall be entitled to the redemption
rights provided for in the redemption rights agreement, substantially in
the form attached hereto as Exhibit F (the "GGP Series B Preferred OP Units
Redemption Agreement") or, if they convert such GGP Series B Preferred OP
Units into GGP Common OP Units pursuant to the GGP Partnership Agreement
amendment described above, the redemption rights provided for in the
redemption rights agreement, substantially in the form attached hereto as
Exhibit G (the "GGP Common OP Units Redemption Agreement"). Pursuant to the
terms of the GGP Series B Preferred OP Units Redemption Agreement, each GGP
Series B Preferred OP Unit will be redeemable by the holder thereof, for,
at the option of GGP, cash or 0.025 shares of GGP Series C Preferred Stock,
$100 par value per share ("GGP Series C Preferred Stock"). Prior to or as
of the Effective Time, the GGP Charter shall be amended in accordance with
the DGCL by the adoption by the Board of Directors of GGP of a Certificate
of Designations, in substantially the form of Exhibit H hereto, providing
for the creation of the GGP Series C Preferred Stock.
(iii) Holders of PDC Common OP Units may elect to receive GGP Series B
Preferred Units in accordance with the provisions of Section 5.1(c) hereof.
If a holder of PDC Common OP Units fails to comply with the provisions of
Section 5.1(c) hereof with respect to some or all of its PDC Common OP
Units, such holder shall receive cash pursuant to this Section 1.9(b) upon
the conversion of such PDC Common OP Units into GGP Series B Preferred OP
Units in the Partnership Merger.
7
(iv) The PDC Series A OP Units (as defined herein) outstanding
immediately prior to the Effective Time of the Partnership Merger shall
remain outstanding, except that, immediately following the Effective Time,
each such Series A OP Unit, shall, in accordance with the terms of the PDC
LP Agreement, become exchangeable into the right to receive .025 shares of
GGP Series D Preferred Stock.
(v) The PDC Series B OP Units (as defined herein) outstanding
immediately prior to the Effective Time of the Partnership Merger shall
remain outstanding, except that, immediately following the Effective Time,
each such Series B OP Unit, shall, in accordance with the terms of the PDC
LP Agreement, become exchangeable into the right to receive .025 shares of
GGP Series E Preferred Stock.
(vi) The PDC Series C OP Units (as defined herein) outstanding
immediately prior to the Effective Time of the Partnership Merger shall
remain outstanding, except that, immediately following the Effective Time,
each such Series C OP Unit, shall, in accordance with the terms of the PDC
LP Agreement, become exchangeable into the right to receive .025 shares of
GGP Series F Preferred Stock.
(vii) Any PDC OP Units (as defined herein) outstanding and held by JP
immediately prior to the Effective Time of the Partnership Merger shall
remain outstanding.
(viii) At the Effective Time of the Partnership Merger, each holder of
a JP Common OP Unit outstanding immediately prior to the Effective Time
shall cease to have any rights with respect thereto except the right to
receive the applicable Partnership Merger Consideration described above and
any dividends declared and unpaid thereon payable to holders of record
thereof as of a record date preceding the Effective Time. Following the
Effective Time, upon delivery to the Paying Agent of such duly executed
documents, including a Form of Election, as may be required by the Paying
Agent or GGP Partnership, the Surviving Partnership shall pay to such
former holders any unpaid dividends declared in respect of the PDC Common
OP Units with a record date prior to the Effective Time and which remain
unpaid at the Effective Time.
(c) Appraisal Rights. The holders of PDC Common OP Units are entitled to
appraisal rights in accordance with the MRULPA as a result of the Partnership
Merger, but are not entitled to any other similar rights as a result of the
Mergers. The holders of PDC Preferred OP Units are not entitled under applicable
law to appraisal, dissenters' or similar rights as a result of the Mergers.
(d) Adjustments to Partnership Merger Consideration. The Partnership Merger
Consideration shall be adjusted to reflect fully the effect of any
reclassification, combination, subdivision, split, reverse split, distribution
of securities convertible into PDC Common OP Units, reorganization,
recapitalization or other like change with respect to PDC Common OP Units
occurring (or for which a record date is established) after the date hereof and
prior to the Effective Time.
1.10 Procedures for Exchange of PDC Common OP Units in the Partnership
Merger. Except for the provisions relating to the Certificates, all other
provisions of Section 1.8 shall apply to PDC LP, GGP Partnership and the PDC
Common OP Units with respect to the Partnership Merger, except as otherwise
provided in Section 1.9 and Section 5.1(c).
8
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF JP
Except as set forth in the JP SEC Documents (as defined herein) or in the
letter of even date herewith signed by the Chairman and Chief Executive Officer
or the President and Chief Operating Officer of JP and delivered to GGP and GGP
Partnership prior to the execution hereof (the "JP Disclosure Letter"), JP and
PDC LP jointly and severally represent and warrant to GGP, GGP Partnership,
Acquisition and Partnership Acquisition as follows:
2.1 Organization, Standing and Power. JP has been duly organized and is
validly existing and in good standing under the laws of the State of Maryland.
JP has all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as now being conducted. The JP
Amended and Restated Articles of Incorporation, as amended (the "JP Articles"),
are in effect, and no dissolution, revocation or forfeiture proceedings
regarding JP have been commenced. JP is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, would not have a JP Material Adverse Effect (as herein
defined). As used in this Agreement, a "JP Material Adverse Effect" means any
circumstance, event, occurrence, change or effect that is materially adverse to
the business, properties, assets (tangible or intangible), financial condition
or results of operations of JP and PDC LP, taken as a whole, except, in each
case, as a result of (i) changes in general economic conditions nationally or
regionally, (ii) changes affecting the real estate industry generally which do
not affect JP or PDC LP, as the case may be, materially disproportionately
relative to other participants in the real estate industry similarly situated,
or (iii) in and of itself and without the occurrence of any other JP Material
Adverse Effect, changes in the trading prices of JP Common Stock. JP has
delivered to GGP and GGP Partnership true, complete and correct copies of the JP
Articles and JP's Amended and Restated Bylaws, as amended (the "JP Bylaws"), in
each case, as amended or supplemented to the date of this Agreement.
2.2 JP Subsidiaries.
(a) Schedule 2.2 to the JP Disclosure Letter sets forth (i) each Subsidiary
(as defined herein) of JP, including PDC LP (the "JP Subsidiaries"), (ii) the
ownership interest therein of JP, (iii) if not directly wholly owned by JP, the
identity and ownership interest of each of the other owners of such JP
Subsidiary, (iv) each regional mall, community center, free-standing retail
property, mixed-use commercial property and other commercial property in which
such JP Subsidiary owns a fee or leasehold interest, and (v) if not wholly owned
in fee by JP or a JP Subsidiary, the identity and ownership interest of each of
the other Persons having a fee ownership interest in such property. As used in
this Agreement, "Subsidiary" of any Person means any corporation, partnership,
limited liability company, joint venture, trust or other legal entity of which
such Person owns (either directly or through or together with another Subsidiary
of such Person) either (i) a general partner, managing member or other similar
interest or (ii) 10% or more of the voting stock or other equity securities or
value of equity interests (voting or non-voting) of such corporation,
partnership, limited liability company, joint venture, trust or other legal
entity. As used herein, "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization, or any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"), or any other
entity. Schedule 2.2 of the JP Disclosure Letter sets forth a true, complete and
correct list of the equity securities owned by JP, directly or indirectly, in
any corporation, partnership, limited liability company, joint venture, trust or
other legal entity, excluding JP Subsidiaries.
9
(b) Except as set forth in Schedule 2.2 to the JP Disclosure Letter, (i)
all of the outstanding shares of capital stock of each JP Subsidiary that is a
corporation have been duly authorized, validly issued and are (A) fully paid and
nonassessable and not subject to preemptive rights, (B) owned by JP or by
another JP Subsidiary and (C) owned free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens") and (ii) all equity interests in each JP
Subsidiary that is a partnership, joint venture, limited liability company or
trust which are owned by JP, by another JP Subsidiary or by JP and another JP
Subsidiary are owned free and clear of all Liens other than pledges, if any,
contained in organizational documents of such JP Subsidiary and given to secure
performance thereunder or Liens granted to secure outstanding indebtedness of JP
or any JP Subsidiary and which indebtedness is disclosed in the JP Disclosure
Letter. Each JP Subsidiary that is a corporation is duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to own,
operate, lease and encumber its properties and carry on its business as now
being conducted, and each JP Subsidiary that is a partnership, joint venture,
limited liability company or trust is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization and has the
requisite power and authority to own, operate, lease and encumber its properties
and carry on its business as now being conducted. Except as set forth in
Schedule 2.2 to the JP Disclosure Letter, each JP Subsidiary is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually or in the
aggregate, would not reasonably be expected to have a JP Material Adverse
Effect. True, complete and correct copies of the articles or certificate of
incorporation, bylaws, other organizational documents and partnership, joint
venture and operating agreements of each JP Subsidiary, as amended to the date
of this Agreement, have been previously delivered or made available to GGP
Partnership, and all of such documents are listed in Schedule 2.2 to the JP
Disclosure Letter.
2.3 Capital Structure.
(a) The authorized shares of capital stock of JP consist of: (i) 7,690,000
shares of preferred stock, of which (A) 510,000 shares have been designated
8.75% Series A Cumulative Redeemable Preferred Stock, $.0001 par value per share
(the "JP Series A Preferred Stock"), none of which are outstanding, (B)
3,800,000 shares have been designated 8.95% Series B Cumulative Redeemable
Preferred Stock, $.0001 par value per share (the "JP Series B Preferred Stock"),
none of which are outstanding, (C) 320,000 shares have been designated 8.75%
Series C Cumulative Redeemable Preferred Stock, $.0001 par value per share (the
"JP Series C Preferred Stock"), none of which are outstanding, and (D) 3,060,000
shares have been designated Series A Junior Participating Preferred Stock,
$.0001 par value per share (the "JP Junior Preferred Stock"), none of which are
outstanding, (ii) 117,110,000 shares of Common Stock, par value $.0001 per share
("JP Common Stock"), of which 16,151,769 are outstanding on the date of this
Agreement, (iii) 200,000 shares of Price Group Stock, par value $.0001 per share
("Price Group Stock"), of which 200,000 shares are issued and outstanding on the
date of this Agreement and (iv) 75,000,000 shares of Excess Stock, par value
$.0001 per share ("Excess Stock"), none of which are outstanding.
(b) Set forth in Schedule 2.3(b) to the JP Disclosure Letter is a true,
complete and correct list of the following: (i) each qualified or nonqualified
option to purchase shares of JP Common Stock granted under JP's 1993 Stock
Option Plan or any other formal or informal arrangement to purchase shares of JP
Common Stock, Price Group Stock, JP Preferred Stock or any other equity
securities of JP (collectively, the "JP Stock Options"); and (ii) all other
warrants or other rights to acquire JP Common Stock, Price Group Stock, JP
Preferred Stock or any other equity securities of JP, stock appreciation rights,
restricted stock, dividend equivalents, deferred compensation accounts,
performance awards, restricted stock unit awards and other awards which are
outstanding on the date of this
10
Agreement ("JP Stock Rights"). Schedule 2.3(b) to the JP Disclosure Letter sets
forth, as applicable, for each JP Stock Option and JP Stock Right the name of
the grantee, the date of the grant, the number of shares of JP Common Stock,
Price Group Stock or other equity securities of JP subject to each option or
other award, and the exercise price per share. On the date of this Agreement,
except as set forth in this Section 2.3 or in Schedule 2.3(b) to the JP
Disclosure Letter, no shares of JP Common Stock, Price Group Stock, preferred
stock of JP or Excess Stock were outstanding or reserved for issuance.
(c) Except as set forth in Schedule 2.3(c) to the JP Disclosure Letter, all
outstanding shares of JP Common Stock and Price Group Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive or
similar rights under law or the JP Articles or JP By-Laws or any contract or
instrument to which JP is a party or by which it is bound. There are no bonds,
debentures, notes or other indebtedness of JP or any JP Subsidiary having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of JP may vote.
(d) Other than (i) as set forth in this Section 2.3 or in Schedule 2.3(b),
2.3(c) or 2.3(d) to the JP Disclosure Letter, (ii) non-preferred units of
limited partnership in PDC LP ("PDC Common OP Units"), which may be exchanged
for cash or, at the option of JP, JP Common Stock at a rate of one share of JP
Common Stock for each JP Common OP Unit, (iii) the 8.75% Series A Cumulative
Redeemable Preferred Units of limited partnership interest (the "PDC Series A OP
Units") of PDC LP, which are exchangeable in accordance with their terms, for
shares of JP Series A Preferred Stock, (iv) the 8.95% Series B Cumulative
Preferred Units of limited partnership interest of PDC LP (the "PDC Series B OP
Units"), which are exchangeable in accordance with their terms, for shares of JP
Series B Preferred Stock, (v) the 8.75% Series C Cumulative Preferred Units of
limited partnership interest of PDC LP (the "PDC Series C OP Units," and
collectively with the PDC Series A OP Units and PDC Series B OP Units, the "PDC
Preferred OP Units"), which are exchangeable in accordance with their terms, for
shares of JP Series C Preferred Stock, (vi) the JP Rights (as defined herein),
which entitle the holders of shares of JP Common Stock to purchase units of JP
Junior Preferred Stock upon the terms and conditions specified therein or, upon
the occurrence of certain events, shares of JP Common Stock, or (vii) the Price
Group Stock, which is convertible at the option of JP into an equal number of
shares of JP Common Stock, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which JP or any JP Subsidiary is a party or by which such entity
is bound, obligating JP or any JP Subsidiary to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of JP or any JP Subsidiary or obligating
JP or any JP Subsidiary to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking
(other than to JP or a JP Subsidiary).
(e) As of the date of this Agreement, 510,000 PDC Series A OP Units,
3,800,000 PDC Series B OP Units, 320,000 PDC Series C OP Units and 19,990,331
PDC Common OP Units are validly issued and outstanding, fully paid and
nonassessable and not subject to preemptive or similar rights under law or the
PDC LP Agreement or any contract or instrument to which JP or PDC LP is a party
or by which either is bound, of which 16,351,769 are owned by JP. The PDC Common
OP Units and the PDC Preferred OP Units are collectively referred to as the "PDC
OP Units." The above-described PDC OP Units are the only authorized and
outstanding partnership interests in PDC LP as of the date of this Agreement.
Schedule 2.3(e) to the JP Disclosure Schedule sets forth the name of each holder
of PDC OP Units and the number and type of PDC OP Units owned by each such
holder as of the date of this Agreement. Except as provided in the PDC LP
Agreement, or as set forth on Schedule 2.3(d) to the JP Disclosure Letter, PDC
LP has not issued or granted and is not a party to any outstanding commitments
of any kind relating to, or any presently effective agreements or understandings
with respect to, the issuance
11
or sale of interests in PDC LP, whether issued or unissued, or securities
convertible or exchangeable into interests in PDC LP.
(f) All dividends on JP Common Stock and Price Group Stock and all
distributions on PDC OP Units, which have been declared prior to the date of
this Agreement, have been paid in full. Neither JP nor PDC LP is in arrears with
respect to dividends or other distributions on any of its outstanding shares of
capital stock or partnership interests.
(g) Set forth on Schedule 2.3(g) to the JP Disclosure Letter is a list of
each registration rights agreement or other agreement between JP and/or PDC LP,
on the one hand, and one or more other parties, on the other hand, which sets
forth the obligations of JP and/or PDC LP with respect to the registration of
any securities of JP, PDC LP and/or any other JP Subsidiary pursuant to the
Securities Act of 1933, as amended (the "Securities Act").
2.4 Other Interests. Except for interests in the JP Subsidiaries, interests
valued at less than $100,000 and certain other entities as set forth in Schedule
2.4 to the JP Disclosure Letter (the "JP Other Interests"), none of JP, PDC LP
or any other JP Subsidiary owns directly or indirectly any interest or
investment (whether equity or debt) in any Person (other than investments in
short-term investment securities and notes receivable from tenants). With
respect to the JP Other Interests, PDC LP owns such interests free and clear of
all Liens other than pledges, if any, contained in organizational documents of
such JP Other Interests and given to secure performance thereunder. Other than
any breach which, individually or in the aggregate, would not have a JP Material
Adverse Effect, none of JP, PDC LP or any other JP Subsidiary is in breach of
any provision of any agreement, document or contract relating to the JP Other
Interests, all of which agreements, documents and contracts are (a) listed in
Schedule 2.4 to the JP Disclosure Letter, (b) unmodified except as described
therein and (c) in full force and effect. To the Knowledge of JP, the other
parties to any such agreement, document or contract which is of a material
nature are not in material breach of any of their respective obligations under
such agreements, documents or contracts.
2.5 Authority; Noncontravention; Consents.
(a) JP has the requisite corporate power and authority to enter into this
Agreement and, subject to (i) the requisite JP stockholder approval of this
Agreement and the Merger (the "JP Stockholder Approval"), and (ii) the requisite
approval of the holders of PDC OP Units, as specified in Schedule 2.5(a) to the
JP Disclosure Letter, of this Agreement, the PDC LP Amendment described in
Schedule 2.5(a) to the JP Disclosure Letter (the "PDC LP Amendment") and the
Partnership Merger (collectively, the "JP Partner Approvals"), to consummate the
transactions contemplated by this Agreement to which JP is a party. PDC LP has
the requisite power and authority to enter into this Agreement and, subject to
the requisite JP Partner Approvals, to consummate the transactions contemplated
by this Agreement to which PDC LP is a party. The execution and delivery of this
Agreement by JP and PDC LP and the consummation by JP and PDC LP of the
transactions contemplated by this Agreement to which they are parties have been
duly authorized by all necessary action on the part of JP and PDC LP, except for
and subject to the JP Stockholder Approval and the JP Partner Approvals. This
Agreement has been duly executed and delivered by JP and PDC LP and constitutes
a valid and binding obligation of each of JP and PDC LP, enforceable against
each of them in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity.
(b) Except as set forth in Schedule 2.5(b)(1) to the JP Disclosure Letter
and subject to obtaining the JP Stockholder Approval and the JP Partner
Approvals, the execution and delivery of this Agreement by JP and PDC LP do not,
and the consummation of the transactions contemplated by this
12
Agreement to which either of JP or PDC LP is a party and compliance by JP and
PDC LP with the provisions of this Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to material loss of a benefit under,
or give rise to a right of purchase under, or result in the creation of any Lien
upon any of the properties or assets of JP or any JP Subsidiary under, (i) the
JP Articles or JP Bylaws or the comparable charter or organizational documents
or partnership, operating, or similar agreement (as the case may be) of any JP
Subsidiary, each as amended or supplemented, (ii) any Material Contract (as
defined herein) applicable to JP or any JP Subsidiary or the respective
properties or assets of JP or any JP Subsidiary or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
(collectively, "Laws") applicable to JP or any JP Subsidiary, or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights, loss or Liens that,
individually or in the aggregate, would not (x) have a JP Material Adverse
Effect or (y) prevent or delay the consummation of the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required by
or with respect to JP or any JP Subsidiary in connection with the execution and
delivery of this Agreement by JP or the consummation by JP of the transactions
contemplated by this Agreement, except for (i) the filing with the Securities
and Exchange Commission (the "SEC") of the Proxy Statement (as defined herein),
(ii) the filing and acceptance for record of the Maryland Articles of Merger by
the Department, (iii) the filing and acceptance for record of the Delaware
Certificate of Merger with the Secretary of State, (iv) the filing and
acceptance for record of the Maryland Articles of Partnership Merger by the
Department or (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule
2.5(b)(2) to the JP Disclosure Letter, (B) as may be required under (w) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (x) laws requiring transfer, recordation or gains tax filings, (y)
federal, state or local environmental laws or (z) the blue sky laws of various
states, to the extent applicable, or (C) which, if not obtained or made, would
not prevent or delay in any material respect the consummation of any of the
transactions contemplated by this Agreement or otherwise prevent JP or PDC LP
from performing their obligations under this Agreement in any material respect
or reasonably be expected to have, individually or in the aggregate, a JP
Material Adverse Effect.
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities. Each of
JP and PDC LP has filed all required reports, schedules, forms, statements and
other documents with the SEC since January 1, 1997 through the date hereof
(collectively, the "JP SEC Documents"). Schedule 2.6(a) to the JP Disclosure
Letter contains a true, complete and correct list of all JP SEC Documents filed
by JP or PDC LP with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), between January 1, 1997 and the date of this
Agreement. All of the JP SEC Documents (other than preliminary material), as of
their respective filing dates, complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and, in each
case, the rules and regulations promulgated thereunder applicable to such JP SEC
Documents. None of the JP SEC Documents at the time of filing contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent such statements have been modified or
superseded by later JP SEC Documents filed and publicly available prior to the
date of this Agreement. The consolidated financial statements of JP and PDC LP,
respectively, included in the JP SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of unaudited statements, as permitted by the applicable rules and
regulations of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
in all material respects, in accordance with the applicable requirements of GAAP
and the applicable rules and
13
regulations of the SEC, the consolidated financial position of (a) in the case
of JP, JP and the consolidated JP Subsidiaries taken as a whole, and (b) in the
case of PDC LP, PDC LP and its consolidated JP Subsidiaries taken as a whole, in
each case, as of the dates thereof, and the consolidated results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
Schedule 2.6(b) to the JP Disclosure Letter, JP has no Subsidiaries which are
not consolidated for accounting purposes. Except for liabilities and obligations
set forth in the JP SEC Documents or in Schedule 2.6(c) to the JP Disclosure
Letter or incurred by JP or any JP Subsidiary in the ordinary course of business
since December 31, 2001, none of JP or any JP Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of JP or in the
notes thereto and which, individually or in the aggregate, would have a JP
Material Adverse Effect.
2.7 Absence of Certain Changes or Events. Except as disclosed in the JP SEC
Documents or in Schedule 2.7 to the JP Disclosure Letter, since the date of the
most recent audited financial statements included in the JP SEC Documents (the
"JP Financial Statement Date"), JP and the JP Subsidiaries have conducted their
business only in the ordinary course (taking into account prior practices,
including the acquisition and disposition of properties and issuance of
securities) and there has not been (a) a JP Material Adverse Effect through the
date hereof, (b) except for regular quarterly distributions not in excess of
$0.51 per share of JP Common Stock or JP Common OP Unit, $0.408 per share of
Price Group Stock, $0.546875 per JP Series A OP Unit, $0.559375 per JP Series B
OP Unit and $0.546875 per JP Series C OP Unit (or, in each case, with respect to
the period commencing on the date hereof and ending on the Closing Date,
distributions as necessary to maintain REIT (as defined herein) status), in each
case, with customary record and payment dates (subject to Section 5.9), any
authorization, declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the JP Common
Stock, Price Group Stock or the PDC OP Units or any other equity security of JP
or PDC LP, (c) any split, combination or reclassification of the JP Common
Stock, the Price Group Stock or the PDC OP Units or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for, or giving the right to acquire by exchange or exercise,
shares of stock of JP or partnership interests in PDC LP, or any issuance of an
ownership interest in any other JP Subsidiary, (d) any damage, destruction or
loss through the date hereof, whether or not covered by insurance, that,
individually or in the aggregate, has or would have a JP Material Adverse
Effect, (e) any change in accounting methods, principles or practices by JP or
any JP Subsidiary materially affecting its assets, liabilities or business,
except insofar as may have been disclosed in JP SEC Documents or required by a
change in GAAP, or (f) except as expressly contemplated by this Agreement, any
amendment of any employment, consulting, severance, retention or any other
agreement between JP or any JP Subsidiary and any of their respective officers,
directors or managers.
2.8 Litigation. Except as disclosed in the JP SEC Documents or in Schedule
2.8 to the JP Disclosure Letter, and other than personal injury and other
routine tort litigation arising from the ordinary course of operations of JP and
the JP Subsidiaries (a) which are covered by adequate insurance subject to a
reasonable deductible or retention limit or (b) for which all material costs and
liabilities arising therefrom are reimbursable pursuant to common area
maintenance or similar agreements, there is no suit, action or proceeding
pending (in which service of process has been received by an employee of JP or a
JP Subsidiary) or, to the Knowledge of JP, threatened against or affecting JP or
any JP Subsidiary that, individually or in the aggregate, would reasonably be
expected to (i) have a JP Material Adverse Effect or (ii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any court or
Governmental Entity or arbitrator outstanding against JP, any JP Subsidiary
having, or which, insofar as reasonably can be foreseen, in the future would
reasonably be expected to have, any such effect. Notwithstanding the foregoing,
no claim has been made under any directors' and officers' liability insurance
policy maintained at any time by JP or any of the JP Subsidiaries.
14
2.9 Properties.
(a) Except as provided in Schedule 2.2 to the JP Disclosure Letter, JP or
the JP Subsidiary set forth on Schedule 2.2 to the JP Disclosure Letter owns fee
simple title to or holds a leasehold interest in each of the real properties
identified in Schedule 2.2 to the JP Disclosure Letter (the "JP Properties"),
which are all of the real estate properties owned by them, in each case (except
for the Permitted Title Exceptions (as defined herein) free and clear of Liens
or other encumbrances on title ("Encumbrances"). Schedule 2.2 to the JP
Disclosure Letter further identifies which of the JP Properties are owned in fee
simple by JP or a JP Subsidiary, and which of the JP Properties are subject to a
ground lease. Except as set forth in Schedule 2.2 to the JP Disclosure Letter,
no other Person has any ownership interest in any of the JP Properties, and any
such ownership interest so scheduled does not materially detract from the value
of the JP Subsidiary's interest in, or materially interfere with the present use
of, any of the JP Properties subject thereto or affected thereby. Except as set
forth in Schedule 2.9(a) to the JP Disclosure Letter, none of the JP Properties
is subject to any restriction on the sale or other disposition thereof
(including, without limitation, rights of first refusal) or on the financing or
release of financing thereon. The JP Properties are not subject to any rights of
way, written agreements, laws, ordinances and regulations affecting building,
development, use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions") or Encumbrances, except for the
following (collectively, the "Permitted Title Exceptions"): (i) Property
Restrictions and Encumbrances set forth in Schedule 2.9(a) to the JP Disclosure
Letter or those that will not have a JP Material Adverse Effect, (ii) Property
Restrictions imposed or promulgated by law or any Governmental Entity with
respect to real property, including zoning regulations, which, to the knowledge
of JP, are not violated by the current use of the Properties, (iii) the JP Space
Leases, the Ground Leases, other leases and the REAs, (iv) Property Restrictions
and Encumbrances disclosed on the Existing Title Policies (as defined herein),
the title reports listed in Schedule 2.9(a) to the JP Disclosure Letter or
existing surveys (true, complete and correct copies of which surveys have been
delivered to GGP and GGP Partnership) (provided, however, that ground leases and
mortgage indebtedness shall not be Permitted Title Exceptions unless
specifically noted on Schedules 2.9(f) and 2.5(b)(i) to the JP Disclosure
Letter), and (v) Liens for real estate Taxes not yet due and payable,
mechanics', carriers', workmen's, and repairmen's liens, if any, which,
individually or in the aggregate, do not materially detract from the value of or
materially interfere with the present use of any of the JP Properties subject
thereto or affected thereby. Schedule 2.9(a) to the JP Disclosure Letter lists
each of the JP Properties which are under development or substantial renovation
as of the date of this Agreement and describes generally the status of such
development or renovation as of the date hereof.
(b) Schedule 2.9(b) to the JP Disclosure Letter sets forth a list of
policies of title insurance (the "Existing Title Policies") that have been
issued insuring the applicable JP Subsidiary's fee simple title or leasehold
estate, as the case may be, to the JP Properties owned by it. True, complete and
correct copies of such policies have been provided or made available to GGP.
Such policies are, at the date hereof, in full force and effect. Except as
provided in Schedule 2.9(b) to the JP Disclosure Letter, no claim has been made
against any such policy.
(c) Except as provided in Schedule 2.9(c) to the JP Disclosure Letter, JP
has received no written notice and otherwise has no Knowledge (i) that any
certificate, permit or license from any Governmental Entity having jurisdiction
over any of the JP Properties, or any agreement, easement or other right, which
is in either case necessary, in any material respect, to permit the lawful use
and operation of the buildings and improvements on any of the JP Properties or
which is necessary, in any material respect, to permit the lawful use and
operation of all driveways, roads and other means of egress and ingress to and
from any of the JP Properties, has not been obtained or is not in full force and
effect, or of any pending threat of modification or cancellation of any of the
same which would have a material adverse effect on such JP Property, or (ii) of
any violation of any federal, state or municipal law,
15
ordinance, order, regulation or requirement affecting any of the JP Properties
issued by any Governmental Entity which would have a material adverse effect on
such JP Property.
(d) Neither JP nor any JP Subsidiary has received any written or published
notice to the effect that (i) any condemnation or rezoning proceedings are
pending or threatened with respect to any of the JP Properties or (ii) any
zoning, building or similar law, code, ordinance, order or regulation is or will
be violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the JP Properties or by the continued maintenance,
operation or use of the parking areas which would have a material adverse effect
on such Property.
(e) Schedule 2.9(e) sets forth the rent rolls for each JP Property, which
rent rolls are not dated earlier than December 31, 2001 (the "JP Rent Roll"). JP
has made available to GGP and GGP Partnership true, complete and correct copies
of all JP Space Leases as defined herein, including all amendments,
modifications, supplements, renewals, extensions and guarantees related thereto,
as of the date hereof. "JP Space Lease" means each lease or other right of
occupancy affecting or relating to a property in which JP, PDC LP or any other
JP Subsidiary (or an entity in which any of the foregoing directly or indirectly
has an interest) is the landlord, either pursuant to the terms of the lease
agreement or as successor to any prior landlord, but excluding any Ground Lease
(as defined herein) and excluding any lease, license or occupancy agreement with
a term of less than 6 months and/or terminable upon not more than 30 days
notice. Except for discrepancies that, either individually or in the aggregate,
would not have a material adverse effect on the applicable JP Property, all
information set forth in the JP Rent Roll is true, complete and correct as of
the date thereof. Except as set forth in a delinquency report made available to
GGP and GGP Partnership, none of JP or any JP Subsidiary, on the one hand, nor,
to the Knowledge of JP, any other party, on the other hand, is in default
(whether monetary or non-monetary) under any JP Space Lease, except for such
defaults that individually or in the aggregate, would not have a JP Material
Adverse Effect.
(f) With regard to any JP Property where JP or any JP Subsidiary holds a
leasehold estate or is the lessor under any ground lease (a "Ground Lease"),
each such Ground Lease (and whether JP or such JP Subsidiary is lessor or lessee
with respect thereto) is identified on Schedule 2.9(f) to the JP Disclosure
Letter and JP has provided to GGP and GGP Partnership true, complete and correct
copies of all Ground Leases, including all amendments, modifications,
supplements, renewals, extensions and guaranties related thereto, as of the date
hereof. Each Ground Lease is a valid and subsisting lease and none of JP or any
JP Subsidiary, on the one hand, nor, to the Knowledge of JP, none of the other
parties under the Ground Lease, on the other hand, is in default under any terms
thereunder, except for such defaults that, individually or in the aggregate,
would not have a JP Material Adverse Effect.
(g) With regard to any JP Property where JP or any JP Subsidiary is a party
to a reciprocal easement agreement, operating agreement or similar agreement
imposing obligations on, and granting rights to, a JP Property and an adjacent
property owned by a third party (any such agreement, a "REA"), each such REA is
identified on Schedule 2.9(g) to the JP Disclosure Letter and JP has provided to
GGP and GGP Partnership true, complete and correct copies of all REAs, including
all amendments, modifications, supplements, renewals, extensions and guaranties
related thereto, as of the date hereof. Each REA is a valid agreement and none
of JP or any JP Subsidiary, on the one hand, nor, to the Knowledge of JP, any
other party to a REA, on the other hand, is in default under any terms
thereunder, except for such defaults that, individually or in the aggregate,
would not have a JP Material Adverse Effect.
(h) To the Knowledge of JP, there are no pending threats of modification or
cancellation of any Property Permits that, individually or in the aggregate,
would have a material adverse effect on the JP Property for which such Property
Permits are required, and no Property Permit for any JP
16
Property will cease to be effective as a result of the consummation of
transactions contemplated by this Agreement which would have a material adverse
effect on such JP Property.
(i) Schedule 2.9(i) to the JP Disclosure Letter contains a true, complete
and correct list, by type of insurance, carrier, coverages (including limits)
and term, of all material policies of casualty, liability and other types of
insurance (except title insurance) carried by JP or any JP Subsidiary, as
applicable, with respect to the JP Properties. All such policies are in full
force and effect and none of JP or any JP Subsidiary, as applicable, has
received from any insurance company notice of any material defects or
deficiencies affecting the insurability of JP or any JP Subsidiary, as
applicable, or any of their respective assets thereunder, including the JP
Properties.
2.10 Environmental Matters.
(a) "Environmental Law" shall mean all applicable Laws, including any
plans, other criteria, or guidelines promulgated pursuant to such Laws, relating
to the protection of human health, safety and natural resources, animal health
or welfare or the environment, including, without limitation, Laws relating to
the use, manufacturing, production, generation, installation, recycling, reuse,
sale, storage, handling, transport, treatment, release, threatened release or
disposal of any Hazardous Materials (including the Comprehensive Environmental
Response, Compensation, and Liability Act, as amended, 42 U.S.C. ss.ss. 9601 et
seq. ("CERCLA")). "Hazardous Materials" shall mean substances, wastes, radiation
or materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic, (ii) which are
listed, regulated or defined under any Environmental Law, and shall include
"hazardous wastes," "hazardous substances," "hazardous materials," "pollutants,"
"contaminants," "toxic substances," "radioactive materials" or "solid wastes,"
(iii) which contain without limitation polychlorinated biphenyls (PCBs),
asbestos or asbestos-containing materials, lead-based paints, urea-formaldehyde
foam insulation, or petroleum or petroleum products (including, without
limitation, crude oil or any fraction thereof) or (v) which pose a hazard to
human health, safety, natural resources, industrial hygiene, or the environment.
"Release" shall have the meaning set forth in Section 101 of CERCLA, without
regard to the exclusions set forth therein.
(b) Except as disclosed in the JP SEC Documents or in Schedule 2.10(b) to
the JP Disclosure Letter or in the environmental audits or reports listed
thereon,
(i) none of JP, any of the JP Subsidiaries or, to JP's Knowledge, any
other Person has caused or permitted the presence of any Hazardous
Materials at, on or under any of the JP Properties and JP does not have any
Knowledge of the presence of any Hazardous Materials at, on or under any of
the JP Properties, such that the presence of such Hazardous Materials
(including the presence of asbestos in any buildings or improvements at the
JP Properties) would, individually or in the aggregate, reasonably be
expected to have a JP Material Adverse Effect;
(ii) except in accordance with the Environmental Permits (as defined
herein), to the Knowledge of JP, there have been no Releases of Hazardous
Materials at, on, under or from (A) the JP Properties or (B) any real
property previously owned, operated or leased by JP or the JP Subsidiaries
(the "Former JP Properties"), in the case of (B), during the period of JP's
or a JP Subsidiary's ownership, operation or tenancy, which with respect to
any such Releases as described in this clause (ii) would, individually or
in the aggregate, reasonably be expected to have a JP Material Adverse
Effect;
(iii) JP and the JP Subsidiaries have not received any written notice
that any of them has failed to comply with Environmental Laws, or has any
liability under the
17
Environmental Laws, except to the extent that such failures to comply and
liabilities, individually or in the aggregate, would not reasonably be
expected to have a JP Material Adverse Effect; and
(iv) JP and the JP Subsidiaries have been duly issued, and currently
have and will maintain through the Closing Date, all permits, licenses,
certificates and approvals required under any Environmental Law
(collectively, the "Environmental Permits") to operate their businesses as
currently operated except where the failure to obtain and maintain such
Environmental Permits would not, individually or in the aggregate,
reasonably be expected to have a JP Material Adverse Effect. JP and the JP
Subsidiaries have timely filed applications for all Environmental Permits,
except where failure to do so would not have a JP Material Adverse Effect.
(c) JP has previously delivered or made available to GGP true, complete and
correct copies of all material third party reports, including, without
limitation, environmental site assessment reports and environmental
investigations and testing or analysis that are dated within 5 years of the date
of this Agreement and are, to the Knowledge of JP, in the possession or control
of JP or any of the JP Subsidiaries and which relate to the presence or release
of Hazardous Materials, or any non-compliance with Environmental Laws by any of
them.
2.11 Related Party Transactions. Set forth in Schedule 2.11 to the JP
Disclosure Letter is a list of all material arrangements, agreements and
contracts entered into by JP or any JP Subsidiary with (a) any investment banker
or financial advisor, or (b) any Person who is an officer, director or Affiliate
(as defined herein) of JP, any JP Subsidiary, any relative of any of the
foregoing, or any entity of which any of the foregoing is an Affiliate or (c)
any Person who acquired JP Common Stock, Price Group Stock or PDC OP Units, in
each case, which remain in effect. True, complete and correct copies of all of
such documents have previously been delivered or made available to JP, and are
listed in Schedule 2.11 to the JP Disclosure Letter. As used in this Agreement,
the term "Affiliate" shall have the same meaning as such term is defined in Rule
405 promulgated under the Securities Act.
2.12 Employee Benefits. As used herein, the term "Employee Plan" includes
any pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, fringe benefit, profit sharing, deferred
compensation, stock option or grant, bonus, incentive, vacation pay, tuition
reimbursement, severance pay, or other employee benefit plan, trust, agreement,
contract, policy or commitment (including, without limitation, any pension plan,
as defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder ("ERISA")
("Pension Plan"), and any welfare plan as defined in Section 3(1) of ERISA
("Welfare Plan")), whether any of the foregoing is funded, insured or
self-funded, written or oral, (i) sponsored or maintained by JP, any JP
Subsidiary or any entity that presently would be deemed to be a single employer
with JP or any JP Subsidiary under Section 414(b), (c), (m) or (o) of the Code
(each, a "Controlled Group Member") and covering any Controlled Group Member's
active or former employees (or their beneficiaries), (ii) to which any
Controlled Group Member is a party or by which any Controlled Group Member (or
any of the rights, properties or assets thereof) is bound or (iii) with respect
to which any Controlled Group Member may otherwise have any material liability
(whether or not such Controlled Group Member still maintains such Employee
Plan). Each Employee Plan is listed on Schedule 2.12 to the JP Disclosure
Letter. Except as disclosed in Schedule 2.12 to the JP Disclosure Letter, with
respect to the Employee Plans:
(a) No Controlled Group Member has any liability under any Welfare Plan or
otherwise for continuing benefits or coverage for any participant or any spouse
or beneficiary of a participant after such participant's termination of
employment, except as may be required by Section
18
4980B of the Internal Revenue Code of 1986, as amended (the "Code"), or Section
601 (et seq.) of ERISA, or under any applicable state law.
(b) Each Employee Plan complies in all material respects with the
applicable requirements of ERISA and any other applicable law governing such
Employee Plan, and each Employee Plan has at all times been properly
administered in all material respects in accordance with all such requirements
of law, and in accordance with its terms and the terms of any applicable
collective bargaining agreement to the extent consistent with all such
requirements of law. Each Pension Plan which is intended to be qualified under
Section 401(a) of the Code ("Qualified Pension Plan") has received a favorable
determination letter from the IRS stating that such Plan meets the requirements
of Section 401(a) of the Code and that the trust associated with such Plan, if
any, is tax-exempt under Section 501(a) of the Code and no event has occurred
which would reasonably be expected to jeopardize the qualified status of any
such plan or the tax exempt status of any such trust under Sections 401(a) and
Section 501(a) of the Code, respectively. Each Qualified Pension Plan has been
or will be timely amended for the requirements of the tax legislation commonly
known as "GUST" and will be submitted to the Internal Revenue Service for a
favorable determination letter within the remedial amendment period prescribed
by "GUST." None of the Employee Plans is a multiple employer plan subject to
Section 413(c) of the Code or a multiple employer welfare arrangement as defined
in Section 3(40) of ERISA. None of the Employee Plans is currently subject to an
audit, investigation or review by a Governmental Entity pursuant to a voluntary
compliance program or otherwise. No lawsuits, claims (other than routine claims
for benefits) or complaints to, or by, any Person or Governmental Entity have
been filed, are pending or, to the Knowledge of JP, are threatened with respect
to any Employee Plan and, to the Knowledge of JP, there is no fact or
contemplated event which would reasonably be expected to give rise to any such
lawsuit, claim (other than routine claims for benefits) or complaint with
respect to any Employee Plan. Without limiting the foregoing, the following are
true with respect to each Employee Plan:
(i) all Controlled Group Members have complied in all material
respects with the reporting and disclosure requirements of ERISA, the Code,
or both, with respect to each Employee Plan and no Controlled Group Member
has incurred any material liability in connection with such reporting or
disclosure;
(ii) all contributions and payments with respect to Employee Plans
that are required to be made by a Controlled Group Member with respect to
periods ending on or before the Closing Date (including periods from the
first day of the current plan or policy year to the Closing Date) have
been, or will be, made or accrued before the Closing Date in accordance
with the appropriate plan document, actuarial report, collective bargaining
agreements or insurance contracts or arrangements or as otherwise required
by ERISA or the Code; and
(iii) to the extent applicable, JP has delivered to GGP and GGP
Partnership true, complete and correct copies of (A) plan documents, or any
and all other documents that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all amendments thereto, (B)
the most recent determination letter, if any, received from the Internal
Revenue Service, (C) the three most recent Form 5500 Annual Reports (and
all schedules and reports relating thereto) and actuarial reports and (D)
all related trust agreements, insurance contracts or other funding
agreements that implement each such Employee Plan.
(c) With respect to each Employee Plan there has not occurred, and no
Person is contractually bound to enter into, any prohibited transaction within
the meaning of Section 4975(c) of the Code or Section 406 of ERISA, which
transaction is not exempt under Section 4975(d) of the Code or Section 408 of
ERISA and which could subject JP or any Controlled Group Member to material
liability.
19
(d) No Controlled Group Member has ever maintained, participated in or been
obligated to contribute to any Pension Plan subject to Code Section 412 or Title
IV of ERISA, including without limitation, to a multiemployer plan as defined in
Section 3(37) of ERISA. No Controlled Group Member or any trade or business
which is or has been for the last six years under common control with a
Controlled Group Member under Section 414 of the Code or Section 4001(b) of
ERISA ("ERISA Affiliate") has (while under common control) incurred any
liability under Title IV of ERISA or Section 412 of the Code and no event or
condition exists with respect to a Pension Plan, including, without limitation,
a multiemployer plan as defined in Section 3(37) of ERISA which could give rise
to a lien on any of the assets of a Controlled Group Member or an ERISA
Affiliate.
(e) With respect to each Welfare Plan maintained by any Controlled Group
Member, such Plan provides the Plan Sponsor the authority to amend or terminate
such Welfare Plan at any time, without liability after such amendment or
termination for continuation of benefits provided prior to such amendment or
termination.
(f) Except as provided in Section 5.7(c), Section 5.7(e) or as disclosed in
Schedule 2.12 of the JP Disclosure Letter, no employee of a Controlled Group
Member will become entitled to any retirement, severance or similar benefit or
enhanced or accelerated benefit solely as a result of the transactions
contemplated hereby. Except as disclosed in Schedule 2.12 of the JP Disclosure
Letter, without limiting the generality of the foregoing, no amount required to
be paid or payable to or with respect to any employee of a Controlled Group
Member in connection with the transactions contemplated hereby (either solely as
a result thereof or as a result of such transactions in conjunction with any
other event) will be an "excess parachute payment" within the meaning of Section
280G of the Code.
2.13 Employees; Employee Policies. A true, complete and correct list of (a)
the names, job titles, annual salaries and all bonuses of all salaried employees
of JP and the JP Subsidiaries, and (b) the wage rates for all non-salaried
employees of JP and the JP Subsidiaries as of the date hereof, and true,
complete and correct copies of all employee handbooks of JP and the JP
Subsidiaries currently in effect, have been provided to GGP and GGP Partnership
separately. None of JP or any of the JP Subsidiaries is subject to a union
organizing effort or a party to a union contract or collective bargaining
agreement. None of JP or any of the JP Subsidiaries is a party to any pending,
or to the Knowledge of JP, threatened labor dispute. JP and the JP Subsidiaries
are in material compliance with employment and labor laws. There are no claims
pending, or to the Knowledge of JP, threatened to be brought, in any court or
administrative agency or before any arbitrator by any former or current
employees of JP or the JP Subsidiaries (i) for compensation, severance benefits,
vacation pay or pension benefits or (ii) arising out of the status of JP or any
of the JP Subsidiaries as an employer, whether in the form of claims for
employment discrimination, harassment, unfair labor practices, grievances,
wrongful discharge or otherwise.
2.14 Taxes.
(a) Each of JP and the JP Subsidiaries (i) has filed all Tax returns and
reports required to be filed by it (after giving effect to any filing extension
properly granted by a Governmental Entity having authority to do so) and all
such returns and reports are accurate and complete in all material respects,
(ii) has paid (or JP has paid on its behalf) all Taxes (as defined herein) shown
on such returns and reports as required to be paid by it, and (iii) has complied
in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441, 1442, 1445, 3121, and 3402 of
the Code or similar provisions under any foreign laws) and has, within the time
period prescribed by law, withheld and paid over to the proper Governmental
Entities all amounts required to be so withheld and paid over under applicable
laws and regulations, except, with respect to all of the foregoing clauses
(a)(i), (a)(ii) and
20
(a)(iii), where the failure to file such Tax returns and reports or failure to
pay such Taxes or failure to comply with such withholding requirements would
not, individually or in the aggregate, reasonably be expected to have a JP
Material Adverse Effect. The most recent audited financial statements contained
in the JP SEC Documents reflect an adequate reserve for all material Taxes
payable by JP and the JP Subsidiaries for all taxable periods and portions
thereof through the JP Financial Statement Date. Since the JP Financial
Statement Date, JP has incurred no liability for material Taxes under Sections
857(b), 860(c) or 4981 of the Code, including without limitation, any Tax
arising from a prohibited transaction described in Section 857(b)(6) of the
Code, and none of JP or any JP Subsidiary has incurred any material liability
for Taxes other than in the ordinary course of its trade or business and other
than transfer or similar Taxes arising in connection with the sales of property.
No event has occurred, and no condition or circumstance exists, which could
reasonably be expected to result in any Tax described in the preceding sentence
being imposed upon JP or any JP Subsidiary. None of JP or any JP Subsidiary is
the subject of any audit, examination, or other proceeding in respect of federal
income Taxes, and to JP's Knowledge, no audit, examination or other proceeding
in respect of federal income Taxes involving any of JP or any JP Subsidiary is
being considered by any Tax authority. To the Knowledge of JP, no deficiencies
for any Taxes have been proposed, asserted or assessed against JP or any JP
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending. Except as set forth in Schedule 2.14 of the JP Disclosure Letter, none
of JP or any JP Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that could obligate it to make any
payments that are not fully deductible under Sections 162(m) or 280G of the
Code. None of the assets of JP or any JP Subsidiary is subject to any Lien
arising in connection with any failure or alleged failure to pay any Tax. As
used in this Agreement, "Taxes" shall include all taxes, charges, fees, levies
and other assessments, including, without limitation, income, gross receipts,
excise, property, sales, withholding (including, without limitation, dividend
withholding and withholding required pursuant to Sections 1445 and 1446 of the
Code), social security, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, including estimated taxes,
imposed by the United States or any taxing authority (domestic or foreign),
whether computed on a separate, consolidated, unitary, combined or any other
basis, and any interest, fines, penalties or additional amounts attributable to,
or imposed upon, or with respect to any such taxes, charges, fees, levies or
other assessments.
(b) JP (i) for all taxable years for which the Internal Revenue Service
could assert a tax liability, has been subject to taxation as a real estate
investment trust (a "REIT") within the meaning of Section 856 of the Code and
has satisfied all requirements to qualify as a REIT for all such years, (ii) has
operated since December 31, 2001 to the date of this representation, and will
continue to operate, in such a manner as to qualify as a REIT for the taxable
year ending on the earlier of December 31, 2002 or the Closing Date and, if
later, for the taxable year of JP ending on the Closing Date (provided that, for
purposes of applying Section 857 of the Code for the taxable year of JP ending
on the Closing Date, the earnings and profits of JP for such taxable year shall
be computed assuming that (A) Section 562(e) of the Code applies to the deemed
sale of JP's assets pursuant to the Merger and (B) that the Merger will be
treated for federal income tax purposes in the manner described in paragraph G
of the Recitals hereof), and (iii) has not taken or omitted to take any action
which would reasonably be expected to result in a challenge to its status as a
REIT and, to JP's Knowledge, no such challenge has been proposed, is pending or
threatened. Each JP Subsidiary which is a partnership, joint venture or limited
liability company has been since its formation and continues to be treated for
federal income tax purposes as a partnership or disregarded entity and not as a
corporation or an association taxable as a corporation. PDC LP is not a
publicly-traded partnership within the meaning of Section 7704(b) of the Code
that is taxable as a corporation pursuant to Section 7704(a) of the Code. Each
JP Subsidiary which is a corporation has been since its formation a qualified
REIT subsidiary under Section 856(i) of the Code. Neither JP nor any JP
Subsidiary holds any asset (x) the disposition of which would be subject to
rules similar to Section 1374 of the Code as a result of an election under IRS
Notice 88-19 or Temporary Treas. Reg. Sec. 1.337(d)-5T or (y) which is subject
to a consent filed pursuant to Section 341(f) of the Code and the regulations
21
thereunder. JP does not own, directly or indirectly, any interest in any
"taxable REIT subsidiary," as that term is defined by Section 856(l) of the
Code.
2.15 No Payments to Employees, Officers or Directors. Schedule 2.15 to the
JP Disclosure Letter contains a true, complete and correct list of all
arrangements, agreements or plans pursuant to which cash and non-cash payments
will become payable, and the maximum aggregate amount which may be payable
thereunder to each employee, officer or director of JP or any JP Subsidiary as a
result of the Mergers or a termination of service subsequent to the consummation
of the Mergers. Except as described in Schedule 2.15 to the JP Disclosure
Letter, or as otherwise provided for in this Agreement, there is no employment
or severance contract, or other agreement requiring payments, cancellation of
indebtedness or other obligation to be made on a change of control or otherwise
as a result of the consummation of any of the transactions contemplated by this
Agreement or as a result of a termination of service subsequent to the
consummation of any of the transactions contemplated by this Agreement, with
respect to any employee, officer or director of JP or any JP Subsidiary. There
is no agreement or arrangement with any employee, officer or other service
provider under which JP or any JP Subsidiary has agreed to pay any Tax that
might be owed under Section 4999 of the Code with respect to payments to such
individuals. Schedule 2.15 to the JP Disclosure Letter contains a true, complete
and correct list of each indemnification or similar agreement under which JP or
any JP Subsidiary has agreed to indemnify any current or former director,
officer, manager, trustee or employee of any such entity.
2.16 Broker. Except as set forth in Schedule 2.16 to the JP Disclosure
Letter, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of JP or any JP Subsidiary.
2.17 Compliance with Laws. Except as set forth on Schedule 2.17 to the JP
Disclosure Letter, none of JP or any JP Subsidiary has violated or failed to
comply with any Laws applicable to its business, properties or operations,
except to the extent that such violations and failures would not, individually
or in the aggregate, reasonably be expected to have a JP Material Adverse
Effect.
2.18 Contracts; Debt Instruments.
(a) None of JP or any JP Subsidiary has received a written notice that it
is in violation of or in default under any Material Contract, as defined herein,
to which it is a party or by which it or any of its properties or assets is
bound, nor to the Knowledge of JP does such a violation or default exist, except
to the extent that such violation or default, individually or in the aggregate,
would not reasonably be expected to have a JP Material Adverse Effect. For
purposes of this Agreement, "Material Contract" shall mean (i) any loan
agreement, indenture, note, bond, debenture or any other document or agreement
evidencing a capitalized lease obligation or other Indebtedness (as defined
herein) to any Person, (ii) each material instrument, contract or agreement
(exclusive of any JP Space Lease) entered into by JP or any JP Subsidiary which
may result in total payments by or liability of JP or any JP Subsidiary in
excess of $500,000, and (iii) any other agreements filed or required to be filed
as exhibits to the JP SEC Documents pursuant to Item 601(b)(10) of Regulation
S-K under the Securities Act and the Exchange Act. For purposes of this Section
2.18, "Indebtedness" shall mean (A) indebtedness for borrowed money, whether
secured or unsecured, (B) obligations under conditional sale or other title
retention agreements relating to property purchased by such Person, (C)
capitalized lease obligations, (D) obligations under interest rate cap, swap,
collar or similar transaction or currency hedging transactions (valued at the
termination value thereof) and (E) guarantees of any such indebtedness of any
other Person. Schedule 2.18(a) to the JP Disclosure Schedule sets forth a list
of each such Material Contract, which is not listed in any other subpart to the
JP Disclosure Schedule, and the outstanding principal balance of each component
of Indebtedness of JP, PDC LP and each other JP Subsidiary as of the date
specified in
22
the schedule. JP and PDC LP, have not received any notice and otherwise do not
have Knowledge that any other party to any Material Contract is in default
(whether monetary or non-monetary) thereunder, other than such defaults that
individually or in the aggregate would not result in a JP Material Adverse
Effect.
(b) To the extent not set forth in response to the requirements of Section
2.18(a), Schedule 2.18(b) to the JP Disclosure Letter sets forth each interest
rate cap, interest rate collar, interest rate swap, currency hedging
transaction, and any other agreement relating to a similar transaction to which
JP or any JP Subsidiary is a party or an obligor with respect thereto, true,
complete and correct copies of which have been previously delivered or made
available to GGP and GGP Partnership. There are no loans by JP or a JP
Subsidiary to any non wholly-owned JP Subsidiary except as set forth on Schedule
2.18(b) to the JP Disclosure Letter (which Schedule indicates the outstanding
amount of Indebtedness as of the date hereof).
(c) Except as set forth in Schedule 2.18(c) to the JP Disclosure Letter,
none of JP or any JP Subsidiary is a party to any agreement relating to the
management of any JP Property by any Person other than JP or a JP Subsidiary.
(d) None of JP or any JP Subsidiary is a party to any agreement pursuant to
which JP or any JP Subsidiary manages or provides services with respect to any
real properties other than JP Properties, except for the agreements described in
Schedule 2.18(d) to the JP Disclosure Letter, true, complete and correct copies
of which have been delivered to GGP.
(e) JP has delivered to GGP and GGP Partnership prior to the date of this
Agreement a true, complete and correct capital budget for the year 2002 relating
to budgeted capital improvements and development. Schedule 2.18(e) to the JP
Disclosure Letter lists all material agreements entered into by JP or each of
the JP Subsidiaries relating to the development or construction of, or additions
or expansions to, any JP Properties (or any properties with respect to which JP
has executed as of the date of this Agreement a purchase agreement or other
similar agreement) which are currently in effect and under which JP or any of
the JP Subsidiaries currently has, or expects to incur, an obligation in excess
of $250,000 in the aggregate. True, complete and correct copies of such
agreements have previously been delivered or made available to GGP and GGP
Partnership.
(f) Schedule 2.18(f) to the JP Disclosure Letter lists all agreements
entered into by JP or any JP Subsidiary providing for the sale of, or option to
sell, any JP Properties or the purchase of, or option to purchase, by JP or any
JP Subsidiary, on the one hand, or the other party thereto, on the other hand,
any real estate which are currently in effect.
(g) Except as set forth in Schedule 2.18(g) to the JP Disclosure Letter,
none of JP or any JP Subsidiary has any material continuing contractual
liability (A) for indemnification or otherwise under any agreement relating to
the sale of real estate previously owned, whether directly or indirectly, by JP
or any JP Subsidiary or (B) to pay any additional purchase price for any of the
JP Properties.
(h) Except as set forth in Schedule 2.18(h) to the JP Disclosure Letter,
none of JP or any JP Subsidiary has entered into or is subject, directly or
indirectly, to any Tax Protection Agreements. As used herein, a "Tax Protection
Agreement" is an agreement, oral or written, (i) that has as one of its purposes
to permit a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer of
property to PDC LP or any other JP Subsidiary that is treated as a partnership
for federal income tax purposes, and that (A) prohibits or restricts in any
manner the disposition of any assets of JP or any JP Subsidiary, (B) requires
that JP or any JP Subsidiary maintain, or put in place, or replace,
indebtedness, whether or not secured by one or more of the JP
23
Properties, or (C) requires that JP or any JP Subsidiary offer to any Person at
any time the opportunity to guarantee or otherwise assume, directly or
indirectly (including, without limitation, through a deficit restoration
obligation, indemnification agreement or other similar arrangement), the risk of
loss for federal income tax purposes for indebtedness or other liabilities of JP
or any JP Subsidiary, (ii) that specifies or relates to a method of taking into
account book-tax disparities under Section 704(c) of the Code with respect to
one or more assets of JP or a JP Subsidiary, or (iii) that requires a particular
method for allocating one or more liabilities of JP or a JP Subsidiary under
Section 752 of the Code. None of JP or any JP Subsidiary is in violation of or
in default under any Tax Protection Agreement.
(i) Except as set forth in Schedule 2.18(i) to the JP Disclosure Letter and
except for the Nondisclosure Agreement, dated January 31, 2002, between JP and
GGP (the "Confidentiality Agreement"), and other confidentiality agreements
entered into in the ordinary course of business, neither JP nor any JP
Subsidiary is a party to any confidentiality, standstill, lock-up or voting
agreement.
(j) Other than any breach which, individually or in the aggregate, would
not have a JP Material Adverse Effect, none of JP, PDC LP or any other JP
Subsidiary is in breach of any provision of any agreement, document or contract
relating to the capital stock or other equity interests of a non-wholly-owned JP
Subsidiary, all of which agreements, documents and contracts are (a) listed in
Schedule 2.18(j) to the JP Disclosure Letter, (b) unmodified except as described
therein and (c) in full force and effect. To the Knowledge of JP, the other
parties to any such agreement, document or contract which is of a material
nature are not in material breach of any of their respective obligations under
such agreements, documents or contracts.
2.19 Opinion of Financial Advisor. JP has received the written opinion of
UBS Warburg LLC, JP's financial advisor, to the effect that the proposed
consideration to be received by the holders of JP Common Stock is fair to such
holders from a financial point of view.
2.20 State Takeover Statutes; JP Rights Plan; Ownership Limits. JP has
taken all action necessary to exempt the transactions contemplated by this
Agreement (including the actions and transactions contemplated by the Voting
Agreement) from the operation of any "fair price," "moratorium," "control share
acquisition" or any other anti-takeover statute or similar statute enacted under
the laws of the State of Maryland, the State of Delaware or federal laws of the
United States or similar statute or regulation (a "Takeover Statute") and the
limitations imposed by Article IX of the JP Articles. The Board of Directors of
JP has resolved to, and prior to the Closing, JP shall, take all action
necessary to render the rights (the "JP Rights") issued and/or outstanding under
or pursuant to the terms of the Amended and Restated Rights Agreement, dated as
of January 13, 2001, as amended, between JP and Mellon Investor Services LLC, as
rights agent (the "JP Rights Agreement"), inapplicable to the Mergers, this
Agreement and the other transactions contemplated hereby (including the actions
and transactions contemplated by the Voting Agreement).
2.21 Investment Company Act of 1940. None of JP or any JP Subsidiary is, or
at the Effective Time will be, required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act").
2.22 Definition of Knowledge of JP. As used in this Agreement, the phrase
"Knowledge of JP" (or words of similar import) means the actual (and not
constructive or imputed) knowledge of those individuals identified in Schedule
2.22 to the JP Disclosure Letter.
2.23 Required Stockholder Approvals and Partner Approvals. The affirmative
vote of the holders of at least a majority of the outstanding shares of JP
Common Stock and Price Group Stock, voting together as a single class with
respect to the Merger, is the only vote or consent of the holders of
24
any class or series of JP capital stock necessary or required under this
Agreement, the JP Articles, JP Bylaws or applicable law to approve the Mergers,
this Agreement and the transactions contemplated hereby. The affirmative vote or
consent of JP, in its capacity as the general partner of PDC LP, and the holders
of PDC OP Units as described on Schedule 2.5 to the JP Disclosure Letter are the
only votes or consents of the holders of any class or series of PDC LP's
partnership interests necessary or required under this Agreement, the PDC LP
Agreement, any other agreement or applicable law to approve the Mergers, this
Agreement, the PDC LP Amendment and the transactions contemplated hereby. By
virtue of executing this Agreement, JP, in its capacity as general partner,
shall be deemed to have approved the matters described in the second sentence of
this Section 2.23.
2.24 Intellectual Property. JP and each JP Subsidiary, as applicable own,
or are licensees of or otherwise possess legally enforceable rights to use, all
material patents, trademarks, trade names, domain names, service marks and
copyrights, any applications for and registrations of such patents, trademarks,
trade names, domain names, service marks and copyrights, and all processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are used or necessary to conduct their business as currently conducted,
except where the failure to own, be so licensed or otherwise possess,
individually or in the aggregate, would not have a JP Material Adverse Effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF GGP,
GGP PARTNERSHIP AND ACQUISITION
Except as set forth in the GGP SEC Documents (as defined herein) or in the
letter of even date herewith signed by a duly authorized representative of GGP
and delivered to JP prior to the execution hereof (the "GGP Disclosure Letter"),
GGP, GGP Partnership and Acquisition jointly and severally represent and warrant
to JP as follows:
3.1 Organization, Standing and Power of GGP, GGP Partnership, Acquisition
and Partnership Acquisition.
(a) GGP is a Delaware corporation duly organized, validly existing and in
good standing under the laws of Delaware and has the requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted. GGP is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually or
in the aggregate, would not reasonably be expected to have an GGP Material
Adverse Effect, as defined herein. GGP has made available to JP complete and
correct copies of the charter and by-laws of GGP, in each case, as amended or
supplemented to the date of this Agreement (respectively, the "GGP Charter" and
"GGP Bylaws").
(b) GGP Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of Delaware and has the requisite
power and authority to own, operate, lease and encumber its properties and carry
on its business as now being conducted. GGP Partnership is duly qualified or
licensed to do business as a foreign limited partnership and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not reasonably be expected to have a GGP
Material Adverse Effect, as defined herein. As used in this Agreement, a "GGP
Material Adverse Effect" means
25
any circumstance, event, occurrence, change or effect that is materially adverse
to the business, properties, assets (tangible or intangible), financial
condition or results of operations of GGP, GGP Partnership and any Subsidiary of
GGP or GGP Partnership (collectively, "GGP Subsidiaries"), taken as a whole,
except, in each case, as a result of (i) changes in general economic conditions
nationally or regionally, (ii) changes affecting the real estate industry
generally which do not affect GGP or GGP Partnership, as the case may be,
materially disproportionately relative to other participants in the real estate
industry similarly situated, or (iii) in and of itself and without the
occurrence of any other GGP Material Adverse Effect, changes in the trading
prices of GGP Common Stock or GGP Preferred Stock (as defined herein). All
partnership interests in GGP Partnership have been duly authorized and are
validly issued and outstanding. GGP Partnership has made available to JP
complete and correct copies of its Second Amended and Restated Agreement of
Limited Partnership of GGP Partnership, as amended to the date of this Agreement
(the "GGP Partnership Agreement"), which is the partnership agreement of GGP
Partnership in effect as of the date hereof.
(c) Acquisition is a Delaware limited liability company duly organized,
validly existing and in good standing under the laws of Delaware and has the
requisite power and authority to own, operate, lease and encumber its properties
and carry on its business as now being conducted. Acquisition is duly qualified
or licensed to do business as a foreign limited liability company and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not reasonably be expected
to have a GGP Material Adverse Effect. GGP and GGP Partnership have made
available to JP complete and correct copies of the organizational documents of
Acquisition.
(d) Partnership Acquisition is a Maryland limited liability company duly
organized, validly existing and in good standing under the laws of Maryland and
has the requisite power and authority to own, operate, lease and encumber its
properties and carry on its business as now being conducted. Partnership
Acquisition is duly qualified or licensed to do business as a foreign limited
liability company and is in good standing in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not reasonably be expected to have an GGP Material Adverse Effect. GGP and GGP
Partnership have made available to JP complete and correct copies of the
organizational documents of Partnership Acquisition.
3.2 Capital Stock.
(a) As of February 22, 2002, the authorized shares of capital stock of GGP
consist of: (i) 5,000,000 shares of preferred stock, $100 par value per share,
of which (A) 345,000 shares have been designated 7.25% Preferred Income Equity
Redeemable Stock (the "GGP Series A Preferred Stock"), 337,500 of which are
outstanding, (B) 175,000 shares have been designated 8.95% Cumulative Redeemable
Preferred Stock, Series B (the "GGP Series B Preferred Stock"), none of which
are outstanding, and (C) 100,000 shares have been designated Series A Junior
Participating Preferred Stock (the "GGP Series A Junior Preferred Stock"), none
of which are outstanding, and (ii) 210,000,000 shares of Common Stock, par value
$.10 per share ("GGP Common Stock"), of which 61,989,803 are outstanding. The
GGP Series A Preferred Stock, the GGP Series B Preferred Stock and GGP Series A
Junior Preferred Stock are referred to herein collectively as the "GGP Preferred
Stock").
(b) As of December 31, 2001, 81,327,739.0515 non-preferred units of limited
partnership in GGP Partnership (the "GGP Common OP Units") and 337,500 7.25%
Series A Cumulative Redeemable Preferred Units in GGP Partnership (the "GGP
Series A Preferred OP Units" and, together with the GGP Common OP Units and the
GGP Series B Preferred OP Units described in clause (c), the
26
"GGP OP Units") are issued and outstanding, fully paid and non-assessable and
not subject to preemptive or similar rights under law or the GGP Partnership
Agreement or any contract or instrument to which GGP or GGP Partnership is a
party or by which either is bound, of which 61,755,246.1942 GGP Partnership
Common OP Units and all of the GGP Partnership Series A Preferred Units are
owned by GGP.
(c) As of the date of this Agreement, except as set forth above in Section
3.2(a) and 3.2(b) or in the GGP SEC Documents, no GGP OP Units, GGP Common
Stock, shares of any series of GGP Preferred Stock or other voting securities of
GGP Partnership or GGP were issued, reserved for issuance or outstanding. All
outstanding GGP Partnership OP Units, shares of GGP Common Stock, and shares of
GGP Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. The GGP Series B Preferred
OP Units to be issued in the Partnership Merger and the securities to be issued
upon conversion or exchange of such units have been or will be, as the case may
be, when issued, duly authorized by all necessary corporate or partnership
action and upon issuance of such GGP Series B Preferred OP Units or such
securities to be issued upon conversion or exchange of such GGP Series B
Preferred OP Units, the relevant security will be duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights, and
the holders will be entitled to the full rights associated with such securities
as holders under the applicable organizational documents.
3.3 Authority; Noncontravention; Consents.
(a) Each of GGP, GGP Partnership, Acquisition and Partnership Acquisition
has the requisite power and authority to enter into this Agreement and the
Related Agreements (as herein defined) and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Related Agreements by GGP, GGP Partnership, Acquisition and Partnership
Acquisition and the consummation by GGP, GGP Partnership, Acquisition and
Partnership Acquisition of the transactions contemplated by this Agreement and
the Related Agreements to which any of GGP, GGP Partnership, Acquisition or
Partnership Acquisition is a party have been (or, in the case of the
Certificates of Designation relating to the GGP Series C Preferred Stock, GGP
Series D Preferred Stock, GGP Series E Preferred Stock, GGP Series F Preferred
Stock and GGP Series G Preferred Stock and the Amendment to the GGP Partnership
Agreement creating the GGP Series B Preferred Units, will be, prior to the
Closing) duly authorized by all necessary action on the part of GGP, GGP
Partnership, Acquisition and Partnership Acquisition. This Agreement has been,
and at the Effective Time each Related Agreement will be, duly executed and
delivered by each of the foregoing which is a party thereto and constitute or
will constitute valid and binding obligations of GGP, GGP Partnership,
Acquisition and Partnership Acquisition, as applicable, enforceable against GGP,
GGP Partnership, Acquisition and Partnership Acquisition, as applicable, in
accordance with and subject to their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. GGP Partnership will obtain prior to
the Closing the requisite approval of the holders of GGP OP Units to the
amendment of the GGP Partnership Agreement for the purpose of creating the new
GGP Series B Preferred OP Units to the extent such approval is required. No
other consent of any holder of capital stock of GGP or partner interest in GGP
Partnership is required in connection with the Mergers or any of the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement and/or the Related
Agreements by GGP, GGP Partnership, Acquisition and Partnership Acquisition do
not, and the consummation of the transactions contemplated by this Agreement
and/or the Related Agreements to which any of GGP, GGP Partnership, Acquisition
or Partnership Acquisition is a party and compliance by GGP, GGP Partnership,
Acquisition or Partnership Acquisition with the provisions of this Agreement
and/or the Related Agreements will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material
27
obligation or to loss of a material benefit under, or give rise to a right of
purchase under, or result in the creation of any Lien upon any of the properties
or assets of GGP, GGP Partnership or any GGP Subsidiary under, require the
consent or approval of any third party lender or otherwise result in a material
detriment to GGP, GGP Partnership, Acquisition, Partnership Acquisition or any
other GGP Subsidiary under, any provision of (i) the GGP Charter or Bylaws, the
GGP Partnership Agreement or the comparable charter or organizational documents
or partnership, operating or similar agreement (as the case may be) of GGP or
any GGP Subsidiary, each as amended or supplemented to the date of this
Agreement, (ii) any Material Contract applicable to GGP, GGP Partnership,
Acquisition, Partnership Acquisition or any other GGP Subsidiary, the respective
properties or assets of GGP Partnership, or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any Laws
applicable to GGP, GGP Partnership or any GGP Subsidiary or their respective
properties or assets, other than, in the case of clause (ii) or (iii), any such
conflicts, violations, defaults, rights, losses or Liens that, individually or
in the aggregate, would not (x) reasonably be expected to have a GGP Material
Adverse Effect or (y) prevent or delay the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
by or with respect to GGP, GGP Partnership or any GGP Subsidiary in connection
with the execution and delivery of this Agreement or the consummation by GGP or
GGP Partnership of any of the transactions contemplated by this Agreement,
except for (i) the filing and acceptance for record of the Maryland Articles of
Merger by the Department, (ii) the filing and acceptance for record of the
Delaware Certificate of Merger with the Secretary of State, (iii) the filing and
acceptance for record of the Maryland Articles of Partnership Merger by the
Department, (iv) such filings as may be required in connection with the payment
of any Transfer and Gains Taxes, (v) such filings as may be required pursuant to
the Exchange Act with respect to the Voting Agreement, (vi) the filing of the
Form D relating to the private placement of the GGP Series B Preferred OP Units
with the SEC, (vii) the filing and acceptance for record of the Certificates of
Designation contemplated by Exhibits I, J, K and L with the Secretary of State,
and (viii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule 3.3(b)
to the GGP Disclosure Letter or (B) as may be required under (x) federal, state
or local environmental laws or (y) the blue sky laws of various states, to the
extent applicable, or (C) which, if not obtained or made, individually or in the
aggregate, would not prevent or delay in any material respect the consummation
of any of the transactions contemplated by this Agreement or otherwise prevent
GGP and GGP Partnership from performing their obligations under this Agreement
in any material respect or reasonably be expected to have, individually or in
the aggregate, a GGP Material Adverse Effect.
3.4 Litigation. There is no suit, action or proceeding pending (in which
service of process has been received by an employee of GGP or an GGP
Subsidiary), or, to the Knowledge of GGP, GGP Partnership, Acquisition or
Partnership Acquisition, threatened against or affecting GGP, GGP Partnership,
Acquisition, Partnership Acquisition or any other GGP Subsidiary that would be
reasonably likely to prevent the consummation of the transactions contemplated
by this Agreement.
3.5 Interim Operations of Acquisition and Partnership Acquisition. Each of
Acquisition and Partnership Acquisition was formed solely for the purpose of
engaging in the transactions contemplated hereby and, as of the Closing Date and
as of the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions,
agreements and arrangements contemplated by this Agreement, has engaged in no
business or activities, has incurred no other obligations or liabilities, and
has no assets other than in connection with the transactions, agreements and
arrangements contemplated by this Agreement.
3.6 Capital Resources. GGP and GGP Partnership will have prior to the
Closing amounts available under credit facilities, which, together with
available cash and marketable securities, will be
28
sufficient to fully fund the cash consideration requirement for the Merger, the
Partnership Merger, and the other transactions contemplated by this Agreement
(the "Required Funding").
3.7 GGP SEC Documents; Information Supplied.
(a) GGP has filed all required reports, schedules, forms, statements and
other documents with the SEC since January 1, 1997 through the date hereof
(collectively, the "GGP SEC Documents"). All of the GGP SEC Documents (other
than preliminary material), as of their respective filing dates, complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and, in each case, the rules and regulations promulgated thereunder
applicable to such GGP SEC Documents. None of the GGP SEC Documents at the time
of filing contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent such statements have been modified or
superseded by later GGP SEC Documents filed and publicly available prior to the
date of this Agreement. The consolidated financial statements of GGP included in
the GGP SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented in all material respects, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position of GGP and the consolidated GGP Subsidiaries
taken as a whole as of the dates thereof, and the consolidated results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except for
liabilities and obligations set forth in the GGP SEC Documents or in Schedule
3.7(a) to the GGP Disclosure Letter or incurred by GGP, GGP Partnership or any
GGP Subsidiary in the ordinary course of business since December 31, 2001, none
of GGP, GGP Partnership, or any GGP Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of GGP or in
the notes thereto and which, individually or in the aggregate, would have a GGP
Material Adverse Effect.
(b) None of the information supplied or to be supplied by GGP, GGP
Partnership, Acquisition or Partnership Acquisition specifically for inclusion
in the Proxy Statement or the Partner Solicitation Materials (as herein defined)
will, at the date the Proxy Statement is filed with the SEC or mailed to JP's
stockholders or at the time of the JP Stockholders Meeting, or at the time of
any amendment or supplement thereof, 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.
3.8 Taxes. GGP (i) for all taxable years for which the Internal Revenue
Service could assert a tax liability, has been subject to taxation as a REIT
within the meaning of Section 856 of the Code and has satisfied all requirements
to qualify as a REIT for all such years, (ii) has operated since December 31,
2001 to the date of this representation, and intends to continue to operate, in
such a manner as to qualify as a REIT for the taxable year ending on December
31, 2002 and thereafter, and (iii) has not taken or omitted to take any action
which would reasonably be expected to result in a challenge to its status as a
REIT and, to the Knowledge of GGP (as defined below), no such challenge has been
proposed, is pending or threatened. Each Subsidiary of GGP which is a
partnership, joint venture or limited liability company has been since its
formation and continues to be treated for federal income tax purposes as a
partnership or a disregarded entity and not as a corporation or an association
taxable as a corporation. GGP Partnership is not a publicly-traded partnership
within the meaning of Section 7704(b) of the Code that is taxable as a
corporation pursuant to Section 7704(a) of the Code. Each Subsidiary of GGP
which is a
29
corporation has been since its formation (i) a corporation subject to taxation
as a REIT within the meaning of Section 856 of the Code and has for all such
years satisfied all requirements for qualification and taxation as a REIT within
the meaning of Section 856 of the Code and intends to continue to operate in
such a manner as to qualify as a REIT, (ii) a qualified REIT subsidiary under
Section 856(i) of the Code or (iii) a "taxable REIT subsidiary," as that term is
defined by Section 856(i) of the Code. Neither GGP nor any of its Subsidiaries
holds any asset (x) the disposition of which would be subject to rules similar
to Section 1374 of the Code as a result of an election under IRS Notice 88-19 or
Temporary Treas. Reg. Sec. 1.337(d)-5T or (y) which is subject to a consent
filed pursuant to Section 341(f) of the Code and the regulations thereunder.
Except as set forth in Schedule 3.8 to the GGP Disclosure Letter, GGP does not
own, directly or indirectly, any interest in any "taxable REIT subsidiary," as
that term is defined by Section 856(l) of the Code.
3.9 Definition of Knowledge of GGP. As used in this Agreement, the phrase
"Knowledge of GGP" (or words of similar import) means the actual (and not
constructive or imputed) knowledge of those individuals identified in Schedule
3.9 to the GGP Disclosure Letter.
3.10 Broker. Except as set forth in Schedule 3.10 to the GGP Disclosure
Letter, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of GGP, GGP Partnership or any GGP Subsidiary.
ARTICLE 4
COVENANTS
4.1 Conduct of JP's and PDC LP's Business Pending Mergers. During the
period from the date of this Agreement to the Effective Times, except as
consented to in writing by GGP and GGP Partnership or as expressly provided for
in this Agreement, each of JP and PDC LP shall, and shall cause (or, in the case
of JP Subsidiaries that JP or PDC LP do not control, shall use commercially
reasonable efforts to cause) each of the JP Subsidiaries to:
(a) conduct its business only in the usual, regular and ordinary course and
in substantially the same manner as heretofore conducted;
(b) use commercially reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its officers and
employees;
(c) report on a regular basis to one or more representatives of GGP with
respect to operational matters of materiality;
(d) promptly notify GGP and GGP Partnership of any change in the condition
(financial or otherwise), business, properties, assets, liabilities or the
normal course of its businesses or in the operation of its properties, or of any
material governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) that, individually or in the
aggregate, has had or would reasonably be expected to have a JP Material Adverse
Effect;
(e) promptly deliver to GGP and GGP Partnership true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) preserve JP's qualification as a REIT within the meaning of Section 856
of the Code;
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(g) maintain its books and records in accordance with GAAP consistently
applied and not change in any material manner any of its methods, principles or
practices of accounting in effect at the JP Financial Statement Date, except as
may be required by the SEC, applicable law or GAAP;
(h) duly and timely file all reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
to extensions permitted by law, provided JP notifies GGP and GGP Partnership
that it is availing itself of any such extensions and provided such extensions
do not adversely affect JP's status as a qualified REIT under the Code;
(i) not make or rescind any election relating to Taxes (unless required by
law or necessary to preserve JP's status as a REIT or the status of any JP
Subsidiary as a partnership or disregarded entity for federal income tax
purposes or as a qualified REIT subsidiary under Section 856(i) of the Code, as
the case may be) provided, that nothing in this Agreement shall preclude JP from
designating dividends paid by it as "capital gain dividends" within the meaning
of Section 857 of the Code, subject to the reasonable consent of GGP;
(j) not (i) acquire, enter into any option to acquire, or exercise an
option or other right or election or enter into any other commitment or
contractual obligation (each, a "Commitment") for the acquisition of any real
property other than the acquisition of the real properties described on Schedule
4.1(j) of the JP Disclosure Letter in accordance with the terms thereof, (ii)
enter into any Commitment to develop or construct other real estate projects,
except in accordance with the 2002 JP Operating Budget, a copy of which
previously was delivered to GGP (the "JP Budget"), (iii) incur or enter into any
Commitment to incur additional Indebtedness (secured or unsecured) except under
its existing revolving line(s) of credit and Commitments for Indebtedness
described in Schedule 4.1(j) to the JP Disclosure Letter or in furtherance of
the completion of the transactions contemplated by this Agreement or (iv)
modify, amend or terminate, or enter into any Commitment to modify, amend or
terminate, any Indebtedness (secured or unsecured) in existence as of the date
hereof;
(k) not amend the JP Articles or the JP Bylaws, or the articles or
certificate of incorporation, bylaws, code of regulations, partnership agreement
(including, without limitation, the PDC LP Agreement), operating agreement or
joint venture agreement or other charter or organizational document of any JP
Subsidiary;
(l) make no change in the number of issued and outstanding shares of
capital stock, units of limited partnership interest, or other equity interests
in JP, PDC LP or any other JP Subsidiary (including by way of redemption or
repurchase), other than pursuant to (i) the exercise of options disclosed in
Schedule 2.3 to the JP Disclosure Letter, (ii) the exchange of PDC OP Units by
the holders thereof or the issuance of other securities in exchange for
convertible or exchangeable stock described in Schedule 2.3 to the JP Disclosure
Letter, (iii) the exercise of any other convertible securities described in
Schedule 2.3 to the JP Disclosure Letter or (iv) the exchange of JP Common Stock
for Excess Stock or Excess Stock for Common Stock, or repurchase of Excess Stock
in accordance with Article Ninth of the JP Articles;
(m) grant no option or other right or commitment relating to its shares of
capital stock, units of limited partnership interest or other equity interests
or any security convertible into its shares of capital stock, units of limited
partnership interest or other equity interests, or any security the value of
which is measured by shares of stock, or any security subordinated to the claim
of its general creditors and, other than pursuant to Section 5.7(c) of this
Agreement, not amend or waive any rights under any of the JP Stock Options or JP
Stock Rights;
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(n) not sell, lease, mortgage, subject to Lien or otherwise dispose of any
of the JP Properties, except that JP may lease the JP Properties in accordance
with the 2002 JP leasing plan, a copy of which previously was delivered to GGP;
(o) not sell, lease, mortgage, subject to Lien or otherwise dispose of any
of its personal property or intangible property, except for any such transaction
which is in the ordinary course of business consistent with past practice and is
not material, individually or in the aggregate;
(p) not make any loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to JP Subsidiaries in existence on the date hereof and expense
advances to employees which, in each case, are made in the ordinary course of
business consistent with past practice and except in connection with a
transaction permitted by Section 4.1(j);
(q) not incur, pay, discharge or satisfy (i) any of the Indebtedness
described on Schedule 2.18(a) other than the payment of regularly scheduled
principal and interest payments or (ii) any other claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities prudently incurred or otherwise reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) furnished to GGP and GGP Partnership or
incurred in the ordinary course of business consistent with past practice or in
furthermore of the transactions contemplated by this Agreement;
(r) not enter into any guarantee relating to the Indebtedness of another
Person, enter into any keep well or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing;
(s) except as disclosed in Schedule 4.1(s) to the JP Disclosure Letter, not
enter into or modify or amend any Commitment with any officer, director or
Affiliate of JP or any of the JP Subsidiaries;
(t) except as disclosed in Schedule 4.1(t) to the JP Disclosure Letter, not
increase any compensation of, or enter into or amend any employment agreement
with, any of its officers, directors or employees earning more than $50,000 per
annum, other than as required by any contract or Plan or in accordance with
waivers by employees of benefits under such agreements;
(u) other than as permitted by Section 5.7(e), not adopt any new employee
benefit plan or amend any existing plans or rights;
(v) not settle any stockholder derivative or class action claims arising
out of or in connection with any of the transactions contemplated by this
Agreement;
(w) not change the ownership of any of the JP Subsidiaries, except changes
which arise as a result of the acquisition of PDC OP Units pursuant to the PDC
LP Agreement;
(x) not accept a promissory note in payment of the exercise price payable
under any option to purchase shares of JP Common Stock;
(y) not enter into any Tax Protection Agreement;
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(z) not settle or compromise any material federal, state, local or foreign
Tax liability; and
(aa) not authorize, recommend, propose or announce an intention to do any
of the foregoing prohibited actions, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing prohibited actions.
4.2 No Solicitation.
(a) Subject to Section 4.3, JP for itself and in its capacity as the sole
general partner of PDC LP (i) shall not, and shall not authorize or permit,
directly or indirectly, any officer, director, employee, Affiliate, agent,
investment banker, financial advisor, attorney, accountant, broker, finder,
consultant or other representative of JP, PDC LP or any other JP Subsidiary
(each, a "JP Representative") to invite, initiate, solicit, encourage or
facilitate (including by way of furnishing nonpublic information or assistance
or by amending or granting any waiver under the JP Rights Agreement), directly
or indirectly, any inquiries or the making of any proposal (including, without
limitation, any proposal or offer to its stockholders, the partners of PDC LP or
other holders of equity securities of JP, PDC LP or any other JP Subsidiary) or
other action that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as herein defined), or enter into, maintain, or continue
discussions or negotiate with any Person in furtherance of such inquiries or in
order to obtain a Competing Transaction or publicly propose to do any of the
foregoing and (ii) will take the reasonable steps necessary to inform JP
Representatives of the obligations undertaken in this Section 4.2 and to cause
them to comply with all such obligations.
(b) JP shall notify GGP and GGP Partnership orally and in writing (as
promptly as practicable but in any event within 48 hours) of its receipt of any
inquiries and proposals (including the identity of the parties, price and all
other material terms thereof) and shall provide GGP a copy of all written
inquiries, proposals or requests which it, PDC LP, any other JP Subsidiary, or
any JP Representative may receive relating to any of such matters and shall
promptly (but in any event within 48 hours) inform GGP and GGP Partnership
orally and in writing with respect to any such inquiry or proposal that becomes
reasonably likely to lead to a Superior Competing Transaction (as defined
herein).
(c) For purposes of this Agreement, a "Competing Transaction" shall mean
any of the following, whether occurring directly or indirectly (other than the
transactions expressly provided for in this Agreement): (i) any merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving JP (or any of the JP
Subsidiaries, including PDC LP); (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of 20% or more of the assets or equity
securities of JP, PDC LP or any other JP Subsidiary in a single transaction or
series of related transactions, excluding any bona fide financing transactions
which do not, individually or in the aggregate, have as a purpose or effect the
sale or transfer of control of such assets; (iii) any tender offer or exchange
offer for 20% or more of the outstanding equity securities of JP, PDC LP or any
other JP Subsidiary or any transaction resulting in the issuance of such amount
of securities; or (iv) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the foregoing.
(d) For purposes of this Agreement, a "Superior Competing Transaction"
means a bona fide written proposal that was not invited, initiated, solicited or
encouraged, directly or indirectly, by JP, PDC LP, any other JP Subsidiary or
any JP Representative for a Competing Transaction made by a third party which a
majority of the entire Board of Directors of JP determines after consultation
with its financial advisor, in good faith, taking into account financial
considerations and other relevant factors, including relevant legal, financial,
tax, regulatory and other aspects of such proposal, and the conditions,
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prospects and time required for completion of such proposal, to be more
favorable than the Mergers to the JP stockholders and the holders of PDC Common
OP Units.
4.3 Board Actions. Notwithstanding Section 4.2 or any other provision of
this Agreement to the contrary, to the extent required by the fiduciary
obligations of the Board of Directors of JP as determined by a majority of such
board in good faith after consultation with outside counsel, JP may:
(a) disclose to its stockholders or holders of PDC OP Units any information
required to be disclosed under applicable Law;
(b) to the extent applicable, comply with Rule 14e-2(a) promulgated under
the Exchange Act with respect to a Competing Transaction; provided, however,
that neither JP nor its Board of Directors shall be permitted to approve or
recommend a Competing Transaction which is not a Superior Competing Transaction;
(c) if it receives a proposal for a Competing Transaction that was
unsolicited and its Board of Directors determines in good faith (after
consulting with its outside counsel and its financial advisor) that such
proposal is reasonably likely to lead to a Superior Competing Transaction and
provided further that JP provides prompt oral and written notice to GGP and GGP
Partnership to the effect that it is furnishing information to such Person, (x)
furnish non-public information with respect to JP, PDC LP or any JP Subsidiary
to the Person who made such proposal (provided that JP shall furnish such
information pursuant to a confidentiality agreement which is no more favorable
to such Person than the Confidentiality Agreement) and (y) participate in
negotiations regarding such proposal, provided that JP provides prompt oral and
written notice to GGP and GGP Partnership to the effect that it is entering into
discussions with such Person; and
(d) approve or recommend (and in connection therewith withdraw or modify
its approval or recommendation of this Agreement and the Mergers) a Superior
Competing Transaction or enter into an agreement with respect to such Superior
Competing Transaction.
4.4 Conduct of GGP's and GGP Partnership's Business Pending Mergers. During
the period from the date of this Agreement to the Effective Times, except as
consented to in writing by JP or as expressly contemplated in this Agreement,
GGP, GGP Partnership, Acquisition and Partnership Acquisition shall, and shall
cause each of the GGP Subsidiaries to:
(a) take no action that would prevent or materially delay the consummation
of the transactions contemplated by this Agreement;
(b) promptly deliver to JP true and correct copies of any report,
statement, schedule or other document filed with the SEC by GGP subsequent to
the date of this Agreement; and
(c) not amend the articles or certificate of incorporation, bylaws,
partnership agreement, operating agreement or other charter or organizational
document of GGP or GGP Partnership, in a manner which would require the consent
of the Contributing Holders of PDC Common OP Units if such amendment were
effected following the Closing;
4.5 Other Actions. Each of JP and PDC LP, on the one hand, and GGP, GGP
Partnership, Acquisition and Partnership Acquisition, on the other hand, shall
not take, and shall cause their respective Subsidiaries not to take, any action
that would result in (a) any of the representations and warranties of such party
(without giving effect to any knowledge qualification) set forth in this
Agreement that are qualified as to materiality becoming untrue, (b) any of such
representations and warranties (without
34
giving effect to any knowledge qualification) that are not so qualified becoming
untrue in any material respect or (c) except as contemplated by Section 4.2 or
4.3, any of the conditions to the Mergers set forth in Article 6 not being
satisfied.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Proxy Statement; Stockholders Meeting; Partner
Solicitation; Partner Approvals.
(a) As promptly as reasonably practicable following the date of this
Agreement, JP shall prepare and file with the SEC under the Exchange Act a proxy
statement and form of proxy (such proxy statement and proxy together with any
amendments and supplements thereto, the "Proxy Statement") and JP shall use its
commercially reasonable efforts to respond as promptly as practicable to any
comments of the SEC with respect thereto and to cause the Proxy Statement to be
mailed to JP's stockholders as promptly as practicable following the date of
this Agreement. JP shall promptly notify GGP and GGP Partnership upon the
receipt of any comments from the SEC or its staff or any request from the SEC or
its staff for amendments or supplements to the Proxy Statement and shall provide
GGP and GGP Partnership with copies of all correspondence between JP and its
representatives, on the one hand, and the SEC and its staff, on the other hand.
GGP and GGP Partnership shall promptly provide any information or responses to
comments, or other assistance, reasonably requested in connection with any of
the foregoing. Prior to filing or mailing the Proxy Statement or responding to
any comments of the SEC with respect thereto, JP (i) shall provide GGP and GGP
Partnership an opportunity to review and comment on such document or response
and (ii) shall give reasonable consideration to all comments proposed by GGP and
GGP Partnership. Each of JP, PDC LP, GGP and GGP Partnership shall promptly
correct any information provided by it for use in the Proxy Statement if and to
the extent that such information shall have become false or misleading in any
material respect, and JP shall cause such corrected information to be included
in the Proxy Statement.
(b) JP shall, as promptly as reasonably practicable following the date of
this Agreement, establish a record date for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "JP Stockholders Meeting") for the
purpose of obtaining the JP Stockholder Approval. Subject to Section 4.3, JP
shall, through its Board of Directors, recommend to its stockholders approval of
this Agreement, the Merger and the transactions contemplated by this Agreement,
and shall include such recommendation in the Proxy Statement.
(c) The Holders of PDC Common OP Units.
(i) As promptly as reasonably practicable following the date of this
Agreement, JP, PDC LP, GGP and GGP Partnership shall prepare certain
solicitation materials (the "Partner Solicitation Materials"), which will
be used by GGP Partnership as a private placement memorandum to offer the
GGP Series B Preferred OP Units to the holders of the PDC Common OP Units
and by JP and PDC LP to solicit the JP Partner Approvals. Such Partner
Solicitation Materials shall include or incorporate by reference
information about GGP and GGP Partnership, a description of the
transaction, the position of JP as the general partner of PDC LP with
respect to such transaction, available appraisal rights for holders of PDC
Common OP Units, the impact of the Voting Agreement and other matters that
the parties reasonably determine are to be specified therein. The parties
shall reasonably cooperate with each other in the preparation of the
Partner Solicitation Materials.
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(ii) JP and PDC LP, on the one hand, and GGP and GGP Partnership, on
the other hand, agree that none of the information supplied or to be
supplied by them for inclusion or incorporation by reference in the Partner
Solicitation Materials will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they are made, not misleading. Each party agrees that if it
shall become aware prior to the Partnership Merger Effective Time of any
information that would cause any of the statements in the Partner
Solicitation Materials to be false or misleading with respect to any
material fact, or to omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they are
made, not false or misleading, it shall promptly inform the other parties
thereof and shall take the necessary steps, in cooperation with the other
parties, to correct such information and to disseminate updated
information.
(iii) Subject to the fiduciary duties of JP, as the general partner of
PDC LP, JP (A) agrees to seek the written consents and approvals of the
holders of PDC Common OP Units on each of the matters specified in the
definition of JP Partner Approvals and recommend to the holders of PDC
Common OP Units approval of such matters, and include such recommendation
in the Partnership Solicitation Materials and (B) hereby approves and
consents to each of the matters specified in the definition of JP Partner
Approvals and agrees to vote all of its PDC OP Units in favor of such
matters (or to provide its consent with respect thereto).
(iv) As promptly as reasonably practicable following the date of this
Agreement, GGP and GGP Partnership shall prepare a form of election in form
and substance reasonably acceptable to JP and PDC LP (the "Form of
Election"), pursuant to which each holder of PDC Common OP Units will
specify (A) the number of PDC Common OP Units which it desires to have
converted into the right to receive GGP Series B Preferred OP Units and (B)
the number of PDC Common OP Units which it desires to have converted into
the right to receive cash in the Partnership Merger. Any holder electing
option (A) must also agree to become a party to the GGP Partnership
Agreement, the GGP Series B OP Units Redemption Agreement, the GGP Common
OP Units Redemption Agreement and the Tax Matters Agreement in
substantially the form of Exhibit I attached hereto (together, the "Related
Agreements"). In order to be eligible to elect to receive GGP Series B
Preferred OP Units in the Partnership Merger, a holder of PDC Common OP
Units must qualify as an "accredited investor" under the Securities Act.
(v) Concurrently with the mailing of the Proxy Statement to JP
Shareholders, GGP Partnership shall mail Forms of Election to holders of
record of PDC Common OP Units, together with the Partner Solicitation
Materials. An election to subscribe for the GGP Series B Preferred Units
shall be effective only if a properly executed Form of Election is received
by GGP Partnership prior to 5:00 p.m., Eastern Standard Time, on the second
business day preceding the JP Stockholders Meeting. If a holder of PDC
Common OP Units fails to return a duly completed Form of Election within
the time period specified above and does not duly perfect its appraisal
rights pursuant to the MRULPA, such holder shall be deemed to have elected
to receive cash upon the conversion of its PDC Common OP Units in the
Partnership Merger. GGP Partnership and PDC LP by mutual agreement shall
have the right to make rules, not inconsistent with the terms of this
Agreement, governing the validity of Forms of Election and the issuance and
delivery of GGP Series B Preferred OP Units in the Partnership Merger.
(vi) JP shall not exercise any appraisal, dissenters' or other similar
rights with respect to any of its PDC OP Units, including, without
limitation, any rights under Section 10-208(f) of the MRULPA.
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(vii) The parties shall reasonable cooperate with each other with
respect to the matters set forth in this Section 5.1(c), and intend that
the offer of the GGP Series B Preferred Units shall be conducted as a
private placement, exempt from the registration requirements of the
Securities Act.
(d) GGP and GGP Partnership covenant and agree that, concurrently with the
Closing, they will each enter into, with each holder of PDC Common OP Units who
validly elects to receive GGP Series B Preferred OP Units in the Partnership
Merger, the Related Agreements to which they are parties, and will reasonably
cooperate with such holders so that such holders become limited partners of GGP
Partnership and enjoy the full rights and benefits of the GGP Series B Preferred
OP Units.
5.2 Access to Information; Confidentiality. Subject to the requirements of
confidentiality agreements with third parties in existence on the date hereof,
JP and PDC LP shall, and shall cause each of the JP Subsidiaries to, afford to
GGP and GGP Partnership and to the officers, employees, accountants, counsel,
financial advisors and other representatives of GGP and GGP Partnership,
reasonable access during normal business hours prior to the Effective Times to
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, JP and PDC LP shall, and shall cause each of
the JP Subsidiaries to, furnish promptly to GGP and GGP Partnership (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as GGP and GGP Partnership may reasonably request.
5.3 Commercially Reasonable Efforts; Notification.
(a) Subject to the terms and conditions herein provided, (i) each of the
parties shall use commercially reasonable efforts to cooperate with one another
in (A) determining which filings are required to be made prior to the Effective
Times with, and which consents, approvals, permits or authorizations are
required to be obtained prior to the Effective Times from, Governmental Entities
and any third parties in connection with the execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, and (B)
timely making all such filings and timely seeking all such consents, approvals,
permits and authorizations; (ii) JP and PDC LP shall use commercially reasonable
efforts to obtain in writing any consents required from third parties to
effectuate the Mergers and the other transactions contemplated hereby, such
consents to be in form reasonably satisfactory to GGP and GGP Partnership; and
(iii) each of the parties shall use commercially reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If at any time after the Effective
Times any further action is necessary or desirable to carry out the purpose of
this Agreement, each party shall take all such necessary action.
(b) JP and PDC LP shall use commercially reasonable efforts to obtain from
PricewaterhouseCoopers LLP access to all work papers relating to audits of JP
and PDC LP performed by PricewaterhouseCoopers LLP, and the continued
cooperation of PricewaterhouseCoopers LLP with regard to the preparation of
consolidated financial statements for the Surviving Company.
(c) JP and PDC LP shall give prompt notice to GGP and GGP Partnership, and
GGP and GGP Partnership shall give prompt notice to JP, (i) if any
representation or warranty made by it or them contained in this Agreement that
is qualified as to materiality becomes untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified becomes untrue or
inaccurate in any material respect or (ii) of the failure by it or them to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
37
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
5.4 Tax Matters.
(a) Purchase Price Allocation. On or prior to the Closing Date, GGP, GGP
Partnership, JP and PDC LP shall reach agreement as to the manner in which the
consideration to be paid pursuant to this Agreement, together with any assumed
liabilities (the "Allocable Consideration"), shall be allocated among the assets
of JP and, to the extent applicable, the JP Subsidiaries. Such allocation shall
be made in the manner required by Section 1060 of the Code and the regulations
promulgated thereunder. In making such allocation, the fair market values as
reasonably determined by the parties shall apply. GGP, GGP Partnership, JP and
PDC LP hereby agree that IRS Form 8594 will be timely filed based on such fair
market values.
(b) Tax Treatment of Merger. The parties shall treat the Merger for all
income tax purposes as a taxable purchase of assets by GGP Partnership in
exchange for the Allocable Consideration and a liquidating distribution of the
Merger Consideration by JP to the JP shareholders within the meaning of Section
562(b)(1) of the Code including, without limitation, filing JP final Tax returns
consistent with such treatment, and no party shall take any position
inconsistent with such treatment.
(c) Tax Treatment of Partnership Merger. The parties shall treat the
Partnership Merger, for all tax purposes, as a tax-free contribution by the
Contributing Holders of PDC Common OP Units of their limited partnership
interests in PDC LP to GGP Partnership in exchange for GGP Series B Preferred OP
Units under Section 721 of the Code and a sale by the Selling Holders of PDC
Common OP Units of their limited partnership interests in PDC LP to GGP
Partnership in exchange for cash, including without limitation, filing PDC LP
and GGP Partnership Tax returns consistent with such treatment, and no party
shall take any position inconsistent with such treatment.
(d) Payroll Records. GGP, GGP Partnership and JP agree that, for federal
income tax purposes, GGP Partnership will have purchased substantially all of
the property used in the business of JP as a result of the transactions
contemplated by this Agreement, and that, in connection therewith, GGP and/or
GGP Partnership will employ individuals who immediately before the Closing Date
were employed in such business by JP. Accordingly, pursuant to Rev. Proc. 96-60,
1996-2 C.B. 399, JP shall make available to GGP and GGP Partnership all
necessary payroll records for the calendar year that includes the Closing Date,
with the result that GGP or GGP Partnership will furnish a Form W-2 to each
employee employed by GGP or GGP Partnership who had been employed by JP,
disclosing all wages and other compensation paid for such calendar year and
Taxes withheld therefrom, and JP will be relieved of the responsibility to do
so.
5.5 Public Announcements. Each party will consult with each other party
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other written public statements, including, without
limitation, any press release or other written public statement which addresses
in any manner the transactions contemplated by this Agreement, and shall not
issue any such press release or make any such written public statement prior to
such consultation, except as may be required by applicable Law, court process or
by obligations pursuant to any listing agreement with any national securities
exchange, in which case the disclosing party will use its reasonable efforts to
advise the other parties prior to making the relevant disclosure. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement will be in the form agreed to by the
parties prior to the execution of this Agreement.
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5.6 Transfer and Gains Taxes. Each party 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 (together with
any related interest, penalties or additions to Tax, "Transfer and Gains
Taxes"). On, from and after the Effective Time, GGP and GGP Partnership shall
pay or cause to be paid all Transfer and Gains Taxes (which term shall include
any transfer taxes resulting from or relating to the Mergers, but shall not in
any event be construed to include for these purposes any Tax imposed under the
Code or state income taxes) without deduction or withholding from any amounts
payable to the holders of JP shares or limited partnership interests of PDC LP.
5.7 Benefit Plans and Other Employee Arrangements.
(a) Benefit Plans. After the Effective Time, all employees of JP who are
employed by the Surviving Company shall, at the option of the Surviving Company,
either continue to be eligible to participate in an employee benefit plan, as
defined in Section 3(3) of ERISA, of JP which is, at the option of the Surviving
Company, continued by the Surviving Company, or alternatively shall be eligible
to participate in the same manner as other similarly situated employees of GGP
Partnership in any employee benefit plan, as defined in Section 3(3) of ERISA,
sponsored or maintained by GGP and GGP Partnership after the Effective Time.
With respect to each such employee benefit plan, service with JP or any JP
Subsidiary (as applicable) and the predecessor of any of them shall be included
for purposes of determining eligibility to participate and vesting (if
applicable) under such employee benefit plan. GGP and GGP Partnership shall, or
shall cause the Surviving Company and its Subsidiaries to, (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to all employees
of JP who are employed by the Surviving Company under any Welfare Plan that such
employees may be eligible to participate in after the Effective Time, other than
limitations or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Effective Time under any
Welfare Plan maintained for such employees immediately prior to the Effective
Time, and (ii) provide each such employee of JP who is employed by the Surviving
Company with credit for any co-payments and deductibles paid prior to the
Effective Time in satisfying any applicable deductible or out-of-pocket
requirements under any Welfare Plans that such employees are eligible to
participate in after the Effective Time.
(b) Stock Option and Restricted Stock Plans. At the Effective Time, the
stock option plans or programs of JP and the restricted stock plans or programs
of JP shall be discontinued.
(c) JP Stock Options. As soon as practicable following the date of this
Agreement, JP shall ensure that the Board of Directors of JP (or, if
appropriate, any committee administering the JP Stock Option plans) shall adopt
such resolutions or take such other actions (if any) to provide that each JP
Stock Option outstanding immediately prior to the Effective Time (whether vested
or unvested) shall be converted at the Effective Time in the manner contemplated
by Section 1.7(d). All amounts payable pursuant to this Section 5.7(c) shall be
subject to any required withholding of Taxes and shall be paid as soon as
practicable following the Effective Time, without interest. JP shall take all
actions determined to be necessary to effectuate the provisions of this Section
5.7(c) as mutually agreed by GGP and GGP Partnership and JP. Prior to the
Effective Time, JP shall ensure that the Board of Directors of JP (or, if
appropriate, any committee administering the JP Stock Option plans) shall take
or cause to be taken such actions as are required to cause the JP Stock Option
plans to terminate as of the Effective Time.
(d) Withholding. To the extent required by applicable law, JP shall require
each employee who exercises a JP Stock Option or who receives JP Common Stock or
Price Group Stock pursuant to any existing commitment to pay to JP in cash or JP
Common Stock an amount sufficient to
39
satisfy in full JP's obligation to withhold Taxes incurred by reason of such
exercise or issuance (unless and to the extent such withholding is satisfied
pursuant to the provision regarding withholding in Section 1.8(i)).
(e) JP Severance Agreements. No later than the Closing Date, GGP or GGP
Partnership shall negotiate and enter into severance agreements, which shall not
be subject to amendment or modification for the one-year period beginning on the
Closing Date without the mutual consent of the parties, with the JP and PDC LP
employees identified on Exhibit J attached hereto upon substantially the
economic terms set forth on such Exhibit J.
5.8 Indemnification; Exculpation; Insurance.
(a) (i) In the event of any threatened or actual claim, action, suit,
demand, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action,
suit, demand, proceeding or investigation in which any person who is now,
or has been at any time prior to the date hereof, or who becomes prior to
the Effective Time, a director or officer of JP, PDC LP or any other JP
Subsidiary (the "Indemnified Parties") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of,
or pertaining to (i) the fact that he is or was a director or officer of
JP, PDC LP or any other JP Subsidiary, or is or was serving at the request
of JP, PDC LP or any other JP Subsidiary as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise,
or (ii) the negotiation, execution or performance of this Agreement or any
of the transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their commercially reasonable efforts to defend against
and respond thereto. It is understood and agreed that JP shall indemnify,
and hold harmless, and after the Effective Time GGP and GGP Partnership
(JP, or GGP and GGP Partnership, as applicable, being the "Indemnifying
Parties") shall jointly and severally indemnify, and hold harmless, as and
to the full extent permitted by applicable law, each Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorneys' fees and expenses (to the extent permitted
below)), judgments, fines and amounts paid in settlement in connection with
any such threatened or actual claim, action, suit, demand, proceeding or
investigation, and in the event of any such threatened or actual claim,
action, suit, demand, proceeding or investigation (whether asserted or
arising before or after the Effective Time), JP, and GGP and GGP
Partnership after the Effective Time, shall promptly pay reasonable
expenses in advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Party upon the submission of
appropriate invoices and to the full extent permitted by law, and subject
to the limitations described below and the provision by such Indemnified
Party of an undertaking to reimburse the amounts so advanced in the event
of a final non-appealable determination by a court of competent
jurisdiction that such Indemnified Party is not entitled to such amounts.
Notwithstanding the foregoing, the Indemnifying Parties shall have no
obligation hereunder to any Indemnified Party when and if a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and non-appealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law.
(ii) Any Indemnified Party wishing to claim indemnification under this
Section 5.8, upon learning of any such claim, action, suit, demand,
proceeding or investigation, shall promptly notify JP and, after the
Effective Time, GGP and GGP Partnership, thereof; provided that the failure
to so notify shall not affect the obligations of JP, GGP and GGP
Partnership except to the extent such failure to notify
40
materially prejudices such 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
and control 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 as provided below and except
for the reasonable costs of investigation subsequently incurred by the
Indemnified Parties in connection with the defense. If the Indemnifying
Parties assume the defense, the Indemnifying Parties shall have the right
to settle such action without the consent of the Indemnified Parties;
provided, however, that the Indemnifying Parties shall be required to
obtain such consent (which consent shall not be unreasonably withheld) if
the settlement includes any admission of wrongdoing on the part of the
Indemnified Parties or any decree or restriction on the Indemnified
Parties; provided, further, that no Indemnifying Party, in the defense of
any such action shall, except with the consent of the Indemnified Parties
(which consent shall not be unreasonably withheld), consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Parties of a release from all liability with respect to such
action. The Indemnified Parties will have the right to employ their own
counsel in any such action, but the fees, expenses and other charges of
such counsel will be at the expense of such Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) a conflict or potential conflict
exists (based on advice of counsel to the Indemnified Parties) between the
Indemnified Parties and the Indemnifying Parties (in which event counsel
for the Indemnified Partner may participate in the defense of such action)
or (iii) the Indemnifying Parties have not in fact employed counsel to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the Indemnifying Parties.
(iii) It is understood that the Indemnifying Parties shall not, in
connection with any proceeding or related proceedings, be liable for the
reasonable fees, disbursements and other charges of more than one separate
firm at any one time for all such Indemnified Parties.
(iv) The Indemnifying Parties will not be liable for any settlement of
any action or claim effected without their written consent (which consent
shall not be unreasonably withheld).
(b) For six years after the Effective Time, GGP and GGP Partnership shall
maintain in effect JP's current directors' and officers' liability insurance
covering each person currently covered by JP's directors' and officers'
liability insurance policy for acts or omissions occurring prior to the
Effective Time on terms with respect to such coverage and amounts no less
favorable in the aggregate to such directors and officers than those of such
policy as in effect on the date of this Agreement; provided that GGP and GGP
Partnership may substitute therefor policies of a reputable insurance company
the terms of which, including coverage and amount, are no less favorable in the
aggregate to such directors and officers than the insurance coverage otherwise
required under this Section 5.8(b); provided, however, that in no event shall
GGP or GGP Partnership be required to pay aggregate annual premiums for
insurance under this Section 5.8(b) in excess of $200,000.00, provided that GGP
and GGP Partnership shall nevertheless be obligated to provide such a policy
with the best coverage reasonably available as may be obtained for such amount.
(c) In the event that GGP, GGP Partnership or any of their successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving entity of such
41
consolidation or merger or (ii) transfers or conveys all or substantially all
its properties and assets to any Person, then, and in each such case, GGP and
GGP Partnership shall cause proper provision to be made so that the successors
and assigns of GGP and GGP Partnership assume the obligations set forth in this
Section 5.8.
(d) To the fullest extent permitted by law, from and after the Effective
Time, all rights to indemnification as of the date hereof in favor of the
directors and officers of JP and the JP Subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in, with respect to
JP, the JP Articles and the JP Bylaws, or, with respect to the JP Subsidiaries,
their respective certificates of incorporation and by-laws (or similar
organizational documents) in effect on the date hereof, or otherwise in effect
on the date hereof, shall survive the Mergers and shall continue in full force
indefinitely.
(e) The provisions of this Section 5.8 are intended to be for the
irrevocable benefit of, and will be enforceable by, each Indemnified Party, his
or her heirs and his or her representatives. Each Indemnified Party shall be
entitled to enforce the covenants under this Section 5.8(e).
5.9 Declaration of Dividends and Distributions. From and after the date of
this Agreement, JP shall not make any dividend or distribution to its
stockholders without the prior written consent of GGP and GGP Partnership;
provided, however, the written consent of GGP and GGP Partnership shall not be
required for the authorization and payment of (a) quarterly distributions with
respect to the JP Common Stock of up to $0.51 per share for the quarter ending
March 31, 2002 and, if the Closing occurs after March 31, 2002, up to $0.51 per
share for each full quarter thereafter, with the dividend for the quarter in
which the Closing occurs to be prorated for the number of days in such quarter
elapsed prior to the Closing and (b) quarterly distributions with respect to the
Price Group Stock of up to $0.408 per share for the quarter ending March 31,
2002 and, if the Closing occurs after March 31, 2002, up to $0.408 per share for
each full quarter thereafter, with the dividend for the quarter in which the
Closing occurs to be prorated for the number of days in such quarter elapsed
prior to the Closing (each such per share amount in (b) being 80% of the
corresponding per share amount in (a)), provided that JP shall notify GGP and
GGP Partnership of the proposed record date for any such distribution prior to
such date. From and after the date of this Agreement, PDC LP shall not make any
distribution to the holders of PDC OP Units except (a) a distribution per JP
Common OP Unit in the same amount as a dividend per share of JP Common Stock
permitted pursuant to this Section 5.9, with the same record and payment dates
as such dividend on JP Common Stock and (b) quarterly dividends with respect to
the PDC Preferred OP Units which are required by the terms of the PDC LP
Agreement. The foregoing restrictions shall not apply, however, to the extent a
distribution (or an increase in a distribution) by JP is permitted under Section
1.8(d), or is necessary for JP to maintain REIT status, avoid the incurrence of
any Taxes under Section 857 of the Code, avoid the imposition of any excise
Taxes under Section 4981 of the Code, or avoid the need to make one or more
extraordinary or disproportionately larger distributions to meet any of the
three preceding objectives.
5.10 Resignations. On the Closing Date, JP shall cause the directors and
officers of JP and of each of the JP Subsidiaries to submit their resignations
from such positions, effective as of the Effective Time.
5.11 Registration Rights Agreements. At the Closing, JP shall assign and
GGP shall assume by appropriate instrument the Registration Rights Agreements
described in Schedule 5.11 to the JP Disclosure Letter relating to the
registration rights granted to the holders of PDC Series A OP Units, PDC Series
B OP Units and PDC Series C OP Units.
42
5.12 Information Supplied. None of JP, PDC LP, GGP or GGP Partnership shall
supply information for inclusion or incorporation by reference in the Proxy
Statement or in the Partner Solicitation Materials that will, at the date mailed
to JP stockholders, at the time of the JP Stockholders Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading.
5.13 The JP Rights Plan. JP shall either (i) redeem, effective immediately,
prior to the Effective Time, all of the then outstanding Rights (as defined in
the Rights Agreement) for cash pursuant to and in compliance with Section 23 of
the Rights Agreement or (ii) take such other action to terminate the Rights
Agreement as of that time, as JP and GGP may mutually agree. JP shall not redeem
the Rights issued under the Rights Agreement, or terminate the Rights Agreement,
prior to the Effective Time of the Merger (other than in accordance with the
preceding sentence) unless required to do so by a court of competent
jurisdiction; provided, however, that JP may take any of the foregoing actions
if the Board of Directors of JP shall have accepted a proposal for a Superior
Competing Transaction in accordance with the terms of Section 4.2.
5.14 Noncompetition Agreements. At or prior to Closing, JP shall cause John
Price and the individuals identified in Schedule 5.14 to the JP Disclosure
Schedule to enter into noncompetition and confidentiality agreements
substantially in the form attached hereto as Exhibit K.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligations of each party to effect the Mergers and to consummate the other
transactions contemplated by this Agreement to occur on the Closing Date shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) JP Stockholder and Partner Approvals. The JP Stockholder Approval and
JP Partner Approvals shall have been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Mergers or any of the other transactions contemplated hereby
shall be in effect.
6.2 Conditions to Obligations of GGP, GGP Partnership, Acquisition and
Partnership Acquisition. The obligations of GGP, GGP Partnership, Acquisition
and Acquisition Partnership Acquisition to effect the Mergers and to consummate
the other transactions contemplated by this Agreement to occur on the Closing
Date are further subject to the following conditions, any one or more of which
may be waived by GGP and GGP Partnership:
(a) Representations and Warranties. Each of the representations and
warranties of JP and PDC LP set forth in this Agreement which is qualified by
materiality shall be true and correct, and each of the representations and
warranties of JP and PDC LP set forth in this Agreement which is not so
qualified shall be true and correct in all material respects, in each case, as
of the date of this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent that such representations and
warranties are expressly limited by their terms to another date, in which case
such representations and warranties shall be true and correct as of such other
date). This condition shall be
43
deemed to have been satisfied unless all breaches of the representations and
warranties of JP and PDC LP in this Agreement (without giving effect to any
materiality, any JP Material Adverse Effect or any similar qualification or
limitation) would, in the aggregate, reasonably be expected to have a JP
Material Adverse Effect. GGP and GGP Partnership shall have received a
certificate (which certificate may be qualified by knowledge to the same extent
as such representations and warranties are so qualified) signed on behalf of JP
by the chief executive officer and the chief financial officer of JP, in such
capacities, to such effect.
(b) Performance of Obligations of JP and PDC LP. JP and PDC LP shall have
performed in all material respects all obligations required to be performed by
them under this Agreement at or prior to the Effective Time, and GGP and GGP
Partnership shall have received a certificate signed on behalf of JP by the
chief executive officer and the chief financial officer of JP, in such
capacities, to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there shall
have been no JP Material Adverse Effect, and GGP shall have received a
certificate of the chief executive officer and chief financial officer of JP, in
such capacities, certifying to such effect.
(d) Tax Opinions Relating to REIT Status and Partnership Status. GGP and
GGP Partnership shall have received an opinion of Clifford Chance Rogers & Wells
LLP or other counsel to JP reasonably satisfactory to GGP and GGP Partnership,
dated as of the Closing Date, to the effect that, (i) for all taxable years for
which the Internal Revenue Service could assert a Tax liability with respect to
JP, JP was organized and has operated in conformity with the requirements for
qualification and taxation as a REIT under the Code, and (ii) for all taxable
years for which the Internal Revenue Service could assert a Tax liability with
respect to PDC LP, PDC LP has been, and continues to be, treated for federal
income tax purposes as a partnership and not as a corporation or association
taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations). For purposes of such
opinion, Clifford Chance Rogers & Wells LLP may rely on (in addition to
customary assumptions and representations for opinions of this type) assumptions
to the effect that (A) Code Section 562(e) applies to the deemed sale of assets
by JP pursuant to the Merger in computing the earnings and profits of JP for the
taxable year ending on the Closing Date, (B) that the Merger will be treated for
federal income tax purposes in the manner described in paragraph G of the
Recitals hereof, and (C) no action will be taken following the Mergers that is
inconsistent with JP's status as a REIT for any period prior to the Mergers.
(e) Consents. The consents (or waivers of such consents) from third
parties, specified in Schedule 6.2(e) of the JP Disclosure Letter shall have
been obtained and remain in full force and effect.
6.3 Conditions to Obligations of JP and PDC LP. The obligations of JP and
PDC LP to effect the Mergers and to consummate the other transactions
contemplated to occur on the Closing Date is further subject to the following
conditions, any one or more of which may be waived by JP and PDC LP:
(a) Representations and Warranties. Each of the representations and
warranties of GGP, GGP Partnership, Acquisition and Partnership Acquisition set
forth in this Agreement which is qualified by materiality shall be true and
correct, and each of the representations and warranties of GGP, GGP Partnership,
Acquisition and Partnership Acquisition set forth in this Agreement which is not
so qualified shall be true and correct in all material respects, in each case,
as of the date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date (except to the extent that such representations and
warranties are expressly limited by their terms to another date, in which case
such representations and warranties shall be true and correct as of such other
date). This condition shall be deemed to have been satisfied unless all breaches
of the representations and warranties of GGP and GGP
44
Partnership in this Agreement (without giving effect to any materiality, JP
Material Adverse Effect or any similar qualification or limitation) would, in
the aggregate, reasonably be expected to have a GGP Material Adverse Effect. JP
shall have received a certificate (which certificate may be qualified by
knowledge to the same extent as such representations and warranties are so
qualified) signed on behalf of GGP by a duly authorized representative of GGP,
in such capacity, to such effect.
(b) Performance of Obligations of GGP, GGP Partnership, Acquisition and
Partnership Acquisition. GGP, GGP Partnership, Acquisition and Partnership
Acquisition shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Effective Time, and JP shall have received a certificate signed on behalf of GGP
by a duly authorized representative of GGP, in such capacity, to such effect.
(c) Tax Opinions Relating to REIT Status and Partnership Status.
Contributing Holders of PDC Common OP Units shall have received an opinion of
Neal, Gerber & Eisenberg or other counsel to GGP reasonably satisfactory to
Contributing Holders of PDC Common OP Units, dated as of the Closing Date, to
the effect that, (i) for all taxable years for which the Internal Revenue
Service could assert a Tax liability with respect to GGP, GGP was organized and
operated in conformity with the requirements for qualification and taxation as a
REIT under the Code, and (ii) for all taxable years for which the Internal
Revenue Service could assert a Tax liability with respect to GGP Partnership,
GGP Partnership has been, and continues to be, treated for federal income tax
purposes as a partnership and not as a corporation or association taxable as a
corporation (with customary exceptions, assumptions and qualifications and based
upon customary representations).
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER; BOARD ACTIONS
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Partnership Merger, whether such action occurs before or
after any of the JP Stockholder Approval or JP Partner Approvals are obtained:
(a) by mutual written consent duly authorized by the Board of Directors of
JP and GGP;
(b) by GGP and GGP Partnership, or upon a breach of or failure to perform
any representation, warranty, covenant, obligation or agreement on the part of
JP or PDC LP set forth in this Agreement, or if any representation or warranty
of JP or PDC LP shall become untrue, in either case such that the conditions set
forth in Section 6.2(a) or Section 6.2(b), as the case may be, would be
incapable of being satisfied by July 31, 2002 (or as otherwise extended by
mutual agreement of the parties hereto);
(c) by JP upon a breach of any representation, warranty, covenant,
obligation or agreement on the part of GGP, GGP Partnership, Acquisition or
Partnership Acquisition set forth in this Agreement, or if any representation or
warranty of GGP, GGP Partnership, Acquisition or Partnership Acquisition shall
become untrue, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b), as the case may be, would be incapable of being
satisfied by July 31, 2002 (or as otherwise extended by mutual agreement of the
parties hereto);
(d) by either GGP, GGP Partnership or JP, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Mergers shall have become final and
non-appealable; provided, however, that a party may not terminate
45
pursuant to this clause (d) if the terminating party shall have materially
breached its obligations under this Agreement;
(e) by either GGP, GGP Partnership or JP, if the Mergers shall not have
been consummated before July 31, 2002; provided, however, that a party may not
terminate pursuant to this clause (e) if the terminating party shall have
materially breached its obligations under this Agreement;
(f) by either GGP, GGP Partnership or JP, if, upon a vote at a duly held JP
Stockholders Meeting or any adjournment thereof, the JP Stockholder Approval
shall not have been obtained as contemplated by Section 5.1 or the JP Partner
Approvals shall not have been obtained as contemplated by Section 5.1;
(g) by JP, if the Board of Directors of JP shall have withdrawn, modified,
amended or qualified in any manner adverse to GGP or GGP Partnership its
approval or recommendation of either of the Mergers or this Agreement in
connection with, or approved or recommended, any Superior Competing Transaction
in compliance with the provisions of Sections 4.2 and 4.3; and
(h) by GGP or GGP Partnership, if (i) prior to the JP Stockholder Meeting,
the Board of Directors of JP or any committee thereof shall have failed to
recommend or withdrawn, modified, amended or qualified in any manner adverse to
GGP or GGP Partnership its approval or recommendation of the Mergers or this
Agreement, or approved or recommended any Superior Competing Transaction, (ii)
JP or PDC LP shall have entered into any agreement with respect to any Competing
Transaction or (iii) the Board of Directors of JP or any committee thereof shall
have resolved or publicly disclosed its intent to do any of the foregoing.
7.2 Certain Fees, Expenses and Rights. If this Agreement is terminated
pursuant to Section 7.1(b), then JP and PDC LP shall be jointly liable to pay to
GGP Partnership an amount equal to the GGP Break-Up Expenses (as defined
herein). If this Agreement shall be (i) terminated pursuant to Section 7.1(b),
7.1(e) (if JP shall have exercised such termination right) or 7.1(f), and (A) on
or after January 31, 2002 and prior to such termination a Person has made a
proposal relating to a Competing Transaction and (B) within one year of any such
termination JP shall consummate a Competing Transaction or execute a definitive
agreement providing for a transaction or series of transactions which would
otherwise constitute a Competing Transaction (a "JP Acquisition Agreement") with
such Person or its Affiliates or associates or Persons acting in concert with
such Person (whether or not any JP Acquisition Agreement relates to the same
Competing Transaction which had been received at the time of the termination of
this Agreement) or (ii) terminated pursuant to Section 7.1(g) or 7.1(h), then JP
and PDC LP shall be jointly liable to pay to GGP Partnership an amount equal to
the GGP Break-Up Fee (as defined below) less any GGP Break-Up Expenses otherwise
to be paid hereunder.
The payment of the GGP Break-Up Fee or GGP Break-Up Expenses shall be
compensation for the loss suffered by GGP, GGP Partnership and their Affiliates
as a result of the failure of the Mergers to be consummated (including, without
limitation, opportunity costs and out-of-pocket costs and expenses) and to avoid
the difficulty of determining damages under the circumstances. The GGP Break-Up
Fee shall be paid by JP to GGP Partnership, or the GGP Break-Up Expenses shall
be paid by JP to GGP Partnership, in immediately available funds within two (2)
business days after the date the event giving rise to the obligation to make
such payment occurred. JP and PDC LP acknowledge that the agreements contained
in this Section 7.2 are integral parts of this Agreement; accordingly, if JP
fails to promptly pay the GGP Break-Up Fee or GGP Break-Up Expenses due pursuant
to this Section 7.2 and, in order to obtain payment, GGP or GGP Partnership
commences a suit which results in a judgment against JP or PDC LP for any
amounts owed pursuant to this Section 7.2, JP and PDC LP shall pay to GGP
Partnership its costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit.
46
As used in this Agreement, "GGP Break-Up Fee" shall be an amount equal to the
lesser of (i) $19,000,000 (the "Base Amount") and (ii) the sum of (A) the
maximum amount that can be paid to GGP Partnership without causing GGP to fail
to meet the requirements of Sections 856(c)(2) and (3) of the Code determined as
if the payment of such amount did not constitute income described in Sections
856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as
determined by independent accountants to GGP, and (B) in the event GGP or GGP
Partnership receives a letter from its outside counsel (the "GGP Break-Up Fee
Tax Opinion") or a private letter ruling from the Internal Revenue Service ("IRS
GGP Break-Up Fee Ruling") stating that GGP Partnership's receipt of the Base
Amount would either constitute Qualifying Income or would be excluded from gross
income of GGP within the meaning of Sections 856(c)(2) and (3) of the Code (the
"REIT Requirements") or that the receipt by GGP Partnership of the remaining
balance of the Base Amount following the receipt of and pursuant to such GGP
Break-Up Fee Tax Opinion or IRS GGP Break-Up Fee Ruling would not cause GGP to
be deemed to have constructively received such remaining balance prior thereto,
the Base Amount less the amount payable under clause (A) above. In the event
that GGP Partnership is not able to receive the full Base Amount, JP shall place
the unpaid amount in escrow and shall not release any portion thereof to GGP
Partnership unless and until JP receives one of the following: (i) a letter from
GGP's or GGP Partnership's independent accountants indicating the maximum amount
that can be paid at that time to GGP Partnership without causing GGP to fail to
meet the REIT Requirements, (ii) a GGP Break-Up Fee Tax Opinion or (iii) a copy
of the IRS GGP Break-Up Fee Ruling, in any of which events JP shall pay to GGP
Partnership the lesser of the unpaid Base Amount or the maximum amount stated in
the letter referred to in (i) above. JP's obligation to pay any unpaid portion
of the GGP Break-Up Fee shall terminate three years from the date of this
Agreement (and any amounts still held in escrow shall be released to JP).
Subject to satisfaction of the conditions set forth in the penultimate sentence
of this paragraph, there is no limitation on the number of distributions that
can be made from the escrow prior to the third anniversary of this Agreement.
The "GGP Break-Up Expenses" payable to GGP Partnership shall be an amount
equal to the lesser of (i) $2,000,000 and (ii) GGP's and GGP Partnership's
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, all attorneys',
accountants' and investment bankers' fees and expenses). If the GGP Break-Up
Expenses payable to GGP Partnership exceed the maximum amount that can be paid
to GGP Partnership without causing GGP to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute Qualifying Income, as determined by independent
accountants to GGP (the "Maximum Amount"), the amount initially payable to GGP
Partnership shall be limited to the Maximum Amount. If, however, within the
three-year period commencing on the date of this Agreement, GGP or GGP
Partnership receives a letter from its outside counsel ("GGP Break-Up Expenses
Tax Opinion") or a private letter ruling from the Internal Revenue Service ("IRS
GGP Break-Up Expenses Ruling") stating that GGP Partnership's receipt of the GGP
Break-Up Expenses would either constitute Qualifying Income or would be excluded
from GGP's gross income within the meaning of the REIT Requirements or that
receipt by GGP Partnership of the remaining balance of the GGP Break-Up Expenses
above the Maximum Amount following the receipt of and pursuant to such GGP
Break-Up Expenses Tax Opinion or IRS GGP Break-Up Expenses Ruling would not
cause GGP to be deemed to have constructively received such remaining balance
prior thereto, GGP Partnership shall be entitled to have payable to it the full
amount of the GGP Break-Up Expenses. In the event that GGP Partnership is not
able to receive the full GGP Break-Up Expenses, JP shall place the unpaid amount
in escrow and shall not release any portion thereof to GGP Partnership unless
and until JP receives one of the following: (i) a letter from the independent
accountants of GGP or GGP Partnership indicating the maximum amount that can be
paid at that time to GGP Partnership without causing GGP to fail to meet the
REIT Requirements, (ii) a GGP Break-Up Expenses Tax Opinion or (iii) a copy of
the IRS GGP Break-Up Expenses Ruling, in any of which events JP shall pay to GGP
Partnership the lesser of the unpaid GGP Break-Up Expenses or the maximum amount
stated in the letter referred to in (i) above. The
47
obligation of JP to pay any unpaid portion of the GGP Break-Up Expenses shall
terminate three years from the date of this Agreement. Subject to satisfaction
of the conditions set forth in the penultimate sentence of this paragraph, there
is no limitation on the number of distributions that can be made from the escrow
prior to the third anniversary of this Agreement.
If this Agreement shall be terminated pursuant to Section 7.1(c), then GGP
and GGP Partnership thereupon shall be jointly liable to pay to JP an amount
equal to the lesser of (i) $2,000,000 and (ii) JP's out-of-pocket expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, all attorneys', accountants' and
investment bankers' fees and expenses) (the "JP Break-Up Expenses"). GGP
acknowledges that if JP commences a suit which results in a judgment against GGP
or GGP Partnership for any amounts owed pursuant to this Section 7.2, GGP and
GGP Partnership shall be jointly and severally liable to JP for JP's costs and
expenses (including reasonable attorneys' fees and expenses) in connection with
such suit.
The foregoing provisions of this Section 7.2 have been agreed to by each of
the parties hereto in order to induce the other parties to enter into this
Agreement and to consummate the Mergers and the other transactions contemplated
by this Agreement, it being agreed and acknowledged by each of them that the
execution of this Agreement by them constitutes full and reasonable
consideration for such provisions.
7.3 Effect of Termination. In the event of termination of this Agreement by
either JP, GGP or GGP Partnership as provided in Section 7.1, this Agreement
shall forthwith become void and have no effect, without any liability or
obligation on the part of JP, PDC LP, GGP, GGP Partnership, Acquisition or
Partnership Acquisition, other than Section 7.2, this Section 7.3 and Article 8,
and except to the extent that such termination results from a willful breach by
any party of any of its representations, warranties, covenants or agreements set
forth in this Agreement or a failure or refusal by such party to consummate the
transactions contemplated hereby when such party was obligated to do so in
accordance with the terms hereof.
7.4 Amendment. This Agreement may be amended by the parties in writing by
the Board of Directors of JP (on behalf of itself and PDC LP) or GGP (on behalf
of itself, GGP Partnership, Acquisition and Partnership Acquisition) at any time
before or after any JP Partners Approvals or JP Stockholder Approval are
obtained and prior to the filing of the Maryland Articles of Merger and/or the
Maryland Articles of Partnership Merger with the Department and/or the Delaware
Certificate of Merger with the Secretary of State; provided, however, that,
after the JP Partner Approvals and JP Stockholder Approval are obtained, no such
amendment, modification or supplement shall be made which by law requires the
further approval of stockholders or partners without obtaining such further
approval. The parties agree to amend this Agreement in the manner provided in
the immediately preceding sentence to the extent required to continue the status
of each of JP and GGP as a REIT. Acquisition and Partnership Acquisition hereby
agree that any consent or waiver of compliance given by GGP and GGP Partnership
hereunder shall be conclusively binding on each of them, whether given expressly
or on its behalf.
7.5 Extension; Waiver. At any time prior to the Effective Time, the parties
may (a) extend the time for the performance of any of the obligations or other
acts of the other party or parties, (b) waive any inaccuracies in the
representations and warranties of the other party or parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.4, waive compliance with any of the agreements or
conditions of the other party or parties contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
48
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) or sent by telecopy (providing confirmation of transmission) to the
parties at the following addresses or telecopy numbers (or at such other address
or telecopy number for a party as shall be specified by like notice):
(a) if to GGP, GGP Partnership, Acquisition or Partnership Acquisition, to:
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, Illinois 60606
Attention: Bernard Freibaum
Fax No.: (312) 960-5463
with a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60602
Attention: Marshall E. Eisenberg, Esq.
Fax No.: (312) 269-1747
(b) if to JP or PDC LP, to:
JP Realty, Inc.
35 Century Park-Way
Salt Lake City, Utah 84115
Attention: Paul K. Mendenhall
Fax No.: (801) 486-7653
with a copy to:
Clifford Chance Rogers & Wells LLP
200 Park Avenue
New York, NY 10166
Attention: Jay L. Bernstein, Esq.
Fax No.: (212) 878-8375
8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings
49
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The parties have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the JP
Disclosure Letter, the GGP Disclosure Letter, the Schedules, the Confidentiality
Agreement, the Voting Agreement, and the other agreements entered into in
connection with the Merger and the Partnership Merger (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) except as provided in Sections 5.7 and 5.8, are not intended to confer
upon any Person other than the parties hereto any rights or remedies.
8.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND (AND SOLELY WITH RESPECT TO
THE CONSUMMATION OF THE MERGER, THE APPLICABLE LAWS OF THE STATE OF DELAWARE AND
THE STATE OF MARYLAND), REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties. Notwithstanding the foregoing, each of
Acquisition and Partnership Acquisition may assign, in its sole discretion, any
of or all its respective rights, interests and obligations under this Agreement
to any direct or indirect wholly owned subsidiary of GGP and GGP Partnership
with written notice to JP, but no such assignment shall relieve GGP or GGP
Partnership of any of their obligations hereunder. Subject to the preceding
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and permitted
assigns.
8.8 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions (without any requirement for posting bond) to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any federal court located in Maryland or, to the extent such courts
do not have subject matter jurisdiction, in any state court located in Maryland,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
(without making such submission exclusive) to the personal jurisdiction of any
federal court located in Maryland or to the extent such courts do not have
subject matter jurisdiction, or any state court located in Maryland in the event
any dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
50
8.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.10 Exculpation. This Agreement shall not impose any personal liability on
any stockholder, trustee, trust manager, manager, director, officer, employee or
agent of JP, PDC LP, GGP, GGP Partnership, Acquisition or Partnership
Acquisition, and all Persons shall look solely to the property of JP, PDC LP,
GGP or GGP Partnership for the payment of any claim hereunder or for the
performance of this Agreement.
8.11 Joint and Several Obligations. GGP, GGP Partnership, Acquisition and
Partnership Acquisition shall be jointly and severally liable hereunder. JP and
PDC LP shall be jointly and severally liable hereunder.
8.12 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
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
8.13 Knowledge of GGP. If, to the Knowledge of GGP on the date hereof,
there is a matter which should be set forth on any JP Disclosure Schedule, such
matter shall be deemed to be set forth thereon to the extent of such Knowledge.
51
IN WITNESS WHEREOF, GGP, GGP Partnership, Acquisition, Partnership
Acquisition, JP and PDC LP have caused this Agreement to be signed by their
respective officers, general partners or members thereunto duly authorized all
as of the date first written above.
GENERAL GROWTH PROPERTIES, INC.
By: ________________________________
Name:
Title
GGP LIMITED PARTNERSHIP
By: General Growth Properties, Inc.,
General Partner
By:_____________________________
Name:
Title:
GGP ACQUISITION, L.L.C.
By: GGP Limited Partnership, Member
By: General Growth Properties,
Inc., General Partner
By:_____________________________
Name:
Title:
GGP ACQUISITION II, L.L.C.
By: GGP Limited Partnership, Member
By: General Growth Properties,
Inc., General Partner
By:_____________________________
Name:
Title:
52
JP REALTY, INC.
By: ________________________________
Name:
Title:
PRICE DEVELOPMENT COMPANY, LIMITED
PARTNERSHIP
By: JP Realty, Inc., General
Partner
By:_____________________________
Name:
Title:
53
EXHIBIT B
March 3, 2002
The Board of Directors
JP Realty, Inc.
35 Century Park-Way
Salt Lake City, UT 84155
Dear Members of the Board:
We understand that JP Realty, Inc., a Maryland corporation ("JP Realty" or the
"Company"), is considering a transaction whereby General Growth Properties,
Inc., a Delaware corporation ("General Growth"), will undertake a series of
transactions whereby the Company will become an indirect subsidiary of General
Growth (the "Merger"). Pursuant to the terms of an Agreement and Plan of Merger
(the "Agreement"), (a) each outstanding share of common stock, par value $.0001
per share of the Company (the "Common Stock"), other than Price Group Stock,
will be converted into the right to receive $26.10 in cash without interest (the
"Consideration"), and (b) each outstanding share of Price Group Stock, par value
$.0001 per share (the "Price Group Stock") will be converted into the right to
receive $26.10 in cash without interest (the "Group Stock Consideration"), and
(c) an indirect subsidiary of General Growth will merge with and into Price
Development Company, Limited Partnership, a Maryland limited partnership (the
"Operating Partnership"), and the holders of limited partnership interests in
the Operating Partnership will be entitled to receive partnership interests in
GGP Limited Partnership or cash in exchange for the cancellation of their
limited partnership interests (the "Unit Consideration"). The terms and
conditions of the Merger are more fully set forth in the Agreement.
You have requested our opinion as to the fairness from a financial point of view
to the holders of the Common Stock of the Company of the Consideration to be
received by such holders in the Merger. You have not requested, and our opinion
does not in any manner address, (1) the fairness of the Merger to the holders of
the Price Group Stock of the Group Stock Consideration, (2) the fairness of the
Merger to the limited partners of the Operating Partnership, or (3) the value of
the Consideration relative to the value available to the
limited partners of the Operating Partnership. UBS Warburg LLC ("UBS Warburg")
has acted as financial advisor to the Board of Directors of the Company in
connection with the Merger and will receive a fee for its services. UBS Warburg
will also receive a fee upon delivery of this opinion. In addition, the Company
has agreed to indemnify UBS Warburg for certain liabilities that may arise out
of the rendering of this opinion. In the past, UBS Warburg and its predecessors
have provided investment banking services to the Company and received customary
compensation for the rendering of such services. In the ordinary course of
business, UBS Warburg, its successors and affiliates have and may trade
securities of the Company for their own accounts and the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our opinion does not address the Company's underlying business decision to
proceed with or effect the Merger or constitute a recommendation to any
shareholder of the Company as to how such shareholder should vote with respect
to the Merger. We have not been asked to, nor do we, offer any opinion as to any
terms of the Agreement or the form of the Merger, other than as to the fairness
from a financial point of view, as of the date hereof, to the holders of the
Common Stock (other than holders of Price Group Stock) of the Company of the
Consideration to be received by such holders in the Merger. In rendering this
opinion, we have assumed, with your consent, that the final executed form of the
Agreement does not differ in any material respect from the draft that we have
examined, and that General Growth and the Company will comply with all the
material terms of the Agreement. We have not been authorized to and have not
solicited indications of interest in a business combination with the Company
from any party.
In arriving at our opinion, we have, among other things: (i) reviewed certain
publicly available business and historical financial information relating to the
Company; (ii) reviewed certain internal financial information and other data
relating to the business, operations and financial prospects of the Company,
including estimates and financial forecasts prepared by management of the
Company, that were provided to us by the Company and were not publicly
available; (iii) conducted discussions with members of the senior management of
the Company concerning the business, operations and financial prospects of the
Company; (iv) reviewed publicly available financial and stock market data with
respect to the Company and certain other companies in lines of business we
believe to be generally comparable to those of the Company; (v) compared the
financial terms of the Merger with the publicly available financial terms of
certain other transactions which we believe to be generally relevant, (vii)
reviewed the Agreement; and (viii) conducted such other financial studies, site
visits, analyses, and investigations, and considered such other information as
we deemed necessary or appropriate.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on
such information being complete and accurate in all material respects. We have
further relied upon assurances of management of the Company that they are not
aware of any facts or circumstances that would make such information inaccurate
or misleading. In addition, at your direction, we have not made any independent
evaluation or appraisal of any of the assets or liabilities (contingent or
otherwise) of the Company, nor have we been furnished with any such evaluation
or appraisal. With respect to the financial forecasts and estimates referred to
above, we have assumed, at your direction, that they have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company. We have assumed that all governmental, regulatory or
other consents and approvals necessary for the consummation of the Merger will
be obtained without any material adverse effect on the Company or the Merger.
Our opinion is necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available to us as of the
date hereof.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of the Common Stock of
the Company, other than holders of Price Group Stock, in the Merger is fair,
from a financial point of view, to such holders.
Very truly yours,
UBS WARBURG LLC
By: _____________________________ By: ______________________________
Howard J. Margolis Russell H. Bates
Executive Director Director