EXHIBIT 2.1
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SHURGARD STORAGE CENTERS, INC.,
PUBLIC STORAGE, INC.
and
ASKL SUB LLC
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AGREEMENT AND PLAN OF MERGER
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Dated as of March 6, 2006
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TABLE OF CONTENTS
PAGE
ARTICLE I. DEFINITIONS..................................................2
ARTICLE II. THE MERGER..................................................11
SECTION 2.1. The Merger................................................11
SECTION 2.2. Closing...................................................11
SECTION 2.3. Effective Time............................................12
SECTION 2.4. Effect of the Merger......................................12
SECTION 2.5. Subsequent Actions........................................12
SECTION 2.6. Certificate of Formation; Limited Liability Company
Agreement; Managing Member and Officers...................12
SECTION 2.7. Further Assurances........................................13
SECTION 2.8. Structure.................................................13
ARTICLE III. CONVERSION OF THE COMPANY'S CAPITAL STOCK...................13
SECTION 3.1. Conversion of the Company's Capital Stock.................13
SECTION 3.2. Exchange of Share Certificates............................14
SECTION 3.3. Adjustments to Prevent Dilution...........................18
SECTION 3.4. No Further Rights.........................................18
SECTION 3.5. Dissenting Shares.........................................18
SECTION 3.6. Stock Options, Restricted Stock and Restricted
Stock Units...............................................18
SECTION 3.7. Redemption of Preferred Stock.............................20
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............20
SECTION 4.1. Organization and Qualification; Subsidiaries..............21
SECTION 4.2. Capitalization............................................21
SECTION 4.3. Authorization and Execution...............................23
SECTION 4.4. Absence of Conflicts; Governmental Authorizations.........23
SECTION 4.5. SEC Reports and Financial Statements......................24
SECTION 4.6. Absence of Certain Changes or Events......................25
SECTION 4.7. Litigation................................................26
SECTION 4.8. No Undisclosed Liabilities................................26
SECTION 4.9. Employee Benefit Plans; ERISA.............................27
SECTION 4.10. Labor and Employment Matters..............................30
SECTION 4.11. Information Supplied......................................31
SECTION 4.12. Permits...................................................32
SECTION 4.13. Compliance with Law.......................................32
SECTION 4.14. Taxes.....................................................32
SECTION 4.15. Properties................................................36
SECTION 4.16. Environmental.............................................38
SECTION 4.17. Intellectual Property.....................................38
SECTION 4.18. Material Contracts........................................39
SECTION 4.19. Brokers...................................................41
SECTION 4.20. Opinion of Financial Advisor..............................41
SECTION 4.21. Anti-Takeover Legal Requirements..........................41
SECTION 4.22. Rights Agreement Amendment................................41
SECTION 4.23. Insurance.................................................42
SECTION 4.24. Voting Requirements.......................................42
SECTION 4.25. Affiliate Transactions....................................42
SECTION 4.26. Investment Company Act of 1940............................42
SECTION 4.27. Disclaimer of Other Representations and Warranties........42
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....43
SECTION 5.1. Organization and Qualification............................43
SECTION 5.2. Capitalization............................................43
SECTION 5.3. Authorization and Execution...............................44
SECTION 5.4. Absence of Conflicts; Governmental Authorizations.........44
SECTION 5.5. SEC Reports and Financial Statements......................45
SECTION 5.6. Absence of Certain Changes or Events......................46
SECTION 5.7. Litigation................................................46
SECTION 5.8. No Undisclosed Liabilities................................46
SECTION 5.9. Information Supplied......................................46
SECTION 5.10. No Prior Activities.......................................47
SECTION 5.11. Compliance with Law.......................................47
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SECTION 5.12. Taxes.....................................................47
SECTION 5.13. Properties................................................48
SECTION 5.14. Environmental.............................................48
SECTION 5.15. Brokers...................................................48
SECTION 5.16. Voting Requirements.......................................49
SECTION 5.17. Disclaimer of Other Representations and Warranties........49
ARTICLE VI. COVENANTS OF THE COMPANY....................................49
SECTION 6.1. Access to Information.....................................49
SECTION 6.2. Information for Registration Statement....................50
SECTION 6.3. Conduct of Business.......................................50
SECTION 6.4. No Solicitation...........................................55
SECTION 6.5. Tax Matters...............................................56
SECTION 6.6. Dividends.................................................57
SECTION 6.7. Preferred Stock...........................................58
ARTICLE VII. COVENANTS OF PARENT AND MERGER SUB..........................59
SECTION 7.1. Obligation of Parent to Make Merger Effective and
Merger Sub's Stockholder Consent..........................59
SECTION 7.2. Access to Information.....................................59
SECTION 7.3. Information for Proxy Statement for the Company's
Shareholders..............................................59
SECTION 7.4. Conduct of Business.......................................60
SECTION 7.5. Indemnification Rights....................................60
SECTION 7.6. Employee Benefits.........................................62
SECTION 7.7. Tax Matters...............................................63
ARTICLE VIII. COVENANTS OF ALL PARTIES....................................64
SECTION 8.1. Shareholder Approval; Preparation of Proxy Statement
and Registration Statement................................64
SECTION 8.2. Reasonable Best Efforts...................................66
SECTION 8.3. Listing of Shares.........................................67
SECTION 8.4. Affiliate Letter..........................................68
SECTION 8.5. Section 16(b).............................................68
SECTION 8.6. Company Indebtedness......................................68
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SECTION 8.7. Parent Board of Directors.................................69
SECTION 8.8. Public Announcements......................................69
ARTICLE IX. CONDITIONS OF MERGER........................................69
SECTION 9.1. General Conditions........................................69
SECTION 9.2. Conditions to Obligations of Parent and Merger Sub........70
SECTION 9.3. Conditions to Obligations of the Company..................70
ARTICLE X. TERMINATION, AMENDMENT AND WAIVER...........................71
SECTION 10.1. Termination...............................................71
SECTION 10.2. Effect of Termination.....................................73
ARTICLE XI. GENERAL PROVISIONS..........................................75
SECTION 11.1. Non-Survival of Representations, Warranties and
Agreements................................................75
SECTION 11.2. Notices...................................................75
SECTION 11.3. Expenses..................................................76
SECTION 11.4. Headings..................................................76
SECTION 11.5. Severability..............................................76
SECTION 11.6. Effectiveness; Entire Agreement...........................76
SECTION 11.7. Parent Guarantee..........................................76
SECTION 11.8. Assignment................................................77
SECTION 11.9. No Third Party Beneficiaries..............................77
SECTION 11.10. Governing Law.............................................77
SECTION 11.11. Specific Performance......................................77
SECTION 11.12. Amendment.................................................77
SECTION 11.13. Waiver....................................................78
SECTION 11.14. Counterparts..............................................78
SECTION 11.15. Interpretation............................................78
EXHIBITS
Exhibit A - Form of Parent Voting Agreement
Exhibit B - Form of Company Voting Agreement
Exhibit C - Company REIT Opinion
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Exhibit D - Parent REIT Opinion
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 6, 2006 (the
"AGREEMENT"), by and among SHURGARD STORAGE CENTERS, INC., a Washington
corporation (the "COMPANY"), PUBLIC STORAGE, INC., a California corporation
("PARENT") and ASKL SUB LLC, a Delaware limited liability company and an
indirect Subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H:
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WHEREAS, the Board of Directors of the Company (the "COMPANY
BOARD"), the Board of Directors of Parent and the managing member of Merger Sub
have each determined that it is advisable and in the best interests of their
respective shareholders and interest holders for the Company to merge with and
into Merger Sub (the "MERGER") in accordance with the Washington Business
Corporation Act (as in effect from time to time, the "WBCA") and the Delaware
Limited Liability Company Act (as in effect from time to time, the "LLC ACT")
and upon the terms and subject to the conditions set forth herein;
WHEREAS, the respective Boards of Directors of Parent, Merger Sub
and the Company have each approved the Merger upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Company Board has adopted resolutions approving the
Merger and recommending that the Company's shareholders approve and adopt this
Agreement and the Merger;
WHEREAS, the Board of Directors of Parent has adopted resolutions
approving the Merger and recommending that Parent's shareholders approve the
Share Issuance;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Company is entering into a Voting Agreement with certain
shareholders of Parent, in the form of EXHIBIT A, pursuant to which, among other
things, such shareholders have agreed to vote the shares owned by such
shareholders in favor of the Share Issuance;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Parent is entering into a Voting Agreement with a director and
shareholder of the Company, in the form of EXHIBIT B, pursuant to which, among
other things, such director has agreed to vote the shares owned by such director
in favor of the approval and adoption of this Agreement and the Merger; and
WHEREAS, Parent, the Company and Merger Sub intend that for U.S.
federal, and applicable state, income tax purposes the Merger shall be treated
as a taxable disposition by the Company of all of the Company's assets to Merger
Sub in exchange for the Merger Consideration, the cash paid pursuant to Section
3.7, the Parent Preferred Stock, if any, and the
assumption of the Company's liabilities, followed by a liquidating distribution
of such Merger Consideration, cash paid pursuant to Section 3.7 and Parent
Preferred Stock, if any, to the holders of the Company Common Stock and Company
Preferred Stock, respectively, pursuant to Section 331 and Section 562 of the
Code.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, the Company, Parent and Merger Sub hereby agree as follows:
ARTICLE I.
DEFINITIONS
"ACQUISITION PROPOSAL" means any proposal or offer from a Third
Party for or with respect to the acquisition, directly or indirectly, of
beneficial ownership (as defined under Rule 13(d) of the Exchange Act) of
assets, securities or ownership interests of or in the Company or any of its
Subsidiaries representing 10% or more of the consolidated assets of the Company
and its Subsidiaries or of an equity interest representing a 10% or greater
economic interest in the Company and such Subsidiaries taken as whole, pursuant
to a merger, consolidation or other business combination, sale of shares of
capital stock, sale of assets, share exchange, liquidation, dissolution,
recapitalization, tender offer, exchange offer or similar transaction with
respect to either the Company or any of such Subsidiaries.
"AFFILIATE" means, with respect to any specified Person, any other
Person that, directly or indirectly, through one or more intermediaries,
controls, is controlled by or is under common control with such specified
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
Contract or otherwise.
"AGREEMENT" has the meaning specified in the preamble hereof.
"ARTICLES OF MERGER" has the meaning specified in Section 2.3.
"ASSUMED INDENTURES" has the meaning specified in Section 8.6.
"BENEFITS CONTINUATION PERIOD" has the meaning specified in Section
7.6(a)(i).
"BOOK ENTRY SHARE" means a share of Company Common Stock or Company
Preferred Stock, as applicable, that is held in book-entry form.
"BUSINESS" shall mean all businesses operated by the Company and its
Subsidiaries.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or
other day on which banks are required or authorized by law to be closed in the
City of New York.
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"CERTIFICATE" has the meaning specified in Section 3.1(d).
"CLOSING" has the meaning specified in Section 2.2.
"CLOSING DATE" has the meaning specified in Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMPANY" has the meaning specified in the preamble hereof.
"COMPANY AFFILIATE LETTER" has the meaning specified in Section 8.4.
"COMPANY BOARD" has the meaning specified in the preamble hereof.
"COMPANY COMMON STOCK" means the validly issued, fully paid and
non-assessable shares of Class A common stock, par value $0.001, of the Company.
"COMPANY DISCLOSURE SCHEDULE" has the meaning specified in Article
IV.
"COMPANY INSIDERS" has the meaning specified in Section 8.5.
"COMPANY MATERIAL ADVERSE EFFECT" means any change, event,
circumstance or development which, individually or in the aggregate, is or is
reasonably expected to have a material adverse effect on the business,
operations, financial condition, results of operations, properties, assets or
liabilities of the Company and its Subsidiaries taken as a whole or on the
ability of the Company to timely consummate the transactions contemplated
hereby; PROVIDED, HOWEVER, that this definition shall exclude any such change,
event, circumstance or development to the extent arising out of, attributable to
or resulting from (a) conditions generally affecting the self-storage or real
estate industry (including economic, legal and regulatory changes); (b) changes
in general international, national or regional economic or financial conditions
or changes in the securities markets in general; (c) changes in any laws or
regulations or accounting regulations or principles applicable to the Company
and its Subsidiaries; (d) any outbreak or escalation of hostilities (including
any declaration of war by the United States) or act of terrorism; or (e) the
announcement, execution or consummation of this Agreement and the transactions
contemplated hereby; other than, in each of cases (a) through (d), any change,
event, circumstance or development which, individually or in the aggregate, has
or is reasonably expected to have a materially disproportionate effect on the
Company and its Subsidiaries taken as a whole relative to other industry
participants in the United States or Europe as the case may be.
"COMPANY MATERIAL CONTRACTS" has the meaning specified in Section
4.18(a).
"COMPANY MULTIEMPLOYER PLAN" has the meaning specified in Section
4.9(a)(vi).
"COMPANY NON-U.S. EMPLOYMENT AGREEMENT" shall have the meaning
specified in 4.9(b)(ii).
"COMPANY OPTION PLANS" means Shurgard Storage Centers, Inc. 1995
Long Term
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Incentive Compensation Plan, Shurgard Storage Centers, Inc. 2000 Long
Term Incentive Plan and Shurgard Storage Centers, Inc. 2004 Long Term Incentive
Plan.
"COMPANY PREFERRED STOCK" means the Series C Preferred Stock and the
Series D Preferred Stock.
"COMPANY PROPERTIES" has the meaning specified in Section 4.15.
"COMPANY PROPERTY OWNER" has the meaning specified in Section 4.15.
"COMPANY REIT OPINION" has the meaning specified in Section 6.5(c).
"COMPANY SEC DOCUMENTS" has the meaning specified in Section 4.5(a).
"COMPANY SECTION 16 INFORMATION" has the meaning specified in
Section 8.5.
"COMPANY SHAREHOLDERS' MEETING" has the meaning specified in Section
8.1(d).
"COMPANY U.S. EMPLOYEE" has the meaning specified in Section
7.6(a)(i).
"COMPANY U.S. EMPLOYMENT AGREEMENTS" has the meaning specified in
Section 4.9(a)(ii).
"COMPANY U.S. PENSION PLANS" has the meaning specified in Section
4.9(a)(i).
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement
entered into between the Company and Parent on November 28, 2005.
"CONSENT" means any consent, approval, permit, notice, action,
authorization or giving of notice to any Person not a party to this Agreement.
"CONTRACT" means, with respect to any Person, any written contract,
agreement, understanding or other instrument or obligation to which such Person
is a party or by which such Person or such Person's properties or assets are or
may be bound.
"DAMAGES" means all losses, liabilities, obligations, demands,
claims, damages, payments, Taxes, Liens, deficiencies, costs and expenses
(including costs and expenses of actions, amounts paid in connection with any
assessments, judgments or settlements relating thereto, interest, fines and
penalties recovered by a Third Party with respect thereto and out-of-pocket
expenses and reasonable attorneys' fees and expenses reasonably incurred in
defending against any such actions).
"DIRECTOR INCENTIVE PLAN" means the Shurgard Storage Centers, Inc.
Amended and Restated Stock Incentive Plan for Nonemployee Directors.
"DISSENTING SHARES" has the meaning specified in Section 3.5.
"DOJ" has the meaning specified in Section 8.2(b).
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"EFFECTIVE TIME" means the date and time at which the Merger becomes
effective as provided in Section 2.3.
"EMPLOYMENT AGREEMENTS" has the meaning specified in Section 7.6(c).
"ENVIRONMENTAL LAWS" means any Legal Requirement relating to the
protection of the environment or of health and human safety.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) under common control with a Person or any of its Subsidiaries and
which, together with such Person or any of its Subsidiaries, is treated as a
single employer within the meaning of Section 414(b), (c), (m) or (o) of the
Code.
"ESPP" means the Shurgard Storage Centers, Inc. Employee Stock
Purchase Plan.
"EXCESS SHARES" has the meaning specified in Section 3.2(f).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and the rules promulgated thereunder.
"EXCHANGE AGENT" has the meaning specified in Section 3.2(a).
"EXCHANGE FUND" has the meaning specified in section 3.2(a).
"EXCHANGE RATIO" has the meaning specified in Section 3.1(b).
"FINANCIAL ADVISORS" has the meaning specified in Section 4.19.
"FTC" has the meaning specified in Section 8.2(b).
"GAAP" means generally accepted United States accounting principles,
consistently applied on a basis consistent with the basis on which the financial
statements of the Company or Parent as the case may be, were prepared as of
December 31, 2004.
"GAIN SHARING PLAN" has the meaning specified in Section 7.6(b).
"GOVERNMENTAL ENTITY" means any United States federal, state or
local or foreign government, arbitration panel, court or governmental
department, commission, board, bureau, agency or instrumentality or self
regulatory organization.
"HAZARDOUS MATERIAL" means (i) any petroleum or petroleum products,
microbial matter (including mold), radioactive materials, friable asbestos
materials, urea formaldehyde foam insulation and polychlorinated biphenyls, or
(ii) any chemicals, materials, substances or wastes which are defined as,
regulated as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants," "pollutant,"
"contaminant" or words of similar
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import, or regulated as such, under any Environmental Law or for which a Person
may be subject to liability under any Environmental Law.
"HOLDERS" has the meaning specified in Section 3.2(b)(i).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" means, with respect to any Person, all obligations,
contingent or otherwise in respect of borrowed money (other than preferred
stock), letters of credit, purchase money indebtedness, guarantees, keep well
arrangements, capital leases and any other indebtedness for borrowed money
whether or not evidenced by a note, mortgage, bond, indenture or similar
instrument.
"INDEMNIFIED PARTIES" has the meaning specified in Section 7.5(a).
"INTELLECTUAL PROPERTY RIGHTS" has the meaning specified in Section
4.17.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" means with respect to the Company, the actual knowledge
of the executive officers and directors of the Company, and with respect to
Parent or Merger Sub, the actual knowledge of the executive officers and
directors of Parent or Merger Sub.
"LEASED PROPERTIES" has the meaning specified in Section 4.15.
"LEGAL REQUIREMENT" means any law, statute, rule, ordinance or
regulation of any Governmental Entity or any decision, judgment, order, writ,
injunction, decree, award or determination of any Governmental Entity.
"LIEN" means, with respect to any properties or assets, any
mortgage, deed of trust, deed to secure debt, pledge, hypothecation, assignment,
security interest, lien, Tax lien, assessment, adverse claim, levy, charge,
liability or encumbrance in respect of such properties or assets.
"LLC ACT" has the meaning specified in the Recitals hereto.
"MERGER" has the meaning specified in the recitals hereof.
"MERGER CONSIDERATION" has the meaning specified in Section 3.1(b).
"MERGER SUB" has the meaning specified in the preamble hereof.
"NON-U.S. EMPLOYEE BENEFIT PLANS" has the meaning specified in
Section 4.9(b).
"OPTIONS" means options to purchase shares of Company Common Stock,
as granted pursuant to the Company Option Plans or the Directors Incentive Plan.
"OUTSIDE DATE" has the meaning specified in Section 10.1(d)(iii).
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"PARENT" has the meaning specified in the preamble hereof.
"PARENT 8.7% PREFERRED STOCK" has the meaning specified in Section
3.1(c).
"PARENT 8.75% PREFERRED STOCK" has the meaning specified in Section
3.1(c).
"PARENT COMMON STOCK" means the validly issued, fully paid and
non-assessable shares of common stock, par value $0.10, of Parent.
"PARENT DISCLOSURE SCHEDULE" has the meaning specified in Article V.
"PARENT LEASED PROPERTIES" has the meaning specified in Section
5.13.
"PARENT MATERIAL ADVERSE EFFECT" means any change, event,
circumstance or development which, individually or in the aggregate, is or is
reasonably expected to have a material adverse effect on the business,
operations, financial condition, results of operations, properties, assets or
liabilities of Parent and its Subsidiaries taken as a whole or on the ability of
Parent to timely consummate the transactions contemplated hereby; PROVIDED,
HOWEVER, that this definition shall exclude any such change, event, circumstance
or development to the extent arising out of, attributable to or resulting from
(a) conditions generally affecting the self-storage or real estate industry
(including economic, legal and regulatory changes); (b) changes in general
international, national or regional economic or financial conditions or changes
in the securities markets in general; (c) changes in any laws or regulations or
accounting regulations or principles applicable to Parent and its Subsidiaries;
(d) any outbreak or escalation of hostilities (including any declaration of war
by the United States) or act of terrorism; or (e) the announcement, execution or
consummation of this Agreement and the transactions contemplated hereby; other
than, in each of cases (a) through (d), any change, event, circumstance or
development which, individually or in the aggregate, has or is reasonably
expected to have a materially disproportionate effect on Parent and its
Subsidiaries taken as a whole relative to other industry participants in the
United States.
"PARENT PLAN" has the meaning specified in Section 7.6(a)(ii).
"PARENT PREFERRED STOCK" has the meaning specified in Section
3.1(c).
"PARENT PROPERTIES" has the meaning specified in Section 5.13.
"PARENT PROPERTY OWNER" has the meaning specified in Section 5.13.
"PARENT REIT OPINION" has the meaning specified in Section 7.7(c).
"PARENT RESTRICTED STOCK UNIT" has the meaning specified in Section
3.6(c).
"PARENT SEC DOCUMENTS" has the meaning specified in Section 5.5(a).
"PARENT SHAREHOLDERS MEETING" has the meaning specified in Section
8.1(e).
"PARENT TERMINATION COSTS" has the meaning specified in Section
10.2(e).
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"PERMITS" has the meaning specified in Section 4.12.
"PERMITTED LIENS" means (a) liens for utilities and current Taxes
not yet due and payable, (b) mechanics', carriers', workers', repairers',
materialmen's, warehousemen's, lessor's, landlord's and other similar liens
arising or incurred in the ordinary course of business not yet due and payable,
(c) liens for Taxes being contested in good faith by appropriate proceedings and
for which appropriate reserves have been included on the balance sheet of the
applicable Person, (d) easements, restrictive covenants and similar encumbrances
or impediments against any assets or properties of an entity and which
individually or in the aggregate do not materially interfere with the business
of such entity or the operation of the property to which they apply, (e) minor
irregularities and defects of title which individually or in the aggregate do
not materially interfere with an entity's business or the operation of the
property to which they apply, (f) Liens related to indebtedness incurred in the
ordinary course of business, and (g) Liens disclosed on the existing title
policies, title commitments and/or surveys which have been previously provided
or made available to Parent before 12:00 noon EST on February 25, 2006, none of
which materially interfere with the business of the Company or its Subsidiaries
or the operation of the property to which they apply.
"PERSON" means any corporation, association, partnership, limited
liability company, joint venture, organization, individual, business, trust or
any other entity or organization of any kind or character, including a
Governmental Entity.
"PROXY STATEMENT" has the meaning specified in Section 8.1(a).
"QUALIFIED REIT SUBSIDIARY" has the meaning specified in Section
4.14(k).
"QUALIFYING INCOME" has the meaning specified in Section 10.2(d).
"QUALIFYING AMENDMENT" has the meaning specified in Section 8.1(b).
"RECENT COMPANY SEC DOCUMENTS" has the meaning specified in Section
4.6.
"RECENT PARENT SEC DOCUMENTS" has the meaning specified in Section
5.6.
"REGISTRATION STATEMENT" has the meaning specified in Section 4.11.
"REIT" has the meaning specified in Section 4.14(f).
"REIT REQUIREMENTS" has the meaning specified in Section 10.2(d).
"RELEASE" means any past or present release, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, escaping, injecting,
leaching, dispersing, migrating, dumping or disposing into the indoor or outdoor
environment (including ambient air, surface water, groundwater, and surface or
subsurface strata) or into or out of any property, including the movement of
Hazardous Material through or into the air, soil, surface water, or groundwater.
"REPRESENTATIVE" has the meaning specified in Section 6.4(a).
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"RESTRICTED STOCK" means a restricted award of Company Common Stock
granted pursuant to the Company Option Plans.
"RESTRICTED STOCK UNIT" means restricted stock units based on the
value of the Company Common Stock, as granted pursuant to the Company Option
Plans.
"RIGHTS" has the meaning specified in Section 4.2(a).
"RIGHTS AGREEMENT" has the meaning specified in Section 4.2(a).
"RULE 145" has the meaning specified in Section 8.4.
"SEC" means the United States Securities and Exchange Commission.
"SECOND QUARTER RECORD DATE" has the meaning specified in Section
6.6.
"SECTION 754 ELECTION" has the meaning specified in Section 4.14(p).
"SECURITIES ACT" means the Securities Act of 1933, as amended and
the rules promulgated thereunder.
"SERIES C PREFERRED STOCK" means the 8.7% Series C Cumulative
Redeemable Preferred Stock, par value $0.001 per share, of the Company.
"SERIES D PREFERRED STOCK" means the 8.75% Series D Cumulative
Redeemable Preferred Stock, par value $0.001 per share, of the Company.
"SHARE ISSUANCE" has the meaning specified in Section 8.3.
"SUBSEQUENT DETERMINATION" has the meaning specified in Section
6.4(b).
"SUBSIDIARIES" means (a) the joint venture established pursuant to
the Joint Venture Agreement, dated as of December 20, 2002, between Shurgard
Self Storage SCA and Crescent Euro Self Storage Investments Sarl, (b) the joint
venture established pursuant to the Second Joint Venture Agreement, dated as of
May 11, 2004, between Shurgard Self Storage SCA and Crescent Euro Self Storage
Investments II Sarl, and (c) any corporation, association, partnership, limited
liability company, joint venture, trust or any other entity or organization of
which a Person (either directly or through or together with any other
Subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests or has the ability to elect a majority of the board of
directors or other governing body of such corporation or other legal entity or
which such Person otherwise controls.
"SUPERIOR PROPOSAL" means an unsolicited BONA FIDE written
Acquisition Proposal by a Third Party, (i) on terms which the Company Board
determines in good faith, and in consultation with its legal and financial
advisors, to be more favorable from a financial point of view to the Company's
shareholders than the Merger, taking into account any amendments to this
Agreement proposed by Parent, (ii) for which financing, to the extent required,
is then committed subject to customary conditions and which in the good faith
judgment of the
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Company Board is reasonably capable of being obtained by such Third Party, and
(iii) which, in the good faith reasonable judgment of the Company Board, is
reasonably likely to be consummated on the timetable and terms proposed;
provided that for purposes of this definition the references in the definition
of Acquisition Proposal to "10%" shall be deemed to be references to "50%".
"SUPERIOR PROPOSAL NOTICE" has the meaning specified in Section
10.1(e).
"SURVIVING COMPANY" has the meaning specified in Section 2.1.
"TAKEOVER STATUTES" has the meaning specified in Section 4.21.
"TAX" or "TAXES" means (i) any and all taxes, charges, fees, levies
or other assessments imposed by any United States Federal, state, or local
taxing authority or by any non-U.S. taxing authority, including income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding (including dividend withholding or withholding required
pursuant to Sections 1441 through 1446 of the Code), social security, national
insurance (or other similar contributions or payments), franchise, estimated,
severance, stamp, and other taxes (including any interest, fines, penalties or
additions attributable to or imposed on or with respect to any such taxes,
charges, fees, levies or other assessments) (whether disputed or not) and (ii)
any obligation with respect to Taxes payable by reason of Treasury Regulation
Section 1.1.502-6 (or any analogous or similar provision under state, local or
foreign law).
"TAX PROTECTION AGREEMENT" means a Contract that (a) relates to the
deferral of U.S. federal taxable income that otherwise might have been
recognized upon a transfer of property to the Company or any of its Subsidiaries
or the recognition of income relating to a negative capital account and that
prohibits or restricts in any manner the disposition of any assets of the
Company or any of its Subsidiaries, (b) requires that the Company or its
Subsidiaries maintain, put in place, or replace, indebtedness whether or not
secured by one or more properties, (c) requires that the Company or any of its
Subsidiaries offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly (including through a "deficit
restoration obligation," guarantee (including a "bottom" guarantee),
indemnification or other similar arrangement), the risk of loss for U.S. federal
income Tax purposes of indebtedness or other liabilities of the Company or any
of its Subsidiaries, or (d) requires the Company to make or refrain from making
Tax elections, operate (or refrain from operating) in a particular manner, use
(or refrain from using) a specified method of taking into account book-tax
disparities under Section 704(c) of the Code with respect to one or more assets
of the Company or any Subsidiary, or use (or refrain from using) a particular
method for allocating one or more liabilities of the Company or any Subsidiary
under Section 752 of the Code.
"TAX RETURN" means any return, report, information return or other
document (including any related or supporting information, schedule or amendment
thereto) and, where applicable, profit and loss accounts and balance sheets)
with respect to Taxes, including any documents accompanying payments of
estimated Taxes, or accompanying requests for the extension of time in which to
file any such return, report, information return or other document.
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"TAXABLE REIT SUBSIDIARY" has the meaning specified in Section
4.14(k).
"TERMINATION FEE" has the meaning specified in Section 10.2(d).
"TERMINATION FEE TAX OPINION" has the meaning specified in Section
10.2(d).
"THIRD PARTY" means any Person or group (as defined in Section
13(d)(3) under the Exchange Act) other than Parent, Merger Sub or any Affiliate
thereof.
"TRANSFER TAXES" has the meaning set forth in Section 6.5(b).
"UNPAID BASE AMOUNT" has the meaning specified in Section 10.2(d).
"UNVESTED PARENT RESTRICTED STOCK UNITS" has the meaning specified
in Section 3.6(c).
"U.S. EMPLOYEE BENEFIT PLANS" has the meanings specified in Section
4.9(a)(i).
"VESTED PARENT RESTRICTED STOCK UNITS" has the meaning specified in
Section 3.6(c).
"VOTING DEBT" means, with respect to the Company, any Indebtedness
having the right to vote on any matters on which shareholders of the Company may
vote, and with respect to Parent, any Indebtedness having the right to vote on
any matters on which shareholders of Parent may vote.
"WBCA" has the meaning specified in the Recitals hereto.
ARTICLE II.
THE MERGER
SECTION 2.1. THE MERGER. At the Effective Time and subject to and
upon the terms and conditions of this Agreement, the WBCA and the LLC Act, the
Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall cease, and Merger Sub shall continue as the
surviving entity. Merger Sub as the surviving entity after the Merger
hereinafter sometimes is referred to as the "SURVIVING COMPANY." The parties
hereto intend that for U.S. federal, and applicable state, income tax purposes
the Merger shall be treated as a taxable disposition by the Company of all of
its assets to Merger Sub in exchange for the Merger Consideration, the cash paid
pursuant to Section 3.7, the Parent Preferred Stock, if any, and the assumption
of all of the Company's liabilities, followed by a liquidating distribution of
such Merger Consideration, cash paid pursuant to Section 3.7 and Parent
Preferred Stock, if any, to the holders of the Company Common Stock and Company
Preferred Stock, respectively, pursuant to Section 331 and Section 562 of the
Code.
SECTION 2.2. CLOSING. The closing of the Merger (the "CLOSING")
shall take place at the offices of Wachtell, Lipton, Rosen & Katz, 51 West 52nd
Street, New York, NY 10019 at 10:00 am on the second Business Day following the
satisfaction (or, to the extent
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permitted by law, waiver by all parties) of the conditions set forth in Section
9.1, or, if on such day any condition set forth in Section 9.2 or 9.3 has not
been satisfied (or, to the extent permitted by law, waived by the party entitled
to the benefits thereof), as soon as practicable after all the conditions set
forth in Article IX have been satisfied (other than those conditions that by
their nature are to be satisfied at the Closing), but subject to the fulfillment
or, to the extent permitted by law, waiver of those conditions by the parties
entitled to the benefits thereof), or at such other place, time and date as
shall be agreed in writing between Parent, Merger Sub and the Company. The date
on which the Closing occurs is referred to in this Agreement as the "CLOSING
DATE."
SECTION 2.3. EFFECTIVE TIME. Prior to the Closing, the parties shall
prepare, and on the Closing Date the parties shall file, articles of merger or
other appropriate documents (the "ARTICLES OF MERGER") with the Secretary of
State of the State of Washington and with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with, the
relevant provisions of the WBCA and the LLC Act. The Merger shall become
effective at such time on the Closing Date as Merger Sub and the Company shall
agree and specify in the Articles of Merger (the time the Merger becomes
effective being the "EFFECTIVE TIME").
SECTION 2.4. EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of WBCA and the
LLC Act. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving Company,
and all debts, liabilities and duties of the Company and Merger Sub shall become
the debts, liabilities and duties of the Surviving Company.
SECTION 2.5. SUBSEQUENT ACTIONS. If, at any time after the Effective
Time, the Surviving Company shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Company its right, title or interest in, to or under any of the rights,
properties or assets of either of the Company or Merger Sub acquired or to be
acquired by the Surviving Company as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Company shall be authorized to execute and deliver, in the name
and on behalf of either the Company or Merger Sub, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of each of such corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Company or otherwise to carry out this Agreement.
SECTION 2.6. CERTIFICATE OF FORMATION; LIMITED LIABILITY COMPANY
AGREEMENT; MANAGING MEMBER AND OFFICERS.
(a) Unless otherwise determined by Merger Sub, the Certificate of
Formation and the Limited Liability Company Agreement of Merger Sub, as in
effect immediately before the Effective Time, shall be the Certificate of
Formation and the Limited Liability Company Agreement of the Surviving Company
at the Effective Time until thereafter amended as provided by law and such
Certificate of Formation and Limited Liability Company Agreement.
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(b) The managing member of Merger Sub immediately before the
Effective Time will be the initial managing member of the Surviving Company,
and, except as Merger Sub may otherwise notify the Company in writing prior to
the Effective Time, the officers of the Company immediately before the Effective
Time will be the initial officers of the Surviving Company, in each case until
their respective successors are elected or appointed and qualified or until
their death, resignation or removal in accordance with the Certificate of
Formation of the Surviving Company and the Limited Liability Company Agreement
of the Surviving Company.
SECTION 2.7. FURTHER ASSURANCES. At and after the Effective Time,
the officers and directors of the Surviving Company will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name
and on behalf of the Company or Merger Sub, any other actions and things to
vest, perfect or confirm of record or otherwise in the Surviving Company any and
all right, title and interest in, to and under any of the rights, properties or
assets acquired or to be acquired by the Surviving Company as a result of, or in
connection with, the Merger.
SECTION 2.8. STRUCTURE. Notwithstanding anything in this Agreement
otherwise to the contrary, the Company shall cooperate with and agree to any
reasonable changes requested by Parent regarding the structure of the
transactions contemplated herein (such cooperation shall include entering into
appropriate amendments to this Agreement); provided that any such changes do not
have an adverse effect on either the holders of the Company Common Stock or the
holders of the Company Preferred Stock, including if such changes are reasonably
likely to require a recirculation of the Proxy Statement.
ARTICLE III.
CONVERSION OF THE COMPANY'S CAPITAL STOCK
SECTION 3.1. CONVERSION OF THE COMPANY'S CAPITAL STOCK. Subject to
the terms and conditions of this Agreement:
(a) CANCELLATION OF PARENT-OWNED STOCK. At the Effective Time, each
share of Company Common Stock and each share of Company Preferred Stock, if any,
owned by Parent, Merger Sub, any other subsidiary of Parent or the Company
immediately prior to the Effective Time shall be canceled and retired without
payment of any consideration therefor.
(b) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 3.3, each
issued and outstanding share of Company Common Stock (other than shares of
Company Common Stock to be retired in accordance with Section 3.1(a)), including
each Right attached thereto, shall be converted into the right to receive 0.82
(the "EXCHANGE RATIO") of a fully paid and nonassessable share of Parent Common
Stock (subject to Section 3.2(f)) (the "MERGER CONSIDERATION").
(c) COMPANY PREFERRED STOCK. Subject to Section 3.7, each share of
Series C Preferred Stock, if any, which is issued and outstanding and has not
been redeemed immediately prior to the Effective Time in accordance with its
terms (other than shares of Series C Preferred Stock owned or held by Parent,
Merger Sub, the Company or any of their respective direct or
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indirect wholly owned Subsidiaries, all of which shall be canceled as provided
in Section 3.1(a)), shall be converted into the right to receive one fully paid
and nonassessable share of Parent 8.7% cumulative redeemable preferred stock
(the "PARENT 8.7% PREFERRED STOCK"). Subject to Section 3.7, each share of
Series D Preferred Stock if any, which is issued and outstanding and has not
been redeemed immediately prior to the Effective Time in accordance with its
terms (other than shares of Series D Preferred Stock owned or held by Parent,
Merger Sub, the Company or any of their respective direct or indirect wholly
owned Subsidiaries, all of which shall be canceled as provided in Section
3.1(a)), shall be converted into the right to receive one fully paid and
nonassessable share of Parent 8.75% cumulative redeemable preferred stock (the
"PARENT 8.75% PREFERRED STOCK" and together with the Parent 8.7% Preferred
Stock, the "PARENT PREFERRED STOCK"). Immediately prior to the Effective Time,
unless all shares of Series C Preferred Stock and Series D Preferred Stock have
been redeemed prior to the Effective Time in accordance with the respective
terms thereof, the articles of incorporation or other equivalent organizational
documents of Parent shall be modified in accordance with applicable Legal
Requirements in order to create the Parent 8.7% Preferred Stock and the Parent
8.75% Preferred Stock, as the case may be, having preferences, conversion and
other rights, privileges, voting powers, restrictions, limitations as to
distributions, qualifications and terms or conditions of redemption hereof
identical to that of shares of the Series C Preferred Stock and the Series D
Preferred Stock, respectively, including with respect to distribution and rights
upon liquidation, dissolution or winding up, and shall be pari passu with all
issued and outstanding preferred stock of Parent at the Closing Date as to
distributions and rights upon liquidation, dissolution or winding up.
(d) As of the Effective Time, each share of Company Common Stock and
each share of Company Preferred Stock (to the extent not previously redeemed in
accordance with its terms) shall no longer be outstanding and shall
automatically be retired and shall cease to be outstanding, and each holder of a
certificate representing any such share(s) (a "CERTIFICATE") shall cease to have
any rights with respect to Company Common Stock or Company Preferred Stock (as
the case may be), except (i) the right to receive the Merger Consideration or
Parent Preferred Stock, as the case may be, (ii) any cash in lieu of fractional
shares of Parent Common Stock to be paid in consideration for shares of Company
Common Stock, and (iii) any dividends or other distributions to which holders
become entitled, all in accordance with Section 3.2 upon the surrender of such
Certificate.
(e) At the Effective Time, each limited liability company interest
of Merger Sub shall remain outstanding and represent a limited liability company
interest of the Surviving Company.
SECTION 3.2. EXCHANGE OF SHARE CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
designate a bank, trust company or other Third Party entity reasonably
acceptable to the Company to act as agent (the "EXCHANGE AGENT") for (i) the
holders of shares of Company Common Stock to receive the Merger Consideration to
which such holders shall become entitled with respect to such holder's shares of
Company Common Stock pursuant to Section 3.1(b) and (ii) the holders of shares
of Company Preferred Stock to receive the shares of Parent Preferred Stock, as
applicable, to which such holders shall become entitled with respect to such
holder's shares of Company Preferred Stock pursuant to Section 3.1(c); PROVIDED,
HOWEVER, that if all shares of
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Company Preferred Stock are redeemed prior to the Effective Time in accordance
with the terms thereof, this Section 3.2 shall be inapplicable to the Company
Preferred Stock. Prior to the Effective Time, Parent shall cause Merger Sub to
deposit with the Exchange Agent: (x) that number of Parent Common Stock
certificates in any denominations as the Exchange Agent shall specify, (y) that
number of Parent Preferred Stock certificates in any denominations as the
Exchange Agent shall specify and (z) the cash in respect of fractional shares,
if any, in each case as are issuable or payable pursuant to this Article III in
respect of shares of Company Common Stock and Company Preferred Stock for which
Certificates or Book Entry Shares have been properly delivered to the Exchange
Agent. The deposit made by Merger Sub or the Surviving Company, as the case may
be, pursuant to this Section 3.2(a) is hereinafter referred to as the "EXCHANGE
FUND." The Exchange Agent shall cause the Exchange Fund to be held for the
benefit of the holders of Company Common Stock and Company Preferred Stock to be
applied promptly to making the payments provided for in Section 3.2(b); provided
that any interest earned on any cash in the Exchange Fund shall be for the
benefit of Merger Sub. The Exchange Fund shall not be used for any purpose that
is not expressly provided for in this Agreement.
(b) PAYMENT PROCEDURES.
(i) As soon as practicable after the Effective Time, but in no
event later than three Business Days after the Effective Time, the
Surviving Company shall cause the Exchange Agent to mail to each record
holder, as of the Effective Time (the "HOLDERS"), (A) a letter of
transmittal specifying that delivery shall be effected, and risk of loss
and title to the Certificates held by any Holder representing Company
Common Stock or Company Preferred Stock shall pass only upon delivery of
such Certificates (or affidavits of loss in lieu thereof) to the Exchange
Agent or, in the case of Book Entry Shares, upon adherence to the
procedures set forth in the letter of transmittal, such letter of
transmittal to be in such form and have such other provisions as Parent and
the Company may reasonably agree and (B) instructions for use in effecting
the surrender of the Certificates in exchange for the Merger Consideration
or the applicable Parent Preferred Stock, as the case may be, or, in the
case of Book Entry Shares, the surrender of such shares, for payment of the
Merger Consideration or the applicable Parent Preferred Stock therefor.
(ii) Upon surrender by a Holder of the Company Common Stock to
the Exchange Agent of any Certificate (or evidence of loss in lieu thereof)
or Book Entry Shares, as applicable, for cancellation together with a duly
executed letter of transmittal, the Holder shall be entitled to receive in
exchange therefor the Merger Consideration that such holder is entitled to
receive pursuant to this Article III (and the amount of cash in respect of
any dividends or other distributions to which such holder is entitled
pursuant to Section 3.2(b)(iv), if any) and the Certificate or Book Entry
Shares so surrendered shall forthwith be cancelled. No interest will be
paid or accrued on any amount payable upon due surrender of the
Certificates or Book Entry Shares. In the event of a transfer of ownership
of shares of Company Common Stock that is not registered in the transfer
records of the Company, payment may be issued to such a transferee if the
Certificate formerly representing such shares of Company Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer, and the Person requesting such issuance
pays any transfer or other Taxes
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required by reason of such payment to a Person other than the registered
holder of such Certificate or establishes to the satisfaction of Parent and
the Company that such Tax has been paid or is not applicable.
(iii) Each holder of Series C Preferred Stock upon surrender
of any Certificate or Book Entry Shares, as applicable, to the Exchange
Agent together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, shall
be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of Parent 8.7% Preferred Stock into which
the aggregate number of shares of Series C Preferred Stock previously
represented by such Certificate or Book Entry Shares shall have been
converted pursuant to this Agreement and the amount of cash in respect of
any dividends or other distributions to which such holder is entitled
pursuant to Section 3.2(b)(iv), if any. Each holder of Series D Preferred
Stock upon surrender of any Certificate or Book Entry Shares, as
applicable, to the Exchange Agent together with such letter of transmittal,
duly executed, and such other documents as may reasonably be required by
the Exchange Agent, shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of Parent
8.75% Preferred Stock into which the aggregate number of shares of Series D
Preferred Stock previously represented by such Certificate or Book Entry
Shares shall have been converted pursuant to this Agreement and the amount
of cash in respect of any dividends or other distributions to which such
holder is entitled pursuant to Section 3.2(b)(iv), if any.
(iv) No dividends or other distributions with respect to
securities of the Parent Common Stock or the Parent Preferred Stock with a
record date after the Closing Date shall be paid to the holder of any
Certificates or Book Entry Shares not surrendered until such Certificates
or Book Entry Shares, as applicable, are surrendered as provided in this
Section 3.2. Following such surrender, there shall be paid, without
interest, to the Person in whose name the Parent Common Stock or Parent
Preferred Stock, as applicable, has been registered, (A) at the time of
surrender, the amount of all dividends or other distributions with a record
date after the Closing Date previously paid or payable on the date of such
surrender with respect to such Parent Common Stock or Parent Preferred
Stock, as applicable, and (B) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Closing
Date and prior to surrender and with a payment date subsequent to surrender
payable with respect to such Parent Common Stock or Parent Preferred Stock,
as applicable.
(c) TRANSFERS. After the Effective Time, there shall be no
registration of transfers on the stock transfer books of the Company of shares
of Company Common Stock or Company Preferred Stock that were outstanding
immediately prior to the Effective Time.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
relating to the Merger Consideration or the Parent Preferred Stock that remains
unclaimed by the holders of Company Common Stock or Company Preferred Stock, as
the case may be, six months after the Effective Time shall be returned to
Parent, the Surviving Company or another affiliate of Parent, as may be
designated by Parent or the Surviving Company. Any holders of Company Common
Stock or Company Preferred Stock who have not theretofore complied with
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this Article III shall thereafter look only to Parent for payment of the Merger
Consideration or Parent Preferred Stock, as the case may be, upon due surrender
of their Certificates (or affidavits of loss in lieu thereof), without any
interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving
Company, the Exchange Agent or any other Person shall be liable to any former
holder of shares of Company Common Stock or Company Preferred Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar Legal Requirements. Any amounts remaining unclaimed
by such holders three years after the Effective Time (or such earlier date
immediately prior to such time when the amounts would otherwise escheat to or
become property of any Government Entity) shall become, to the extent permitted
by applicable law, the property of the Surviving Company free and clear of any
claims or interest of any Person previously entitled thereto.
(e) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount as indemnity against any claim that may be made against
it or the Surviving Company with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration or the applicable Parent Preferred Stock.
(f) FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement to the contrary, no fractional shares of Parent Common Stock will be
issued and any holder of shares of Company Common Stock entitled to receive a
fractional share of Parent Common Stock but for this Section 3.2(f) shall be
entitled to receive a cash payment in lieu thereof, in an amount equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such holders, of the
shares of Parent Common Stock constituting the excess of (i) the number of whole
shares of Parent Common Stock delivered to the Exchange Agent by Parent over
(ii) the aggregate number of whole shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being herein called
the "EXCESS SHARES"). As soon as practicable following the Effective Time, the
Exchange Agent shall determine the number of Excess Shares and, as agent for the
former holders of Company Common Stock, shall sell the Excess Shares at the
prevailing prices on the New York Stock Exchange. The Exchange Agent shall
deduct from the proceeds of the sale of the Excess Shares all commissions,
transfer Taxes and other out-of-pocket transaction costs, including the expenses
and compensation of the Exchange Agent, incurred in connection with such sale of
Excess Shares. Until the net proceeds of such sale have been distributed to the
former holders of Company Common Stock, the Exchange Agent will hold such
proceeds in trust for such former holders. As soon as practicable after the
determination of the amount of cash to be paid to such former holders in lieu of
any fractional interests, the Exchange Agent shall make available in accordance
with this Agreement such amounts to such former holders.
(g) WITHHOLDING RIGHTS. Each of Parent, the Surviving Company and
the Exchange Agent, as applicable, shall be entitled to deduct and withhold from
the consideration otherwise payable to any Person pursuant to this Agreement
such amounts as it is required to deduct and withhold with respect to the making
of such payment under any provision of any Legal Requirement applicable to
Taxes. If Parent or the Surviving Company or the Exchange Agent, as the case may
be, so withholds amounts, such amounts shall be treated for all purposes
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of this Agreement as having been paid to the holder of the shares of Company
Common Stock or Options, as applicable, in respect of which Parent or the
Surviving Company or the Exchange Agent, as the case may be, made such deduction
and withholding.
SECTION 3.3. ADJUSTMENTS TO PREVENT DILUTION. Notwithstanding
anything to the contrary in this Agreement, if, after the date hereof, and prior
to the Effective Time, the issued and outstanding shares of Company Common Stock
or Parent Common Stock shall have been changed into a different number of shares
or a different class by reason of any stock split, reverse stock split, stock
dividend, reclassification, recapitalization, split-up, combination, exchange of
shares or other similar transaction, then the Merger Consideration and Exchange
Ratio and any other similarly dependent items, as the case may be, shall be
appropriately adjusted to provide to Parent, Merger Sub and the holders of
Company Common Stock the same economic effect as contemplated by this Agreement
prior to such action, and as so adjusted shall, from and after the date of such
event, be the Merger Consideration, the Exchange Ratio or other dependent item,
as applicable, subject to further adjustment in accordance with this sentence.
SECTION 3.4. NO FURTHER RIGHTS. From and after the Effective Time,
holders of Certificates shall cease to have any rights as shareholders of the
Company, except as expressly provided herein or by applicable Legal
Requirements.
SECTION 3.5. DISSENTING SHARES. Notwithstanding Section 3.1(a),
shares of Company Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has complied with the provisions of Chapter 23B.13
of the WBCA that are applicable prior to the Effective Time ("DISSENTING
SHARES") shall not be converted into or represent the right to receive the
Merger Consideration, unless such holder withdraws or otherwise loses (through
failure to perfect or otherwise) his, her or its right to obtain payment of the
fair value of his or its Dissenting Shares, but shall instead be entitled only
to such rights with respect to such Dissenting Shares as may be granted to such
holder pursuant to Chapter 23B.13 of the WBCA. If after the Effective Time such
holder withdraws or loses (through failure to perfect or otherwise) his, her or
its right to obtain payment of the fair value of his, her or its Dissenting
Shares under Chapter 23B.13 of the WBCA, such Dissenting Shares shall be treated
as if they had been converted as of the Effective Time into a right to receive
the Merger Consideration payable with respect thereto. The Company shall use
reasonable best efforts to give Parent notice of any notice of intent to demand
payment under Section 23B.13.210, demand for payment under Section 23B.13.230 or
withdrawal of any such demands received by the Company and involve Parent in the
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
SECTION 3.6. STOCK OPTIONS, RESTRICTED STOCK AND RESTRICTED STOCK
UNITS.
(a) The Company shall not grant Options after the date of this
Agreement under the Company Option Plans, or otherwise.
(b) The Company shall take such actions as are necessary to cause
all outstanding Options to become fully vested and exercisable at the Effective
Time and to cause
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all shares of Restricted Stock to become fully vested immediately after the
Effective Time. For purposes of vesting under the Company Option Plans, any
holder of Restricted Stock whose employment is terminated by the Company or
Parent as of the Effective Time shall be deemed to have been terminated
immediately after the Effective Time. At the Effective Time, each holder of a
then-outstanding and unexercised Option shall receive, by virtue of the Merger
and without any action on the part of the holder thereof, options exercisable
for shares of Parent Common Stock having the same terms and conditions as the
Options (including such terms and conditions as may be incorporated by reference
into the agreements evidencing the Options pursuant to the plans or arrangements
pursuant to which such Options were granted), except that (i) the number of
shares issuable upon exercise of each Option shall be multiplied by the Exchange
Ratio (and rounded down to the nearest share), and (ii) the exercise price of
each outstanding Option shall be divided by the Exchange Ratio (and rounded up
to the nearest cent). Parent and Merger Sub shall use all reasonable efforts to
ensure that the Options (i) shall be converted in a manner consistent with
Section 424(a) of the Code, and (ii) shall be converted in a manner consistent
with the requirements of Section 409A of the Code.
(c) As of the Effective Time, each holder of a Restricted Stock Unit
shall have such Restricted Stock Unit converted, by virtue of the Merger and
without any action on the part of the holder thereof, into a restricted stock
unit settleable in Parent Common Stock or cash (based on the fair market value
of Parent Common Stock), having the same terms and conditions as the Restricted
Stock Unit (including such terms and conditions as may be incorporated by
reference into the agreement evidencing the Restricted Stock Unit pursuant to
the Company Option Plan pursuant to which such Restricted Stock Unit was
granted) (a "PARENT RESTRICTED STOCK UNIT"), provided that (i) the number of
Parent Restricted Stock Units into which the Restricted Stock Units are
converted shall equal the number of Restricted Stock Units multiplied by the
Exchange Ratio, (ii) 25% of the Parent Restricted Stock Units shall be vested as
of immediately after the Effective Time notwithstanding any termination of
employment by the Company or Parent occurring as of the Effective Time (the
"VESTED PARENT RESTRICTED STOCK UNITS") and the remaining 75% of the Parent
Restricted Stock Units (the "UNVESTED PARENT RESTRICTED STOCK UNITS") shall vest
ratably thereafter on each of the first five anniversaries of the Closing Date,
subject to the holder of such Parent Restricted Stock Units continuing to be
employed by the Parent or its Subsidiaries on the applicable vesting date, and
(iii) notwithstanding anything to the contrary herein, in the terms of the
applicable Company Option Plan or otherwise, (x) the Vested Parent Restricted
Stock Units shall be settled on the 90-day anniversary of the Effective Time and
(y) for purposes of vesting of the Restricted Stock Units and the Unvested
Parent Restricted Stock Units only, this Agreement and the transactions
contemplated hereby (including the Merger) shall not be deemed to constitute a
Corporate Transaction under the applicable Company Option Plan or otherwise be
deemed an initial vesting trigger under (nor be considered in any way in
connection with any subsequent vesting trigger) any applicable agreement,
arrangement or plan.
(d) As of the Effective Time, each share of Restricted Stock shall
receive, by virtue of the Merger and without any action on the part of the
holder thereof, a restricted share of Parent Common Stock having the same terms
and conditions of the Restricted Stock (including such terms and conditions as
may be incorporated by reference into the agreement evidencing the Restricted
Stock pursuant to the Company Option Plan to which such Restricted Stock was
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granted) except that the number of shares of Restricted Stock shall be
multiplied by the Exchange Ratio.
(e) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery upon
the exercise of Options and the vesting of Restricted Stock Units after the
Effective Time. The Company shall take all corporate action necessary to
authorize the matters set forth in this Section 3.6 to occur as of the Effective
Time. Within two Business Days following the Effective Time, Parent and Merger
Sub shall file or cause to be filed all registration statements on Form S-8 or
other appropriate form as may be necessary in connection with the purchase and
sale of Parent Common Stock contemplated by such Options or Restricted Stock
Units subsequent to the Effective Time, and shall maintain the effectiveness of
such registration statements (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as any of the Options or
Restricted Stock Units registered thereunder remain outstanding. As soon as
reasonably possible after the Effective Time, Parent shall qualify under
applicable state securities laws the issuance of such shares of Parent Common
Stock issuable upon exercise of Options and the vesting of the Restricted Stock
Units.
(f) As of the date hereof, the ESPP shall be terminated. The rights
of participants in the ESPP with respect to any offering period then underway
under the ESPP shall be determined by treating the last Business Day prior to
the date hereof as the last day of such offering period and by making such other
pro-rata adjustments as may be necessary to reflect the shortened offering
period but otherwise treating such shortened offering period as a fully
effective and completed offering period for all purposes under the ESPP.
SECTION 3.7. REDEMPTION OF PREFERRED STOCK. On the Closing Date,
Merger Sub will purchase shares of Company Common Stock for cash at a price per
share equal to then fair market value of such Company Common Stock and in an
amount sufficient to redeem each outstanding share of Series C Preferred Stock
and Series D Preferred Stock in accordance with its respective terms, and the
Company will use such cash proceeds to redeem such Company Preferred Stock on
the Closing Date prior to the Effective Time.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Simultaneously with the execution and delivery of this Agreement,
the Company shall deliver to Parent and Merger Sub a disclosure schedule with
numbered sections corresponding to the relevant sections in this Agreement (the
"COMPANY DISCLOSURE SCHEDULE"). Any exception or qualification set forth in the
Company Disclosure Schedule with respect to a particular representation,
warranty or covenant contained in this Agreement shall be deemed to be an
exception or qualification with respect to all other applicable representations,
warranties and covenants contained in this Agreement to the extent any
description of facts regarding the event, item or matter disclosed is adequate
so as to make readily apparent or otherwise make Parent and Merger Sub
reasonably aware that such exception or qualification is applicable to such
other representations, warranties or covenants whether or not such exception or
qualification is so numbered. Except as otherwise set forth in the Company
Disclosure Schedule,
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the Company hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 4.1. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) The Company is (i) a corporation duly organized and validly
existing under the laws of the State of Washington and has the requisite
corporate power and authority and any necessary governmental authority to own,
operate or lease the properties that it purports to own, operate or lease and to
carry on its business as it is now being conducted, and (ii) is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except in the
case of (ii) for such failure which, when taken together with all other such
failures, would not, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect.
(b) Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite corporate or similar power and authority and any necessary
governmental authority to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, when taken together with
all other such failures, would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect.
(c) The Company has heretofore made available to Parent complete and
correct copies of the charter, by-laws, partnership agreements, operating
agreements and other organizational documents of each of the Company
Subsidiaries, each as amended to date, and each such agreement or instrument is
in full force and effect as of the date hereof.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of: (i)
120,000,000 shares of Company Common Stock and (ii) 40,000,000 shares of Company
Preferred Stock, of which, 2,800,000 shares have been designated as Series A
Junior Participating Preferred Stock, 2,000,000 shares have been designated as
Series C Preferred Stock and 3,450,000 shares have been designated as Series D
Preferred Stock. As of the date hereof: (A) 47,073,810 shares of Company Common
Stock were issued and outstanding, all of which were validly issued, fully paid
and nonassessable, which includes 300,627 shares of Restricted Stock; (B)
5,450,000 shares of Company Preferred Stock were issued and outstanding; (C)
2,789,717 shares of Company Common Stock were reserved for issuance upon
exercise of outstanding Options under the Company Option Plans or the Director
Incentive Plan listed in SCHEDULE 4.2(A) of the Company Disclosure Schedule; and
(D) 2,800,000 shares of Series A Junior Participating Preferred Stock were
reserved for issuance upon the exercise of outstanding rights to purchase Series
A Junior Participating Preferred Stock (the "RIGHTS") issued under the Company's
Rights Agreement, dated as of March 12, 2004 (the "RIGHTS AGREEMENT").
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(b) The issuance and sale of all the shares of capital stock
described in this Section 4.2 have been made in compliance in all material
respects with United States federal and state securities laws, rules and
regulations. SCHEDULE 4.2(B) of the Company Disclosure Schedule accurately sets
forth as of the date hereof the names of all holders of options to purchase the
Company's capital stock (including but not limited to Company Options) and the
number and type of shares issuable upon exercise of such options, the exercise
price and vesting schedule with respect thereto. Except as set forth in SCHEDULE
4.2(B) of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary has agreed to register any securities under the Securities Act or
under any state securities law or granted registration rights to any Person, and
complete and correct copies of any such agreements have previously been made
available to Parent. Except as set forth in SCHEDULE 4.2(B) of the Company
Disclosure Schedule, there are no (A) outstanding stock-appreciation rights,
security-based performance units, "phantom" stock or other security rights
(other than in the case of clause (A) pursuant to the joint venture Contracts
set forth on SCHEDULE 4.18 of the Company Disclosure Schedule) or (B) other
Contracts pursuant to which any Person is or may be entitled to receive any
payment or other value based on the revenues, earnings or financial performance,
stock price performance of the Company or any of its Subsidiaries or assets
(other than in the case of clause (B) as set forth in the U.S. Employee Benefit
Plans and Non-U.S. Employee Benefit Plans set forth on SCHEDULE 4.9 of the
Company Disclosure Schedule, the Employment Agreements or distributions pursuant
to the joint venture Contracts set forth on SCHEDULE 4.18 of the Company
Disclosure Schedule, ordinary course payments, compensation or bonus
arrangements or commissions to officers or employees of the Company).
(c) All outstanding shares of Company Common Stock are, and all
shares of Company Common Stock that may be issued pursuant to the Company Option
Plans or the Director Incentive Plan will be, when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and nonassessable and
not subject to or issued in violation of any purchase option, call option, right
of first refusal, right of first offer, preemptive right, subscription right or
any similar right. Except as set forth above or on SCHEDULE 4.2(C) of the
Company Disclosure Schedule or in the joint venture Contracts set forth on
SCHEDULE 4.18 of the Company Disclosure Schedules, (i) there are no other
options, warrants or other Contracts obligating the Company or any Subsidiary of
the Company to issue or sell any shares of capital stock of or other equity
interests in the Company or any Subsidiary of the Company or any Voting Debt of
the Company or any Subsidiary of the Company to any Person other than the
Company and its Subsidiaries and (ii) there is no Voting Debt of the Company or
any Subsidiary of the Company.
(d) SCHEDULE 4.2(D) of the Company Disclosure Schedule sets forth
the name of each Subsidiary of the Company (whether owned, directly or
indirectly, through one or more intermediaries). All of the outstanding shares
of capital stock of, or other equity interest in, to the extent owned directly
or indirectly by the Company, each such Subsidiary are duly authorized, validly
issued, fully paid and nonassessable, and are owned, directly or indirectly, by
the Company, as applicable, free and clear of all Liens. The following
information for each Subsidiary is set forth on SCHEDULE 4.2(D) of the Company
Disclosure Schedule, if applicable: (i) its name and jurisdiction of
incorporation or organization and (ii) the type of and percentage interest held
by the Company in the Subsidiary and the names of and percentage interest held
by the other interest holders, if any, in the Subsidiary Except for interests in
Subsidiaries of the
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Company, neither the Company nor any of its Subsidiaries owns directly or
indirectly any interest or investment (whether equity or debt) in any Person
(other than investments in investment securities).
(e) Except as set forth in SCHEDULE 4.2(E) of the Company Disclosure
Schedule, all dividends or distributions on securities of the Company or any
Company Subsidiary that have been declared or authorized prior to the date of
this Agreement have been paid in full (except to the extent such dividends have
been publicly announced and are not yet due and payable).
(f) Except for the Transaction Documents and except as set forth in
SCHEDULE 4.2(F) of the Company Disclosure Schedule, to the Company's Knowledge
there are not any voting trusts, proxies or other Contracts relating to the
voting of any shares of stock of the Company or any Company Subsidiary, to which
the Company or any Company Subsidiary is a party or by which it is bound. Except
as set forth in SCHEDULE 4.2(F) of the Company Disclosure Schedule, there are no
restrictions on the Company's ability to vote the equity interests of any of the
Company Subsidiaries.
(g) Except as set forth in SCHEDULE 4.2(G) of the Company Disclosure
Schedule, there are not any Company Subsidiaries in which any officer or
director of the Company or any Company Subsidiary owns any stock or other
securities. There are no Contracts between the Company or any Company Subsidiary
and any Person that could cause such Person to be treated as holding any stock
or security in the Company or any Company Subsidiary as an agent for, or nominee
of, the Company or any Company Subsidiary.
SECTION 4.3. AUTHORIZATION AND EXECUTION. The execution and delivery
of this Agreement and, subject to obtaining the requisite shareholders'
approval, the performance by the Company of this Agreement and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding agreement of the Company enforceable
against the Company in accordance with its terms, assuming this Agreement is
enforceable against Parent and Merger Sub, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
rearrangement, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium, liquidation, conservatorship or similar laws or by general
principles of equity.
SECTION 4.4. ABSENCE OF CONFLICTS; GOVERNMENTAL AUTHORIZATIONS.
(a) The execution and delivery by the Company of this Agreement, the
performance by the Company of its obligations hereunder and the consummation by
the Company of the transactions contemplated hereby will not, (i) conflict with
or result in any violation of any provision of the Articles of Incorporation or
Restated By-Laws or equivalent organizational document, each as amended to date,
of the Company or any of its Subsidiaries; (ii) subject to obtaining the
Consents listed in SCHEDULE 4.4 of the Company Disclosure Schedule, conflict
with, result in any violation or breach of, constitute a default under, give
rise to any right of termination or acceleration (with or without notice or the
lapse of time or both), right of
-23-
purchase, first offer or forced sale, or increase in any cost or obligation of
the Company or any of its Subsidiaries or the loss of any benefit of the Company
or any of its Subsidiaries pursuant to, or result in being declared void or
voidable, any term or provision of any Company Material Contract as to which the
Company or any of its Subsidiaries is a party or by which any of their
respective properties or assets are or may be bound; or (iii) violate in any
respect any term of any Legal Requirement applicable to the Company or any of
its Subsidiaries or by which any of their respective properties or assets are
bound or affected, except, in the case of clauses (ii) and (iii) immediately
above, for any such conflicts, violations, breaches, defaults, terminations,
cancellations or Liens which would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect.
(b) Without limiting the generality of Section 4.4(b), and except as
set forth on SCHEDULE 4.4 of the Company Disclosure Schedule, the transactions
contemplated herein do not (a) violate any provision regarding direct or
indirect transfers of interests in any Company Subsidiary that are set forth in
any Contract relating to the operation of, or the ownership of interests in, any
Company Subsidiary, even if such transactions result in a termination under
Section 708 of the Code of any Company Subsidiary or (b) trigger any
termination, buy-sell, transfer, option, right of first refusal, right of first
offer, tag-along or any similar right by any party under any joint venture
Contract or require the consent of any joint venture partner.
(c) Except for applicable requirements, if any, of the Exchange Act
(including the filing with the SEC of the Proxy Statement relating to any
required approval by the Company's shareholders of this Agreement), the
Securities Act, the filing and recordation of appropriate merger documents as
required by the WBCA and the LLC Act, filings required pursuant to any state
securities or "blue sky" laws and such other notices, reports or other filings
the failure of which to be made would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect or prevent or
materially impair the consummation of the transactions contemplated hereby, the
Company is not required to submit any notice, report or other filing to any
Governmental Entity or obtain any Consent of any Governmental Entity in
connection with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 4.5. SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports, schedules, statements
and other documents required to be filed by it with the SEC, and has made
available to Parent true and complete copies of all such forms, reports,
schedules, statements and other documents filed by it since January 1, 2002,
under the Exchange Act or the Securities Act (such forms, reports, schedules,
statements and other documents, including any financial statements or schedules
included therein, are referred to as the "COMPANY SEC DOCUMENTS"). Except as set
forth in SCHEDULE 4.5 of the Company Disclosure Schedule each of the Company SEC
Documents, at the time filed, (i) did not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by such Company SEC Document and
(ii) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. No Subsidiary of the Company is
required to file any form, report or
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other document with the SEC. To the Company's Knowledge, the Company does not
have any comments from the SEC with respect to any of the Company SEC Documents
filed since December 2003 which are outstanding or have not been adequately
addressed, nor has it received letters from the SEC requesting information or
otherwise inquiring as to any matters affecting the Company which has not been
adequately addressed. None of the Company SEC Documents is the subject of any
confidential treatment request by the Company.
(b) Except as set forth in SCHEDULE 4.5 of the Company Disclosure
Schedule, the consolidated financial statements included in the Company SEC
Documents comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of the unaudited statements of
the Company, as permitted by SEC Forms 10-Q and 8-K) and fairly present in all
material respects (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position, results of
operations and cash flows of the Company for the periods presented in the
Company SEC Documents.
(c) Each of the principal executive officer of the Company and the
principal financial officer of the Company (or each former principal executive
officer of the Company and each former principal financial officer of the
Company, as applicable) has made the certifications required by Sections 302 and
906 of the Sarbanes-Oxley Act and the rules and regulations of the SEC
promulgated thereunder with respect to the Company's filings pursuant to the
Exchange Act. For purposes of the preceding sentence, "PRINCIPAL EXECUTIVE
OFFICER" and "PRINCIPAL FINANCIAL OFFICER" shall have the meanings given to such
terms in the Sarbanes-Oxley Act.
(d) Except as otherwise permitted by this Agreement, there are no
"off balance sheet arrangements" (as defined by item 303(a)(4) of Regulation S-K
promulgated by the SEC) in respect of the Company and its Subsidiaries.
(e) SCHEDULE 4.5(D) of the Company Disclosure Schedule sets forth
all loans between the Company and the Company's European Subsidiaries as of the
date hereof.
SECTION 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September
30, 2005, except as contemplated by this Agreement or as set forth in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004 or the
Company's Quarterly Reports on Form 10-Q or the Company's Current Reports on
Form 8-K or the Company's proxy statement on Schedule 14A, in each case as
amended, filed subsequent thereto and prior to the date hereof (excluding any
disclosures set forth in any risk factor section, in any section relating to
forward looking statements and any other disclosures included therein that are
cautionary, predictive or forward-looking in nature) (the "RECENT COMPANY SEC
DOCUMENTS"), or on SCHEDULE 4.6 of the Company Disclosure Schedule, there has
not been:
(a) any event that has had or is, individually or in the aggregate,
reasonably expected to have a Company Material Adverse Effect;
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(b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any of the assets of the Company or its Subsidiaries,
exceeding $500,000 individually or $5,000,000 in the aggregate;
(c) any acquisition (by merger, consolidation, purchase of assets or
otherwise) of any Person or business, or any sale of all or any portion of the
Company's or its Subsidiaries' assets, in each case exceeding $500,000
individually or $5,000,000 in the aggregate;
(d) any pledge of any assets of the Company or any of its
Subsidiaries or the granting of any Lien on any of the assets of the Company or
any of the Subsidiaries, in each case to secure indebtedness for borrowed money;
(e) any incurrence of Indebtedness other than in the ordinary course
of business and consistent with past practice or any issuance of any debt
securities by the Company or any of its Subsidiaries;
(f) any material change in the Company's accounting principles,
except insofar as may have been required by a change in GAAP; or
(g) except as set forth on SCHEDULE 4.6 of the Company Disclosure
Schedule, any action by the Company or its Subsidiaries that would not be
permitted by (1) Section 6.3(ix)(capital expenditures) or (2) Section
6.3(xix)(facilities) if such action had been taken after the date hereof,
provided that as to clause (1) such representation as to the Company's U.S.
operations is only made through February 28, 2006 and as to the Company European
operations such representation is only made through December 31, 2005; provided
further that neither the Company nor its Subsidiaries has made or committed to
make any capital expenditures since such dates outside of the ordinary course of
business or inconsistent with past practice.
SECTION 4.7. LITIGATION. Except for environmental matters, which are
exclusively addressed in Section 4.16, or as disclosed in the Recent Company SEC
Documents, or as set forth on SCHEDULE 4.7 of the Company Disclosure Schedule,
there are no claims, actions, suits, arbitrations, inquiries, proceedings or
investigations pending or, to the Knowledge (after reasonable inquiry) of the
Company, threatened against the Company or any of its Subsidiaries or any
properties or rights of the Company or any of the Subsidiaries, before any
Governmental Entity or other Person, which, individually or in the aggregate,
has had or would, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect or would materially impair or delay the
ability of the Company to perform its obligations hereunder or prevent the
consummation of the transactions contemplated hereby. Neither the Company, nor
any of its Subsidiaries, nor any of the Company's or any of its Subsidiaries'
respective properties is subject to any order, judgment, writ, injunction or
decree, which, individually or in the aggregate, has had or would, individually
or in the aggregate, be reasonably expected to have a Company Material Adverse
Effect.
SECTION 4.8. NO UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any liabilities of a nature required by GAAP to be
reflected in a consolidated balance sheet or the notes thereto, except
liabilities that (a) are accrued or reserved against in the most recent
financial statements included in the Company SEC Documents filed prior to the
date
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hereof or are reflected in the notes thereto, (b) were incurred in the ordinary
course of business since September 30, 2005, (c) are incurred pursuant to the
transactions contemplated by this Agreement, (d) have been discharged or paid in
full prior to the date of this Agreement in the ordinary course of business or
(e) would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.
SECTION 4.9. EMPLOYEE BENEFIT PLANS; ERISA.
(a) U.S. EMPLOYEE BENEFIT PLANS; ERISA.
(i) SCHEDULE 4.9(A)(I) of the Company Disclosure Schedule sets
forth (i) a list of all employee benefit plans (as defined in Section 3(3)
of ERISA) and all other employee compensation and benefit policies,
arrangements or payroll practices, including sick leave, vacation pay,
salary continuation for disability, consulting or other compensation
agreements, retirement, bonus (including any retention bonus plan), stock
option, stock purchase, restricted stock, incentive, deferred compensation,
retiree medical or life insurance, hospitalization, medical insurance, life
insurance, scholarship programs, retirement, supplemental retirement,
severance or other benefit plans, programs or arrangements, that are
maintained, contributed to or sponsored by the Company or any of its
Subsidiaries in the United States for the benefit of any current or former
employee, officer or director of the Company or any of the Subsidiaries in
the United States, and (ii) all "employee pension benefit plans," as
defined in Section 3(2) of ERISA, maintained or contributed to by the
Company or any ERISA Affiliate or as to which the Company or any ERISA
Affiliate is liable to contribute (the "COMPANY U.S. PENSION PLANS") (all
such plans and arrangements listed in clauses (i) and (ii), (collectively,
the "U.S. EMPLOYEE BENEFIT PLANS"). The Company has made available to
Parent and Merger Sub (A) a true and complete copy of each written U.S.
Employee Benefit Plan, (B) all current summary plan descriptions and all
determination letters from the IRS with respect to any such U.S. Employee
Benefit Plan, (C) all administrative service agreements and Form 5500s with
respect to any such U.S. Employee Benefit Plan, (D) any related trust (or
other funding or financing arrangement) with respect to a U.S. Employee
Benefit Plan, and (E) all amendments to any such U.S. Employee Benefit
Plan.
(ii) SCHEDULE 4.9(A)(II) of the Company Disclosure Schedule
sets forth a list of all (x) material individual employment, consulting,
termination, severance, change in control, retention, post-employment and
other compensation agreements, arrangements and plans existing prior to the
execution of this Agreement or which will exist prior to the Closing, which
are currently in effect (or with respect to which there may be liability)
between the Company or any of its Subsidiaries located in the United States
and any current or former director, officer or employee thereof, including
the name of such current or former director, officer or employee and (y)
all such agreements, arrangements and plans under which the annual
compensation or severance obligation exceeds $100,000 (collectively, the
"COMPANY U.S. EMPLOYMENT AGREEMENTS"). Copies of the Company U.S.
Employment Agreements have been made available to Parent and Merger Sub.
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(iii) (i) Each U.S. Employee Benefit Plan has been maintained
in all material respects in accordance with its terms and the requirements
of ERISA and the Code and other applicable laws, (ii) each of the Company
and its Subsidiaries has performed all material obligations required to be
performed by it under any U.S. Employee Benefit Plan and is not in any
material respect in default under or in violation of any U.S. Employee
Benefit Plan, and (iii) no action or proceeding (other than claims for
benefits in the ordinary course) is pending or threatened in writing with
respect to any U.S. Employee Benefit Plan by any current or former
employee, officer or director of the Company or any of its Subsidiaries
located in the United States that would be reasonably expected to have a
Company Material Adverse Effect.
(iv) Each U.S. Employee Benefit Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
has received a favorable determination letter from the IRS that it is so
qualified and each related trust that is intended to be exempt from federal
income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt and, to the
Knowledge of the Company, no fact or event has occurred since the date of
such determination letter or letters from the IRS that could reasonably be
expected adversely to affect the qualified status of any such U.S. Employee
Benefit Plan or the exempt status of any such trust.
(v) The Company and its ERISA Affiliates have complied in all
material respects with the requirements of Section 4980B of the Code and
Parts 6 and 7 of Subtitle B of Title I of ERISA regarding health care
coverage under the U.S. Employee Benefit Plans.
(vi) None of the U.S. Employee Benefit Plans is a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of
ERISA) ("COMPANY MULTIEMPLOYER PLAN") and neither the Company nor any of
its ERISA Affiliates has withdrawn in a complete or partial withdrawal from
any Company Multiemployer Plan, nor has any of them incurred any present or
contingent liability due to the termination or reorganization of any
Company Multiemployer Plan, nor are any of them reasonably expected to
incur liability under Section 4063 or 4064 of ERISA with respect to any
such Company Multiemployer Plan.
(vii) Neither the Company nor any ERISA Affiliate has ever
maintained, sponsored, contributed to or otherwise incurred any present or
contingent liability with respect to any "single-employer plan", as defined
in Section 4001(a)(15) of ERISA, and neither the Company nor any ERISA
Affiliate has any present or contingent liability under Title IV of ERISA
to the Pension Benefit Guaranty Corporation or to a trustee appointed under
Section 4042 of ERISA, and no events have occurred and no circumstances
exist that could reasonably be expected to result in any such liability to
the Company or any ERISA Affiliate.
(viii) To the Knowledge of the Company, there is no liability
for breaches of fiduciary duty in connection with the U.S. Employee Benefit
Plans, and neither the Company nor any of its Subsidiaries or any "party in
interest" or "disqualified person" with respect to the U.S. Employee
Benefit Plans has engaged in a non-exempt
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"prohibited transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA.
(ix) Any and all contributions, premiums and other payments
with respect to compensation or service before and through the Closing
Date, or otherwise with respect to periods before and through the Closing
Date, due from any of the Company or its ERISA Affiliates to, under or on
account of each U.S. Employee Benefit Plan shall have been paid prior to
the Closing Date or shall have been fully reserved and provided for or
accrued on the Company financial statements.
(x) Except as set forth in SCHEDULE 4.9(A)(X) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby, whether
alone, or in connection with any other event, will (i) result in any
payment (including any retention bonuses, parachute payments or
non-competition payments) becoming due to any employee or former employee
or group of employees or former employees of the Company or any of its
Subsidiaries in the United States; (ii) increase any benefits otherwise
payable under any U.S. Employee Benefit Plan or any Company U.S. Employment
Agreement; or (iii) result in the acceleration of the time of payment or
vesting of any Options, Restricted Stock Units or any other rights or
benefits. The Company has provided Parent with a reasonable good-faith
estimate of the amount of any estimated severance payment (including
estimated gross-up, if applicable) owed under the Company U.S. Employment
Agreements due to the transactions contemplated by this Agreement and any
subsequent termination of employment.
(b) NON-U.S. EMPLOYEE BENEFIT PLANS.
(i) SCHEDULE 4.9.(B)(I) of the Company Disclosure Schedule
sets forth all material employee benefit plans and arrangements maintained
for the benefit of employees of the Company located outside of the United
States (the "NON-U.S. EMPLOYEE BENEFIT PLANS"). All Non-U.S. Employee
Benefit Plans are in compliance with all applicable Legal Requirements and
have been operated in compliance with the terms thereof, including funding
requirements, except to the extent that any non-compliance could not
reasonably be expected to have a Company Material Adverse Effect. There are
no claims pending or, to the Knowledge of the Company, threatened by
employees of the Company's Subsidiaries located outside of the United
States, with respect to non-compliance with the terms of any Non-U.S.
Employee Benefit Plans or any applicable requirements, which individually
or in the aggregate could reasonably be expected to have a Company Material
Adverse Effect. No other events or conditions have occurred relating to the
maintenance or operation of a Non-U.S. Employee Benefit Plan or with
respect to the employment of employees of any Company Subsidiary located
outside of the United States, which individually or in the aggregate could
reasonably be expected to have a Company Material Adverse Effect.
(ii) SCHEDULE 4.9(B)(II) of the Company Disclosure Schedule
sets forth a list of all individual employment, consulting, termination,
severance, change in control, retention, post-employment and other
compensation agreements, arrangements and plans,
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(other than statutorily mandated agreements, arrangements and plans)
existing prior to the execution of this Agreement or which will exist prior
to Closing, which are currently in effect (or with respect to which there
may be liability) between a non-US Subsidiary of the Company and any
current or former director, officer or employee thereof and under which the
annual compensation or severance obligation is at least $100,000
(collectively, the "COMPANY NON-U.S. EMPLOYMENT AGREEMENTS").
(iii) Each Non-U.S. Employee Benefit Plan that is intended to
be registered for tax purposes has been registered with the applicable
government agency, and, to the Knowledge of the Company, no fact or event
has occurred since the date of such registration that could reasonably be
expected adversely to affect such registration.
(iv) Any and all contributions, premiums and other payments
with respect to compensation or service before and through the Closing
Date, or otherwise with respect to periods before and through the Closing
Date, due from the Company's Subsidiaries located outside of the United
States under or on account of each Non-U.S. Employee Benefit Plan shall
have been paid prior to the Closing Date or shall have been fully reserved
and provided for or accrued on the Company financial statements.
(v) Except as set forth in SCHEDULE 4.9(B)(V) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby, whether
alone, or in connection with any other event, will (i) result in any
payment (including any retention bonuses, parachute payments or
non-competition payments) becoming due to any employee or former employee
or group of employees or former employees of the Company's Subsidiaries
located outside of the United States; (ii) increase any benefits otherwise
payable under any Non-U.S. Employee Benefit Plan or any Company Non-U.S.
Employment Agreement; or (iii) result in the acceleration of the time of
payment or vesting of any Options, Restricted Stock Units or any other
rights or benefits.
SECTION 4.10. LABOR AND EMPLOYMENT MATTERS. Except as to clauses
(b), (c), (e) and (f), which, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect:
(a) Except as provided in SCHEDULE 4.10(A) of the Company Disclosure
Schedule and, with respect to any of the Company's Subsidiaries located outside
of the United States, any industry-level collective bargaining agreement,
neither the Company nor its Subsidiaries is a party to any collective bargaining
agreement or other current labor agreement with any labor union or organization,
and there is no question involving current union representation of employees of
the Company or any of its Subsidiaries, nor does the Company or any of its
Subsidiaries have any Knowledge of any activity or proceeding of any labor
organization (or representative thereof) or employee group (or representative
thereof) to organize any such employees.
(b) There is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure pending,
or, to the Knowledge of
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the Company, threatened against the Company or any of its Subsidiaries located
in the United States.
(c) Except as provided in SCHEDULE 4.10(C) of the Company Disclosure
Schedule, there is no complaint, lawsuit or proceeding in any forum by or on
behalf of any present or former employee, any applicant for employment or any
classes of the foregoing, alleging breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortious conduct in connection with
the employment relationship pending, or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries.
(d) There is no strike, slowdown, work stoppage or lockout pending,
or, to the Knowledge of the Company, threatened, against or involving the
Company or any of its Subsidiaries.
(e) The Company and each its Subsidiaries are in compliance with all
applicable Laws in respect of employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health.
(f) Except as provided in SCHEDULE 4.10(F) of the Company Disclosure
Schedule, as of the date of this Agreement, there is no proceeding, claim, suit,
action or governmental investigation pending or, to the Knowledge of the
Company, threatened, with respect to which any current or former director,
officer, employee or agent of the Company or any of its Subsidiaries is claiming
indemnification from the Company or any of its Subsidiaries.
SECTION 4.11. INFORMATION SUPPLIED. None of the information supplied
by the Company for inclusion or incorporation by reference in the registration
statement on Form S-4 or any amendment or supplement thereto pursuant to which
shares of Parent Common Stock issuable in the Merger will be registered with the
SEC (the "REGISTRATION STATEMENT") shall (i) when filed with the SEC or other
regulatory agency, (ii) when it is declared effective by the SEC, and (iii) 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 were
made, not misleading. None of the information to be supplied by the Company for
inclusion or incorporation by reference in the Proxy Statement shall (i) when
filed with the SEC or other regulatory agency, (ii) when it (or any amendment
thereof or supplement thereto) is mailed to the holders of Company Common Stock,
(iii) at the times of each of the Company Shareholders' Meeting and the Parent
Shareholders' Meeting, and (iv) 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. If at any time
prior to the Effective Time, any event with respect to the Company, or with
respect to information supplied by the Company specifically for inclusion in the
Proxy Statement or Registration Statement, shall occur which is required to be
described in an amendment of, or supplement to, the Proxy Statement or
Registration Statement, such event shall be so described by the Company and
promptly provided to Parent and Merger Sub. All documents that the Company is
responsible for filing with the SEC in connection with the transactions
contemplated herein, to the extent relating to the Company or other information
supplied by the Company for
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inclusion therein, will comply as to form, in all material respects, with the
provisions of the Exchange Act, and each such document required to be filed with
any Governmental Entity (other than the SEC) will comply in all material
respects with the provisions of any Legal Requirement as to the information
required to be contained therein. Notwithstanding the foregoing the Company
makes no representation or warranty with respect to the information supplied or
to be supplied by Parent or Merger Sub or its Affiliates for inclusion or
incorporation by reference in the Proxy Statement or the Registration Statement.
SECTION 4.12. PERMITS. Except for environmental matters which are
addressed exclusively in Section 4.16, the permits, licenses, approvals,
variances, exemptions, orders, franchises, certifications and authorizations
from Governmental Entities and accreditation and certification agencies, bodies
or other organizations, including building permits and certificates of occupancy
(collectively, "PERMITS"), held by the Company and its Subsidiaries are valid
and sufficient in all respects for all business presently conducted by the
Company and its Subsidiaries and for the operation of the Company's properties,
except as would not, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect. All applications required to have been
filed for the renewal of the Company Permits have been duly filed on a timely
basis with the appropriate Governmental Entities, and all other filings required
to have been made with respect to such Company Permits have been duly made on a
timely basis with the appropriate Governmental Entities, except for failures to
file which, individually or in the aggregate, have not constituted and would not
reasonably be expected to constitute a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has received any claim or notice nor has
any Knowledge (after reasonable inquiry) indicating that the Company or any of
its Subsidiaries is currently not in compliance with the terms of any such
Permits, except where the failure to be in compliance would not, individually or
in the aggregate, be reasonably expected to have a Company Material Adverse
Effect.
SECTION 4.13. COMPLIANCE WITH LAW. Except for environmental matters,
which are exclusively addressed in Section 4.16, to the Company's Knowledge
(after reasonable inquiry), the Business is not being, and has not since January
1, 2004 been, conducted in violation of any Legal Requirement, except such
violations which, individually or in the aggregate, would not be reasonably
expected to have a Company Material Adverse Effect. To the Knowledge (after
reasonable inquiry) of the Company, no investigation, review or inquiry by any
Governmental Entity with respect to the Company or any of the Company
Subsidiaries is pending or is threatened that would reasonably be expected to
have a Company Material Adverse Effect.
SECTION 4.14. TAXES. Except as disclosed in SCHEDULE 4.14 of the
Company Disclosure Schedule:
(a) The Company and each of its Subsidiaries has duly and timely
filed (taking into account any extension of time within which to file) all
material Tax Returns required to be filed by them in the manner provided by law
and all such Tax Returns were correct and complete in all material respects.
(b) The Company and each of its Subsidiaries has (i) timely paid
(or had paid on its behalf) all material Taxes (whether or not shown on any Tax
Return) that are required to
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be paid by it and, with respect to any period ending on or prior to September
30, 2005 for which Tax Returns have not yet been filed or for which Taxes are
not yet due or owing, has made accruals for the projected amount of such Taxes
in its books and records and in the balance sheet dated September 30, 2005
contained in the Company SEC Documents filed prior to the date of this Agreement
and (ii) has complied in all material respects with the applicable Legal
Requirements relating to the payment and withholding of any material Taxes
(including any Taxes required to have been withheld in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder or
other Third Party and sales, use and gross receipts Taxes), has duly and timely
withheld and paid over to the appropriate Governmental Entity all amounts so
withheld and paid under all applicable Legal Requirements, and has duly and
timely filed all material Tax Returns with respect to such withheld Taxes.
(c) There are no material Liens for Taxes upon the assets of the
Company or any of its Subsidiaries, other than Permitted Liens.
(d) No deficiencies for material Taxes have been asserted or
assessed or threatened in writing by any Governmental Entity against the Company
or any of its Subsidiaries.
(e) No requests for waivers of the time to assess any material
amount of Taxes against the Company and its Subsidiaries have been granted and
remain in effect or are pending, and no claim has been asserted in writing by
any Governmental Entity in any jurisdiction where the Company and its
Subsidiaries does not file Tax Returns that the Company or any of its
Subsidiaries is or may be subject to taxation by such jurisdiction, and none of
the Company and its Subsidiaries has incurred any material liability for the
excise tax on "redetermined rents, redetermined deductions and excess interest"
described in section 857(b)(7) of the Code. Neither the Company nor any
Subsidiary is a party to any litigation or administrative proceeding relating to
Taxes (other than litigation dealing with property tax valuations).
(f) The Company, for all taxable years beginning with its date of
formation has always been, and will be for the taxable year or portion thereof
that will end with and include the Merger, a real estate investment trust within
the meaning of Section 856 of the Code (a "REIT") and has qualified as a REIT
for all such years, and (ii) has not taken any action or omitted to take any
action which would reasonably be expected to result in a successful challenge by
the IRS to its status as a REIT, and no such challenge is pending, or is or has
been threatened in writing.
(g) All Taxes that have been incurred since the date of the
financial statements of the Company as set forth in the Recent Company SEC
Documents have been incurred in the ordinary course of business in amounts
consistent with prior periods (adjusted for changes in ordinary course operating
results).
(h) True, correct and complete copies of all U.S. federal income Tax
Returns for the Company and the Subsidiaries that are treated as corporations or
partnerships for U.S. federal income tax purposes, with respect to the taxable
years commencing on or after January 1, 2002 have been delivered or made
available to Parent.
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(i) The Company has not incurred, and, to the Company's Knowledge,
no event has occurred, and no condition or circumstance exists, that will make
it likely that the Company will at any time prior to, but not including the
Effective Time of the Merger, incur, any liability for any material Taxes under
Sections 857(b), 860(c) or 4981 of the Code. Except as disclosed on the
Company's Tax Returns, neither the Company nor any Subsidiary (other than a
Taxable REIT Subsidiary) has engaged at any time in any "prohibited
transactions" within the meaning of Section 857(b)(6) of the Code.
(j) Other than regular quarterly dividends in amounts consistent
with the amounts permitted under Sections 6.6(b) and (c) of this Agreement, the
Company will not be required to make distributions to its shareholders in order
to maintain its REIT status or to avoid the imposition of corporate level Tax or
excise Tax under Section 4981 of the Code (determined without regard to the
effects of the Merger).
(k) Each Subsidiary other than any such Subsidiary that is a taxable
REIT subsidiary within the meaning of Section 856(l) of the Code (a "TAXABLE
REIT SUBSIDIARY") or a qualified REIT subsidiary within the meaning of Section
856(i)(2) of the Code (a "QUALIFIED REIT SUBSIDIARY"), has since the date it
became a subsidiary been, and will through the Effective Time of the Merger be,
classified for U.S. federal income tax purposes as a partnership or disregarded
entity, as the case may be, and not as a corporation or an association taxable
as a corporation, or a "publicly traded partnership" within the meaning of
Section 7704(b) of the Code. Each Company Subsidiary that is a corporation has
always been a Qualified REIT Subsidiary or a Taxable REIT Subsidiary and each
Subsidiary that is a Taxable REIT Subsidiary and will continue to be a Taxable
REIT Subsidiary through the Closing Date.
(l) The Company is not a foreign person within the meaning of
Section 1445(b)(2) of the Code, and to the Company's Knowledge the Company is a
"domestically-controlled" REIT within the meaning of Section 897(h) of the Code
and Treasury Regulation Section 1.897-1(c)(2)(i).
(m) The Company does not have any earnings and profits attributable
to the Company or any other corporation in any non-REIT year within the meaning
of Section 857 of the Code.
(n) None of the Company and its Subsidiaries (i) is a party to any
Tax allocation or sharing agreement (other than such an agreement that is
exclusively between or among the Company and its wholly owned Subsidiaries,
either directly or indirectly) or (ii) has any liability for the Taxes of any
Person other than the Company and its Subsidiaries (A) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Legal
Requirement) or (B) as a transferee or successor or (C) by Contract or otherwise
(not including any gross-ups for withholding Taxes or tax indemnities for
equipment leasing).
(o) Neither the Company nor any Subsidiary holds any asset the
disposition of which would subject the Company to taxation under Section 337(d)
of the Code, the Treasury Regulations thereunder or IRS Notice 88-19 (or any
comparable provisions of state or local law). None of the Company and its
Subsidiaries holds any asset the disposition of which would be subject to rules
similar to Section 1374 of the Code.
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(p) The Company has the right to make or to require, and, after the
Effective Time of the Merger will continue to have the right to make or to
require, each Subsidiary that is treated for U.S. federal income tax purposes as
a partnership to make, in the manner provided in Section 1.754-1(b) of the
Treasury Regulations, an election under Section 754 of the Code (and any
corresponding elections under state or local tax law) (a "SECTION 754 ELECTION")
to adjust the basis of its property as provided in Sections 734(b) and 743(b) of
the Code. At no time prior to the Merger will there have been a revocation or
attempted revocation of a Section 754 Election with respect to any Subsidiary
that is treated for federal income tax purposes as a partnership.
(q) Neither the Company nor any of its Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (i) in the two
years prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement.
(r) Neither the Company nor any Subsidiary has (i) agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of Law or has any application pending with any Governmental
Entity requesting permission for any changes in accounting methods, (ii)
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any similar Legal Requirement, (iii) requested any extension of time
within which to file any material Tax Return, which Tax Return has since not
been filed, (iv) granted any extension of the statute of limitations for the
assessment or collection of Taxes, or otherwise entered into or filed any
agreements, arrangements, waivers or objections extending the statutory period
or providing for an extension of time with respect to the assessment or
reassessment of Taxes or the filing of any Tax Return, or any payment of Taxes,
(v) granted to any Person (other than to an employee of the Company) any power
of attorney that is currently in force with respect to any material Tax matter,
or (vi) received a ruling from any Governmental Entity in respect of Taxes.
(s) Neither the Company nor any of its Subsidiaries is subject to
any Tax Protection Agreements.
(t) Except as set forth on SCHEDULE 4.14 of the Company Disclosure
Schedule no amount has been paid by the Company or any of the Company's ERISA
Affiliates, and no amount is expected to be paid by the Company or any of the
Company's ERISA Affiliates, which would be subject to the provisions of Section
162(m) of the Code such that all or a part of such payments would not be
deductible by the payor.
(u) The aggregate basis of the assets that will be sold to Merger
Sub in the Merger exceeds the amount of the liabilities Merger Sub is assuming
and taking the assets subject to by not less than $500 million, as determined
for federal income tax purposes.
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SECTION 4.15. PROPERTIES.
(a) The Company or one of its Subsidiaries (each a "COMPANY PROPERTY
OWNER") owns fee simple title to each of the real properties (or the applicable
portion thereof) set forth on Schedule III entitled, "Real Estate and
Accumulated Depreciation", of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 as being owned in fee (and which do not
otherwise qualify as Leased Properties as defined below), as adjusted to reflect
purchases and sales disclosed in the Company SEC Documents prior to the date
hereof or on SCHEDULE 4.15(A) or SCHEDULE 4.6 of the Company Disclosure Schedule
(together with the land underlying such properties and all buildings, structures
and other improvements and fixtures located on or under such land and all
easements, rights and other appurtenances thereto, collectively, the "COMPANY
PROPERTIES"), and a valid leasehold estate to each of the real properties
identified as being leased and set forth on SCHEDULE 4.15(A)(I) or SCHEDULE 4.6
of the Company Disclosure Schedule (collectively, the "LEASED PROPERTIES")
pursuant to leases, subleases or other agreements (together with any amendments
or modifications thereto, collectively, the "COMPANY LEASES"). The Company has
delivered or made available to Parent true and complete copies of the Company
Leases, and except as would not have a Company Material Adverse Effect, each
Company Lease is valid, binding and in full force and effect. The Company
Properties and the Leased Properties are all of the real properties owned or
leased by the Company and its Subsidiaries. Except as would not, individually or
in the aggregate, be reasonably expected to have a Company Material Adverse
Effect, the interests of the Company Property Owners in the Company Properties
and the Leased Properties are good and marketable and the same are owned free
and clear of Liens except for Permitted Liens. No written termination of or
notice of default has been received by the Company or any of its Subsidiaries
under a Company Lease, and to the Company's Knowledge no event has occurred
which, with due notice or lapse of time or both, would constitute a default or
violation thereunder or which might interfere with the quiet enjoyment of the
tenant under any Company Lease, except as would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect.
(b) American Land Title Association (or TLTA, CLTA or other similar
local equivalent) policies of title insurance (or marked title insurance
commitments having the same force and effect as title insurance policies) have
been issued by national title insurance companies insuring the good and
marketable fee simple or leasehold, as applicable, title of the Company or its
Subsidiaries, as applicable, with respect to each of the Company Properties and
the Leased Properties that are located in the United States, with the only
exceptions or exclusions from such coverage being Permitted Liens, except as
would not have a Company Material Adverse Effect. Except as would not have a
Company Material Adverse Effect, each such policy is in full force and effect
and no claims have been made or are pending or, to the Knowledge of the Company,
threatened thereunder. The Company has delivered or made available to Parent
true and complete copies of all such policies except where the failure to do so
would not have a Company Material Adverse Effect.
(c) The Company and the Subsidiaries have good title to the personal
properties and assets (i) reflected on the consolidated financial statements
included in the Company SEC Documents or acquired since the date of such
financial statements and (ii) sufficient for the conduct and operation of their
respective businesses as currently conducted,
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except for properties and assets not material in the aggregate to the Business
and disposed of in the ordinary course of business consistent with past practice
and except for such defects in title which, individually or in the aggregate,
would not have a Company Material Adverse Effect.
(d) Except as listed in SCHEDULE 4.15(D) of the Company Disclosure
Schedule or which, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect, each Company Property and
Leased Property (i) is in good operating condition and repair and is
structurally sound and free of latent or patent structural, mechanical or other
significant defects, with no alterations or repairs being required thereto under
applicable Legal Requirements or insurance company requirements; (ii) has not
suffered any casualty or other damage that has not been repaired; (iii) consists
of sufficient land, parking areas, driveways and other improvements and lawful
means of access to permit the use thereof in the manner and for the purposes to
which it is presently devoted; and (iv) is otherwise suitable, sufficient,
adequate and appropriate in all respects (whether physical, structural, legal,
practical or otherwise) for its current use, operation and occupancy, except, in
each such case, to the extent that failure to meet such standards does not
impair or adversely affect the manner or extent of the current use, operation or
occupancy of such property. Except as would not have a Company Material Adverse
Effect, the Business will, at the Closing Date, include all right, title and
interest in and to all assets that are used primarily in or that are being held
primarily for use or are otherwise necessary in the operation of the Business as
currently conducted.
(e) Except as set forth on SCHEDULE 4.15(E) of the Company
Disclosure Schedule or which, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect, there are no
(i) pending or, to the Knowledge of the Company, threatened (in writing)
requirements by any insurance company which has issued an insurance policy
covering any Company Property or Leased Property which require any repairs or
work to be done on any Company Property or Leased Property, (ii) condemnation,
eminent domain or rezoning or proceedings that are pending or, to the Knowledge
of the Company, threatened (in writing) with respect to any portion of any of
the Company Properties or Leased Properties; (iii) pending or, to the Knowledge
of the Company (after reasonable inquiry), threatened (in writing) action or
proceeding by any Governmental Entity for assessment or collection of taxes,
impact fees or special assessments affecting any part of any Company Property or
Leased Property; or (iv) zoning, building, land-use, fire, safety and signage or
other applicable Laws (including to the Knowledge of the Company, Title III of
the Americans with Disabilities Act, 42 U.S.C. ss.ss. 12181-12213, as amended
from time to time) or orders that are presently being violated or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the Company Properties or Leased Properties or by
the continued maintenance, operation or use of the parking areas related
thereto.
(f) Except as set forth in SCHEDULE 4.15(F), SCHEDULE 4.18 or
SCHEDULE 6.3 of the Company Disclosure Schedule, no Company Property or Leased
Property is subject to any sales contract, option, right of first refusal or
similar agreement or arrangement in favor of any Third Party the exercise of
which would, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(g) Except in the ordinary course of business consistent with past
practice, neither the Company nor any of its Subsidiaries has distributed or
authorized the distribution of
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any localized, mass or direct mailing which provides any coupons, discounts or
any other rental concession, rebates or free rent for any new or existing
tenants of any Company Property or any Leased Property which would be effective
after the Closing Date.
SECTION 4.16. ENVIRONMENTAL. Except as would not, individually or in
the aggregate, be reasonably expected to have a Company Material Adverse Effect,
or as disclosed in the Company SEC documents or on SCHEDULE 4.16 of the Company
Disclosure Schedule:
(a) (i) each of the Company Properties, the Leased Properties and
the Business is in compliance with all applicable Environmental Laws; (ii) there
is no litigation, investigation, request for information or other proceeding
pending, or, to the Knowledge of the Company (after reasonable inquiry),
threatened against the Company or any Subsidiary under any applicable
Environmental Laws; and (iii) the Company has not received any written notice
(I) of violation or potential liability under any applicable Environmental Laws
that remains unresolved, or (II) that any judicial, administrative or compliance
order has been issued against the Company or any Subsidiary which remains
unresolved.
(b) Neither the Company nor any Subsidiary has used, generated,
stored, treated or handled any Hazardous Material on the Company Properties or
Leased Properties, in a manner that would reasonably be expected to result in
liability under Environmental Laws, and there are currently no underground
storage tanks, active or abandoned, used for the storage of Hazardous Materials
on, in or under any Company Properties or Leased Properties in violation of
applicable Environmental Laws. Neither the Company nor any Subsidiary has caused
a Release of Hazardous Materials on either the Company Properties or the Leased
Properties and, to the Knowledge of the Company, no Third Party has caused a
Release or threatened Release of Hazardous Materials on either the Company
Properties or Leased Properties.
(c) To the Knowledge of the Company, all Hazardous Material which
has been removed from any Company Properties or Leased Properties was handled,
transported and disposed of at the time of removal in compliance with applicable
Environmental Laws.
(d) No representation or warranty is made under this Section 4.16
with respect to the contents of individual storage units of the Company and its
Subsidiaries unless the Company has Knowledge of a Release of Hazardous
Materials from an individual storage unit on either the Company Properties or
the Leased Properties.
SECTION 4.17. INTELLECTUAL PROPERTY. Except as would, individually
or in the aggregate, be reasonably expected to have a Company Material Adverse
Effect, (a) the Company and its Subsidiaries own, or are licensed or otherwise
possess valid rights to use, all patents, trademarks, service marks, trade
names, trade secrets, domain names, computer software, copyrights, inventions,
processes, discoveries, formulas, research and development, and applications and
registrations for any of the foregoing, in each case, which are material to the
conduct of the business of the Company and its Subsidiaries taken as a whole,
(collectively, the "INTELLECTUAL PROPERTY RIGHTS"); (b) to the Company's
Knowledge, there are no conflicts with or infringements of any Intellectual
Property Rights by any Third Party, and the conduct of the business of the
Company and its Subsidiaries does not conflict with or infringe any intellectual
property or other proprietary right of any Third Party; and (c) there are
neither any outstanding
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nor, to the Company's Knowledge, threatened disputes or disagreements with
respect to any of the Intellectual Property Rights.
SECTION 4.18. MATERIAL CONTRACTS.
(a) As of the date hereof, except as set forth on SCHEDULE 4.18 of
the Company Disclosure Schedule or disclosed in the Recent Company SEC
Documents, neither the Company nor any of its Subsidiaries is a party to or
bound by:
(i) any Contract which contains restrictions with respect to
payment of dividends or any other distribution in respect of the capital
stock or other equity interests of the Company or any of its Subsidiaries;
(ii) any Contract relating to development, construction,
capital expenditures or purchases of material, supplies, equipment or other
assets or properties (other than purchase orders for such items in the
ordinary course of business) in each case requiring aggregate payments by
the Company or any of its Subsidiaries in excess of $2,000,000 during their
remaining term following the Closing Date;
(iii) any Contract relating to (A) Indebtedness of the Company
or any of its Subsidiaries in excess of $1,500,000, (B) any guarantee or
assumption of other obligations or reimbursement of any maker of a letter
of credit except for agreements entered into in the ordinary course
consistent with past practice which agreements relate to obligations which
do not exceed $1,500,000 in the aggregate for all such agreements;
(iv) any Contract limiting in any material respect the ability
of the Company or any of its Subsidiaries to engage in the Business or to
compete in such Business with any Person;
(v) any confidentiality agreements entered into by the Company
with a Third Party since January 1, 2004 relating to any actual or
potential business combination, merger, sale of the Company, a sale or
other divestiture in a single or series of related transactions of more
than 25% of the Company's capital stock, assets or operations, or any other
transaction that would reasonably be expected to result in a change of
control of the Company (each a "THIRD PARTY CONFIDENTIALITY AGREEMENT");
(vi) any hedging agreement or other financial agreement or
arrangement designed to protect the Company or its Subsidiaries against
fluctuations in commodities prices or exchange rates;
(vii) any Contract or executed binding letter of intent
involving the future disposition or acquisition of assets or Properties, or
any merger, consolidation or similar business combination transaction;
(viii) any Contract involving any joint venture, partnership,
strategic alliance, shareholders' agreement, co-marketing, co-promotion,
joint development or similar arrangement (other than Contracts with respect
to Indebtedness), in each case
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involving aggregate payments or obligations by the Company or any of its
Subsidiaries in excess of $500,000;
(ix) any Contract involving any resolution or settlement of
any actual or threatened litigation, arbitration, claim or other dispute
which has not been fully performed, other than, in each case, any such
Contracts concerning the routine collection of debts entered into in the
ordinary course of business and other than, in each case, providing for
payments under any such Contract by the Company or any of its Subsidiaries
in an amount less than $75,000;
(x) other than the Articles of Incorporation, the By-Laws or
applicable insurance policies, any Contract providing for continuing
indemnification of any of the Company's directors, officers or employees
(except, in each case, for reimbursement of employment related costs or
expenses in the ordinary course);
(xi) any management agreement to which the Company or any of
its Subsidiaries is a party as manager;
(xii) any guarantee of third party obligations by the Company
or any of its Subsidiaries;
(xiii) any lease for real property in which the amount of
payments which the Company is required to make on an annual basis exceeds
$100,000;
(xiv) any Contract with an accounting firm, consultant or
advisor related to compliance with any Legal Requirements of the Securities
and Exchange Commission or other jurisdictional equivalents thereto;
(xv) any Contract entered into outside of the ordinary course
of business (including any lease or sublease to which the Company or any of
its Subsidiaries is party as lessor or tenant outside of the ordinary
course of business) not disclosed pursuant to any other clause of this
Section 4.18 or involving payments or obligations in excess of $200,000 by
the Company or any of its Subsidiaries which are not terminable by the
Company or its Subsidiaries without penalty or premium on sixty days prior
notice;
The foregoing Contracts to which the Company or any of its
Subsidiaries is a party or are bound are collectively referred to herein as the
"COMPANY MATERIAL CONTRACTS." Notwithstanding anything above, in the case of
clauses (ii), (iii), (vi), (vii), (viii), (xi), and (xii), Company Material
Contracts shall not include any Contract that (1) is terminable upon less than
60-days notice without penalty or premium, (2) will be fully satisfied at or
prior to the Closing or (3) provides for aggregate payments by the Company or
any of its Subsidiaries of less than $200,000 during the remaining term of such
Contract following the Closing Date.
(b) Neither the Company nor any of its Subsidiaries are in breach or
default and, to the Company's Knowledge, no other party to any of the Company
Material Contracts is in breach or default (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation)
under any of the Company Material Contracts, except for
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such defaults which, individually or in the aggregate, would not be reasonably
expected to have a Company Material Adverse Effect.
SECTION 4.19. BROKERS. No broker, finder or investment banker (other
than Banc of America Securities LLC and Citigroup Global Markets Inc.
(collectively, the "FINANCIAL ADVISORS")) is entitled to any brokerage, finder's
or other fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by and on behalf of the Company. The
Company has heretofore furnished to Parent and Merger Sub true and complete
information concerning the financial arrangements between the Company and the
Financial Advisors pursuant to which such firms would be entitled to any payment
as a result of the transactions contemplated hereunder. The Financial Advisors
are entitled to a fee in the amount set forth on SCHEDULE 4.19 of the Company
Disclosure Schedule including amounts that have been previously paid and are not
entitled to any other brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 4.20. OPINION OF FINANCIAL ADVISOR. Each Financial Advisor
has rendered to the Company Board an opinion to the effect that, as of the date
of the opinion and subject to the assumptions and limitations set forth therein,
the Exchange Ratio is fair, from a financial point of view, to the holders of
Company Common Stock (except Parent, Merger Sub and their respective
Affiliates). A true and correct copy of such opinion will be delivered to Merger
Sub solely for informational purposes after receipt thereof by the Company.
SECTION 4.21. ANTI-TAKEOVER LEGAL REQUIREMENTS. Prior to the date of
this Agreement, the Company has taken all actions necessary to exempt under or
make not subject to the requirements of any "moratorium", "control share", "fair
price", "affiliate transaction", "business combination" or other takeover Legal
Requirements and regulations of any state, including the provisions of Section
23B.19 of the WBCA and any other state takeover law or state law that purports
to limit or restrict business combinations or the ability to acquire or vote
shares (collectively, "TAKEOVER STATUTES"): (i) the execution and delivery of
this Agreement; (ii) the Merger; and (iii) the transactions contemplated hereby.
(a) The Company and the Company Board have taken all appropriate and
necessary actions to render any and all limitations on ownership of Company
Common Stock as set forth in the Restated Articles of Incorporation,
inapplicable to the Merger and the other transactions contemplated thereby.
SECTION 4.22. RIGHTS AGREEMENT AMENDMENT. The Company and the Rights
Agent under the Rights Agreement have duly executed and delivered an amendment
to the Rights Agreement (without redeeming the Rights identified therein), and
shall maintain in effect all necessary action (i) to render the Rights Agreement
inapplicable with respect to the Merger, this Agreement and the transactions
contemplated hereby; (ii) to ensure that (x) neither Parent nor Merger Sub nor
any of their "Affiliates" (as such term is defined in the Rights Agreement) or
"Associates" (as such term is defined in the Rights Agreement) is considered to
be an "Acquiring Person" (as such term is defined in the Rights Agreement) and
(y) the provisions of the Rights Agreement, including the occurrence of a
"Distribution Date" (as such term is defined in the Rights Agreement), are not
and shall not be triggered by reason of the announcement or consummation of the
Merger, this Agreement or the consummation of any of the other
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transactions contemplated hereby; and (iii) to ensure that the Rights shall
automatically terminate on and as of the Effective Time be void and of no
further force or effect. The Company has made available to Merger Sub a true,
complete and correct copy of the Rights Agreement, as amended, and the Rights
Agreement has not been further modified or amended.
SECTION 4.23. INSURANCE. The Company and its Subsidiaries have
obtained and maintained in full force and effect insurance in such amounts, on
such terms and covering such risks as management of the Company believes is
reasonable for its business. The Company or the applicable Company Subsidiary
has paid, or caused to be paid, all premiums due under such policies and is not
in default with respect to any obligations under such policies in any material
respect. All such policies are valid, outstanding and enforceable and neither
the Company nor any of its Subsidiaries has agreed to modify or cancel any of
such insurance policies nor has the Company received any notice of any actual or
threatened modification or cancellation of such insurance other than in the
ordinary course of business and consistent with past practice or such as is
normal and customary in the Company's industry. No such policy will terminate as
a result of the Merger.
SECTION 4.24. VOTING REQUIREMENTS. Except as set forth on SCHEDULE
4.24 of the Company Disclosure Schedule, the only vote required of the holders
of the Company's capital stock to adopt this Agreement and to approve the Merger
is the affirmative majority vote of the outstanding shares of Company Common
Stock.
SECTION 4.25. AFFILIATE TRANSACTIONS. Since January 1, 2005, there
have been no transactions or series of related transactions, or to the Knowledge
of the Company (after reasonable inquiry), and except as set forth on SCHEDULE
6.3 of the Company Disclosure Schedule, currently proposed transactions or
series of related transactions, entered or to be entered into by the Company or
any of its Subsidiaries which are of the type required to be disclosed, or would
be required to be disclosed if consummated, by the Company pursuant to Item 404
of Regulation S-K under the Securities Act that are not so disclosed or have not
been disclosed to Parent. True and complete copies of any Contracts relating to
any such consummated transactions have been delivered or made available to
Parent prior to the date hereof.
SECTION 4.26. INVESTMENT COMPANY ACT OF 1940. Neither the Company
nor any of the Company Subsidiaries is, or on the Closing Date will be, required
to be registered as an investment company under the Investment Company Act of
1940, as amended.
SECTION 4.27. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. No
representation or warranty is made in this Article IV with respect to the
contents of individual storage units of the Company and its Subsidiaries unless
the Company has Knowledge of an event or circumstance related to an individual
storage unit. The Company does not make, and has not made, any representations
or warranties in connection with the Merger and the transactions contemplated
hereby other than those expressly set forth in or made pursuant to this
Agreement. Except as expressly set forth herein, no Person has been authorized
by the Company to make any representation or warranty relating to the Company or
any of its Subsidiaries or their respective businesses, or otherwise in
connection with the Merger and the transactions
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contemplated hereby and, if made, such representation or warranty may not be
relied upon as having been authorized by the Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
Simultaneously with the execution and delivery of this Agreement,
Parent and Merger Sub shall deliver to the Company a disclosure schedule with
numbered sections corresponding to the relevant sections in this Agreement (the
"PARENT DISCLOSURE SCHEDULE"). Any exception or qualification set forth in the
Parent Disclosure Schedule with respect to a particular representation, warranty
or covenant contained in this Agreement shall be deemed to be an exception or
qualification with respect to all other applicable representations, warranties
and covenants contained in this Agreement to the extent any description of facts
regarding the event, item or matter disclosed is adequate so as to make readily
apparent or otherwise make the Company reasonably aware that such exception or
qualification is applicable to such other representations, warranties or
covenants whether or not such exception or qualification is so numbered. Except
as otherwise set forth in the Parent Disclosure Schedule, Parent and Merger Sub,
jointly and severally, hereby represent and warrant to the Company as follows:
SECTION 5.1. ORGANIZATION AND QUALIFICATION.
(a) Parent is a corporation duly organized, validly existing, and in
good standing under the laws of the State of California and has all requisite
power and authority to own its assets and to carry on its business as presently
conducted. Parent has all requisite power and authority to execute, deliver, and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby.
(b) Merger Sub is a limited liability company duly organized,
validly existing with active status under the laws of the State of Delaware and
has all requisite power and authority to own its assets and to carry on its
business as presently conducted. Merger Sub has all requisite power and
authority to execute and deliver, and perform its obligations under, this
Agreement and to consummate the transactions contemplated hereby. Parent owns
directly or indirectly substantially all of the issued and outstanding interests
of Merger Sub.
SECTION 5.2. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of: (i)
200,000,000 shares of Parent Common Stock, (ii) 200,000,000 shares of equity
stock, par value $.01 per share, and (iii) 50,000,000 shares of preferred stock
of Parent. As of March 1, 2006: (A) 129,786,793 shares of Parent Common Stock
were issued and outstanding, all of which were validly issued, fully paid and
nonassessable; (B) 8,744.193 shares of Equity Stock, Series A (represented by
8,774,193 depositary shares) which rank on parity with the Parent Common Stock;
(C) 1,702,536 shares of preferred stock of the Parent (including preferred stock
represented by 102,536,000 depositary shares were issued and outstanding and
9,000 shares were reserved for issuance upon the exchange of certain preferred
units; (D) 1,784,145 shares of Parent Common Stock were
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reserved for issuance upon the exercise of outstanding stock options or vesting
of outstanding restricted stock units under the Parent stock option and
incentive plans listed in SCHEDULE 5.2 of the Parent Disclosure Schedule; and
(E) 9,012,128 shares of common stock reserved for issuance upon conversion of
the Equity Stock Depositary Shares and partnership units listed in SCHEDULE 5.2
of the Parent Disclosure Schedule.
(b) All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
right of first offer, preemptive right, subscription right or any similar right.
Except as set forth above in SCHEDULE 5.2 of the Parent Disclosure Schedule, (i)
there are no other options, warrants or other rights, agreements, arrangements
or commitments of any character obligating Parent or any Subsidiary of Parent to
issue or sell any shares of capital stock of or other equity interests in Parent
or any Subsidiary of Parent or any Voting Debt of Parent or any Subsidiary of
Parent and (ii) there is no Voting Debt of Parent or any Subsidiary of Parent.
SECTION 5.3. AUTHORIZATION AND EXECUTION. The execution and delivery
of this Agreement and the performance of each of Parent and Merger Sub of this
Agreement and the consummation by each of them of the transactions contemplated
hereby have been duly and validly authorized by all necessary action on the part
of Parent and Merger Sub. This Agreement has been duly and validly executed and
delivered by each of Parent and Merger Sub and constitutes a legal, valid and
binding agreement of each of Parent and Merger Sub enforceable against Parent
and Merger Sub, as applicable, in accordance with its terms, assuming this
Agreement is enforceable against the Company, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
rearrangement, reorganization, fraudulent conveyance, fraudulent transfer,
moratorium, liquidation, conservatorship or similar laws or by general
principles of equity.
SECTION 5.4. ABSENCE OF CONFLICTS; GOVERNMENTAL AUTHORIZATIONS.
(a) The execution and delivery by each of Parent and Merger Sub of
this Agreement, the performance by each of them of their respective obligations
hereunder and the consummation by each of them of the transactions contemplated
hereby will not (i) conflict with or result in any violation of any provision of
the Certificate of Incorporation or By-Laws or equivalent organizational
documents, each as amended to date, of Parent or Merger Sub, (ii) materially
conflict with, result in any violation or breach of, constitute a default under,
give rise to any right of termination or acceleration (with or without notice or
the lapse of time or both) or increase in any cost or obligation of the Company
pursuant to, or result in being declared void or voidable, any term or provision
of any note, bond, mortgage, indenture, lease, license, Contract or other
instrument to which Parent or Merger Sub is a party or by which any of their
respective properties or assets are or may be bound, (iii) violate in any
material respect any term of any Legal Requirement applicable to Parent or
Merger Sub or by which any their respective properties or assets are bound or
affected, except in the case of clauses (ii) and (iii) immediately above, for
any such conflicts, violations, breaches, defaults, terminations, cancellations
or Liens which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
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(b) Except for applicable requirements, if any, of the Securities
Act, the Exchange Act, the filing and recordation of appropriate merger
documents as required by the WBCA and the LLC Act, filings required pursuant to
any state securities or "blue sky" laws, and such other Consents, notices,
reports or other filings the failure of which to be made would not, individually
or in the aggregate, have a Parent Material Adverse Effect or prevent or
materially impair the consummation of the transactions contemplated hereby,
neither Parent nor Merger Sub is required to obtain any Consent from or submit
any notice, report or other filing to any Governmental Entity in connection with
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
SECTION 5.5. SEC REPORTS AND FINANCIAL STATEMENTS.
(a) Parent has filed all forms, reports, schedules, statements and
other documents required to be filed by it with the SEC, and has made available
to Company true and complete copies of all such forms, reports, schedules,
statements and other documents filed by it since January 1, 2002, under the
Exchange Act or the Securities Act (such forms, reports, schedules, statements
and other documents, including any financial statements or schedules included
therein, are referred to as the "PARENT SEC DOCUMENTS"). Except as set forth in
SCHEDULE 5.5 of the Parent Disclosure Schedule, each of the Parent SEC
Documents, at the time filed, (i) did not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by such Parent SEC Document and
(ii) complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Except for Public Storage
Properties IV, Ltd. and Public Storage Properties V, Ltd., no Subsidiary of
Parent is required to file any form, report or other document with the SEC.
(b) The consolidated financial statements included in the Parent SEC
Documents comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of the unaudited statements of
Parent, as permitted by SEC Forms 10-Q and 8-K) and fairly present in all
material respects (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position, results of
operations and cash flows of Parent for the periods presented in the Parent SEC
Documents.
(c) Each of the principal executive officer of Parent and the
principal financial officer of Parent (or each former principal executive
officer of Parent and each former principal financial officer of Parent, as
applicable) has made the certifications required by Sections 302 and 906 of the
Sarbanes-Oxley Act and the rules and regulations of the SEC promulgated
thereunder with respect to the Company's filings pursuant to the Exchange Act.
For purposes of the preceding sentence, "PRINCIPAL EXECUTIVE OFFICER" and
"PRINCIPAL FINANCIAL OFFICER" shall have the meanings given to such terms in the
Sarbanes-Oxley Act.
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(d) Except as otherwise permitted by this Agreement, there are no
"off balance sheet arrangements" (as defined by item 303(a)(4) of Regulation S-K
promulgated by the SEC) in respect of Parent and its Subsidiaries.
SECTION 5.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September
30, 2005, except as contemplated by this Agreement or as set forth in Parent's
Annual Report on Form 10-K for the year ended December 31, 2004 or Parent's
Quarterly Reports on Form 10-Q or Parent's Current Reports on Form 8-K or
Parent's proxy statement on Schedule 14A, in each case as amended, filed
subsequent thereto and prior to the date hereof (excluding any disclosures set
forth in any risk factor section, in any section relating to forward looking
statements and any other disclosures included therein that are cautionary,
predictive or forward-looking in nature) (the "RECENT PARENT SEC DOCUMENTS"),
there has not been any event that has had or is reasonably expected to have a
Parent Material Adverse Effect.
SECTION 5.7. LITIGATION. Except for environmental matters, which are
exclusively addressed in Section 5.14, or as disclosed in the Recent Parent SEC
Documents, there are no claims, actions, suits, arbitrations, inquiries,
proceedings or investigations pending or, to the Knowledge of Parent, threatened
against Parent or any of its Subsidiaries or any properties or rights of Parent
or any of its Subsidiaries, before any Governmental Entity, which, individually
or in the aggregate, has had or would, individually or in the aggregate, be
reasonably expected to have a Parent Material Adverse Effect or to materially
impair or delay the ability of either of Parent or Merger Sub to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. Neither Parent, Merger Sub, nor any of Parent's
Subsidiaries, nor any of Parent's, Merger Sub's or any of Parent's Subsidiaries'
respective properties is subject to any order, judgment, writ, injunction or
decree, which, individually or in the aggregate, has had or would, individually
or in the aggregate, be reasonably expected to have a Parent Material Adverse
Effect.
SECTION 5.8. NO UNDISCLOSED LIABILITIES. Neither Parent nor any of
its Subsidiaries has any liabilities of a nature required by GAAP to be
reflected in a consolidated balance sheet or the notes thereto, except
liabilities that (a) are accrued or reserved against in the most recent
financial statements included in the Parent SEC Documents filed prior to the
date hereof or are reflected in the notes thereto, (b) were incurred in the
ordinary course of business since September 30, 2005, (c) are incurred pursuant
to the transactions contemplated by this Agreement, (d) have been discharged or
paid in full prior to the date of this Agreement in the ordinary course of
business, or (e) would not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
SECTION 5.9. INFORMATION SUPPLIED. None of the information supplied
by Parent and Merger Sub for inclusion or incorporation by reference in the
Registration Statement shall (i) when filed with the SEC or other regulatory
agency, (ii) when it is declared effective by the SEC, and (iii) 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 were
made, not misleading. None of the information to be supplied by Parent and
Merger Sub for inclusion or incorporation by reference in the Proxy Statement
shall (i) when filed with the SEC or other regulatory agency, (ii) when it (or
any amendment thereof or supplement thereto) is mailed to the holders of Company
Common
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Stock, (iii) at the times of each of the Company Shareholders' Meeting and the
Parent Shareholders' Meeting, and (iv) 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. If at any time
prior to the Effective Time, any event with respect to Parent or Merger Sub, or
with respect to information supplied by Parent or Merger Sub specifically for
inclusion in the Proxy Statement or Registration Statement, shall occur which is
required to be described in an amendment of, or supplement to, the Proxy
Statement or Registration Statement, such event shall be so described by Parent
or Merger Sub and promptly provided to the Company. All documents that Parent or
Merger Sub is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form, in all material
respects, with the provisions of the Exchange Act, and each such document
required to be filed with any Governmental Entity (other than the SEC) will
comply in all material respects with the provisions of applicable Legal
Requirements as to the information required to be contained therein.
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
warranty with respect to the information supplied or to be supplied by the
Company or any Affiliate (other than Parent or Merger Sub to the extent Parent
or Merger Sub is determined to be an Affiliate of the Company) thereof for
inclusion or incorporation by reference in the Proxy Statement or Registration
Statement.
SECTION 5.10. NO PRIOR ACTIVITIES. Except for obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), Merger Sub has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person.
SECTION 5.11. COMPLIANCE WITH LAW. Except for environmental matters,
which are exclusively addressed in Section 5.14 or as disclosed in the Recent
Parent SEC Documents, to the Knowledge of Parent, the business of Parent and
Merger Sub is not being, and has not since January 1, 2004 been, conducted in
violation of any Legal Requirement, except such violations which, individually
or in the aggregate, would not be reasonably expected to have a Parent Material
Adverse Effect. To the Knowledge of Parent, no investigation, review or inquiry
by any Governmental Entity with respect to Parent or any Subsidiaries of Parent
is pending or is threatened that would reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 5.12. TAXES.
Except as would not, individually or in the aggregate, be reasonably
expected to have a Parent Material Adverse Effect:
(a) Parent and its Subsidiaries have timely filed (taking into
account any extension of time within which to file) all Tax Returns required to
be filed by any of them in the manner provided by law and all such Tax Returns
were correct and complete,
(b) Parent and its Subsidiaries have paid (or had paid on their
behalf) all Taxes due in respect of the periods covered by such Tax Returns as
required to be paid by them,
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(c) For all taxable years commencing with 2001 through the date
hereof, Parent 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.
SECTION 5.13. PROPERTIES. Parent or one of its Subsidiaries (each a
"PARENT PROPERTY OWNER") owns fee simple title to each of the real properties
(or the applicable portion thereof) described in the Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 2004 as being owned in fee, as
adjusted to reflect purchases and sales disclosed in the Parent SEC Documents
prior to the date hereof (or which were not required to be so disclosed)
(collectively, the "PARENT PROPERTIES"), and a valid leasehold estate to each of
the real properties subject to a lease described in Parent's Annual Report on
Form 10-K for the fiscal year ended December 31, 2004, as adjusted to reflect
purchases and sales disclosed in the Parent SEC Documents prior to the date
hereof (or which were not required to be so disclosed) (collectively, the
"PARENT LEASED PROPERTIES"). Except as would not, individually or in the
aggregate, be reasonably expected to have a Parent Material Adverse Effect, the
interests of the Parent Property Owners in the Parent Properties and the Parent
Leased Properties are good and marketable, and the same are owned free and clear
of Liens except for Permitted Liens. No written termination of or notice of
default has been received by Parent or any of its Subsidiaries under a lease
pursuant to which Parent or one of its Subsidiaries holds its interest in a
Parent Leased Property, except as would not, individually or in the aggregate,
be reasonably expected to have a Parent Material Adverse Effect.
SECTION 5.14. ENVIRONMENTAL. To Parent's Knowledge and except
as would not, individually or in the aggregate, be reasonably expected to have a
Parent Material Adverse Effect:
(a) (i) each of the Parent Properties and Parent Leased Properties
and Parent's business are in material compliance with all applicable
Environmental Laws; (ii) there is no litigation or other proceeding pending
threatened against Parent under any Environmental Laws; and (iii) Parent has not
received any written notice (I) of violation or potential liability under any
Environmental Laws that remains unresolved, or (II) that any judicial,
administrative or compliance order has been issued against Parent which remains
unresolved.
(b) There has been no Release or threatened Release of Hazardous
Material on the Parent Properties or Parent Leased Properties in material
violation of any Environmental Law.
(c) All Hazardous Materials which has been removed from any Parent
Properties or Parent Leased Properties has been handled, transported and
disposed of at the time of removal in material compliance with Environmental
Laws.
SECTION 5.15. BROKERS. No broker, finder or investment banker (other
than Goldman, Sachs & Co.) is entitled to any brokerage, finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent and Merger Sub.
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SECTION 5.16. VOTING REQUIREMENTS. The only vote required of the
holders of Parent's capital stock in connection with the transactions
contemplated hereby is the approval of the Share Issuance by the affirmative
majority vote of the outstanding shares of Parent Common Stock and the Equity
Stock, Series A (represented by Depositary Shares Each Representing 1/1,000 of a
Share of Equity Stock, Series A) voting together as one class. The Depositary
Shares Each Representing 1/1,000 of a Share of Equity Stock, Series A vote at a
rate of one-tenth of a vote per depositary share.
SECTION 5.17. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. No
representation or warranty is made in this Article V with respect to the
contents of individual storage units of Parent and its Subsidiaries unless
Parent has Knowledge of an event or circumstance related to an individual
storage unit. Parent and Merger Sub do not make, and have not made, any
representations or warranties in connection with the Merger and the transactions
contemplated hereby other than those expressly set forth in or made pursuant to
this Agreement. Except as expressly set forth herein, no Person has been
authorized by Parent or Merger Sub to make any representation or warranty
relating to Parent or Merger Sub or their respective businesses, or otherwise in
connection with the Merger and the transactions contemplated hereby and, if
made, such representation or warranty may not be relied upon as having been
authorized by Parent or Merger Sub.
ARTICLE VI.
COVENANTS OF THE COMPANY
SECTION 6.1. ACCESS TO INFORMATION.
(a) The Company will provide Parent and Parent's counsel,
accountants and other representatives and agents with reasonable access, upon
prior notice and during normal business hours, to the facilities, properties,
officers, directors, district managers, senior MIS personnel, MIS consultants
and vendors, accountants, assets, books and records of the Company and (i)
Parent shall have the right, subject to the terms of this Section 6.1, to
prepare or cause to be prepared surveys, inspections, engineering studies,
environmental assessments and other tests, examinations or studies with respect
to the Company Properties; provided that (A) Parent indemnifies the Company for
any losses, costs or damages associated with any such items or caused during any
period as a result of Parent's access, (B) the Company receives copies of all
such items, and (C) Parent may not do any invasive or destructive testing of the
Company Properties, (ii) Parent shall have the right, upon prior notice and
during normal business hours, to provide employees of the Company with
information; provided that (A) Parent first coordinates the distribution of such
information to the Company employees with the Company, (B) provides the Company
copies of all materials to be provided to employees of the Company, and (C)
provides the Company with a reasonable opportunity to review such materials,
(iii) the Company shall provide Parent with a monthly review of the unaudited
revenues, capital spending and performance data of the Company and the Company
Subsidiaries within 20 days after the end of each such month on a property by
property basis, and (iv) the Company will furnish Parent with such financial and
operating data and other information with respect to the business, personnel and
properties of the Company or the transactions contemplated hereby as Parent
shall from time to time reasonably request; PROVIDED, HOWEVER, that such
investigation (a) shall be conducted
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upon reasonable prior notice with a representative of the Company present, and
in such manner as not to interfere unreasonably with the operation of the
business of the Company, (b) shall not include speaking with employees (other
than district managers in the manner provided above), customers or suppliers of
the Company without the prior consent of the Company (other than to the extent
such customers or suppliers are customers of or suppliers to Parent or any of
its Subsidiaries); provided further that the Company shall provide reasonable
assistance and cooperation to Parent in connection with integration planning and
transition activities (including access to accounting, MIS, and other systems)
and access to employees as reasonably necessary in connection therewith;
provided that such access shall be coordinated with the Company and conducted in
such manner as not to interfere unreasonably with the operation of the business
of the Company, and (c) neither the Company nor any of its Subsidiaries shall be
required to provide access to or to disclose information where such access or
disclosure would violate the rights of any Person with which it has a business
relationship, constitute a waiver of the attorney-client privilege or contravene
any Legal Requirement.
(b) Each of Parent and Merger Sub will hold and treat and will cause
their Representatives to hold and treat in confidence all documents and
information concerning the Company or its Subsidiaries furnished or otherwise
made available to such party in connection with the transactions contemplated by
this Agreement in accordance with the Confidentiality Agreement, which
Confidentiality Agreement shall remain in full force and effect in accordance
with its terms.
SECTION 6.2. INFORMATION FOR REGISTRATION STATEMENT. The Company
will promptly furnish to Parent such data and information relating to it and its
Subsidiaries as Parent may reasonably request for the purpose of including such
data and information in the Registration Statement and any amendments or
supplements.
SECTION 6.3. CONDUCT OF BUSINESS. The Company covenants and agrees
that prior to the Effective Time, except (i) as expressly provided in this
Agreement, (ii) as set forth in SCHEDULE 6.3 of the Company Disclosure Schedule
or (iii) as agreed in writing by Parent, after the date hereof:
(a) (1) Subject to the restrictions set forth in clause (a)(2), the
Company will, and will cause each of its Subsidiaries to, conduct its
business in the ordinary course consistent with past practice, use
reasonable best efforts to preserve substantially intact in all material
respects its present business organization, assets, properties, reputation
and key relations, keep available in all material respects the services of
its present officers, directors and employees (except that Parent agrees
that it shall not be a breach of this provision if any Company employees
choose to voluntarily terminate their employment with the Company after the
date hereof), and (2) the Company will not, and will not, to the extent
such Subsidiary is controlled by the Company or its Affiliates, permit any
of its Subsidiaries, to
(i) authorize, issue or commit to issue, deliver, sell, grant,
pledge or otherwise dispose of or encumber any shares of its capital
stock of any class (whether or not from treasury stock) or other
equity interests in the Company, any other voting securities or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares or securities, except
for the issuance of shares of
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Company Common Stock upon the exercise of, and in accordance with,
Options granted prior to the date hereof; PROVIDED, HOWEVER, that
nothing herein shall prohibit the Company from (A) making automatic
option grants to directors of the Company pursuant to the Directors
Incentive Plan, or (B) issuing shares of Company Common Stock pursuant
to the terms of the ESPP;
(ii) split up, combine or reclassify any of its capital stock
or other equity interests in the Company;
(iii) purchase, redeem or otherwise acquire any shares of its
capital stock of any class or any equity interests in the Company, or
any interest in or right to acquire any such shares or other equity
interests in the Company;
(iv) (A) increase the compensation or benefits payable or to
become payable to the directors, officers, consultants or employees of
the Company, or any of its Subsidiaries, other than to employees at
the level of store manager, district manager or below, in the ordinary
course of business consistent with past practice; provided, that no
such increases shall increase the number of weeks of severance, if
any, that the Company is obligated to pay such employees or the terms
of the Company's severance plans, (B) establish, adopt, enter into or
amend any collective bargaining, bonus, profit sharing, thrift,
compensation, employment, termination, severance, stock incentive or
other plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer, consultant or employee, except as
contemplated by this Agreement or to the extent required by applicable
law or the terms of a collective bargaining agreement, (C) increase
the benefits payable under any existing severance or termination pay
policies or employment or other agreements, (D) take any affirmative
action to accelerate the vesting of any stock-based compensation, (E)
grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or Company U.S. Employment Agreement,
U.S. Employee Benefit Plan or Non-U.S. Employee Benefit Plan
(including the grant of stock options, stock appreciation rights,
stock based or stock related awards, performance units or restricted
stock, or the removal of existing restrictions in any Company U.S.
Employment Agreement, U.S. Employee Benefit Plan or Non-U.S. Employee
Benefit Plan or agreements or awards made thereunder), other than
contributions (whether in stock or cash) made to Company U.S. Pension
Plans as required by the terms of such plans and consistent with past
practice, (F) take any action to fund or in any other way secure the
payment of compensation or benefits under any Company U.S. Employment
Agreement, U.S. Employee Benefit Plan or Non-U.S. Employee Benefit
Plan, (G) make any material determinations not in the ordinary course
of business consistent with past practice under any collective
bargaining agreement, Company U.S. Employment Agreement, U.S. Employee
Benefit Plan or Non-U.S. Employee Benefit Plan, (H) amend or modify
any Company Option Plan, (I) grant or promise any tax offset payment
award under any Company Option Plan, (J) make any loan or cash advance
to, or engage in any transaction with, any current or former director,
officer or employee, except advances to employees in the ordinary
course of business consistent with past practice, (K) make any loan or
cash advance to any current or former consultant or independent
contractor, (L) hire any officers, consultants or employees other than
at the district manager level or below (including office personnel at
such
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levels) in the ordinary course of business consistent with past
practice and only to the extent such hires are reasonably necessary to
replace employees no longer employed after the date hereof or to staff
new facilities, or (M) terminate the employment of any holder of
Restricted Stock or Restricted Stock Units as of the Effective Time;
(v) subject to the provisions of Section 6.4, adopt or effect
a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other
reorganization;
(vi) subject to the provisions of Section 6.4, except for the
lease of self storage facilities and related assets in the ordinary
course of business consistent with past practice and for transactions
disclosed on SCHEDULE 6.3 of the Company Disclosure Schedule,
transfer, sell, lease (other than as lessee pursuant to leases in
effect as of the date hereof), license, sell and leaseback, mortgage
(except as otherwise permitted pursuant to SCHEDULE 6.3 of the Company
Disclosure Schedule), encumber or otherwise dispose of or assign any
(i) Company Properties (ii) of the Company's or any Subsidiary's
interest in the Leased Properties or (iii) or other material assets
(including any contracts or stock (or equivalent thereof of the
Company's Subsidiaries) or permit any (x) Company Properties, (y) of
the Company's or any Subsidiary's interest in the Leased Properties or
(z) or other material assets (including any contracts or stock (or
equivalent thereof of the Company's Subsidiaries) to be subjected to
any Liens, other than Permitted Liens, except (A) to the extent such
Lien is made or incurred in the ordinary course of business consistent
with past practice, or (B) in the case of involuntary Liens on Company
Properties and/or Leased Properties, to the extent such Liens do not
materially affect the value of, or interfere with the business or the
operation of, the Company Properties and the Leased Properties taken
as a whole;
(vii) amend, modify or repeal, or propose to do, or permit or
consent to any amendment, modification or repeal of its Articles of
Incorporation or Restated By-Laws (or equivalent organizational
document) or take any action with respect to such action other than is
contemplated in connection with the Merger;
(viii) enter into, or become obligated under, or change,
amend, terminate or otherwise modify any Company Material Contract
(other than as otherwise permitted by this Section 6.3, including
construction or other Contracts contemplated by clause (ix) below), or
fail to enforce any material rights or claims of the Company under any
Contract in a materially adverse manner (including any write-off or
other materially adverse compromise of any material accounts
receivable of the Company or any of its Subsidiaries);
(ix) make or commit to make capital expenditures except for
expenditures the Company reasonably deems necessary to address
emergency situations, to ensure compliance with applicable law or to
cure a default under a material agreement or as set forth in SCHEDULE
6.3 of the Company Disclosure Schedule;
(x) (A) incur any Indebtedness for borrowed money other than
borrowings pursuant to the Company's and its Subsidiaries' revolving
credit
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arrangements in effect on the date hereof in the ordinary course,
consistent with past practice, for working capital purposes, (B)
issue, sell or amend any debt securities or other rights to acquire
any debt securities of the Company or any of its Subsidiaries,
guarantee any debt securities 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, or (C) make any loans, advances or
capital contributions to, or investment in, or repay any indebtedness
owing to any Person other than the Company or any of its direct or
indirect Subsidiaries in an amount in excess of $1,000,000 other than
the repayment of Indebtedness existing as of the date hereof at
maturity in accordance with its terms; provided that the Company may
take any of the actions proscribed by this Section 6.3(a)(x) following
reasonable consultation with Parent and with Parent's prior written
consent (such consent not to be unreasonably withheld);
(xi) enter into any hedging agreement or other financial
agreement or arrangement designed to protect the Company or its
Subsidiaries against fluctuations in commodities prices or exchange
rates (other than replacement of such existing hedging agreements or
other financial agreements or arrangements required by the Company's
Contracts related to Indebtedness, following reasonable consultation
with Parent); provided that the Company may enter into such agreements
following reasonable consultation with Parent and with Parent's prior
written consent (such consent not to be unreasonably withheld);
(xii) acquire by merging or consolidating with, or by
purchasing all or substantially all, or a portion of all, the assets,
capital stock (or equivalent thereof) or other equity securities of
any other Person, or any business division, assets or properties of
any other Person or otherwise organize or acquire control or ownership
of any other Person.
(xiii) make, amend or rescind any express or deemed material
election relative to Taxes, unless such election or rescission is (i)
required by any Legal Requirement, or (ii) necessary to preserve the
status of the Company as a REIT or of any Subsidiary of the Company
(other than any taxable REIT subsidiary or qualified REIT subsidiary)
as a partnership or disregarded entity for federal income tax
purposes, waive or extend the statute of limitations with respect to
any Taxes, or settle or compromise any material liability for Taxes
(other than settling appeals of property Tax valuations) or amend any
Tax Return; PROVIDED, that nothing in this Agreement shall preclude
the Company from designating dividends paid by it as "capital gains
dividends" within the meaning of Section 857 of the Code or electing
to treat any entity as a taxable REIT subsidiary;
(xiv) enter into any Tax Protection Agreement;
(xv) make any changes in financial accounting methods,
principles or practices, except insofar as may have been required by a
change in GAAP or other Legal Requirement;
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(xvi) take any action, or fail to take any action, which can
reasonably be expected to cause (i) the Company to fail to qualify as
a REIT, or (ii) any of its Subsidiaries to cease to be treated as a
partnership or disregarded entity for federal income tax purposes, as
a REIT, as a Qualified REIT Subsidiary, or as a Taxable REIT
Subsidiary under Section 856(l) of the Code, as the case may be;
(xvii) make any payments or incur any liability or obligation
to or for the benefit of any Third Party for the purpose of obtaining
any consent from such Third Party to the Merger or the transactions
contemplated hereunder;
(xviii) initiate, compromise or settle any litigation or
arbitration proceeding (A) relating to this Agreement or the
transactions contemplated hereby or (B) material to the Company and
its Subsidiaries, taken as a whole;
(xix) open or close any facility or office material to the
Company and its Subsidiaries, taken as a whole;
(xx) adopt or implement any shareholder rights plan or
similar device or arrangement; or
(xxi) take, undertake, incur, authorize, commit or agree to
take any of the foregoing actions.
(b) The Company will advise Parent as soon as reasonably practicable
of (and, in the case of any written notice, provide to Parent a copy of):
(i) the commencement of or, to the Knowledge of the Company,
the threat of any material claim, litigation, action, suit, inquiry or
proceeding involving the Company, any of its Subsidiaries, their respective
properties or assets, or, to the Knowledge of the Company, involving any of
their respective directors, officers or agents (in their capacities as
such);
(ii) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(iii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
and
(iv) in furtherance and not in limitation of Sections 7.2(a),
8.1 and 8.2, a copy of each report, schedule, form, statement and other
document filed or received by it during such period pursuant to the
requirements of domestic or foreign (whether national, federal, state,
provincial, local or otherwise) laws in connection with this transaction or
outside of the ordinary course of business which, in each case, would be
reasonably likely to have a Company Material Adverse Effect.
(c) The Company will, and will cause each of its Subsidiaries to,
comply, in all material respects, with all Legal Requirements applicable to the
Business.
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(d) The Company shall provide to Parent a summary of the amounts
outstanding on its and its Subsidiaries' revolving credit arrangements on a
monthly basis.
(e) Nothing contained in this Agreement shall give Parent, directly
or indirectly, the right to control or direct the Company's or its Subsidiaries'
operations prior to the Effective Time. Prior to the Effective Time, the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision over its and its Subsidiaries' operations.
SECTION 6.4. NO SOLICITATION. (a) Except as provided in this Section
6.4(a) or in Section 6.4(b), the Company shall not, and it shall cause its
Subsidiaries and its and their respective officers, directors, employees, agents
and representatives (collectively, the "REPRESENTATIVES") not to, directly or
indirectly, (i) solicit, encourage, initiate or take any other action to
facilitate any inquiries or the making of any inquiries regarding, or the
submission of, any proposal or offer that constitutes, relates to, or could
reasonably be expected to lead to, any Acquisition Proposal, (ii) enter into,
continue or otherwise participate in any discussions or negotiations regarding,
or furnish to any Person any information with respect to, assist or participate
in any effort or attempt by, or otherwise cooperate in any way with, any Person
relating to any Acquisition Proposal or with respect to, any proposal or offer
that constitutes, or could reasonably be expected to lead to, any Acquisition
Proposal, or (iii) enter into any agreement with respect to any Acquisition
Proposal or approve or recommend any Acquisition Proposal; PROVIDED, HOWEVER,
that (without limiting the rights of Parent or Merger Sub hereunder) nothing
contained in this Section 6.4 or any other provision of this Agreement shall
prohibit the Company or the Company Board from (A) taking and disclosing to the
Company's shareholders a position with respect to a tender or exchange offer by
a Third Party pursuant to Rules 14d-9 and 14e-2 or Item 1012(a) of Regulation
M-A promulgated under the Exchange Act (or any similar communication to
shareholders in connection with the making or amendment of a tender offer or
exchange offer) or (B) making any legally required disclosure to shareholders
with regard to an Acquisition Proposal. Upon execution of this Agreement, the
Company shall, and it shall cause the Representatives to, immediately cease any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and shall immediately request
the return or destruction of all confidential information regarding the Company
or its Subsidiaries provided to any Person or group prior to the date of this
Agreement pursuant to the terms of any applicable Third Party Confidentiality
Agreements, and the Company shall use its reasonable best efforts to enforce (to
the extent the Company has Knowledge of a breach by the other party thereto),
and shall not waive any of the provisions of, any such Third Party
Confidentiality Agreement. Notwithstanding the foregoing, prior to the date of
the Company Shareholders' Meeting, the Company and the Representatives may
furnish information concerning its and its Subsidiaries' business, properties or
assets to any Person or group (so long as such Person or group is not in breach
of the "standstill" provisions of any Third Party Confidentiality Agreement),
and may negotiate and participate in discussions and negotiations with such
Person or group concerning an Acquisition Proposal if: (w) such Person or group
has submitted an unsolicited Acquisition Proposal which did not result from a
material breach by the Company, any of its Subsidiaries or any Representative of
the terms and conditions set forth herein and which the Company Board believes
in good faith (after consultation with its legal and financial advisors) is
reasonably likely to lead to a Superior Proposal; (x) if the Company Board
determines in good faith (after consultation with its legal advisors) that
failing
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to do so would be a breach of its fiduciary duties, including the standards of
conduct set forth in Section 23B.08.300 of the WBCA, (y) prior to providing any
nonpublic information permitted to be provided pursuant to this sentence, the
Company shall have entered into a confidentiality agreement with such Person or
Group on terms no less favorable to it than the Confidentiality Agreement
(without regard to any modification thereof pursuant hereto), and (z) the
Company shall provide Parent a copy of any nonpublic information to be provided
pursuant to this sentence prior to furnishing such information to such Person or
group, PROVIDED, HOWEVER, that the Company shall not be required to provide
Parent any such non-public information that is already contained in the
Intralinks data room as of the date hereof.
(b) Except as set forth in this Section 6.4(b), neither the Company
Board nor any committee thereof shall (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Merger Sub, the approval or
recommendation by the Company Board or any such committee of this Agreement or
the transactions contemplated hereby, including the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding anything in this Agreement to the contrary, prior to the date of
the Company Shareholders' Meeting, the Company Board may withdraw or modify its
approval or recommendation of this Agreement or the transactions contemplated
hereby, including the Merger, approve or recommend a Superior Proposal, or enter
into an agreement with respect to a Superior Proposal (each, a "SUBSEQUENT
DETERMINATION"), in each case if (x) the Company shall not have violated its
obligations under this Section 6.4 in any material respect and shall have
received a Superior Proposal, (y) the Company Board shall have determined in
good faith (after consultation with its legal advisors) that failing to take
such action would be a breach of its fiduciary duties including the standards of
conduct set forth in Section 23B.08.300 of the WBCA, and (z) prior to taking
such action, the Company provides four Business Days written notice to Parent
advising Parent that the Company Board has made the determination described in
clause (y) immediately above and complies with Section 10.1(d)(i).
(c) From and after the date of this Agreement, the Company shall
promptly (but in any event within 24 hours) advise Parent of the receipt of any
inquiries, requests, proposals or offers relating to an Acquisition Proposal
received by the Company and keep Parent informed as to the status of and any
material developments regarding any such inquiries, requests, proposals or
offers. Any such notice shall be made in writing and shall indicate the material
terms and conditions thereof (including the identity of the party making the
Acquisition Proposal and a copy of the Acquisition Proposal and any
modifications thereto).
SECTION 6.5. TAX MATTERS.
(a) From the date of this Agreement until the Effective Time, each
of the Company and its Subsidiaries will duly and timely file all Tax Returns
and other documents required to be filed by it with federal, state, local and
any non-U.S. Tax authorities, subject to extensions permitted by any Legal
Requirement and properly granted by the appropriate authority, provided that the
Company notifies Parent that it or any of its Subsidiaries is availing itself of
such extensions, and provided, further, that such extensions do not adversely
affect the Company's status as a REIT under the Code.
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(b) The Company and its Subsidiaries 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 (together with any related
interest, penalties or additions to such Taxes, "TRANSFER TAXES") which become
payable in connection with the transactions contemplated by this Agreement, and
shall cooperate in attempting to minimize the amount of such Transfer Taxes.
(c) The Company shall provide Parent an opinion of Perkins Coie LLP
or other outside counsel reasonably satisfactory to Parent, dated as of the
Closing Date, to the Company substantially in the form of EXHIBIT C and
reasonably satisfactory to Parent (the "COMPANY REIT OPINION").
(d) For U.S. federal and applicable state income tax purposes, the
Company shall report and treat the Merger as a taxable disposition by the
Company of all of the Company's assets to Merger Sub in exchange for the Merger
Consideration, the cash paid pursuant to Section 3.7, the Parent Preferred
Stock, if any, and the assumption of all of the Company's liabilities, followed
by a liquidating distribution of such Merger Consideration, cash paid pursuant
to Section 3.7 and Parent Preferred Stock, if any, to the holders of Company
Common Stock and Company Preferred Stock under Sections 331 and 562 of the Code.
This Agreement constitutes a "plan of liquidation" of the Company for federal
income tax purposes and the Company Board, prior to that date on which the
Effective Time of the Merger occurs, will adopt this Agreement as such plan.
(e) Prior to the Effective Time, the Company shall use reasonable
best efforts to merge or otherwise convert each Subsidiary of the Company that
is a Qualified REIT Subsidiary into a limited liability company or entity that
is treated, and will continue to be treated after the Effective Time, as a
disregarded entity for U.S. federal income tax purposes, and the Company shall
notify Parent prior to the Effective Time of the name of each Subsidiary that is
a Qualified REIT Subsidiary that will not be so merged or converted prior to the
Effective Time.
SECTION 6.6. DIVIDENDS. From and after the date of this Agreement,
the Company shall not declare or pay any dividend or distribution to its
shareholders without the prior written consent of Parent; provided, that the
written consent of Parent shall not be required for the authorization and
payment of (a) additional distributions required by the Code for the Company to
maintain its REIT status or necessary to eliminate any federal Tax liability,
after giving effect to any payments made pursuant to clauses (b), (c), (d) and
(e) below, and provided that the Company shall consult with Parent prior to
making any such dividend or distribution pursuant to this clause (a) as to the
requirement or necessity thereof; (b) dividends or distributions of up to $2.175
per year per share to holders of the Series C Preferred Stock and dividends or
distributions of up to $2.1875 per year per share to holders of the Series D
Preferred Stock which are paid in accordance with past practices (including
record and payment dates) and the terms of the Certificates of Designation of
such series of Company Preferred Stock; (c) the previously declared quarterly
distributions of $0.56 per share of Company Common Stock payable during the
first quarter of 2006, with record and payment dates of March 3, 2006 and March
13, 2006, respectively; (d) distributions payable to holders of Company Common
Stock,
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the record date of which shall be the earlier of June 3, 2006 or the last
Business Day immediately preceding the Closing Date (the "SECOND QUARTER RECORD
DATE"), which distributions shall be in an amount per share equal to (x) $0.56
less (y) the per share amount of any distributions paid or declared pursuant to
clause (a) above during the period following March 6, 2006 to the Second Quarter
Record Date; and (e) distributions to holders of Company Common Stock for each
calendar quarter thereafter (commencing July 1, 2006) ending on or prior to the
Closing Date in an amount per share equal to the (x) regular quarterly
distribution per share then paid to holders of Parent Common Stock (which Parent
presently intends, subject to declaration by Parent's board of directors, will
be $0.50 per share of Parent Common Stock) multiplied by (y) the Exchange Ratio,
and (z) in each case less the per share amount of any distributions pursuant to
clause (a) above paid or declared following the date hereof and not previously
deducted in computing the distributions payable pursuant to clause (d) or this
clause (e) (any such excess being carried forward), provided, that the record
and payment dates for each quarterly distribution with respect to the Company
Common Stock pursuant to this clause (e) shall be the same as the record and
payment dates for the applicable regular quarterly distribution for the Parent
Common Stock, provided that each such record date shall be in the applicable
calendar quarter, and that such record and payment dates shall be provided by
Parent to the Company by written notice not less than twenty Business Days prior
to the record date for such quarterly Parent distribution. In the event that a
distribution with respect to the Company Common Stock or the Company Preferred
Stock permitted by this Section 6.6 has (x) a record date prior to the Effective
Time and (y) has not been paid as of the Effective Time, the holders of Company
Common Stock or Company Preferred Stock, as applicable, shall be entitled to
receive such distribution from the Company at the time such shares are exchanged
pursuant to Article II and Article III of this Agreement. It is understood and
agreed that Parent may set the record date for the regular quarterly
distribution payable to holders of Parent Common Stock on the same date as the
Second Quarter Record Date, which distribution shall be in an amount per share
equal to the regular quarterly distribution per share then paid to holders of
Parent Common Stock. It is the intention of the parties hereto that each holder
of a share of Company Common Stock (assuming such holder owned such share prior
to and as of March 2, 2006 and does not subsequently transfer such share during
the remainder of 2006 except in connection with the conversion into Parent
Common Stock in connection with the Merger) shall receive one quarterly
distribution during each of the four calendar quarters of 2006, either as a
Company shareholder in accordance with clauses (d) and (e) above or, after the
Effective Time, as a Parent shareholder by receipt of a regular quarterly
distribution.
SECTION 6.7. PREFERRED STOCK. On or before the date the Proxy
Statement is mailed to holders of Company Common Stock (but in no event more
than 90 days prior to the anticipated Closing Date), the Company shall publish a
notice of redemption in a publication of general circulation in the City of New
York, once a week for two successive weeks, and mail a notice to each holder of
record of shares of Series C Preferred Stock and Series D Preferred Stock, such
notice to state that the Company will redeem all of the Series C Preferred Stock
and Series D Preferred Stock immediately prior to and conditioned upon the
Closing and otherwise containing such other information required by the terms of
the Series C Preferred Stock and Series D Preferred Stock and shall, subject to
compliance by Parent with Section 3.7, otherwise take such action as necessary
to cause the redemption of all of the Series C Preferred Stock and Series D
Preferred Stock immediately prior to and conditioned upon the Closing.
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ARTICLE VII.
COVENANTS OF PARENT AND MERGER SUB
Parent covenants and agrees with the Company that, at all times
before the Closing and to the extent specified, after the Closing, Parent at its
expense will comply and will cause Merger Sub or the Surviving Company, as the
case may be, to comply with all covenants and provisions of this Article VII,
except to the extent otherwise expressly required or permitted by this
Agreement.
SECTION 7.1. OBLIGATION OF PARENT TO MAKE MERGER EFFECTIVE AND
MERGER SUB'S STOCKHOLDER CONSENT. Parent shall cause Merger Sub to take all
legally permitted actions necessary on its part to carry out the transactions
contemplated hereby. Parent, as the sole stockholder of Merger Sub, will consent
in writing to the approval of this Agreement and the Merger in accordance with
applicable law.
SECTION 7.2. ACCESS TO INFORMATION.
(a) Parent and Merger Sub will provide the Company's counsel,
accountants and other representatives and agents with reasonable access (in
relation to the Company's status as a party to this Agreement), upon prior
notice and during normal business hours, to the books and records of Parent and
Merger Sub and will furnish the Company with such financial and operating data
and other information with respect to the business, personnel and properties of
Parent and Merger Sub or the transactions contemplated hereby as the Company
shall from time to time reasonably request; PROVIDED, HOWEVER, that such
investigation (a) shall be conducted upon reasonably prior notice with a
representative of Parent present, and in such manner as not to interfere
unreasonably with the operation of the business of Parent or Merger Sub, (b)
shall not include speaking with employees, customers or suppliers of Parent or
Merger Sub without the prior consent of Parent, other than to the extent such
customers or suppliers are customers of or suppliers to the Company or any of
its Subsidiaries, and (c) neither Parent, Merger Sub nor any of Parent's
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate the rights of any Person with
which it has a business relationship, constitute a waiver of the attorney-client
privilege or contravene any Legal Requirement.
(b) The Company will hold and treat and will cause its
Representatives to hold and treat in confidence all documents and information
concerning Parent or Merger Sub or their Subsidiaries furnished or otherwise
made available to such party in connection with the transactions contemplated by
this Agreement in accordance with the confidentiality agreement, dated as of
February 27, 2006, by and between Parent and the Company, which confidentiality
agreement shall remain in full force and effect in accordance with its terms.
SECTION 7.3. INFORMATION FOR PROXY STATEMENT FOR THE COMPANY'S
SHAREHOLDERS. Parent will promptly furnish to the Company such data and
information relating to it and Merger Sub as the Company may reasonably request
for the purpose of including such data and information in the Proxy Statement
and any amendments or supplements thereto used by the Company to obtain the
necessary shareholder approval of the Merger.
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SECTION 7.4. CONDUCT OF BUSINESS. Parent and Merger Sub covenant and
agree that prior to the Effective Time, except (i) as expressly provided in this
Agreement, or (ii) as agreed in writing by Company, after the date hereof:
(a) Parent and Merger Sub will not, and will not permit any of
Parent's Subsidiaries to:
(i) adopt or effect a plan of complete or partial liquidation,
dissolution as to Parent or Merger Sub;
(ii) amend, modify or repeal, or propose to do, or permit or
consent to any amendment, modification or repeal of its Articles of
Incorporation or Restated By-Laws (or equivalent organizational document)
in such a manner as would cause holders of Company Common Stock that
receive Parent Common Stock pursuant to the Merger to be treated
differently than other holders of Parent Common Stock;
(iii) take any action, or fail to take any action, which can
reasonably be expected to cause Parent to fail to qualify as a REIT; or
(iv) take, undertake, incur, authorize, commit or agree to
take any of the foregoing actions.
(b) Parent will advise the Company as soon as reasonably practicable
of (and, in the case of any written notice, provide to the Company a copy of):
(i) the commencement of or, to the Knowledge of Parent, the
threat of any material claim, litigation, action, suit, inquiry or
proceeding involving Parent, any of its Subsidiaries, relating to this
Agreement or the transactions contemplated hereby;
(ii) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement; and
(iii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement.
(c) Parent will, and will cause each of its Subsidiaries to, use
commercially reasonable efforts to preserve substantially intact in all material
respects its present business organization, assets, properties, reputation and
key relations and keep available in all material respects the services of its
present officers, directors and employees.
(d) Parent will, and will cause each of its Subsidiaries to,
comply, in all material respects, with all Legal Requirements applicable to
their business.
SECTION 7.5. INDEMNIFICATION RIGHTS.
(a) Parent and the Surviving Company agree that all rights to
indemnification and advancement of expenses and exculpation and release now
existing in favor of the officers
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and directors of the Company or any of its Subsidiaries (including any Person
who was or becomes a director or officer prior to the Effective Time) (the
"INDEMNIFIED PARTIES") under the WBCA or as provided in the Company's or any of
its Subsidiaries' articles of incorporation, by-laws, resolutions or any other
written agreement between them with respect to matters occurring at or prior to
the Effective Time shall survive the Merger and shall continue in full force and
effect for a period of not less than six years after the Effective Time (or, in
the case of claims or other matters occurring on or prior to the expiration of
such six-year period which have not been resolved prior to the expiration of
such six-year period, until such matters are finally resolved), and Parent shall
cause the Surviving Company and its Subsidiaries to, and the Surviving Company
shall, honor all such rights. Parent shall cause to be maintained in effect for
not less than six years from the Effective Time the current policies of the
directors' and officers' liability insurance maintained by the Company (provided
that Parent may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous) PROVIDED, that
in no event shall Parent be required to pay aggregate premiums for insurance
under this Section 7.5(a) in excess of 200% of the aggregate premiums paid by
the Company in 2005 for such purpose and, if the annual premiums of such
insurance coverage exceed such amount, Parent shall use its reasonable best
efforts to obtain a policy with the greatest coverage available for a cost not
exceeding such amount; and PROVIDED, FURTHER, that officers and directors of the
Company or any Subsidiary may be required to make application and provide
customary representations and warranties to Parent's insurance carrier for the
purpose of obtaining such insurance. Until the sixth anniversary of the
Effective Time, Parent and its Affiliates shall not amend, modify or repeal the
provisions for indemnification of directors or officers contained in the
articles of incorporation or by-laws (or comparable charter documents) of the
Surviving Company or its Subsidiaries in such a manner as would adversely affect
the rights of any individual who has served as a director or officer of the
Company or its Subsidiaries prior to the Effective Time to be indemnified in
respect of their serving in such capacities prior to the Effective Time.
(b) Notwithstanding anything herein to the contrary, if any claim,
action, suit, proceeding or investigation (whether arising before, at or after
the Effective Time) is made against or involves any Indemnified Party, on or
prior to the sixth anniversary of the Effective Time, the provisions of this
Section 7.5 shall continue in effect until the final disposition of such claim,
action, suit, proceeding or investigation.
(c) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs and
legal representatives. The indemnification provided for herein shall not be
deemed exclusive of any other rights to which an Indemnified Party is entitled,
whether pursuant to any Legal Requirement, contract or otherwise.
(d) In the event Parent or any of its successors or assigns (i)
consolidates or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any Person,
then and in either such case, proper provision shall be made so that the
successors and assigns of Parent shall assume the obligations set forth in this
Section 7.5.
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SECTION 7.6. EMPLOYEE BENEFITS.
(a) EMPLOYEE BENEFITS - U.S. EMPLOYEES.
(i) Parent agrees that, during the period commencing at the
Effective Time and ending on December 31, 2006 (the "BENEFITS CONTINUATION
PERIOD"), the employees of the Company and any of its Subsidiaries located
in the United States who are employed as of the Closing Date and continue
employment (each a "COMPANY U.S. EMPLOYEE") will continue to be provided
with salary and benefits under employee benefit and commission or similar
plans that are comparable in the aggregate to those currently provided by
the Company or any of its Subsidiaries located in the United States to such
employees under the U.S. Employee Benefit Plans listed in SCHEDULE 4.9(A)
of the Company Disclosure Schedule; provided that discretionary benefits
shall remain discretionary.
(ii) For purposes of all employee benefit plans, programs and
agreements maintained by or contributed to by Parent and its Subsidiaries
(including, after Closing, the Surviving Company), Parent shall, or shall
cause its Subsidiaries to cause each such plan, program or arrangement to
treat the prior service with the Company or any of its Subsidiaries located
in the United States of any Company U.S. Employee (to the same extent such
service is recognized under analogous plans, programs or arrangements of
the Company or any of its Subsidiaries located in the United States prior
to the Effective Time) as service rendered to Parent or any of its
Subsidiaries, as the case may be, for all purposes; PROVIDED, HOWEVER, that
such crediting of service shall not (i) operate to duplicate any benefit or
the funding of such benefit under any plan, (ii) require the crediting of
past service for benefit accrual purpose under any defined benefit pension
plan or (iii) be credited if past service credit has not been or will not
be provided to employees or Parent or its Subsidiaries participating in
such plan. Company U.S. Employees shall also be given credit for any
deductible or co-payment amounts paid in respect of the plan year in which
the Closing occurs, to the extent that, following the Closing, they
participate in any other plan for which deductibles or co-payments are
required. Parent shall also cause each Parent Plan (as defined below) to
waive any preexisting condition or waiting period limitation which would
otherwise be applicable to a Company U.S. Employee on or after the
Effective Time (to the extent such limitation would not apply under the
corresponding U.S. Employee Benefit Plan). Parent shall recognize any
accrued but unused vacation of the Company U.S. Employees as of the
Effective Time, and Parent shall cause the Company and its Subsidiaries
located in the United States to provide such paid vacation. For purposes of
this Agreement, a "PARENT PLAN" shall mean such employee benefit plan, as
defined in Section 3(3) of ERISA, or a nonqualified employee benefit or
deferred compensation plan, stock option, bonus or incentive plan or other
employee benefit or fringe benefit program, that may be in effect generally
for employees of Company and its Subsidiaries located in the United States
from time to time.
(iii) (A) During the Benefits Continuation Period, Parent
shall satisfy or Parent shall cause the Company to satisfy any liability
for all severance and similar obligations payable to any Company U.S.
Employee, including for any Company U.S.
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Employee who is terminated by Parent or the Company, or any of their
respective Subsidiaries located in the United States on terms no less
favorable than those provided under the applicable Company severance plan
set forth in SCHEDULE 7.6(A)(III)(A) of the Company Disclosure Schedule;
PROVIDED, that all payment under such plans and programs that are
discretionary shall remain discretionary, and (B) notwithstanding anything
herein to the contrary, during the one year period following the Closing
Date, Parent shall satisfy or Parent shall cause the Company to satisfy any
liabilities incurred pursuant to the programs set forth on SCHEDULE
7.6(A)(III)(B) of the Company Disclosure Schedule.
(iv) Except as provided in this Section 7.6(a), nothing in
this Agreement shall limit or restrict the rights of Parent or the Company
to modify, amend, terminate or establish employee benefit plans or
arrangements, in whole or in part, at any time after the Effective Time.
(v) No provision of this Section 7.6(a) shall create any
third party beneficiary rights in any Company U.S. Employee or any current
or former director or consultant of the Company or its Subsidiaries located
in the United States in respect of continued employment (or resumed
employment) or any other matter.
(b) EMPLOYEE BENEFITS - NON-U.S. EMPLOYEES. Parent agrees that, at
the Effective Time, Parent shall be responsible for and shall pay to any
participant who holds gain sharing rights under the Shurgard Europe Gain Sharing
Plan (the "GAIN SHARING PLAN"), any amounts due to such participant pursuant to
Rule 7.1 of the Gain Sharing Plan. At the Effective Time, any gain sharing
rights that were held by participants under the Gain Sharing Plan immediately
prior to the Effective Time shall become fully matured pursuant to sub-Rule
5.1.5 of the Gain Sharing Plan.
(c) EMPLOYMENT AGREEMENTS. Parent agrees to cause the Company to
honor all Contracts listed in SCHEDULE 7.6(C) of the Company Disclosure Schedule
in accordance with their terms (including any termination or amendment rights),
which are applicable with respect to any employee, officer, director or
executive or former employee, officer, director, or executive of the Company or
any of its Subsidiaries (collectively, the "EMPLOYMENT AGREEMENTS"). Parent
acknowledges that a "Business Combination" as that term is used in the
Employment Agreements, shall occur at the Effective Time. Neither this Section
7.6(c) nor any other provision of this Agreement shall limit the ability or
right of the Company and its Subsidiaries to terminate the employment of any of
their respective employees after the Effective Time (subject to any rights of
any such employees pursuant to any binding Contract, arrangement, policy, plan
or commitment).
SECTION 7.7. TAX MATTERS.
(a) From the date of this Agreement until the Effective Time, Parent
and its Subsidiaries will duly and timely file all Tax Returns and other
documents required by it to be filed with federal, state and local Tax
authorities, subject to extensions permitted by any Legal Requirement and
properly granted by the appropriate authority, provided that such extensions do
not adversely affect Parent's status as a REIT under the Code.
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(b) Parent and its Subsidiaries shall cooperate in the preparation,
execution, and filing of all returns, questionnaires, applications, or other
documents regarding any Transfer Taxes which become payable in connection with
the transactions contemplated by this Agreement, and shall cooperate in
attempting to minimize the amount of such Transfer Taxes.
(c) For U.S. federal and applicable state income tax purposes,
Parent and its Subsidiaries shall report and treat the Merger as a taxable
disposition by the Company of all of the Company's assets to Merger Sub in
exchange for the Merger Consideration, the cash paid pursuant to Section 3.7,
the Parent Preferred Stock, if any, and the assumption of all of the Company's
liabilities, followed by a liquidating distribution of such Merger
Consideration, cash paid pursuant to Section 3.7 and the Parent Preferred Stock,
if any, to the holders of the Company Common Stock and Company Preferred Stock
pursuant to Sections 331 and 562 of the Code.
(d) Parent shall provide to the Company an opinion of Hogan &
Hartson, L.L.P. or other outside counsel reasonably satisfactory to the Company,
dated as of the Closing Date, to Parent substantially in the form of EXHIBIT D
and reasonably satisfactory to the Company (the "PARENT REIT OPINION").
ARTICLE VIII.
COVENANTS OF ALL PARTIES
SECTION 8.1. SHAREHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT
AND REGISTRATION STATEMENT.
(a) As promptly as practicable following the date hereof, the
Company and Parent shall cooperate in preparing and shall cause to be filed with
the SEC mutually acceptable proxy materials that shall constitute the proxy
statement/prospectus relating to the matters to be submitted to the Company
common shareholders at the Company Shareholders' Meeting (as defined below) and
to Parent common shareholders at the Parent Shareholders Meeting (such joint
proxy statement/prospectus, and any amendments or supplements thereto, the
"PROXY STATEMENT"), and Parent shall prepare and file with the SEC the
Registration Statement (of which the Proxy Statement will be a part). Parent and
the Company shall use their reasonable best efforts to cause the Registration
Statement to become effective under the Securities Act as soon after such filing
as practicable and to keep the Registration Statement effective as long as is
necessary to consummate the Merger. The Company, acting through the Company
Board shall, subject to its fiduciary duties under the WBCA, have included in
the Proxy Statement the recommendation of the Company Board that the
shareholders of the Company approve the Merger and adopt this Agreement. Parent,
acting through its board of directors, shall have included in the Proxy
Statement the recommendation of Parent's board of directors that the
shareholders of Parent approve the Share Issuance. All correspondence and
communications to the SEC made by the Company or Parent with respect to the
transactions contemplated by this Agreement, will be provided to the other party
with an opportunity to review and comment thereon, prior to such communication
or correspondence being made to the SEC, and all other correspondence or
communication made to the SEC by the Company shall be provided to Parent at the
time of submission to the SEC.
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(b) Parent and the Company shall make all necessary filings with
respect to the Merger and the transactions contemplated thereby under the
Securities Act and the Exchange Act and applicable blue sky laws and the rules
and regulations thereunder. Each party will advise the other, promptly after it
receives notice thereof, of the time when the Registration Statement has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Parent Common Stock or
the Parent Preferred Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the SEC for amendment of the
Proxy Statement or the Registration Statement or comments thereon and responses
thereto or requests by the SEC for additional information. No amendment or
supplement to the Proxy Statement or the Registration Statement shall be filed
without the approval of both parties hereto, which approval shall not be
unreasonably withheld or delayed; PROVIDED that, with respect to documents filed
by a party which are incorporated by reference in the Proxy Statement or the
Registration Statement, this right of approval shall apply only with respect to
information relating to the other party and its Affiliates, their business,
financial condition or results of operations or the transactions contemplated
hereby; and PROVIDED, FURTHER, that the Company, in connection with a Subsequent
Determination, may amend or supplement the Proxy Statement (including by
incorporation by reference) pursuant to a Qualifying Amendment (as defined
below) to effect such a Subsequent Determination, and in such event, this right
of approval shall apply only with respect to information relating to Parent and
its Affiliates or their business, financial condition or results of operations.
"QUALIFYING AMENDMENT" means an amendment or supplement to the Proxy Statement
(including by incorporation by reference) to the extent it contains (i) a
Subsequent Determination, (ii) a statement of the reasons of the Company Board
for making such Subsequent Determination and (iii) additional information
reasonably related to the foregoing.
(c) If at any time prior to the Effective Time, any information
relating to Parent or the Company, or any of their respective Affiliates,
officers or directors, should be discovered by Parent or the Company that should
be set forth in an amendment or supplement to the Registration Statement or the
Proxy Statement, so that such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party which discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the shareholders of the Company.
(d) The Company shall, following the execution of this Agreement,
duly call, give notice of, convene and hold a meeting of its common shareholders
for the purpose of adopting this Agreement and approving the Merger (the
"COMPANY SHAREHOLDERS' MEETING"). The Company shall, subject to the provisions
of Section 6.4, (i) use its reasonable best efforts to solicit from common
shareholders of the Company proxies in favor of adoption of this Agreement and
approval of the Merger for the Company Shareholders' Meeting and (ii) recommend
to its common shareholders the adoption of this Agreement and approval of the
Merger.
(e) Parent shall, following the execution of this Agreement, duly
call, give notice of, convene and hold a meeting of its common shareholders (the
"PARENT SHAREHOLDERS' MEETING") for the purpose of approving the Share Issuance.
Parent shall (i) use its reasonable
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best efforts to solicit from common shareholders of Parent proxies in favor of
approval of the Share Issuance for the Parent Shareholders' Meeting and (ii)
recommend to its common shareholders the approval of the Share Issuance. The
Parent board of directors shall not withdraw or modify, or propose to withdraw
or modify, in a manner adverse to the Company, its approval or recommendation of
this Agreement, the Merger and the Share Issuance. Parent shall take all actions
necessary or advisable to authorize and create the Parent Preferred Stock
including amending its articles of incorporation and, if required, obtaining the
approval of its shareholders in connection therewith.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if this Agreement is terminated, the Company shall not be required to
hold the Company Shareholders' Meeting and Parent shall not be required to hold
the Parent Shareholders' Meeting.
SECTION 8.2. REASONABLE BEST EFFORTS.
(a) Each of the parties agrees to use its reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable under Legal Requirements applicable to such party and
otherwise to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (i) the obtaining of all other necessary actions or
non-actions, extensions, waivers, Permits or Consents from Persons, including
Third Parties and the making of all other necessary registrations, notices and
filings (including other filings with Governmental Entities, if any), (ii) the
preparation of the Proxy Statement, (iii) the preparation of the Registration
Statement and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carryout
the purposes of, this Agreement.
(b) Each of Parent and the Company shall use its reasonable best
efforts to cooperate in all respects with each other in connection with any
filing or submission to or any investigation or proceeding by the Federal Trade
Commission (the "FTC"), the Antitrust Division of the Department of Justice (the
"DOJ") or any other Governmental Entity.
(c) Each of Parent and the Company shall, in connection with the
efforts referenced in Section 8.2(a) to obtain all required Permits and Consents
under any applicable Legal Requirements, use its reasonable best efforts to (i)
subject to applicable Legal Requirements and provided that parties may redact
any discussion of the value of this or alternative transactions, permit the
other party to review and discuss in advance, and consider in good faith the
views of the other in connection with, any proposed written or material oral
communication (or other correspondence or memoranda) between it and any
Governmental Entity, and (ii) promptly inform each other of and supply to such
other party any communication (or other correspondence or memoranda) received by
such party from, or given by such party to, the DOJ, the FTC or any other
Governmental Entity, in each case regarding the Merger contemplated hereby.
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(d) In furtherance and not in limitation of the covenants of the
parties contained in this Section 8.2, if any objections are asserted with
respect to the Merger contemplated hereby under any antitrust or competition
law, each of Parent and the Company agrees to use its reasonable best efforts
(which under no circumstances shall involve divesting of material assets) to
resolve any antitrust concerns, federal, state, foreign or private, obtain all
Permits and Consents and obtain termination of the waiting period under the HSR
Act or any other applicable law and the termination of any outstanding judicial
or administrative orders prohibiting the Closing so as to permit consummation of
the Merger as soon as practicable. In furtherance and not in limitation thereof,
if any administrative or judicial action or proceeding, including any proceeding
by a private party, is instituted (or threatened in writing to be instituted)
challenging any transaction contemplated by this Agreement as violative of any
law or regulation, or if any statute, rule, regulation, executive order, decree,
injunction or administrative order is enacted, entered, promulgated or enforced
by a Governmental Entity that would make the Merger illegal or would otherwise
prohibit or materially impair or delay the consummation of the transactions
contemplated hereby, the Company shall cooperate with Parent in all respects in
responding thereto, and each shall use its respective reasonable best efforts to
contest, resist and/or attempt to resolve any such action or proceeding and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the transactions
contemplated by this Agreement, and to have such statute, rule, regulation,
executive order, decree, injunction or administrative order repealed, rescinded
or made inapplicable so as to permit consummation of the Merger.
(e) In connection with the obtaining of Consents from Third Parties
or obviating the need to obtain such Consents, if requested in writing by
Parent, the Company shall or shall cause its Subsidiaries to execute any
documents, agreements and instruments and take such other actions to the extent
practicable, in accordance with applicable Legal Requirements and the Company's
Articles of Incorporation and By-Laws and the applicable formation and governing
Contracts of the Company's Subsidiaries (including forming Subsidiaries and
transferring properties or assets of the Company to such Subsidiaries), all in
such order, form and substance as reasonably requested by Parent; PROVIDED,
HOWEVER, that if the Closing is not consummated and this Agreement is terminated
in accordance with its terms, Parent shall, promptly upon request by the
Company, reimburse the Company for all out-of-pocket costs and expenses
(including fees and expenses of counsel, accountants, appraisers and other
advisors) incurred by the Company or its Subsidiaries in connection with any
actions taken by the Company or its Subsidiaries at the direction of Parent in
accordance with this Section 8.2(e). If the Closing is not consummated and this
Agreement is terminated in accordance with its terms, Parent agrees to indemnify
and hold harmless the Company and its Subsidiaries from and against any and all
liabilities arising or resulting from, or suffered or incurred by any of them,
in connection with any actions taken in good faith or at Parent's direction in
connection with this Section 8.2(e).
SECTION 8.3. LISTING OF SHARES. Parent shall use its reasonable best
efforts to cause the shares of Parent Common Stock and the Parent Preferred
Stock to be issued in the Merger and by the transactions contemplated by this
Agreement and the shares of Parent Common Stock to be reserved for issuance upon
exercise of Options (the "SHARE ISSUANCE") to be approved for listing, upon
official notice of issuance, on the NYSE.
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SECTION 8.4. AFFILIATE LETTER. On or prior to the date of the
Company Shareholders Meeting, the Company will deliver to Parent a letter (the
"COMPANY AFFILIATE LETTER") identifying all persons who are "affiliates" of the
Company for purposes of Rule 145 under the Securities Act ("RULE 145"). On or
prior to the Closing Date, the Company will use all reasonable efforts to cause
each person identified as an "affiliate" in the Company Affiliate Letter to
deliver a written agreement, in form and substance reasonably acceptable to
Parent, in connection with restrictions on affiliates under Rule 145.
SECTION 8.5. SECTION 16(B). Assuming that the Company delivers to
Parent the Company Section 16 Information (as hereinafter defined) in a timely
fashion prior to the Effective Time, the Board of Directors of Parent, or a
committee of Non-Employee Directors thereof (as such term is defined for
purposes of Rule 16b-3(d) under the Exchange Act), shall reasonably promptly
thereafter and in any event prior to the Effective Time adopt a resolution
providing in substance that the receipt by the Company Insiders (as hereinafter
defined) of Parent Common Stock in exchange for shares of Company Common Stock
pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the Company Section 16 Information, are intended to be
exempt from liability pursuant to Section 16(b) under the Exchange Act in
accordance with Rule 16b-3 and interpretations of the SEC thereunder. "COMPANY
SECTION 16 INFORMATION" shall mean information accurate in all material respects
regarding Company Insiders, the number of shares of Company Common Stock held by
each such Company Insider and expected to be exchanged for Parent Common Stock
in the Merger and any other information that may be required under applicable
interpretations of the SEC under Rule 16b-3. "COMPANY INSIDERS" shall mean those
officers and directors of the Company who are subject to the reporting
requirements of Section 16(a) of the Exchange Act and who are listed in the
Company Section 16 information.
SECTION 8.6. COMPANY INDEBTEDNESS. With respect to the indentures
set forth on SCHEDULE 8.6 of the Company Disclosure Schedule (collectively, the
"ASSUMED INDENTURES"), Parent shall execute and deliver to the trustees or other
representatives in accordance with the terms of the respective Assumed
Indentures, supplemental indentures or other instruments, in form reasonably
satisfactory to the respective trustees or other representatives, expressly
assuming the obligations of the Company and/or any of its Subsidiaries under
such indentures with respect to the due and punctual payment of the principal of
(and premium, if any) and interest, if any, on, and conversion and redemption
obligations, if any, under, all debt securities issued by the Company and/or any
of its Subsidiaries under the Assumed Indentures and the due and punctual
performance of all the terms, covenants and conditions of the Assumed Indentures
to be kept or performed by the Company and/or any of its Subsidiaries and shall
deliver such supplemental indentures or other instruments to the respective
trustees or other representatives under the Assumed Indentures. The Company and
its Subsidiaries shall provide, and shall cause their respective officers,
employees and Representatives to provide, all cooperation reasonably requested
by Parent in connection with the repayment, defeasance, modification,
refinancing, or assumption, effective upon the Closing of all rights and
obligations of the Company and its Subsidiaries in respect of Indebtedness and
any debt or equity financing arrangements of Parent. Such cooperation shall
include, but not be limited to, the preparation and delivery of any required
certificates, supplemental indentures, notices, supplemental agreements and
other customary documents and deliverables. If the Closing is not consummated,
Parent shall, promptly upon request by the Company, reimburse the Company for
all reasonable out-of-pocket
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costs and expenses (including fees and expenses of counsel) incurred by the
Company or its Subsidiaries in connection with any actions taken by the Company
or its Subsidiaries in accordance with this Section 8.6.
SECTION 8.7. PARENT BOARD OF DIRECTORS. At the Effective Time,
Parent shall take all requisite action to cause one of the current independent
members of the Company Board mutually selected by Parent and the Company to be
appointed as a director to the Board of Directors of Parent.
SECTION 8.8. PUBLIC ANNOUNCEMENTS. The press release announcing the
execution of this Agreement shall be issued only in such form as shall be
mutually agreed upon by Merger Sub and the Company. Thereafter, Merger Sub and
the Company shall consult with each other before issuing any press release or
otherwise making any public statements with respect to the transactions
contemplated by this Agreement, including the Merger and shall not issue any
such press release or make any such public statement before such consultation,
except as may be required by any applicable Legal Requirement.
ARTICLE IX.
CONDITIONS OF MERGER
SECTION 9.1. GENERAL CONDITIONS. Notwithstanding any other
provisions of this Agreement, the obligations of all of the parties hereto to
effect the Merger shall be subject to satisfaction of the following conditions:
(a) THE COMPANY'S SHAREHOLDER APPROVAL. The shareholders of the
Company shall have approved the Merger as provided for in Section 8.1.
(b) PARENT'S SHAREHOLDER APPROVAL. The shareholders of Parent shall
have approved the Share Issuance as provided for in Section 8.1.
(c) RESTRAINTS. No temporary restraining order, prelimignary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued since the date of this Agreement by any Governmental
Entity and shall remain in effect; and no U.S. federal or state Legal
Requirement that makes consummation of the Merger illegal shall be in effect or
shall have been enacted or adopted since the date of this Agreement and shall
remain in effect.
(d) NYSE LISTING. The shares of Parent Common Stock and Parent
Preferred Stock to be issued in the Merger and the shares of Parent Common Stock
to be reserved for issuance upon exercise of Options shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(e) EFFECTIVENESS OF THE REGISTRATION STATEMENT. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated and not concluded or withdrawn.
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SECTION 9.2. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB.
Notwithstanding any other provisions of this Agreement, the obligations of
Parent and Merger Sub to effect the Merger shall be subject to satisfaction of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in (i) Sections 4.2(a) (Capitalization), 4.3
(Authorization and Execution), 4.19 (Brokers), 4.20 (Opinion of Financial
Advisors), 4.21 (Anti-takeover Legal Requirements), 4.22 (Rights Agreement
Amendment), and 4.24 (Voting Requirements) of this Agreement shall be true and
correct in all material respects on and as of the date hereof and on and as of
Closing Date as if made at and as of the Closing Date (except for any
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date) and (ii) in all
other sections of this Agreement shall be true and correct (without regard to
any materiality or Company Material Adverse Effect qualifier contained therein),
on and as of the date hereof and on and as of the Closing Date as if made at and
as of the Closing Date (except for any representations and warranties made as of
a specified date, which shall be true and correct as of the specified date),
except where the failure of such representations and warranties to be true and
correct would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the
Effective Time.
(c) NO MATERIAL ADVERSE EFFECT. After the date of this Agreement,
there shall not have occurred or been discovered any Company Material Adverse
Effect or events, developments or circumstances that would reasonably be
expected to, individually or in the aggregate, have a Company Material Adverse
Effect, except for events, developments or circumstances associated with or
related to Parent waiving the condition in Section 9.2(f).
(d) TAX OPINION. The Company shall have delivered to Parent and
Merger Sub the Company REIT Opinion.
(e) OFFICER'S CERTIFICATE. The Company shall have delivered to
Parent an officer's certificate reasonably satisfactory to Parent certifying
that the conditions set forth in Section 9.2(a), (b) and (c) have been
satisfied.
(f) CONSENTS AND APPROVALS. All Permits and Consents legally
required to be obtained to consummate the Merger shall have been obtained from
all Governmental Entities, whether domestic or foreign, except where the failure
to obtain any such Permit or Consent, or for any such Permit or Consent to be in
full force and effect, would not be reasonably likely to, individually or in the
aggregate, have a Company Material Adverse Effect or Parent Material Adverse
Effect.
SECTION 9.3. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
Notwithstanding any other provisions of this Agreement, the obligations of the
Company to effect the Merger shall be subject to satisfaction of the following
conditions:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Merger Sub contained in (i) Sections 5.3 (Authorization
and Execution) and 5.16 (Voting Requirements) of this Agreement shall be true
and correct in all material respects on and as of the date hereof and on and as
of Closing Date as if made at and as of the Closing Date (except for any
representations and warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date) and (ii) in all
other sections of this Agreement shall be true and correct (without regard to
any materiality or Parent Material Adverse Effect qualifier contained therein),
on and as of the date hereof and on and as of the Closing Date as if made at and
as of the Closing Date (except for any representations and warranties made as of
a specified date, which shall be true and correct as of the specified date),
except where the failure of such representations and warranties to be true and
correct would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(b) AGREEMENTS AND COVENANTS. Each of Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it at
or prior to the Effective Time.
(c) NO MATERIAL ADVERSE EFFECT. After the date of this Agreement,
there shall not have occurred or been discovered any Parent Material Adverse
Effect or events, developments or circumstances that would reasonably be
expected to, individually or in the aggregate, have a Parent Material Adverse
Effect.
(d) TAX OPINION. Parent shall have delivered to the Company the
Parent REIT Opinion.
(e) OFFICERS' CERTIFICATES. Each of Parent and Merger Sub shall have
delivered to the Company an officers' certificate reasonably satisfactory to the
Company certifying that the conditions set forth in Section 9.3(a), (b) and (c)
have been satisfied.
ARTICLE X.
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. TERMINATION. This Agreement may be terminated at
any time before the Effective Time:
(a) By mutual written consent of the Board of Directors of Merger
Sub and the Company Board; or
(b) By either Parent, Merger Sub or the Company, if any
Governmental Entity shall have issued an order, decree or ruling or taken any
other action (which order, decree or ruling the parties hereto shall use their
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement; or
(c) By either Parent, Merger Sub or the Company, if (i) the
shareholders of the Company fail to approve the Merger upon the taking of a vote
at a duly held meeting of the shareholders or at any adjournment thereof or (ii)
the shareholders of Parent fail to approve the
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Share Issuance upon the taking of a vote at a duly held meeting of the
shareholders or at any adjournment thereof; or
(d) By the Company:
(i) if the Company has approved a Superior Proposal in
accordance with Section 6.4(b); PROVIDED, HOWEVER, that this Agreement may
be terminated by the Company pursuant to this Section 10.1(d)(i) only after
the fourth Business Day following the Company's delivery of written notice
to Parent advising Parent and Merger Sub that the Company Board is prepared
to accept a Superior Proposal setting forth the material terms and
conditions of any such Superior Proposal, including the amount of
consideration per share of Company Common Stock the shareholders of the
Company will receive and the definitive agreements pursuant to which such
Superior Proposal would be implemented (the "SUPERIOR PROPOSAL NOTICE")
only if (i) during such four Business Day period, if requested by Parent or
Merger Sub, the Company has caused its financial and legal advisors to
negotiate with Parent in good faith to propose adjustments in the terms and
conditions of this Agreement and (ii) the Company Board has considered such
proposed adjustments in the terms and conditions of this Agreement and has
concluded in good faith, after consultation with its financial and legal
advisors, that the Acquisition Proposal as set forth in the Superior
Proposal Notice remains a Superior Proposal even after giving effect to the
adjustments proposed by Parent and Merger Sub and provided that,
immediately prior to and as a condition of such termination, the Company
shall comply with its obligations under the terms of Section 10.2(b); or
(ii) if there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of Parent or
Merger Sub contained in this Agreement such that the condition set forth in
either Section 9.3(a) or 9.3(b) would not be satisfied and which, if
curable, shall not have been cured prior to the earlier of thirty Business
Days after the giving of written notice by the Company to Parent and the
Outside Date (as defined below); provided, that the Company shall not have
the right to terminate this Agreement pursuant to this clause (ii) if the
Company is then in material breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement such that
the condition set forth in either Section 9.3(a) or 9.3(b) would not be
satisfied; or
(iii) if the Closing shall not have occurred on or before
December 31, 2006 (the "OUTSIDE DATE"); provided that the Company may not
terminate this Agreement pursuant to this Section 10.1(d)(iii) if the
Company is in material breach of this Agreement; or
(e) By Parent or Merger Sub:
(i) the Company Board shall have (w) withdrawn, or modified
or changed in a manner adverse to Parent or Merger Sub its approval or
recommendation of this Agreement or the transactions contemplated hereby,
including the Merger, (x) recommended or approved an Acquisition Proposal,
(y) adopted any resolution to effect any of the foregoing, or (z) failed to
reconfirm its recommendation of this Agreement
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within five Business Days after being requested in writing by Parent to do
so (except as permitted by Section 6.4(b)); or
(ii) if there shall have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company
contained in this Agreement such that the condition set forth in either
Section 9.2(a) or 9.2(b) would not be satisfied and which, if curable,
shall not have been cured prior to the earlier of thirty Business Days
after the giving of written notice by Parent to the Company and the Outside
Date; provided, that Parent or Merger Sub shall not have the right to
terminate this Agreement pursuant to this clause (ii) if Parent or Merger
Sub is then in material breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement such that the condition
set forth in either Section 9.2(a) or 9.2(b) would not be satisfied; or
(iii) if the Closing shall not have occurred on or before the
Outside Date; provided that Parent and Merger Sub may not terminate this
Agreement pursuant to this Section 10.1(e)(iii) if Parent or Merger Sub is
in material breach of this Agreement.
SECTION 10.2. EFFECT OF TERMINATION. (a) In the event of termination
of this Agreement by either the Company or Parent or Merger Sub as provided in
Section 10.1, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Merger Sub or the
Company, except (i) that the terms and conditions set forth in this Article X
shall continue to remain in full force and effect notwithstanding any such
termination, (ii) as otherwise provided in Section 11.1, and (iii) that nothing
contained herein shall relieve any party for willful breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement.
(b) In the event this Agreement is terminated (x) by the Company
pursuant to Section 10.1(d)(i) or (y) by Parent pursuant to Section 10.1(e)(i),
then the Company shall pay, or cause to be paid, to Parent (A) in the case of
clause (x) above, on the date of such termination and immediately prior to and
as a condition to the termination and (B) in the case of clause (y) above,
within two Business Days after such termination, an amount equal to the
Termination Fee (as defined below) by wire transfer of immediately available
funds to an account designated by Parent.
(c) In the event that this Agreement is terminated by any party
pursuant to Section 10.1(c)(i) or by the Company pursuant to Section
10.1(d)(iii) or by Parent pursuant to Section 10.1(e)(ii) and, in each case, an
Acquisition Proposal shall at the time of such termination have been publicly
proposed or publicly announced and within 12 months of the termination of this
Agreement, the Company or any of its Subsidiaries consummates a transaction
included in the definition of Acquisition Proposal (or enters into an agreement
with respect to such a transaction which subsequently closes), then the Company
shall pay Parent an amount equal to the Termination Fee, by wire transfer of
immediately available funds to an account designated by Parent, within two
Business Days after the consummation of such Acquisition Proposal. For purposes
of this Section 10.2(c), the definition of "Acquisition Proposal" contained in
this Agreement shall be applied by substituting "25%" for "10%" in such
definition.
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(d) As used in this Agreement, the "TERMINATION FEE" shall be an
amount equal to the lesser of (x) $125 million (the "BASE AMOUNT") less the
amount of any Parent Termination Costs which have previously been paid pursuant
to Section 10.2(e) and (y) the sum of (A) the maximum amount that can be paid to
Parent without causing Parent 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 Parent, and (B) in the event Parent receives and, prior to the
date the Termination Fee is due to be paid to Parent as described above,
provides a copy to the Company of an opinion or a letter from outside counsel
(the "TERMINATION FEE TAX OPINION") indicating that Parent has received an
opinion of counsel or a ruling from the IRS holding that Parent's receipt of the
Base Amount would either constitute Qualifying Income or would be excluded from
gross income of Parent within the meaning of Sections 856(c)(2) and (3) of the
Code (the "REIT REQUIREMENTS"), the Base Amount less the amount payable under
clause (A) above. In the event that Parent is not able to receive the full Base
Amount on the date the Termination Fee is due as described above, the Company
shall place the amount by which the Base Amount exceeds the amount paid under
clause (y)(A) of the preceding sentence above (the "UNPAID BASE AMOUNT") with an
escrow agent selected by Parent which shall not release any portion thereof to
Parent unless and until Parent provides the escrow agent (with a copy to the
Company) with either one of the following: (A) a letter from Parent's
independent accountants indicating the maximum portion of the Unpaid Base Amount
that can be paid at that time to Parent without causing Parent to fail to meet
the REIT Requirements or (B) a Termination Fee Tax Opinion, in either of which
events the escrow agent shall pay to Parent from the escrow the lesser of the
Unpaid Base Amount and, if applicable, the maximum amount stated in the
accountants' letter referred to in clause (A) of this sentence. The escrow
agent's obligation to pay any portion of the Unpaid Base Amount shall terminate
three years from the Effective Time. Amounts remaining in escrow after such
obligation terminates shall be released to the Company.
(e) If this Agreement is terminated pursuant to Section 10.1(c)(i)
and an Acquisition Proposal shall at the time of such termination have been
publicly proposed or publicly announced, the Company shall pay to Parent all of
the costs and expenses incurred by Parent or its Affiliates in connection with
this Agreement and the transactions contemplated by this Agreement up to a
maximum amount of $10,000,000 (collectively, "PARENT TERMINATION COSTS"), such
payment to be made by wire transfer of immediately available funds to an account
designated by Parent not later than two Business Days after being notified by
Parent of the amount of such costs and expenses. Parent may reduce the amount of
such Parent Termination Costs to be paid by the Company as not to adversely
affect Parent's ability to meet the requirements of either or both of Sections
856(c)(2) or (3) of the Code and the amount of such reduction shall be placed in
escrow by the Company and shall not be released unless Parent provides the
Company with a Termination Fee Tax Opinion, and at such time any Termination Fee
Tax Opinion is delivered, shall promptly release the amount referred to in such
Termination Fee Tax Opinion to Parent. Such escrow arrangement shall expire, and
remaining funds returned to the Company, on the date that is three years after
the date of this Agreement. Nothing herein shall be construed to limit the
number of distributions pursuant to this escrow prior to the date of the
expiration of such escrow.
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(f) The Company and Parent agree that the agreements contained in
this Section 10.2 are an integral part of the transactions contemplated by this
Agreement, and that the payments to be made thereunder shall be compensation for
the loss suffered by the applicable party as a result of the failure of the
Merger to be consummated and constitute liquidated damages and not a penalty.
ARTICLE XI.
GENERAL PROVISIONS
SECTION 11.1. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 10.1, as the case may be, except that the agreements set
forth in Article II, Article III and Section 7.5, Section 7.6 and (to the extent
applicable to any of the foregoing) Article XI shall survive the Effective Time
indefinitely and those set forth in Section 6.1(b), Section 7.2(b), Section 10.2
and (to the extent applicable to any of the foregoing) Article XI shall survive
termination indefinitely.
SECTION 11.2. NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made (i) as of the date delivered or sent by facsimile if delivered
personally or by facsimile, and (ii) on the third Business Day after deposit in
the U.S. mail, if mailed by registered or certified mail (postage prepaid,
return receipt requested), in each case to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be effective upon
receipt):
(a) if to Parent or Merger Sub:
Public Storage, Inc.
701 Western Avenue
Glendale, California 91201
Attention: John S. Baumann, Esq.
Facsimile: 818-548-9288
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Adam O. Emmerich, Esq.
David E. Shapiro, Esq.
Facsimile: 212-403-2000
(b) if to the Company:
Shurgard Storage Centers, Inc.
1155 Valley Street, Suite 400
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Seattle, Washington 98109
Attention: Jane A. Orenstein, Esq.
Facsimile: (206) 652-3710
With a copy to:
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
Attention: Richard L. Posen, Esq.
Facsimile: (212) 728-9255
SECTION 11.3. EXPENSES. Whether or not the transactions contemplated
by this Agreement are consummated, and except as otherwise expressly set forth
herein, all legal and other costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
SECTION 11.4. HEADINGS. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.5. SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 11.6. EFFECTIVENESS; ENTIRE AGREEMENT. This Agreement shall
not be effective until, and shall become effective and binding upon the parties
hereto upon, the execution and delivery hereof by the Company, Parent and Merger
Sub. This Agreement shall constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and shall supersede all prior
agreements and understandings, both written and oral, among such parties or any
of them with respect to the subject matter hereof (other than the
Confidentiality Agreement).
SECTION 11.7. PARENT GUARANTEE. Parent agrees to take all action
necessary to cause Merger Sub or the Surviving Company, as applicable, to
perform all of its respective agreements, covenants and obligations under this
Agreement. Parent unconditionally guarantees to the Company the full and
complete performance by Merger Sub or the Surviving Company, as
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applicable, of its respective obligations under this Agreement and shall be
liable for any breach of any agreement, covenant or obligation of Merger Sub or
the Surviving Company, as applicable, under this Agreement. Merger Sub shall at
all times prior to the Effective Time be a direct or indirect wholly owned
Subsidiary of Parent.
SECTION 11.8. 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 and any
assignment in violation of this Agreement shall be void; provided that Parent
may substitute one or more of its wholly owned Subsidiaries for Merger Sub
without consent of the other parties hereto.
SECTION 11.9. NO THIRD PARTY BENEFICIARIES. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and their
respective successors and assigns except for (i) the rights of the Company's
shareholders to receive the Merger Consideration and the Parent Preferred Stock,
as applicable, at the Effective Time (of which the Company's shareholders are
the intended beneficiaries), (ii) the rights of the holders of Options to secure
the consideration contemplated by Section 3.6 (of which such holders are the
intended beneficiaries), and (iii) the rights to continued indemnification and
insurance pursuant to Section 7.5 (of which the Persons entitled to
indemnification are the intended beneficiaries). Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other Person any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement. The Company shall be entitled to pursue damages on behalf of its
shareholders arising from the willful and material breach of this Agreement by
Parent or Merger Sub.
SECTION 11.10. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of conflict
or choice of law, except that the Merger shall be effected in accordance with
the WBCA and the LLC Act.
SECTION 11.11. SPECIFIC PERFORMANCE. 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 to prevent breaches of this Agreement and to
enforce specifically the terms and provisions of this Agreement exclusively in
any state or federal court in the State of New York, this being in addition to
any other remedy to which such party is entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State and
City of New York or any New York state or New York City court in the event of
any action, suit or proceeding to enforce this Agreement, (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 (c) agrees that it will not bring any
action relating to this Agreement or any Transaction in any court other than any
court of the United States located in the State and City of New York or any New
York state or New York City court and (d) waives any right to trial by jury with
respect to any action related to or arising out of this Agreement or any
Transaction.
SECTION 11.12. AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by Merger Sub and by action taken by or on behalf
of the Company Board at any time before the Effective Time; PROVIDED, HOWEVER,
that, after approval of the Merger by
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the shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each share of Company
Common Stock will be converted upon consummation of the Merger, without further
approval of the shareholders of the Company. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 11.13. WAIVER. At any time before the Effective Time, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only as against such party
and only if set forth in an instrument in writing signed by such party.
SECTION 11.14. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which shall constitute one and the same agreement.
SECTION 11.15. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section, Schedule or Exhibit such reference shall be to
an Article or Section of, or Schedule or Exhibit to, this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement. The term "or" is
not exclusive. The word "extent" in the phrase "to the extent" shall mean the
degree to which a subject or other thing extends, and such phrase shall not mean
simply "if". The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. References to a Person are
also to its permitted successors and assigns.
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IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
SHURGARD STORAGE CENTERS, INC.
By: /s/ David K. Grant
Name: David K. Grant
Title: President and Chief Executive Officer
PUBLIC STORAGE, INC.
By: /s/ Ronald L. Havner, Jr.
Name: Ronald L. Havner, Jr.
Title: President and Chief Executive Officer
ASKL SUB LLC
By: /s/ Ronald L. Havner, Jr.
Name: Ronald L. Havner, Jr.
Title: President and Chief Executive Officer