-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BVGWWJ6uMcQ5v5ZWSuGvxn1tgViF23wGg4h8dUHCSDxVxdfZIj8cPSHnZ4/CvX/7 EZvQcE+aA7otVYGDkGRwTA== 0000950131-97-002062.txt : 19970327 0000950131-97-002062.hdr.sgml : 19970327 ACCESSION NUMBER: 0000950131-97-002062 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970324 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970326 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SECURITY CAPITAL PACIFIC TRUST CENTRAL INDEX KEY: 0000080737 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 746056896 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10272 FILM NUMBER: 97563348 BUSINESS ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 BUSINESS PHONE: 9158773900 MAIL ADDRESS: STREET 1: 7777 MARKET CENTER AVE CITY: EL PASO STATE: TX ZIP: 79912 FORMER COMPANY: FORMER CONFORMED NAME: PROPERTY TRUST OF AMERICA DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: EL PASO REAL ESTATE INVESTMENT TRUST DATE OF NAME CHANGE: 19700108 8-K 1 FORM 8-K =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) March 24, 1997 -------------- SECURITY CAPITAL PACIFIC TRUST ------------------------------ (Exact Name of Registrant as Specified in its Charter) Maryland -------- (State or Other Jurisdiction of Incorporation) 1-10272 74-6056896 - -------------------------- ---------- (Commission File Number) (I.R.S. Employer Identification No.) 7777 Market Center Avenue, El Paso, Texas 79912 ----------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) (915) 877-3900 -------------- (Registrant's Telephone Number, Including Area Code) Not Applicable -------------- (Former Name or Former Address, if Changed Since Last Report) =============================================================================== Item 5. Other Events. On March 24, 1997, Security Capital Pacific Trust, a Maryland real estate investment trust ("PTR"), announced that it had entered into a definitive agreement relating to a transaction (the "Transaction") pursuant to which PTR will acquire the operations and business of its REIT manager and property manager currently being conducted through wholly owned subsidiaries of Security Capital Group Incorporated ("Security Capital"). A copy of the Merger and Issuance Agreement, dated as of March 24, 1997, between PTR and Security Capital (the "Merger Agreement") is included as an exhibit to this report and is incorporated herein by reference. Also included as exhibits to this report and incorporated herein by reference are the following forms of agreements relating to the Transaction and which will be entered into at the closing of the Transaction: (i) the Third Amended and Restated Investor Agreement between PTR and Security Capital, (ii) the Administrative Services Agreement between PTR and SC Group Incorporated and (iii) the Protection of Business Agreement between PTR and Security Capital. A copy of the press release announcing the Merger Agreement and describing the Transaction is included as an exhibit to this report and is incorporated herein by reference. Item 7. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Document Description ----------- -------------------- 2.1 Merger and Issuance Agreement, dated as of March 24, 1997, between Security Capital Pacific Trust and Security Capital Group Incorporated 10.1 Form of the Third Amended and Restated Investor Agreement between Security Capital Pacific Trust and Security Capital Group Incorporated 10.2 Form of the Administrative Services Agreement between Security Capital Pacific Trust and SC Group Incorporated 10.3 Form of the Protection of Business Agreement between Security Capital Pacific Trust and Security Capital Group Incorporated 99.1 Press Release dated March 24, 1997 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SECURITY CAPITAL PACIFIC TRUST Dated: March 26, 1997 By: /s/ JEFFREY A. KLOPF --------------------- Jeffrey A. Klopf Senior Vice President and Secretary EX-2.1 2 MERGER AND ISSUANCE AGREEMENT EXHIBIT 2.1 =============================================================================== MERGER AND ISSUANCE AGREEMENT DATED AS OF MARCH 24, 1997 BY AND BETWEEN SECURITY CAPITAL PACIFIC TRUST AND SECURITY CAPITAL GROUP INCORPORATED =============================================================================== TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS..................................................... 1 SECTION 1.1 DEFINITIONS............................................ 1 ARTICLE II THE MERGERS, WARRANT ISSUANCE AND RIGHTS OFFERING.............. 6 SECTION 2.1 THE MERGERS............................................ 6 SECTION 2.2 WARRANT ISSUANCE....................................... 6 SECTION 2.3 THE RIGHTS OFFERING.................................... 7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PTR......................... 8 SECTION 3.1 ORGANIZATION AND QUALIFICATION......................... 8 SECTION 3.2 CAPITALIZATION......................................... 8 SECTION 3.3 ISSUANCE OF SECURITIES................................. 9 SECTION 3.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS................ 9 SECTION 3.5 REGISTRATION STATEMENTS AND PROXY STATEMENT AND PROSPECTUS............................. 10 SECTION 3.6 DISCLOSURE, FINANCIAL STATEMENTS AND ABSENCE OF CERTAIN CHANGES........................... 11 SECTION 3.7 ABSENCE OF UNDISCLOSED LIABILITIES..................... 11 SECTION 3.8 BROKERS AND FINDERS.................................... 11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SCG.......................... 12 SECTION 4.1 ORGANIZATION AND QUALIFICATION......................... 12 SECTION 4.2 CAPITALIZATION......................................... 12 SECTION 4.3 ISSUANCE OF SECURITIES................................. 13 SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS................ 13 SECTION 4.5 FINANCIAL STATEMENTS................................... 14 SECTION 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS................... 15 SECTION 4.7 REGISTRATION STATEMENTS AND PROXY STATEMENT AND PROSPECTUSES........................... 15 SECTION 4.8 TAXES.................................................. 15 SECTION 4.9 ABSENCE OF UNDISCLOSED LIABILITIES..................... 17 SECTION 4.10 LITIGATION............................................. 17 SECTION 4.11 NO VIOLATION OF LAW.................................... 17 SECTION 4.12 INSURANCE.............................................. 18 SECTION 4.13 EMPLOYEE BENEFIT PLANS................................. 18 SECTION 4.14 INTELLECTUAL PROPERTY.................................. 18 SECTION 4.15 LABOR.................................................. 19 SECTION 4.16 BROKERS AND FINDERS.................................... 19 SECTION 4.17 INVESTMENT COMPANY ACT................................. 19 -i-
SECTION 4.18 ADEQUACY OF SCG CONSIDERATION.......................... 19 SECTION 4.19 INVESTMENT IN SECURITIES............................... 19 SECTION 4.20 TITLE TO ASSETS; NO REAL PROPERTY...................... 20 SECTION 4.21 PROJECTIONS............................................ 20 ARTICLE V CONDUCT OF BUSINESSES PENDING THE MERGER CLOSING................ 21 SECTION 5.1 CONDUCT OF BUSINESSES.................................. 21 SECTION 5.2 CONDUCT OF BUSINESS OF PTR............................. 23 ARTICLE VI ADDITIONAL AGREEMENTS.......................................... 23 SECTION 6.1 ACCESS TO INFORMATION.................................. 23 SECTION 6.2 PROXY STATEMENT AND REGISTRATION STATEMENT............................................ 24 SECTION 6.3 SHAREHOLDERS' APPROVAL................................. 24 SECTION 6.4 AFFILIATE AGREEMENTS................................... 25 SECTION 6.5 EXCHANGE............................................... 25 SECTION 6.6 EXPENSES............................................... 25 SECTION 6.7 AGREEMENT TO COOPERATE................................. 25 SECTION 6.8 PUBLIC STATEMENTS...................................... 25 SECTION 6.9 CORRECTIONS TO THE SCG WARRANT REGISTRATION STATEMENT AND SCG WARRANT PROSPECTUS................................... 26 SECTION 6.10 VOTING OF SHARES....................................... 26 SECTION 6.11 CONFIDENTIALITY........................................ 26 SECTION 6.12 PERSONNEL.............................................. 28 SECTION 6.13 PRORATIONS............................................. 28 SECTION 6.14 TAX MATTERS............................................ 29 SECTION 6.15 STANDSTILL............................................. 30 ARTICLE VII CONDITIONS.................................................... 31 SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS................. 31 SECTION 7.2 CONDITIONS TO OBLIGATIONS OF PTR....................... 32 SECTION 7.3 CONDITIONS TO OBLIGATIONS OF SCG....................... 33 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................ 34 SECTION 8.1 TERMINATION............................................ 34 SECTION 8.2 EFFECT OF TERMINATION.................................. 35 SECTION 8.3 AMENDMENT.............................................. 35 SECTION 8.4 WAIVER................................................. 35 ARTICLE IX SURVIVAL AND REMEDY; INDEMNIFICATION........................... 35 SECTION 9.1 INDEMNIFICATION........................................ 35 SECTION 9.2 LIMITATION OF INDEMNIFICATION.......................... 36
-ii-
SECTION 9.3 NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE................ 36 SECTION 9.4 SETTLEMENT OR COMPROMISE............................... 37 SECTION 9.5 FAILURE OF INDEMNIFYING PARTY TO ACT................... 37 SECTION 9.6 SURVIVAL............................................... 37 SECTION 9.7 WAIVER OF COUNTERCLAIMS FOR INDEMNIFICATION....................................... 37 ARTICLE X GENERAL PROVISIONS.............................................. 37 SECTION 10.1 NOTICES................................................ 37 SECTION 10.2 INTERPRETATION......................................... 38 SECTION 10.3 MISCELLANEOUS.......................................... 38 SECTION 10.4 COUNTERPARTS........................................... 39 SECTION 10.5 PARTIES IN INTEREST.................................... 39 SECTION 10.6 LIMITATION OF LIABILITY................................ 39 SECTION 10.7 NO PRESUMPTION AGAINST DRAFTER......................... 39
EXHIBITS EXHIBIT I AGREEMENT AND PLAN OF MERGER EXHIBIT II WARRANT AGREEMENT EXHIBIT III WARRANT ISSUANCE AGREEMENT EXHIBIT IV AMENDED AND RESTATED PTR INVESTOR AGREEMENT EXHIBIT V ADMINISTRATIVE SERVICES AGREEMENT EXHIBIT VI LICENSE AGREEMENT EXHIBIT VII PROTECTION OF BUSINESS AGREEMENT EXHIBIT VIII OPINION OF MAYER, BROWN & PLATT SCHEDULES SCHEDULE 3.2(a) EXCEPTIONS TO ASSESSABILITY SCHEDULE 3.2(b) SUBSCRIPTIONS, OPTIONS, ETC. SCHEDULE 3.4(b) PTR REQUIRED CONSENTS SCHEDULE 4.4(b) SCG REQUIRED CONSENTS SCHEDULE 4.10 SCG SUBSIDIARY LITIGATION SCHEDULE 4.14 SCG SUBSIDIARIES' INTELLECTUAL PROPERTY SCHEDULE 4.20 ASSETS AND PERSONNEL SCHEDULE 7.1 AGREEMENTS TO BE TERMINATED -iii- MERGER AND ISSUANCE AGREEMENT THIS MERGER AND ISSUANCE AGREEMENT (this "Agreement"), is entered into as of March 24, 1997 by and between Security Capital Pacific Trust, a Maryland real estate investment trust ("PTR"), and Security Capital Group Incorporated, a Maryland corporation ("SCG"). WHEREAS, the Board of Directors of SCG and the Board of Trustees of PTR have each approved this Agreement and the transactions contemplated hereby upon the terms and subject to the conditions set forth herein; and WHEREAS, it is intended that pursuant to this Agreement, among other things, SCG will cause its subsidiaries engaged in the conduct of the businesses of managing the portfolio of and the properties owned by PTR to be merged with and into a subsidiary of PTR in exchange for certain securities of PTR. NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Affiliate Agreement" shall have the meaning set forth in Section 6.4. "Affiliated Group" shall have the meaning set forth in Section 4.8. "Agreement and Plan of Merger" shall have the meaning set forth in Section 2.1. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Commission" shall mean the Securities and Exchange Commission. "Confidential Material" shall have the meaning set forth in Section 6.11(a). "Current Market Price" of the PTR Common Shares and the SCG Class B Common Shares for any day shall mean the last reported sales price on such day, or, if no sale takes place on such day, the average of the reported closing bid and asked prices on such day, in either case as reported on the New York Stock Exchange or, if such security is not listed or admitted for trading on the New York Stock Exchange, on the principal national securities exchange on which such security is listed or admitted for trading or, if not listed or admitted for trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System or, if such security is not quoted on such National Market System, the average of the closing bid and asked prices on such day in the over-the-counter market as reported by the National Association of Securities Dealers, Inc. Automated Quotations System or, if bid and asked prices for such security on such day shall not have been reported through the National Association of Securities Dealers, Inc. Automated Quotations System, in the case of the PTR Common Shares, the average of the bid and asked prices on such day as furnished by any New York Stock Exchange member firm regularly making a market in PTR Common Shares selected for such purpose by the Chief Executive Officer of PTR or the PTR Board, or, in the case of the SCG Class B Common Shares, the fair market value of the SCG Class B Common Shares as determined in good faith by the SCG Board. "Employee Benefit Plans" shall have the meaning set forth in Section 4.13. "Employees" shall have the meaning set forth in Section 4.13. "Environmental Laws" means the Resource Conservation and Recovery Act and the Comprehensive Environmental Response Compensation and Liability Act and other federal laws governing the environment as in effect on the date of this Agreement together with their implementing regulations as of the date of this Agreement, and all state, regional, county, municipal and other local laws, regulations and ordinances as in effect on the date hereof that are equivalent or similar to the federal laws recited above or that purport to regulate Hazardous Materials. "Exchange" shall mean the New York Stock Exchange, another national securities exchange or the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Fair Market Value" shall mean the average of the daily Current Market Prices of a PTR Common Share during the five (5) consecutive Trading Days commencing six Trading Days prior to the PTR Shareholders' Approval Record Date. "Hazardous Materials" shall mean (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, polychlorinated biphenyls and, only to the extent it exists at levels which are considered hazardous to human health, radon gas and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "toxic substances," "toxic pollutants," "contaminants" or "pollutants" or words of similar import, under any applicable Environmental Laws. 2 "Indemnified Parties" shall have the meaning set forth in Section 9.1. "Indemnifying Parties" shall have the meaning set forth in Section 9.1. "Intellectual Property" shall mean all United States and foreign patents, patent applications, patent licenses, trade names, trademarks, trade name and trademark registrations (and applications therefor), copyrights and copyright registrations (and applications therefor), trade secrets, inventions, processes, designs, know-how and formulae. "Losses" shall have the meaning set forth in Section 9.1. "Merger Closing" shall have the meaning set forth in Section 2.1. "Post-Closing Accrual Statement" shall have the meaning set forth in Section 6.13. "Property Management Agreement" shall have the meaning set forth in Section 5.1(a). "Property Manager" shall mean SCG Realty Services Incorporated, a Texas corporation. "Prorated Items" shall have the meaning set forth in Section 6.13. "Providing Party" shall have the meaning set forth in Section 6.11(a). "Proxy Statement" shall mean the definitive PTR proxy statement, including the SCG Warrant Prospectus, to be filed with the Commission (i) as a proxy statement by PTR and (ii) as a part of the SCG Warrant Registration Statement by SCG. "PTR 10-K" shall have the meaning set forth in Section 3.6. "PTR Board" shall mean the Board of Trustees of PTR. "PTR Common Shares" shall mean the common shares of beneficial interest, $1.00 par value per share, of PTR. "PTR Financial Statements" shall have the meaning set forth in Section 3.6. "PTR Prospectus" shall mean the prospectus, as amended and supplemented, relating to the offering of PTR Common Shares pursuant to Section 2.3, which will form a part of the PTR Registration Statement. "PTR Registration Statement" shall mean the registration statement on Form S-3 of PTR, of which the PTR Prospectus will form a part, which has been or will be filed with the Commission in order to register the offering of PTR Common Shares pursuant to Section 2.3. 3 "PTR Required Statutory Approvals" shall have the meaning set forth in Section 3.4(c). "PTR Series A Preferred Shares" shall mean the Series A Cumulative Convertible Redeemable Preferred Shares of Beneficial Interest, $1.00 par value per share, of PTR. "PTR Series B Preferred Shares" shall mean the Series B Cumulative Redeemable Preferred Shares of Beneficial Interest, $1.00 par value per share, of PTR. "PTR Shareholders' Approval Record Date" shall mean the record date for determination of the holders of PTR Common Shares entitled to vote with respect to obtaining the PTR Shareholders' Approval. "PTR Shareholders' Approval" shall have the meaning set forth in Section 6.3. "PTR Special Committee" shall have the meaning set forth in Section 7.2(a). "Receiving Party" shall have the meaning set forth in Section 6.11(a). "REIT Management Agreement" shall have the meaning set forth in Section 5.1(a). "REIT Manager" shall mean Security Capital Pacific Incorporated, a Delaware corporation. "Related Agreements" shall mean each of the agreements, instruments and documents contemplated to be entered into in connection with this Agreement, including, without limitation, the Agreement and Plan of Merger, the Warrant Issuance Agreement, the Warrant Agreement, the Amended and Restated PTR Investor Agreement, the Administrative Services Agreement, the License Agreement and the Affiliate Agreements. "Representatives" shall have the meaning set forth in Section 6.11(a). "Rights Offering Amount" shall have the meaning set forth in Section 2.3. "Rights Offering Closing Date" shall mean the third business day following the Rights Offering Expiration Date. "Rights Offering Expiration Date" shall have the meaning set forth in Section 2.3. "SCG Board" shall mean the Board of Directors of SCG. "SCG Class B Common Shares" shall mean the shares of Class B common stock, $.01 par value per share, of SCG. "SCG Financial Statements" shall have the meaning set forth in Section 4.5. "SCG Proxy Statement" shall mean the definitive proxy statement mailed to shareholders of SCG with respect to the meeting of shareholders of SCG to be held in connection with the transactions contemplated by this Agreement. "SCG Required Statutory Approvals" shall have the meaning set forth in Section 4.4(c). "SCG Shareholders' Approval" shall have the meaning set forth in Section 6.3. "SCG Subsidiaries" shall mean the REIT Manager and the Property Manager. "SCG Warrant Prospectus" shall mean the prospectus relating to the Warrant Issuance pursuant to Section 2.2 which will form a part of the SCG Warrant Registration Statement and the Proxy Statement. "SCG Warrant Registration Statement" shall mean the registration statement on Form S-4 of SCG, of which the Proxy Statement and the SCG Warrant Prospectus will form a part, to be filed with the Commission in order to register the Warrant Issuance pursuant to Section 2.2. "SCG Warrants" shall have the meaning set forth in Section 2.2. "Securities Act" shall mean the Securities Act of 1933, as amended. "Subsidiary Financial Statements" shall have the meaning set forth in Section 4.5. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, gross receipts, excise, property, sales, withholding, social security, occupation, use, service, service use, license, payroll, franchise, transfer and recording taxes, fees and charges, imposed by the United States, or any state, local or foreign government or subdivision or agency thereof whether computed on a separate, consolidated, unitary, combined or any other basis; and such term shall include any interest, fines, penalties or additional amounts attributable or imposed on or with respect to any such taxes, charges, fees, levies or other assessments. "Tax Returns" shall mean any return, report or other document or information required to be supplied to a taxing authority in connection with Taxes. "Termination Date" shall have the meaning set forth in Section 8.1(b). "Trading Day" shall mean any day on which the PTR Common Shares are traded on the New York Stock Exchange, or if such securities are not listed or admitted for trading on the New York Stock Exchange, on the principal national securities exchange on which such 5 securities are listed or admitted, or if not listed or admitted for trading on any national securities exchange, on the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System, or if such securities are not quoted on such National Market System, in the applicable securities market in which the securities are traded. "Warrant Agreement" shall mean the Warrant Agreement between SCG and The First National Bank of Boston, as warrant agent, substantially in the form of Exhibit II hereto. "Warrant Issuance" shall have the meaning set forth in Section 2.2. "Warrant Issuance Agreement" shall mean the Warrant Issuance Agency Agreement substantially in the form of Exhibit III hereto. "Warrant Issuance Date" shall mean the date established by the Board of Directors of SCG as the date on which the SCG Warrants shall be delivered to the issuance agent pursuant to the Warrant Issuance Agreement, which date shall be within 30 days following the Warrant Issuance Record Date. "Warrant Issuance Record Date" shall have the meaning set forth in Section 2.2. ARTICLE II THE MERGERS, WARRANT ISSUANCE AND RIGHTS OFFERING SECTION 2.1 THE MERGERS. The events set forth in this Section 2.1 shall be effected, upon the terms and subject to the conditions of this Agreement, as soon as practicable after this Agreement and the transactions contemplated hereby are approved by the shareholders of each of PTR and SCG (the "Merger Closing"). It is the intention of the parties that each of the events set forth in this Section 2.1 shall occur simultaneously. PTR and SCG shall each take all actions necessary to cause the SCG Subsidiaries to be merged with and into a subsidiary of PTR, which subsidiary shall be a "qualified REIT subsidiary" of PTR within the meaning of Section 856(i)(2) of the Code, on the terms and conditions set forth in the agreement and plan of merger substantially in the form of Exhibit I hereto (the "Agreement and Plan of Merger"). PTR shall issue that number of PTR Common Shares in connection with the mergers described in this Section 2.1 equal to the amount determined by dividing $75,838,457 by the Fair Market Value of a PTR Common Share; provided, however, that in the event that the Fair Market Value of a PTR Common Share is less than $21.63525, then the number of PTR Common Shares issuable in connection with the mergers described in this Section 2.1 shall be 3,505,319; and provided, further, that in the event that the Fair Market Value of a PTR Common Share is more than $27.11475, then the number of PTR Common Shares issuable in connection with the mergers described in this Section 2.1 shall be 2,796,944. SECTION 2.2 WARRANT ISSUANCE. SCG shall issue (the "Warrant Issuance") warrants to purchase SCG Class B Common Shares (the "SCG Warrants") to holders of PTR 6 Common Shares and PTR Series A Preferred Shares (in each case, other than those owned by SCG) as of the Warrant Issuance Record Date on the terms and in the manner described below. The SCG Warrants shall each (i) be exercisable for one SCG Class B Common Share, (ii) have an exercise price per SCG Class B Common Share equal to the Current Market Price of an SCG Class B Common Share on the Warrant Issuance Date, (iii) shall expire 12 months from the date of issuance and (iv) shall have such other terms and conditions as set forth in the Warrant Agreement. The record date for determining the holders entitled to participate in the Warrant Issuance (the "Warrant Issuance Record Date") shall be the close of business on the date designated by SCG, which date shall be within the 28-day period following the Rights Offering Closing Date and which date shall be consistent with any restrictions in the ruling or opinion described in Section 7.1(d). SCG shall issue an aggregate number of SCG Warrants determined by dividing $102,044,037 by the Current Market Price of an SCG Class B Common Share on the Warrant Issuance Date. The number of SCG Warrants to be issued to each such holder shall be determined by multiplying (a) the aggregate number of SCG Warrants to be issued by (b) the number obtained by dividing (i) the aggregate number of PTR Common Shares held of record by the holder and issuable upon conversion of all PTR Series A Preferred Shares held of record by the holder, in each case as of the close of business on the Warrant Issuance Record Date, by (ii) the total number of PTR Common Shares outstanding (other than those owned by SCG) and issuable upon conversion of all PTR Series A Preferred Shares outstanding (other than those owned by SCG), in each case as of the close of business on the Warrant Issuance Record Date. No certificates or scrip representing fractional SCG Warrants shall be issued in connection with the Warrant Issuance. The Warrant Issuance Agreement shall contain appropriate provision to aggregate and sell all fractional SCG Warrants and remit the net proceeds to the PTR shareholders who would otherwise be entitled to such fractions. The Warrant Issuance shall be made pursuant to and in accordance with the procedures set forth in the Warrant Issuance Agreement. The Warrant Issuance shall not occur unless and until all of the conditions set forth in this Agreement have been satisfied or waived and the mergers described in Section 2.1 have been consummated. SECTION 2.3 THE RIGHTS OFFERING. PTR shall distribute as a dividend to each holder of record of PTR Common Shares, as of the close of business on the PTR Shareholders' Approval Record Date, rights to purchase PTR Common Shares entitling such holder to subscribe for and purchase PTR Common Shares during the period commencing on the date the PTR Prospectus is mailed to such holders and expiring on the close of business on the date of the Merger Closing (the "Rights Offering Expiration Date"). The issuance of such rights and the issuance of PTR Common Shares upon exercise of such rights shall be registered under the PTR Registration Statement and PTR shall use its best efforts to cause the rights to be tradeable on the Exchange on which the PTR Common Shares are listed. Each holder of PTR Common Shares shall receive one (1) right for every one (1) PTR Common Share held of record by such holder as of the PTR Shareholders' Approval Record Date. The exercise price per PTR Common Share for such rights shall be equal to the Fair Market Value of a PTR Common Share; provided, that in the event that the Fair Market Value is more than $27.11475, then the exercise price per PTR Common Share shall be $27.11475. PTR shall make available for 7 issuance in the rights offering, up to a maximum number of PTR Common Shares equal to the difference between (X) the amount determined by dividing (A) the number of PTR Common Shares issuable to SCG pursuant to Section 2.1 by (B) the percentage of all outstanding PTR Common Shares owned by SCG on the PTR Shareholders' Approval Record Date (the amount determined pursuant to this clause (X) being the "Rights Offering Amount") and (Y) the number of PTR Common Shares issuable to SCG pursuant to Section 2.1. Each holder shall be entitled to acquire one (1) PTR Common Share by paying the Fair Market Value and surrendering that number of rights (rounded down to the nearest one-one hundredth (1/100th)) equal to the amount determined by dividing the aggregate number of PTR Common Shares outstanding on the PTR Shareholders' Approval Record Date by the Rights Offering Amount. SCG agrees that it shall not exercise or sell or otherwise transfer any rights issued to it pursuant to this Section 2.3 and SCG shall not purchase or otherwise acquire any rights. PTR shall not accept subscriptions pursuant to such rights unless and until all of the conditions set forth in this Agreement have been satisfied or waived and the mergers described in Section 2.1 have been consummated. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PTR PTR represents and warrants to SCG as follows: SECTION 3.1 ORGANIZATION AND QUALIFICATION. PTR is duly organized, validly existing and in good standing under the laws of the State of Maryland and has the requisite power, trust or otherwise, and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and as it is proposed by it to be conducted, including, without limitation, the conduct of the businesses currently conducted by the SCG Subsidiaries. PTR is qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of PTR. True, accurate and complete copies of each of the declaration of trust and bylaws of PTR as in effect on the date hereof, including all amendments thereto and proposed amendments thereof, have heretofore been delivered to SCG. SECTION 3.2 CAPITALIZATION. (a) The authorized shares of PTR consists of 150,000,000 shares of beneficial interest, of which 76,042,168 PTR Common Shares, 6,105,119 PTR Series A Preferred Shares, and 4,200,000 PTR Series B Preferred Shares are issued and outstanding as of the date hereof. All of the issued and outstanding PTR Common Shares, PTR Series A Preferred Shares and PTR Series B Preferred Shares are validly issued, fully paid and, except as set forth in Schedule 3.2(a), nonassessable and free of preemptive rights. 8 (b) Except as contemplated by this Agreement and the Related Agreements or as set forth in Schedule 3.2(b), as of the date hereof, there are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement that are presently exercisable obligating PTR to issue, deliver or sell, or cause to be issued, delivered or sold, additional PTR Common Shares or obligating PTR to grant, extend or enter into any such agreement or commitment; provided, however, that the foregoing shall not apply to the adoption by PTR of any incentive plan providing for grants of options or restricted shares to directors and employees nor to any grant of options or restricted shares thereunder. There are no voting trusts, proxies or other agreements or understandings to which PTR is a party or by which PTR is bound with respect to the voting of any PTR Common Shares. SECTION 3.3 ISSUANCE OF SECURITIES. The PTR Common Shares issuable to SCG hereunder, when issued in accordance with the provisions of this Agreement and the Related Agreements, will be duly and validly authorized and issued and will be fully paid and, except as set forth in Schedule 3.2(a), nonassessable. The PTR Common Shares issuable upon exercise of rights issued pursuant to Section 2.3, when issued in accordance with the provisions of this Agreement and the Related Agreements, will be duly and validly authorized and issued and will be fully paid and, except as set forth in Schedule 3.2(a), nonassessable. SECTION 3.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) PTR has full power, trust or otherwise, and authority to enter into this Agreement and the Related Agreements to which it is a party and, subject to PTR Shareholders' Approval and PTR Required Statutory Approvals, to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Related Agreements to which it is a party, and the consummation by PTR of the transactions contemplated hereby and thereby, have been duly authorized by the PTR Board and no other proceedings on the part of PTR are necessary to authorize the execution and delivery of this Agreement or the Related Agreements and the consummation by PTR of the transactions contemplated hereby and thereby, except for PTR Shareholders' Approval and the obtaining of PTR Required Statutory Approvals. This Agreement has been duly and validly executed and delivered by PTR, and, assuming the due authorization, execution and delivery hereof by SCG, constitutes a valid and binding agreement of PTR enforceable against PTR in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, (ii) general equitable principles and (iii) to the extent this Agreement or any of the Related Agreements contains indemnification provisions for violations of federal or state securities laws, as enforceability of such provisions may be limited under federal and state securities laws. (b) The execution and delivery of this Agreement and the Related Agreements by PTR, to the extent it is a party thereto, do not, and the consummation by PTR of the 9 transactions contemplated hereby and thereby will not, violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets of PTR under any of the terms, conditions or provisions of, (i) subject to obtaining PTR Shareholders' Approval, PTR's declaration of trust or bylaws, (ii) subject to obtaining PTR Required Statutory Approvals and PTR Shareholders' Approval, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to PTR or any of its properties or (iii) except as set forth on Schedule 3.4(b) hereto, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which PTR is now a party or by which PTR or any of its properties may be bound, excluding from the foregoing clauses (ii) and (iii) such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests, charges or encumbrances that would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of PTR. (c) Except for (i) the filing of the PTR Registration Statement, the Proxy Statement and the SCG Warrant Registration Statement with the Commission pursuant to the Securities Act and the Exchange Act, and the declaration of the effectiveness of the PTR Registration Statement and the SCG Warrant Registration Statement by the Commission and filings with various state blue sky authorities, (ii) any required filings by PTR pursuant to Section 2.1, (iii) any required filings by PTR of amendments to its declaration of trust and (iv) any required filings with or approvals from applicable federal or state housing authorities (the filings and approvals referred to in clauses (i) through (iv) are collectively referred to as the "PTR Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement and the Related Agreements by PTR or the consummation by PTR of the transactions contemplated hereby or thereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of PTR. SECTION 3.5 REGISTRATION STATEMENTS AND PROXY STATEMENT AND PROSPECTUSES. None of the information to be supplied by PTR for inclusion or incorporation by reference in the SCG Warrant Registration Statement will, at the time it becomes effective, at the time of the mailing of the SCG Warrant Prospectus and the Proxy Statement and any amendments thereof or supplements thereto, and at the time of the meeting of shareholders of PTR to be held in connection with the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit to state any material fact 10 required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with all applicable laws, including the provisions of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. No representation is made by PTR with respect to information supplied by SCG, or derived therefrom, for inclusion in the SCG Warrant Registration Statement. SECTION 3.6 DISCLOSURE, FINANCIAL STATEMENTS AND ABSENCE OF CERTAIN CHANGES. PTR's Annual Report on Form 10-K for the year ended December 31, 1996 (the "PTR 10-K"), and each other report or document filed after December 31, 1996 by PTR with the Commission under the Exchange Act, taken together, do not 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. PTR's audited consolidated financial statements contained in the PTR 10-K (the "PTR Financial Statements") have been prepared in accordance with generally accepted accounting principles applied on a consistent basis and fairly present the consolidated financial position of PTR and its subsidiaries as of the dates set forth therein and the results of their operations and cash flows for the periods set forth therein. Since December 31, 1996, there has not been any material adverse change or any event (other than general economic or market conditions) which would reasonably be expected to result in a material adverse change, individually or in the aggregate, in the business, operations, properties, assets, liabilities, condition (financial or other), results of operations or prospects of PTR. SECTION 3.7 ABSENCE OF UNDISCLOSED LIABILITIES. PTR did not have, at December 31, 1996, and has not incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature (other than ordinary and recurring operating expenses), (a) except liabilities, obligations or contingencies which are accrued or reserved against in the PTR Financial Statements with respect to December 31, 1996 or reflected in the notes thereto and (b) except for any liabilities, obligations or contingencies which (i) would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of PTR or (ii) have been discharged or paid in full prior to the date hereof. SECTION 3.8 BROKERS AND FINDERS. PTR has not employed any broker, finder or other intermediary in connection with the transactions contemplated by this Agreement which would be entitled to any brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated hereby. 11 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SCG SCG represents and warrants to PTR as follows: SECTION 4.1 ORGANIZATION AND QUALIFICATION. SCG and each of the SCG Subsidiaries is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and each has the requisite power, corporate or otherwise, and authority to own, lease and operate its assets and properties and to carry on its business as it is now being conducted and as it is proposed by it to be conducted. Each SCG Subsidiary is qualified to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of the business conducted by it makes such qualification necessary, except where the failure to be so qualified and in good standing would not reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of any such SCG Subsidiary. True, accurate and complete copies of each of the articles of incorporation and bylaws of SCG and the certificate of incorporation and bylaws of each SCG Subsidiary as in effect on the date hereof, including all amendments thereto and proposed amendments and restatements thereof, have heretofore been delivered to PTR. SECTION 4.2 CAPITALIZATION. (a) The authorized stock of the REIT Manager consists of 1,000 shares of common stock, of which 1,000 shares of common stock are issued and outstanding. The authorized stock of the Property Manager consists of 100,000 shares of common stock, of which 1,000 shares of common stock are issued and outstanding. All of the issued and outstanding shares of common stock of the REIT Manager and the Property Manager are owned by SCG, or a wholly owned subsidiary of SCG, and are validly issued, fully paid and nonassessable. SCG, or one of its wholly owned subsidiaries, owns good and marketable title to the issued and outstanding shares of common stock of each of the SCG Subsidiaries, in each case, free and clear of all liens, encumbrances, claims, security interests and defects. (b) There are no outstanding subscriptions, options, calls, contracts, commitments, understandings, restrictions, arrangements, rights or warrants, including any right of conversion or exchange under any outstanding security, instrument or other agreement obligating SCG or any subsidiary of SCG to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of either SCG Subsidiary or obligating SCG or any subsidiary of SCG to grant, extend or enter into any agreement or commitment with respect to any of the foregoing. There are no voting trusts, proxies or other agreements or understandings to which SCG or any subsidiary of SCG is a party or is bound with respect to the voting of any shares of either SCG Subsidiary. 12 SECTION 4.3 ISSUANCE OF SECURITIES. Subject to receiving the SCG Shareholders' Approval, the SCG Warrants when issued in accordance with the provisions of this Agreement and the Related Agreements will constitute valid and binding agreements of SCG enforceable against SCG in accordance with their terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally and (ii) general equitable principles. Subject to receiving the SCG Shareholders' Approval, the SCG Class B Common Shares issuable upon exercise of the SCG Warrants, when issued upon exercise of SCG Warrants and in accordance with the Warrant Agreement, will be duly and validly authorized and issued and will be fully paid and nonassessable. SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS. (a) SCG and each of the SCG Subsidiaries has full power, corporate or otherwise, and authority to enter into this Agreement and the Related Agreements to which it is a party and, subject to SCG Shareholders' Approval and SCG Required Statutory Approvals, to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Related Agreements to which they are parties, and the consummation by SCG and the SCG Subsidiaries of the transactions contemplated hereby and thereby, have been duly authorized by the SCG Board and the board of the relevant SCG Subsidiary, and no other corporate proceedings on the part of SCG or either SCG Subsidiary are necessary to authorize the execution and delivery of this Agreement or the Related Agreements and the consummation by SCG and the SCG Subsidiaries of the transactions contemplated hereby and thereby, except for SCG Shareholders' Approval and the obtaining of SCG Required Statutory Approvals. This Agreement has been duly and validly executed and delivered by SCG, and, assuming the due authorization, execution and delivery hereof by PTR, constitutes a valid and binding agreement of SCG enforceable against SCG in accordance with its terms, except that such enforcement may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally, (ii) general equitable principles and (iii) to the extent this Agreement or any of the Related Agreements contains indemnification provisions for violations of federal or state securities laws, as enforceability of such provisions may be limited under federal and state securities laws. As of the date of this Agreement, neither of the SCG Subsidiaries is in violation of its charter, bylaws or other organizational documents. (b) The execution and delivery of this Agreement and the Related Agreements by SCG and each SCG Subsidiary, to the extent it is a party thereto, do not, and the consummation by SCG and the SCG Subsidiaries of the transactions contemplated hereby and thereby will not, violate, conflict with or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the assets of either of the SCG Subsidiaries under any of the terms, conditions or provisions of (i) subject to obtaining SCG Shareholders' Approval, SCG's or such 13 SCG Subsidiary's articles of incorporation or bylaws, (ii) subject to obtaining SCG Required Statutory Approvals and SCG Shareholders' Approval, any statute, law, ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit or license of any court or governmental authority applicable to SCG or either SCG Subsidiary or any of the assets of either of the SCG Subsidiaries, (iii) the certificate of incorporation or bylaws of an SCG Subsidiary or (iv) except as set forth on Schedule 4.4(b) hereto, any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which SCG or either SCG Subsidiary is now a party or by which SCG or either SCG Subsidiary or any of the assets of either of the SCG Subsidiaries may be bound, excluding from the foregoing clauses (ii) and (iv) such violations, conflicts, breaches, defaults, terminations, accelerations or creations of liens, security interests, charges or encumbrances that would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. (c) Except for (i) the filing of the Proxy Statement and the SCG Warrant Registration Statement with the Commission pursuant to the Securities Act and the Exchange Act, and the declaration of the effectiveness of the SCG Warrant Registration Statement by the Commission and filings with various state blue sky authorities, (ii) any required filings by SCG or an SCG Subsidiary pursuant to Section 2.1 and (iii) any required filings by SCG of amendments to its articles of incorporation (the filings and approvals referred to in clauses (i) through (iii) are collectively referred to as the "SCG Required Statutory Approvals"), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any governmental or regulatory body or authority is necessary for the execution and delivery of this Agreement and the Related Agreements by SCG or either SCG Subsidiary or the consummation by SCG or either SCG Subsidiary of the transactions contemplated hereby or thereby, other than such declarations, filings, registrations, notices, authorizations, consents or approvals which, if not made or obtained, as the case may be, would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. SECTION 4.5 FINANCIAL STATEMENTS. The audited financial statements of SCG for the years ended December 31, 1994, 1995 and 1996 (the "SCG Financial Statements" ) have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as otherwise set forth in such financial statements) and fairly present the financial position of SCG as of the dates presented and the results of its operations and cash flows for the periods presented. The unaudited balance sheet of each SCG Subsidiary as at February 28, 1997 and Statements of Funds From Operations for the years ended December 31, 1995 and 1996 (the "Subsidiary Financial Statements") fairly present the financial position of each SCG Subsidiary as of the dates presented and the results of its operations for the periods presented. 14 SECTION 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1996, there has not been any material adverse change or any event (other than general economic or market conditions) which would reasonably be expected to result in a material adverse change, individually or in the aggregate, in the business, operations, properties, assets, liabilities, condition (financial or other), results of operations or prospects of SCG or of either of the SCG Subsidiaries. Each of the SCG Subsidiaries have conducted their respective businesses in the ordinary course during the periods covered by the Subsidiary Financial Statements. SECTION 4.7 REGISTRATION STATEMENTS AND PROXY STATEMENT AND PROSPECTUSES. None of the information to be supplied by SCG for inclusion or incorporation by reference in the SCG Warrant Registration Statement will, at the time it becomes effective, at the time of the mailing of the SCG Warrant Prospectus and the Proxy Statement and any amendments thereof or supplements thereto, and at the time of the meeting of shareholders of PTR to be held in connection with the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The SCG Warrant Registration Statement will comply as to form in all material respects with all applicable laws, including the provisions of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. No representation is made by SCG with respect to information supplied by PTR, or derived therefrom, for inclusion in the SCG Warrant Registration Statement. SECTION 4.8 TAXES. (a) Each SCG Subsidiary has duly and timely filed with the appropriate governmental authorities all Tax Returns required to be filed by it (either separately or as a member of any affiliated group within the meaning of Section 1504 of the Code or any similar group defined under a similar provision of state, local or foreign law (an "Affiliated Group")) for all periods ending on or prior to the Merger Closing, except to the extent of any Tax Returns for which an extension of time for filing has been properly filed. Each such return and filing is true and correct in all respects. All Taxes owed by either SCG Subsidiary have been paid (whether or not shown on a Tax Return). No material issues have been raised in any examination by any taxing authority with respect to the businesses and operations of SCG or either of the SCG Subsidiaries which (i) reasonably could be expected to result in an adjustment to the liability for Taxes for such period examined or (ii), by application of similar principles, reasonably could be expected to result in an adjustment to the liability for Taxes for any other period not so examined. All Taxes which each SCG Subsidiary is required by law to withhold or collect, including without limitation Taxes required to have been withheld in connection with amounts paid or owning to any employee, independent contractor, creditor, stockholder, or other third party and sales, gross receipts and use taxes, have been duly withheld or collected and, to the extent required, have been paid over to the proper governmental authorities or are held in 15 separate bank accounts for such purpose. There are no liens for Taxes upon the assets of SCG or either of the SCG Subsidiaries except for statutory liens for Taxes not yet due. (b) None of SCG, the SCG Subsidiaries or the Affiliated Group has filed for an extension of a statute of limitations with respect to any Tax and no governmental authorities have requested an extension of the statute of limitations with respect to any Tax. The Tax Returns of SCG, each SCG Subsidiary and the Affiliated Group are not being and have not been examined by any taxing authority for any past year or periods. None of SCG, the SCG Subsidiaries or the Affiliated Group is a party to any pending action or any formal or informal proceeding by any taxing authority for a deficiency, assessment or collection of Taxes, and no claim for any deficiency, assessment or collection of Taxes has been asserted, or, to the best knowledge of SCG, threatened against it, including claims by any taxing authority in a jurisdiction where SCG and the SCG Subsidiaries do not file tax returns that any of them is or may be subject to taxation in that jurisdiction. (c) Each SCG Subsidiary has properly accrued on its respective Subsidiary Financial Statements all Taxes due for which such SCG Subsidiary may be liable in its own right (including, without limitation, by reason of being a member of an Affiliated Group or as a transferee of the assets of, or successor to, any corporation, person, association, partnership, joint venture or other entity. Each SCG Subsidiary has established (and until the Closing shall continue to establish and maintain) on its books and records reserves that are adequate for the payment of all Taxes not yet due and payable. (d) Neither SCG Subsidiary (i) has filed a consent under Section 341(f) of the Code concerning collapsible corporations, (ii) is a party to any Tax allocation or sharing agreement other than a tax sharing agreement between an SCG Subsidiary and SCG, which such agreement will be terminated as of the Closing Date, and (iii) has been a member of an Affiliated Group filing a consolidated federal income Tax Return other than a group, the common parent of which is SCG. (e) The Affiliated Group of which each SCG Subsidiary is a member has duly and timely filed all Tax Returns that it was required to file for each taxable period during which any SCG Subsidiary was a member of the group. All such Tax Returns were true, complete and correct in all respects and all Taxes owed by the Affiliated Group, whether or not shown on any Tax Return, have been paid for each taxable period during which any SCG Subsidiary was a member of the group. (f) Neither SCG Subsidiary has any liability for the Taxes of any person other than SCG or such SCG Subsidiary (A) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), (B) as a transferee or successor, (C) by contract, or (D) otherwise. (g) Neither SCG Subsidiary has made any payments, is obligated to make any payments, or is a party to an agreement that could obligate it to make any payments that will not be deductible under Section 280G of the Code. Each SCG Subsidiary has disclosed to the 16 IRS all positions taken on its federal income tax returns which could give rise to a substantial understatement of tax under Section 6662 of the Code. SECTION 4.9 ABSENCE OF UNDISCLOSED LIABILITIES. SCG did not have, at December 31, 1996, and has not incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature (other than ordinary and recurring operating expenses) with respect to any of the assets of either of the SCG Subsidiaries, and neither SCG Subsidiary had, at December 31, 1996, and none has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent or otherwise) of any nature (other than ordinary and recurring operating expenses) (a) except liabilities, obligations or contingencies which are accrued or reserved against in the SCG Financial Statements or the Subsidiary Financial Statements or reflected in the notes thereto and (b) except for any liabilities, obligations or contingencies which (i) would not, in the aggregate, be reasonably expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of SCG or either of the SCG Subsidiaries or (ii) have been discharged or paid in full prior to the date hereof. SECTION 4.10 LITIGATION. Except as set forth on Schedule 4.10, there are no claims, suits, actions or proceedings pending or, to the best of SCG's knowledge, threatened, against, relating to or affecting either of the SCG Subsidiaries or any of the assets of either of the SCG Subsidiaries before or by any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator that could reasonably be expected, either alone or in the aggregate with all such claims, actions or proceedings, to affect materially and adversely the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. Neither SCG Subsidiary is subject to any judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or authority, or any arbitrator which prohibits or restricts the consummation of the transactions contemplated hereby or by any of the Related Agreements or would have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. SECTION 4.11 NO VIOLATION OF LAW. Neither of the SCG Subsidiaries is in violation of or has been given notice or been charged with any violation of any law, statute, order, rule, regulation, ordinance or judgment (including, without limitation, any applicable Environmental Laws) of any governmental or regulatory body or authority, except for violations which, in the aggregate, would not reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. No investigation or review of either of the SCG Subsidiaries by any governmental or regulatory body or authority is pending or, to the best knowledge of SCG, threatened, nor has any governmental or regulatory body or authority indicated to SCG or either SCG Subsidiary an intention to conduct the same. Each of the SCG Subsidiaries and each of its officers and employees has all permits, licenses, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals necessary to conduct its business as presently conducted and as proposed by such SCG Subsidiary to be conducted, except for permits, licenses, franchises, variances, exemptions, 17 orders, authorizations, consents and approvals the absence of which, alone or in the aggregate, would not reasonably be expected to have a material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either of the SCG Subsidiaries. SECTION 4.12 INSURANCE. SCG or the SCG Subsidiaries maintain insurance coverage for each SCG Subsidiary and their respective assets of the types, and in amounts, typical of similar companies engaged in the respective businesses in which such SCG Subsidiary is engaged. All such insurance policies are in full force and effect, and with respect to all policies, none of SCG nor either SCG Subsidiary is delinquent in the payment of any premiums thereon, and no notice of cancellation or termination has been received with respect to any such policy. All such policies are sufficient for compliance with all requirements of law and of all agreements to which either of the SCG Subsidiaries is a party or otherwise bound and are valid, outstanding, collectable, and enforceable policies and will remain in full force and effect through their respective policy periods ending after the Merger Closing (assuming payment of any applicable premiums arising after the Merger Closing). Neither SCG nor either SCG Subsidiary has received written notice within the last 12 months from any insurance company or board of fire underwriters of any conditions, defects or inadequacies that would materially adversely affect the insurability of, or cause any material increase in the premiums for insurance covering, either of the SCG Subsidiaries or any of the assets of either of the SCG Subsidiaries that have not been cured or repaired to the satisfaction of the party issuing the notice. SECTION 4.13 EMPLOYEE BENEFIT PLANS. SCG has previously provided or made available to PTR a copy of each written employee benefit plan maintained by SCG and/or its affiliates ("Employee Benefit Plans") that provides retirement, pension, health care, long-term disability income, workers compensation, life insurance and any other postretirement benefits that, as of the date hereof, covers any employee of an SCG Subsidiary ("Employees") and a copy of each plan, contract, or arrangement constituting an employment or severance agreement with any director or Employee of an SCG Subsidiary. Each Employee Benefit Plan complies and has been administered in form and in operation in all material respects with all applicable requirements of law and no notice has been issued by any governmental authority questioning or challenging such compliance. Neither the execution or delivery of this Agreement or any of the Related Agreements nor the consummation of the transactions contemplated hereby or thereby constitutes or will constitute an event under any Employee Benefit Plan or any such employment or severance agreement that may result in any payment by PTR or any SCG Subsidiary, any restriction or limitation upon the assets of any Employee Benefit Plan, any acceleration of payment or vesting, increase in benefits or compensation, or forgiveness of any loan or other commitment to PTR or an SCG Subsidiary. SECTION 4.14 INTELLECTUAL PROPERTY. Schedule 4.14 is a true and complete list of all of the Intellectual Property used in the conduct of the businesses of the SCG Subsidiaries. All the Intellectual Property listed on Schedule 4.14 is either owned or being licensed by one of the SCG Subsidiaries. With respect to the Intellectual Property indicated on Schedule 4.14 as being owned by one of the SCG Subsidiaries, the respective SCG Subsidiary indicated as owning such Intellectual Property owns all right, title and interest in such 18 Intellectual Property, free and clear of all liens, encumbrances, claims, security interests and defects. With respect to the Intellectual Property indicated on Schedule 4.14 as being licensed by one of the SCG Subsidiaries, the respective SCG Subsidiary indicated as licensing such Intellectual Property (i) has the right under the applicable license agreement to use the relevant Intellectual Property in the manner in which it is being used in the conduct of the business of the SCG Subsidiary and (ii) is in compliance with all terms and conditions of each such license agreement except where such failure to be in compliance could not reasonably be expected to have any material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either SCG Subsidiary. None of the Intellectual Property has been or is the subject of any pending adverse claim, or to the best knowledge of SCG, any threatened litigation or claim of infringement based on the use thereof by either one of the SCG Subsidiaries or a third party. Neither SCG nor either of the SCG Subsidiaries has received any notice contesting SCG's or the SCG Subsidiaries' right to use any of the Intellectual Property and, to the knowledge of SCG, neither of the SCG Subsidiaries has infringed upon or misappropriated any intellectual property rights of third parties. SECTION 4.15 LABOR. None of SCG or any of the SCG Subsidiaries is a party to, or bound by, a collective bargaining agreement, contract or other understanding with a labor union or labor union organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the knowledge of SCG, threatened against the SCG Subsidiaries. To the knowledge of SCG, there are no organizational efforts with respect to the formation of a collective bargaining unit presently being made or threatened involving employees of either SCG Subsidiary. SECTION 4.16 BROKERS AND FINDERS. SCG has not employed any broker, finder or other intermediary in connection with the transactions contemplated by this Agreement which would be entitled to any brokerage, finder's or similar fee or commission in connection with this Agreement or the transactions contemplated hereby. SECTION 4.17 INVESTMENT COMPANY ACT. None of SCG and the SCG Subsidiaries is, and as of the date of the Merger Closing they will not be, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, nor an "investment adviser" within the meaning of the Investment Advisers Act of 1940, as amended. SECTION 4.18 ADEQUACY OF SCG CONSIDERATION. Except for the Intellectual Property described on Schedule 4.14, no part of the respective businesses conducted by the SCG Subsidiaries is conducted through any entity other than the respective SCG Subsidiary. SECTION 4.19 INVESTMENT IN SECURITIES. (a) SCG understands that (i) no Federal or state agency has passed upon the PTR Common Shares to be issued in connection with the mergers described in Section 2.1 or made any finding or determination as to the fairness of SCG's investment therein or the terms of the offer and the sale thereof pursuant to this Agreement and the Related Agreements and (ii) SCG must bear the economic risk of its investment in the PTR Common Shares to be issued in 19 connection with the mergers described in Section 2.1 for an indefinite period of time because such shares will not be registered under the Securities Act or any state securities laws, and, therefore, cannot be sold or transferred unless either they are subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registrations is available. (b) The PTR Common Shares to be issued in connection with the mergers described in Section 2.1 are being acquired for SCG's own account and not with any view toward the resale or distribution thereof, or with any present intention of selling or distributing any such shares. (c) SCG has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the PTR Common Shares to be issued in connection with the mergers described in Section 2.1. (d) SCG has carefully reviewed all documents that it has requested copies of, has been furnished with all other materials that it considers relevant to an investment in the PTR Common Shares to be issued in connection with the mergers described in Section 2.1 and has had a full opportunity to ask questions of and receive answers from PTR or a person or persons acting on behalf of PTR concerning the terms and conditions of an investment in the PTR Common Shares to be issued in connection with the mergers described in Section 2.1. SECTION 4.20 TITLE TO ASSETS; NO REAL PROPERTY. Set forth on Schedule 4.20 is a complete list of all of the assets currently owned by each SCG Subsidiary which are materially important in the conduct of its business as it is being currently conducted and a list of all officers and key employees of each such SCG Subsidiary. The SCG Subsidiaries have good, valid and marketable title to, or a leasehold interest in, (a) all of their material properties and assets (tangible and intangible) reflected in the Subsidiary Financial Statements, except as indicated in the notes thereto and except for properties and assets disposed of in the ordinary course of business, and (b) all of the material properties and assets purchased by an SCG Subsidiary since the date of such financial statements, except for properties and assets disposed of in the ordinary course of business, in each case subject to no lien, claim, or encumbrance other than (i) liens reflected in such financial statements, (ii) liens for current Taxes, assessments or governmental charges or levies not yet due and delinquent, and (iii) liens that could not reasonably be expected to have any material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of either SCG Subsidiary. Neither SCG Subsidiary owns, in whole or in part, or holds as record title holder, or is the holder of any mortgage or deed of trust with respect to, any real property. SECTION 4.21 PROJECTIONS. The projections prepared by SCG and furnished to PTR have been prepared in good faith and with all available information regarding the current operations of PTR and the SCG Subsidiaries and the operations of PTR as proposed to be conducted and are based upon assumptions which SCG believes to be reasonable. However, no representation or warranty is made by SCG that the results set forth in such projections or the assumptions underlying such projections will in fact be realized. SCG has previously caused 20 KPMG Peat Marwick LLP to deliver to PTR a report verifying the mathematical accuracy of the methodology used by SCG in preparing the projections. All of the information supplied by SCG to KPMG Peat Marwick LLP for purposes of preparing such report has been provided or made available to PTR or, if not so provided or made available, is consistent with the information set forth in the projections in all material respects. ARTICLE V CONDUCT OF BUSINESSES PENDING THE MERGER CLOSING SECTION 5.1 CONDUCT OF BUSINESSES OF SCG SUBSIDIARIES. After the date hereof and prior to the Merger Closing or earlier termination of this Agreement, except as PTR shall otherwise agree in writing or as may be otherwise specifically contemplated by this Agreement and the Related Agreements, SCG shall cause each of the SCG Subsidiaries to: (a) conduct the businesses conducted by it in the ordinary and usual course of business and consistent with past practice and, as to the REIT Manager, the requirements of the Fifth Amended and Restated REIT Management Agreement dated as of May 21, 1996, between PTR and it (the "REIT Management Agreement"), and as to the Property Manager, the Management Agreement dated as of October 1, 1996 between PTR and it (the "Property Management Agreement"); (b) not issue, sell, pledge or dispose of, or agree to issue, sell, pledge or dispose of, any additional shares of, or any options, warrants or rights of any kind to acquire any shares of, capital stock of an SCG Subsidiary of any class or any debt or equity securities convertible into or exchangeable for such stock or amend or modify the terms and conditions of any of the foregoing; (c) not (i) incur or become contingently liable with respect to any additional indebtedness for borrowed money, (ii) take any action which would jeopardize PTR's status as a real estate investment trust under the Code, (iii) sell or otherwise dispose of any of its assets, (iv) prepay or cause to be prepaid any principal amount outstanding with respect to indebtedness for borrowed money or (vi) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing; (d) use reasonable efforts to preserve intact its businesses, organization and goodwill, keep available the services of its present officers and employees and preserve the goodwill and business relationships with all lessees, operators, suppliers, distributors, customers and others having business relationships with it and PTR and not engage in any action, directly or indirectly, with the intent to adversely impact the transactions contemplated by this Agreement; (e) confer with one or more representatives of PTR when requested to report on material operational matters and the general status of ongoing operations of its respective businesses; 21 (f) maintain, in full force and effect, with all premiums due thereon paid, policies of insurance covering all of its respective insurable assets and businesses in amounts and as to foreseeable risks usually insured against by persons operating similar businesses under valid and enforceable policies of insurance issued by nationally recognized insurers; (g) except as may be required to distribute earnings and profits, not declare, set aside or pay any dividends on, or make any other distributions in respect of, any of their capital stock, or purchase, redeem or otherwise acquire any shares of their capital stock; (h) not acquire or agree to acquire by merging or consolidating with, or by purchasing a substantial portion of the stock or assets of, or by any other manner, any business or any corporation, partnership, joint venture, association, or other business organization or division thereof; (i) not acquire or agree to acquire any assets that are material, indivor in the aggregate, to either of the SCG Subsidiaries, or make or agree to make any capital expenditures except in the ordinary course of business consistent with past practice; (j) not adopt or amend in any material respect any bonus, profit sharing, compensation, stock option, pension, retirement, deferred compensation, employment or other employee benefit plan, agreement, trust, fund or other arrangement for the benefit or welfare of any present or former director or employee or, other than increases for individuals (other than officers and directors) in the ordinary course of business consistent with past practice, increase the compensation of fringe benefits of any present or former director or employee; and not pay any benefit not required by an existing plan, arrangement or agreement, or grant any new or modified severance or termination arrangement or increase or accelerate any benefits payable under its severance or termination pay policies; (k) not take any action that would, or is reasonably likely to, result in any of its or PTR's representations and warranties in this Agreement becoming untrue, or in any of the conditions to the Merger set forth in Article VII not being satisfied; (l) not pay, discharge or satisfy any claims (including claims of shareholders), liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), except for the payment, discharge or satisfaction, of (i) liabilities or obligations in the ordinary course of business (including for Taxes) consistent with past practice or in accordance with their terms as in effect on the date hereof, (ii) liabilities reflected or reserved against in, or contemplated by, the Subsidiary Financial Statements, or waive, release, grant, or transfer any rights of material value or modify or change in any material respect any existing license, lease, contract or other documents, other than as contemplated by this Agreement or in the ordinary course of business consistent with past practice; (m) not (i) adopt a plan of complete or partial liquidation; (ii) adopt any amendment to its charter or bylaws; (iii) enter into any contract, agreement or arrangement involving more than $500,000 annually, except for agreements entered into in the ordinary course of business 22 and with prior written consent; (iv) authorize or enter into any agreement relating to property management services to be provided by it to a third party property owners on other than customary terms; (v) modify or change in any material respect any existing material agreements, except in the ordinary course and consistent with past practice; (vi) engage in any conduct the nature of which is materially different that the business in which it is currently engaged; or (vi) enter into any agreement providing for acceleration of payment or performance or other consequences as a result of a change of control of it; and (n) not authorize any of, or commit or agree to take any of, the foregoing actions set forth in subsections (b), (c), and (g) through (m). SECTION 5.2 CONDUCT OF BUSINESS OF PTR. After the date hereof and prior to the Merger Closing or earlier termination of this Agreement, except as SCG shall otherwise agree in writing or as may be otherwise specifically contemplated by this Agreement and the Related Agreements, PTR shall: (a) conduct the businesses conducted by it in the ordinary and usual course of business and consistent with past practice; (b) not take any action which would jeopardize its status as a real estate investment trust under the Code; and (c) operate in compliance with the terms and conditions of the Second Amended and Restated Investor Agreement, dated November 18, 1993, between PTR and SCG, as amended or supplemented. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1 ACCESS TO INFORMATION. Each of the parties shall afford to the other party hereto and such other party's accountants, counsel, financial advisors and other representatives full access, during normal business hours throughout the period prior to the Merger Closing or earlier termination of this Agreement, to all properties, books, contracts, commitments and records (including, but not limited to, Tax Returns) of such party and, in the case of SCG, of the SCG Subsidiaries, as appropriate, and, during such period, each shall furnish promptly to the other (a) a copy of each report, schedule and other document filed or received pursuant to the requirements of federal or state securities laws or filed with the Commission in connection with the transactions contemplated by this Agreement and (b) such other information concerning their respective businesses, properties and personnel which are the subject of this Agreement or the Related Agreements as shall be reasonably requested; provided that no investigation pursuant to this Section 6.1 shall affect any representation or warranty made herein or the conditions to the obligations of the respective parties hereto to consummate the transactions contemplated hereby or thereby. Each party shall promptly advise each other party in writing of any change or the occurrence of any event after the date of this Agreement or the Related Agreements having, or which, insofar as can reasonably be foreseen, in the future may 23 have, any material adverse effect on the business, operations, properties, assets, condition (financial or other), results of operations or prospects of such party or, in the case of SCG, either of the SCG Subsidiaries. SECTION 6.2 PROXY STATEMENT AND REGISTRATION STATEMENT. SCG shall file with the Commission as soon as is reasonably practicable after the date hereof the SCG Warrant Registration Statement. SCG shall also take any action required to be taken under applicable state blue sky or securities laws in connection with the issuance of securities pursuant to Sections 2.2. To the extent the PTR Registration Statement shall not have been filed and/or declared effective prior to the date of this Agreement, PTR shall (i) file as soon as is reasonably practicable after the date hereof the PTR Registration Statement and use all reasonable efforts to have the PTR Registration Statement declared effective by the Commission as promptly as practicable, (ii) use all reasonable efforts to continue the effectiveness of the PTR Registration Statement and (iii) keep available for issuance under the PTR Registration Statement such number of shares as would be required to satisfy rights issued pursuant to Section 2.3 assuming that each shareholder of PTR (other than SCG) elects to subscribe for the maximum number of shares for which it is entitled to subscribe. To the extent the PTR Registration Statement shall have been filed and declared effective prior to the date of this Agreement, PTR shall use all reasonable efforts to continue the effectiveness of the PTR Registration Statement and shall keep available for issuance under the PTR Registration Statement such number of shares as would be required to satisfy rights issued pursuant to Section 2.3 assuming that each shareholder of PTR (other than SCG) elects to subscribe for the maximum number of shares for which it is entitled to subscribe. PTR shall also take any action required to be taken under applicable state blue sky or securities laws in connection with the issuance of securities pursuant to Sections 2.1 and 2.3. PTR and SCG shall promptly furnish to each other all information, and take such other actions as may reasonably be requested in connection with any action by any of them in connection with this Section 6.2 and shall cooperate with one another and use their respective best efforts to facilitate the expeditious consummation of the transactions contemplated by this Agreement and the Related Agreements. SECTION 6.3 SHAREHOLDERS' APPROVAL. Each of PTR and SCG shall promptly take such action as may be required by its declaration of trust or articles of incorporation, as applicable, its bylaws and applicable law and promptly seek, and use its best efforts to obtain, the requisite shareholder approval of this Agreement and the transactions contemplated hereby, including amendments to PTR's declaration of trust necessary to consummate the transactions contemplated hereby and any amendments to SCG's articles of incorporation necessary to consummate the transactions contemplated hereby (as appropriate, the "PTR Shareholders' Approval" and "SCG Shareholders' Approval"). The PTR Board and SCG Board shall recommend to their respective shareholders the approval of this Agreement and of the transactions contemplated by this Agreement; provided, however, that prior to the respective meetings of shareholders of PTR and SCG, the PTR Board or SCG Board, as the case may be, may withdraw, modify or amend such recommendation to the extent that the PTR Board or the PTR Special Committee or the SCG Board, as the case may be, deems it necessary to do so in the exercise of its fiduciary obligations to PTR or SCG, as the case may be, after being so 24 advised by nationally recognized counsel not having an interest in the transactions contemplated by this Agreement or the Related Agreements. SECTION 6.4 AFFILIATE AGREEMENTS. PTR shall use its best efforts to cause each principal executive officer, trustee and each other person who is an "affiliate," as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act, of PTR to execute and deliver to SCG on or prior to the Warrant Issuance Date a written agreement (an "Affiliate Agreement") to the effect that such person will not offer to sell, sell or otherwise dispose of any SCG Warrants (or the SCG Class B Common Share issuable upon exercise thereof) issued in the Warrant Issuance and received by such person, except, in each case, pursuant to an effective registration statement or in compliance with Rule 145, as amended from time to time, or in a transaction which, in the opinion of legal counsel satisfactory to SCG, is exempt from the registration requirements of the Securities Act. SECTION 6.5 EXCHANGE. SCG shall use its best efforts to effect, at or before the Warrant Issuance Date, authorization for listing or quotation of the SCG Warrants on the New York Stock Exchange or another Exchange upon official notice of issuance of the SCG Warrants pursuant to the Warrant Issuance. SECTION 6.6 EXPENSES. All costs and expenses incurred in connection with this Agreement, the Related Agreements and the transactions contemplated hereby and thereby shall be paid by the party incurring such expenses; provided, however, that (i) all costs and expenses of the PTR Special Committee (including fees and expenses of counsel and its financial advisors), and all fees and expenses in connection with filing, printing and distributing the PTR Registration Statement, the PTR Prospectus and the Proxy Statement shall be paid by PTR and (ii) all costs and expenses in connection with filing, printing and distributing the SCG Warrant Registration Statement and the SCG Warrant Prospectus and all fees and expenses in connection with the listing of the SCG Warrants (and the SCG Class B Common Shares issuable upon exercise thereof) on any Exchange shall be paid by SCG. SECTION 6.7 AGREEMENT TO COOPERATE. Subject to the terms and conditions herein provided, each of the parties hereto shall cooperate and use its respective best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement and the Related Agreements, including using its best efforts to identify and obtain all necessary or appropriate waivers, consents and approvals to effect all necessary registrations, filings and submissions (including, but not limited to, PTR Required Statutory Approvals, SCG Required Statutory Approvals and any filings under federal and state securities laws) and to lift any injunction or other legal bar to the transactions contemplated hereby and thereby (and, in such case, to proceed with such transactions as expeditiously as possible), subject, however, to obtaining PTR Shareholders' Approval and SCG Shareholders' Approval. SECTION 6.8 PUBLIC STATEMENTS. The parties hereto shall consult with each other prior to issuing any press release or any written public statement with respect to this 25 Agreement and the Related Agreements or the transactions contemplated hereby and thereby and shall not issue any such press release or written public statement prior to review and approval by the other party, except that prior review and approval shall not be required if, in the reasonable judgment of the party seeking to issue such release or public statement, prior review and approval would prevent the timely dissemination of such release or announcement in violation of any applicable law, rule or regulation or rule or policy of the New York Stock Exchange or another Exchange. SECTION 6.9 CORRECTIONS TO THE SCG WARRANT REGISTRATION STATEMENT AND SCG WARRANT PROSPECTUS. Prior to the date of PTR Shareholders' Approval, each of PTR and SCG shall correct promptly any information provided by it to be used specifically in the SCG Warrant Registration Statement or the PTR Registration Statement, or incorporated by reference into either such document, that shall have become false or misleading in any material respect and shall take all steps necessary to file with the Commission and have declared effective or cleared by the Commission any amendment or supplement to the SCG Warrant Registration Statement or the PTR Registration Statement so as to correct the same and to cause the SCG Warrant Registration Statement and the PTR Registration Statement as so corrected to be disseminated to the shareholders of PTR, in each case to the extent required by applicable law. SECTION 6.10 VOTING OF SHARES. SCG will vote all PTR Common Shares owned by it in favor of the approval and adoption of this Agreement, the Related Agreements and the transactions contemplated hereby and thereby (including such amendments to PTR's Declaration of Trust as may be required to allow consummation of such transactions); provided, however, that SCG shall not be obligated to vote any PTR Common Shares in favor of such matters in the event that the PTR Board, the PTR Special Committee or the SCG Board withdraws, modifies or amends its recommendation pursuant to Section 6.3. SECTION 6.11 CONFIDENTIALITY (a) As used herein, "Confidential Material" means, with respect to either party hereto (the "Providing Party"), all information, whether oral, written or otherwise, furnished to the other party hereto (the "Receiving Party") or the Receiving Party's directors, trustees, officers, partners, Affiliates (as defined in Rule 12b-2 under the Exchange Act), employees, agents or representatives (collectively, "Representatives"), by the Providing Party and all reports, analyses, compilations, studies and other material prepared by the Receiving Party or its Representatives (in whatever form maintained, whether documentary, computer storage or otherwise) containing, reflecting or based upon, in whole or in part, any such information. The term "Confidential Material" does not include information which (i) is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party, its Representatives or anyone to whom the Receiving Party or any of its Representatives transmit any Confidential Material in violation of this Agreement, (ii) is or becomes known or available to the Receiving Party on a nonconfidential basis from a source (other than the Providing Party or one of its Representatives) who is not, to the knowledge of the Receiving Party after reasonable inquiry, prohibited from transmitting the information to the Receiving Party or its 26 Representatives by a contractual, legal, fiduciary or other obligation or (iii) is contained in the PTR Registration Statement, the PTR Prospectus, the Proxy Statement, the SCG Warrant Registration Statement or the SCG Warrant Prospectus. (b) Subject to paragraph (c) below or except as required by applicable laws, regulations or legal process, the Confidential Material will be kept confidential and will not, without the prior written consent of the Providing Party, be disclosed by the Receiving Party or its Representatives, in whole or in part, and will not be used by the Receiving Party or its Representatives, directly or indirectly, for any purpose other than in connection with this Agreement, the Related Agreements and the transactions contemplated hereby or thereby or evaluating, negotiating or advising with respect to such matters. Moreover, the Receiving Party agrees to transmit Confidential Material to its Representatives only if and to the extent that such Representatives need to know the Confidential Material for purposes of such transactions and are informed by the Receiving Party of the confidential nature of the Confidential Material and of the terms of this Section 6.11. In any event, the Receiving Party will be responsible for any actions by its Representatives which are not in accordance with the provisions hereof. (c) In the event that the Receiving Party, its Representatives or anyone to whom the Receiving Party or its Representatives supply the Confidential Material are requested (by oral questions, interrogatories, requests for information or documents, subpoena, civil or criminal investigative demand, any informal or formal investigation by any government or governmental agency or authority or otherwise in connection with legal process) to disclose any Confidential Material, the Receiving Party agrees (i) to immediately notify the Providing Party of the existence, terms and circumstances surrounding such a request, (ii) to consult with the Providing Party on the advisability of taking legal available steps to resist or narrow such request and (iii) if disclosure of such information is required, to furnish only that portion of the Confidential Material which, in the opinion of the Receiving Party's counsel, the Receiving Party is legally compelled to disclose and to cooperate with any action by the Providing Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Material (it being agreed that the Providing Party shall reimburse the Receiving Party for all reasonable out-of-pocket expenses incurred by the Receiving Party in connection with such cooperation). (d) In the event of the termination of this Agreement in accordance with its terms, promptly upon request from the Providing Party, the Receiving Party shall, except to the extent prohibited by applicable laws, regulations or legal process, redeliver to the Providing Party or destroy all tangible Confidential Material and will not retain any copies, extracts or other reproductions thereof in whole or in part. Any such destruction shall be certified in writing to the Providing Party by an authorized officer of the Receiving Party supervising the same. Notwithstanding the foregoing, the Receiving Party and one Representative designated by the Receiving Party shall be permitted to retain one permanent file copy of each document constituting Confidential Material to be used only in connection with litigation arising from the transactions contemplated by this Agreement. 27 SECTION 6.12 PERSONNEL. (a) SCG Liability for Employee Obligations. SCG shall indemnify and hold harmless PTR for any and all obligations, debts or liabilities relating to or arising from any Employee's employment with SCG or an SCG Subsidiary, which obligation, debt or liability arises prior to the Merger Closing date. SCG shall honor or cause its insurance carriers to honor all claims for benefits by the Employees under each Employee Benefit Plan with respect to claims incurred by the Employees or their covered dependents before the Merger Closing date. (b) Employee Benefit Plans. PTR shall establish or cause to be established employee benefit plans for the respective Employees who become employees of PTR or any subsidiary thereof after the Merger Closing that are substantially similar to the Employee Benefit Plans, which plans shall recognize service of the Employees with PTR and SCG and their affiliates to the same extent such service has been recognized under the Employee Benefit Plans. The medical plans established by PTR shall recognize any deductibles and copayments Employees have made under the SCG medical plan in the current plan year. (c) Nonassumption of Employee Benefit Plan Liability. PTR shall not incur any liability with respect to an Employee Benefit Plan. SECTION 6.13 PRORATIONS. No later than ninety (90) days after the date of the Merger Closing, SCG shall prepare and deliver a statement (a "Post-Closing Accrual Statement") prorating all of the items listed in this Section 6.13 ("Prorated Items") through the date of the Merger Closing. SCG shall be liable for or entitled to the benefit of the Prorated Items to the extent the Prorated Items relate to any time period up to the date of the Merger Closing, and PTR shall be liable for or entitled to the benefit of the Prorated Items to the extent Prorated Items relate to periods from and subsequent to the date of the Merger Closing. Prorated Items shall be settled between SCG and PTR in cash. The Prorated Items are as follows: (a) all Taxes relating to the businesses of the SCG Subsidiaries which shall have accrued and become payable prior to the date of the Merger Closing shall be paid by SCG. All Taxes which shall be (or should be) accrued but unpaid or which have been paid in advance shall be properly prorated as of the date of the Merger Closing between SCG and PTR. In connection with such proration of Taxes, in the event that actual tax figures are not available at the time of delivery of the Post-Closing Accrual Statement, the taxes to be prorated shall be based upon the actual taxes for the preceding year for which actual tax amounts are available and such taxes shall be reprorated upon request of either party made within sixty (60) days of the date that the actual amounts become available, provided that the actual amount is at least 5% more or 5% less than the amount on which the original proration was based, and appropriate payment shall be made within thirty (30) days after such reproration; (b) rents, taxes and other items payable by either of the SCG Subsidiaries under any agreement; 28 (c) the amount of any license or registration fees with respect to any licenses or registrations of either of the SCG Subsidiaries; (d) the amount of charges for water, telephone, electricity and other utilities and fuel; (e) all accrued vacation, termination and severance pay and accrued sickness benefits for all Employees including related, social security taxes, unemployment compensation taxes, workers compensation taxes and premiums and other employment taxes relating to the same; (f) all other operating expenses, including without limitation insurance premiums and amounts payable to service providers, of the SCG Subsidiaries; and (g) all management fees, commissions and other fees and income of the SCG Subsidiaries; (h) all other items not specifically described in subsections (a)-(g) above which are normally prorated in connection with similar transactions. In addition to the Prorated Items, the Post-Closing Accrual Statement shall also reflect any payments made by SCG or either of the SCG Subsidiaries prior to Merger Closing with respect to any Prorated Items. SCG agrees to furnish PTR with such documents and other records as PTR reasonably requests in order to confirm all adjustment and proration calculations reflected on the Post-Closing Accrual Statement. SECTION 6.14 TAX MATTERS. (a) Tax Reporting. The parties agree that they will report, and will cause the SCG Subsidiaries and the surviving corporation in the mergers pursuant to Section 2.1 to report, the Merger on all Tax Returns and other filings as tax- free reorganizations under Section 368(a) of the Code. (b) Tax Sharing Agreements. Any Tax sharing agreement between SCG and an SCG Subsidiary will be terminated as of the Merger Closing and will have no further effect for any taxable year. (c) Returns for Periods Through the Closing Date. SCG will include the income of each of the SCG Subsidiaries (including any deferred income triggered into income by Section 1.1502-13 of the Treasury Regulations and any excess loss accounts taken into income under Section 1.1502-19 of the Treasury Regulations) on the SCG consolidated Tax Returns for all periods through the Merger Closing and pay any Taxes attributable to such income. Each SCG Subsidiary will furnish Tax information to SCG for inclusion in SCG's consolidated Tax Returns for the period which includes the date of the Merger Closing in accordance with each SCG Subsidiary's past custom and practice. SCG will allow PTR a reasonable opportunity to review 29 and comment upon such Tax Returns (including any amended returns) prior to their being filed to the extent that they relate to any SCG Subsidiary. Without the consent of PTR, SCG will take no position on such returns that relate to any SCG Subsidiary that would be inconsistent with prior positions taken by SCG. The income of each SCG Subsidiary will be apportioned to the period up to and including the Merger Closing date and the period after the Merger Closing date by closing the books of each SCG Subsidiary as of the end of the Merger Closing date. (d) Cooperation. SCG and PTR will cooperate fully with each other in connection with (i) the preparation and filing of any Federal, state or local tax returns that include the business and operations of the SCG Subsidiaries for any period prior to and including the date of the Merger Closing, and (ii) any audit examination by any government taxing authority of the returns referred to in clause (i). Such cooperation shall include, without limitation, the furnishing or making available of records, books of account or other materials of the SCG Subsidiaries necessary or helpful for the defense against assertions of any taxing authority as to any tax returns which include operations of the SCG Subsidiaries for any period prior to and including the date of the Merger Closing. (e) Claims. In a case in which PTR or its subsidiaries receives any inquiry, whether oral or written, from any taxing authority relating to any matter which could result in the indemnification of PTR by SCG under Section 9.1, PTR will promptly give SCG written notice (the "Tax Inquiry Notice") of such inquiry. If such Tax Inquiry Notice is not given to SCG within 30 days after the receipt by PTR or its subsidiaries of such an inquiry and PTR's failure to give such Tax Inquiry Notice materially and substantially adversely affects the ability of SCG to contest any claim made by such taxing authority, SCG shall not be liable to PTR under Section 9.1 for such claim. (f) Settlement or Compromise. PTR will not settle or otherwise compromise any claim or issue subject to indemnification under Section 9.1 without SCG's prior written consent, which SCG shall not unreasonably withhold. Nothing contained herein shall require PTR to contest a claim if PTR shall waive the payment by SCG of any amount that might otherwise be payable by SCG pursuant to Section 9.1 hereof in respect of such claim. (g) Notice 88-19 Election. PTR will make an election to be subject to rules similar to the rules of Section 1374 of the Code in accordance with Internal Revenue Service Notice 88-19, 1988-1 C.B. 486, or any future applicable administrative rules or treasury regulations. SECTION 6.15 STANDSTILL. SCG agrees that, during the period beginning on the Closing Date and ending 180 days thereafter, it will not sell or cause to be sold any PTR Common Shares beneficially owned by SCG. 30 ARTICLE VII CONDITIONS SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligation of each party to effect the transactions contemplated hereby and by the Related Agreements shall be subject to the fulfillment at or prior to the Merger Closing of the following conditions: (a) The other party shall have performed in all material respects its agreements contained in this Agreement required to be performed on or prior to the Merger Closing, and the representations and warranties of each such other party shall be true and correct in all material respects on and as of (i) the date made and (ii) the Merger Closing date with the same effect as if made on that date; and each party shall have received a certificate of an executive officer of each such party to that effect; (b) This Agreement, the Related Agreements and the transactions contemplated hereby and thereby (including any amendments to PTR's Declaration of Trust as may be required to allow consummation of such transactions) shall have been approved by the affirmative vote of holders of two-thirds of the PTR Common Shares and the SCG Required Shareholders' Approval shall have been obtained; (c) The PTR Registration Statement and the SCG Warrant Registration Statement shall each have become effective in accordance with the provisions of the Securities Act, and no stop order suspending such effectiveness shall have been issued and remain in effect and no proceeding for that purpose shall have been initiated or threatened by the Commission; (d) PTR and SCG shall have received a study from Arthur Andersen LLP or another nationally recognized independent certified public accounting firm concluding that the accumulated earnings and profits for the SCG Subsidiaries as of December 31, 1996 and the projected earnings and profits of the SCG Subsidiaries for the period beginning January 1, 1997 and ending on the Merger Closing date are in the aggregate less than $5,000,000; (e) Each of PTR and SCG shall have received a favorable opinion of Mayer, Brown & Platt (substantially in the form set forth in Exhibit VIII) to the effect that the mergers described in Section 2.1 each will qualify as a reorganization within the meaning of Section 368 of the Code and that each of PTR, the SCG Subsidiaries, and the subsidiary of PTR that shall be the surviving corporation in such mergers will be a party to the reorganization within the meaning of Section 368(b) of the Code; (f) PTR and SCG shall have received (i) an opinion from Mayer, Brown & Platt (substantially in the form set forth in Exhibit VIII) that the performance of this Agreement will not jeopardize the status of PTR as a "real estate investment trust" under the Code or (ii) a favorable ruling from the Internal Revenue Service to the effect that the Warrant Issuance will be respected for federal income tax purposes as a direct issuance of the SCG Warrants by SCG to the shareholders of PTR and an opinion from Mayer, Brown & Platt (substantially in the form 31 set forth in Exhibit VIII hereto) that the performance of this Agreement will not jeopardize the status of PTR as a "real estate investment trust" under the Code; (g) No preliminary or permanent injunction or other order or decree by any federal or state court which prevents the consummation of the transactions contemplated by this Agreement and the Related Agreements shall have been issued and remain in effect (each party agreeing to use its best efforts to have any such injunction, order or decree lifted); (h) All governmental consents, orders and approvals legally required for the consummation of the transactions contemplated by this Agreement and the Related Agreements shall have been obtained and be in effect at the Merger Closing (including PTR Required Statutory Approvals and SCG Required Statutory Approvals), and all consents, orders and approvals legally required for the consummation of the transactions contemplated by this Agreement and the Related Agreements shall have been obtained; (i) Each of the parties shall have acquired all material consents required from third parties necessary to consummate the transactions contemplated by this Agreement; (j) All agreements set forth on Schedule 7.1 shall have been terminated effective as of the Closing; and (k) SCG shall have forgiven all indebtedness owing to it from each SCG Subsidiary. SECTION 7.2 CONDITIONS TO OBLIGATIONS OF PTR. Unless waived by PTR, the obligation of PTR to effect the transactions contemplated hereby and by the Related Agreements shall be subject to the fulfillment at or prior to the Merger Closing of the following additional conditions: (a) The Special Committee of the PTR Board (the "PTR Special Committee") shall have received from Robertson, Stephens & Co., or another investment banking firm satisfactory to the PTR Special Committee, a written opinion to the effect that, as of the date of the Proxy Statement and the SCG Warrant Prospectus, the consideration to be received in the transactions contemplated by this Agreement and by the Related Agreements is fair, from a financial point of view, to PTR and its shareholders (other than SCG), and such opinion shall not have been withdrawn, revoked or modified; (b) SCG shall have executed and delivered to PTR an Amended and Restated PTR Investor Agreement substantially in the form of Exhibit IV hereto; (c) SCG shall have executed and delivered to PTR an Administrative Services Agreement substantially in the form of Exhibit V hereto; (d) SCG shall have executed and delivered to PTR a License Agreement with respect to the name "Security Capital" substantially in the form of Exhibit VI hereto; 32 (e) SCG shall have executed and delivered to PTR a Protection of Business Agreement substantially in the form of Exhibit VII hereto; (f) PTR shall have received a "comfort letter" from the independent public accountants of SCG, dated as of the effective date of the SCG Warrant Registration Statement, with respect to financial information of SCG included or incorporated by reference in the Proxy Statement and the SCG Warrant Registration Statement in form and substance reasonably satisfactory to PTR and customary in scope and substance for "comfort letters" delivered by independent public accountants in connection with registration statements and proxy statements; (g) The SCG Warrants to be issued pursuant to the Warrant Issuance shall have been authorized, upon official notice of issuance, for listing or quotation on the Exchange, if any, on which the SCG Class B Common Shares are authorized for listing or quotation; and (h) No governmental consent, order or approval legally required for the consummation of the transactions contemplated by this Agreement and by the Related Agreements shall have any terms which in the reasonable judgment of PTR, when taken together with the terms of all such consents, orders or approvals, would materially impair the value to PTR and the shareholders of PTR of the transactions contemplated by this Agreement and the Related Agreements (including, without limitation, the value of the SCG Warrants to be received by the shareholders of PTR pursuant to Section 2.2), and no governmental authority shall have promulgated any statute, rule or regulation which, when taken together with all such promulgations, would materially impair the value to PTR and the shareholders of PTR of the transactions contemplated by this Agreement and the Related Agreements (including, without limitation, the value of the SCG Warrants to be received by the shareholders of PTR pursuant to Section 2.2). SECTION 7.3 CONDITIONS TO OBLIGATIONS OF SCG. Unless waived by SCG, the obligation of SCG to effect the transactions contemplated hereby and by the Related Agreements shall be subject to the fulfillment at or prior to the Merger Closing of the additional following conditions: (a) The Affiliate Agreements required to be executed and delivered by affiliates of PTR pursuant to Section 6.4 shall have been executed and delivered as required by Section 6.4; (b) PTR shall have executed and delivered to SCG an Amended and Restated PTR Investor Agreement substantially in the form of Exhibit IV hereto; (c) PTR shall have executed and delivered to SCG an Administrative Services Agreement substantially in the form of Exhibit V hereto; (d) PTR shall have executed and delivered to SCG a License Agreement with respect to the name "Security Capital" substantially in the form of Exhibit VI hereto; 33 (e) SCG shall have received a "comfort letter" from the independent public accountants of PTR, dated as of the effective date of the SCG Warrant Registration Statement, with respect to financial information of PTR included or incorporated by reference in the Proxy Statement and the SCG Warrant Registration Statement in form and substance reasonably satisfactory to SCG and customary in scope and substance for "comfort letters" delivered by independent public accountants in connection with registration statements and proxy statements; and (f) No governmental consent, order or approval legally required for the consummation of the transactions contemplated by this Agreement and by the Related Agreements shall have any terms which in the reasonable judgment of SCG, when taken together with the terms of all such consents, orders or approvals, would materially impair the value to SCG of the transactions contemplated by this Agreement and the Related Agreements (including, without limitation, the value of the PTR Common Shares to be received by SCG pursuant to Section 2.1), and no governmental authority shall have promulgated any statute, rule or regulation which, when taken together with all such promulgations, would materially impair the value to SCG and the shareholders of SCG of the transactions contemplated by this Agreement and the Related Agreements (including, without limitation, the value of the PTR Common Shares to be received by SCG pursuant to Section 2.1). ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.1 TERMINATION. This Agreement may be terminated at any time prior to the Merger Closing, whether before or after approval by the shareholders of PTR and SCG: (a) by mutual consent of each of the parties hereto; (b) unilaterally by either of the parties hereto, so long as such party has not breached any of its obligations hereunder (except for such breaches as are immaterial), if the transactions contemplated hereby shall not have been consummated on or before December 31, 1997 (the "Termination Date"); (c) unilaterally by either of the parties hereto (i) if the other party (A) fails to perform any covenant or agreement in this Agreement in any material respect, and does not cure the failure, in all material respects within 15 business days after the terminating party delivers written notice of the alleged failure or (B) fails to fulfill or complete a condition to the obligations of the terminating party (which condition is not waived) by reason of a breach by the non-terminating party of its obligations hereunder or (ii) if any condition to the obligations of the terminating party is not satisfied (other than by reason of a breach by that party of its obligations hereunder), and it reasonably appears that the condition cannot be satisfied prior to the Termination Date; 34 (d) unilaterally by SCG if PTR, through the PTR Board or PTR Special Committee, either fails to recommend to PTR's shareholders the approval of this Agreement and the transactions contemplated hereby or withdraws, modifies or amends such recommendation; and (e) unilaterally by PTR if SCG, through the SCG Board, either fails to recommend to SCG's shareholders the approval of this Agreement and the transactions contemplated hereby or withdraws, modifies or amends such recommendation. SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this Agreement, as provided in Section 8.1, this Agreement shall forthwith become void, and there shall be no further obligation on the part of any party hereto or their respective officers or directors or trustees (except as set forth in this Section 8.2 and in Sections 6.6 and 6.11 and Article IX, which shall survive such termination). Nothing in this Section 8.2 shall relieve any party from liability for any breach of this Agreement. Upon any termination pursuant to Section 8.1(d), PTR shall pay to SCG all of the documented, out-of-pocket expenses incurred by SCG after the date hereof in connection with the transactions contemplated by this Agreement. Upon any termination pursuant to Section 8.1(e), SCG shall pay to PTR all of the documented, out-of-pocket expenses incurred by PTR after the date hereof in connection with the transactions contemplated by this Agreement. SECTION 8.3 AMENDMENT. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto and in compliance with applicable law; provided, however, this Agreement may not be amended in any material respect following the PTR Shareholders' Approval or SCG Shareholders' Approval. SECTION 8.4 WAIVER. At any time prior to the Merger Closing, each party hereto may (a) extend the time for the performance of any of the obligations or other acts of the other party 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 except PTR Shareholders' Approval or the SCG Shareholders' Approval. Any agreement on the part of a party hereto to any such extension or waiver shall be valid if set forth in an instrument in writing signed on behalf of such party. ARTICLE IX SURVIVAL AND REMEDY; INDEMNIFICATION SECTION 9.1 INDEMNIFICATION. Each party hereto agrees to indemnify (each an "Indemnifying Party") the other party hereto and each of such other party's affiliates (each an "Indemnified Party" and collectively, the "Indemnified Parties") against, and agrees to hold it and them harmless from, any and all liabilities, losses, costs, damages, penalties or expenses (including, without limitation, reasonable attorneys' fees and expenses and costs of investigation and litigation) (collectively, "Losses") incurred or suffered by an Indemnified Party arising out of or in connection with any breach of, or inaccuracy in, (i) to the extent SCG is the Indemnifying Party, any of the representations and warranties or agreements of SCG under this Agreement and (ii) to the extent PTR is the Indemnifying Party, the representations and 35 warranties of the PTR set forth in Section 3.3 and Section 3.4(a) of this Agreement. In addition, SCG agrees to indemnify PTR and each of PTR's affiliates (other than SCG, but including, after the Merger Closing, the surviving corporation in the merger pursuant to Section 2.1) (PTR and such included affiliates being included within the terms "Indemnified Party" and "Indemnified Parties" as used in the other sections of this Article IX) against, and agrees to hold it and them harmless from, any and all Losses incurred or suffered by it or them arising out of or in connection with (X) any breach of, or inaccuracy in, any of the representations and warranties of PTR set forth in this Agreement other than those set forth in Section 3.3 or Section 3.4(a), (Y) any acts or omissions of either of the SCG Subsidiaries in their respective capacities as REIT Manager and Property Manager prior to the Merger Closing, but only to the extent that such breach, inaccuracy, act, or omission arises out of or results from the gross negligence, bad faith, or willful misconduct of either SCG Subsidiary or (Z) any income tax liabilities arising pursuant to Treasury Regulations section 1.1502-6 or any analogous state or local provision. SECTION 9.2 LIMITATION OF INDEMNIFICATION. An Indemnified Party shall not be entitled to indemnification under this Article IX until the aggregate of all Losses with respect to which such Indemnified Party would otherwise be entitled to indemnification under this Article IX exceeds $250,000, in which event the Indemnified Party shall be entitled to all such Losses including such $250,000; provided, however, that none of the indemnification obligations hereunder (other than for Losses arising in connection with a breach of the representations and warranties set forth in Section 4.8 or under clause (Z) of Section 9.1) shall exceed the Fair Market Value of the PTR Common Shares received by SCG pursuant to Section 2.1. SECTION 9.3 NOTICE OF CLAIMS; ASSUMPTION OF DEFENSE. The Indemnified Party shall give prompt notice to the Indemnifying Party, in accordance with the terms of Section 10.1 and in the case of a tax inquiry in compliance with the terms of Section 6.14(e), of the assertion of any claim, or the commencement of any suit, action or proceeding by any party in respect of which indemnity may be sought hereunder, specifying with reasonable particularity the basis therefor and giving the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request. The Indemnifying Party may, at its own expense, (a) participate in and (b) upon notice to the Indemnified Party and upon the Indemnifying Party's written agreement that the Indemnified Party is entitled to indemnification pursuant to Section 9.1 for Losses arising out of such claim, suit, action or proceeding, at any time during the course of any such claim, suit, action or proceeding, assume the defense thereof; provided that (x) the Indemnifying Party's counsel is reasonably satisfactory to the Indemnified Party and (y) the Indemnifying Party shall thereafter consult with the Indemnified Party upon its reasonable request from time to time with respect to such claim, suit, action or proceeding; provided, however, that the Indemnified Party shall have the right to retain its own counsel, with the reasonable fees and expenses to be paid by the Indemnifying Party, if the Indemnified Party reasonably believes that representation of it by the counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interest between the Indemnified Party and any other party represented by such counsel in such proceeding. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the right (but not the duty) to participate in the defense thereof and to employ counsel, at its own expense, separate from the counsel 36 employed by the Indemnifying Party. Whether or not the Indemnifying Party chooses to defend or prosecute any such claim, suit, action or proceeding, all of the parties hereto shall cooperate in the defense or prosecution thereof. SECTION 9.4 SETTLEMENT OR COMPROMISE. Any settlement or compromise made or caused to be made by the Indemnified Party or the Indemnifying Party, as the case may be, of any claim, suit, action or proceeding of the kind referred to in Section 9.3 shall also be binding upon the Indemnifying Party or the Indemnified Party, as the case may be, in the same manner as if a final judgment or decree had been entered by a court of competent jurisdiction in the amount of such settlement or compromise. No party shall settle or compromise any such claim, suit, action or proceeding without the prior written consent of the other party, which shall not be unreasonably withheld. SECTION 9.5 FAILURE OF INDEMNIFYING PARTY TO ACT. In the event that the Indemnifying Party does not elect to assume the defense of any claim, suit, action or proceeding within a reasonable time of being notified by the Indemnified Party, then any failure of the Indemnified Party to defend or to participate in the defense of any such claim, suit, action or proceeding or to cause the same to be done, shall not relieve the Indemnifying Party of its obligations hereunder. SECTION 9.6 SURVIVAL. The indemnification provided by this Article IX shall be a continuing right to indemnification and shall survive the closing of the transactions contemplated hereby and the expiration or termination of this Agreement (i) for a period of two years following the Merger Closing with respect to any indemnification not in connection with a breach of the representations and warranties set forth in Section 4.8 and (ii) until the expiration of the statute of limitations (as it may be extended) with respect to each tax year or period pertinent to the representations and warranties set forth in Section 4.8 with respect to any indemnification in connection with a breach thereof; and the Indemnified Party shall be entitled to bring an action thereon only if the Indemnified Party has given the Indemnifying Party written notice within such two-year period or statute-of-limitations period, as the case may be. SECTION 9.7 WAIVER OF COUNTERCLAIMS FOR INDEMNIFICATION. If and to the extent that SCG, by virtue of being an Indemnifying Party hereunder, would have a claim against any Indemnified Party for indemnification against Losses under the REIT Management Agreement or Property Management Agreement, SCG hereby waives and forever releases the Indemnified Parties from any such claim. ARTICLE X GENERAL PROVISIONS SECTION 10.1 NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, sent via a recognized overnight courier with delivery confirmed in writing or sent via facsimile to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): 37 (a) If to PTR, to: Security Capital Pacific Trust 125 Lincoln Avenue Santa Fe, New Mexico 87501 Attention: R. Scot Sellers Fax: (505) 989-8533 with copies to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Attention: Edward J. Schneidman Fax: (312) 701-7711 Munger Tolles & Olson LLP 355 South Grand Avenue, 35th Floor Los Angeles, California 90071 Attention: R. Gregory Morgan Fax: (213) 687-3702 (b) If to SCG, to: Security Capital Group Incorporated 125 Lincoln Avenue, Suite 300 Santa Fe, New Mexico 87501 Attention: Jeffrey A. Klopf Fax: (505) 988-8920 with a copy to: Mayer, Brown & Platt 190 South LaSalle Street Chicago, Illinois 60603 Attention: Edward J. Schneidman Fax: (312) 701-7711 SECTION 10.2 INTERPRETATION. The 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 10.3 MISCELLANEOUS. This Agreement (including the documents and instruments referred to herein) (a) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, among the parties, or any of them, with 38 respect to the subject matter hereof and thereof; (b) shall not be assigned by operation of law or otherwise; and (c) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Maryland (without giving effect to the provisions thereof relating to conflicts of law). SECTION 10.4 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. SECTION 10.5 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of the parties hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. SECTION 10.6 LIMITATION OF LIABILITY. Any obligation or liability whatsoever of PTR which may arise at any time under this Agreement or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be satisfied, if at all, out of PTR's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of its shareholders, trustees, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. SECTION 10.7 NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto has jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the parties hereto and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement. * * * * * 39 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective officers thereunto duly authorized as of the date first written above. SECURITY CAPITAL PACIFIC TRUST By: /s/ R. Scot Sellers ------------------------------- R. Scot Sellers Managing Director SECURITY CAPITAL GROUP INCORPORATED By: /s/ Jeffrey A. Klopf ------------------------------- Jeffrey A. Klopf Senior Vice President 40 EX-10.1 3 THIRD AMENDED AND RESTATED INVESTOR AGREEMENT EXHIBIT 10.1 THIRD AMENDED AND RESTATED INVESTOR AGREEMENT THIS THIRD AMENDED AND RESTATED INVESTOR AGREEMENT (this "Agreement"), dated as of __________, 1997, is by and between Security Capital Pacific Trust, a Maryland real estate investment trust (the "Company"), and Security Capital Group Incorporated, a Maryland corporation ("SCG"). W I T N E S S E T H - - - - - - - - - - WHEREAS, the Company and SCG have entered into that certain Merger and Issuance Agreement, dated as of March 24, 1997, (the "Merger Agreement"), pursuant to which, among other things, SCG will cause certain of its subsidiaries to be merged into a subsidiary of the Company in exchange for the Company's common shares of beneficial interest, $0.01 par value per share (the "Common Shares"); WHEREAS, the Company and SCG are parties to that certain Investor Agreement, dated and amended and restated as of February 23, 1990, which was further amended by that certain Amended and Restated Investor Agreement dated as of May 14, 1991, by that certain Supplemental Agreement dated as of May 14, 1991, and by that certain Second Amended and Restated Investor Agreement dated as of July 11, 1994 (as so amended and restated and further amended, the "Original Agreement"); WHEREAS, the Company and SCG have also entered into that certain Supplemental Investment Agreement, dated as of October 1, 1991, that certain Second Supplemental Investment Agreement dated as of December 7, 1993, and that certain Third Supplemental Investment Agreement dated as of December 6, 1994 (collectively the "Investment Agreements"); WHEREAS, the Company and SCG desire to amend and restate the Original Agreement to clarify certain ambiguities and update the Original Agreement, to consolidate the provisions of the Investment Agreements with the provisions of the Original Agreement and thereby terminate the Investment Agreements, and to reflect the continuing relationship between the Company and SCG after consummation of the transactions contemplated by the Merger Agreement (the "Transaction"); and WHEREAS, the execution and delivery of this Agreement is a condition to the consummation of the Transaction. NOW, THEREFORE, in consideration of the premises, the mutual covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. Definitions. In addition to the terms defined elsewhere herein, the following terms shall have the following meanings: "Affiliate" shall have the meaning ascribed thereto in Rule 12b-2 under the Exchange Act as in effect on the date hereof; provided, that neither party hereto shall be deemed to be an Affiliate of the other party hereto for purposes of this Agreement unless otherwise stated herein. "Approval Rights" shall have the meaning set forth in Section 5(d) of this Agreement. "Beneficial Owner" shall mean any Person deemed to be a "Beneficial Owner" of or to "Beneficially Own" any Common Shares in accordance with the term "beneficial ownership" as defined in Rule 13d-3 under the Exchange Act. "Board" shall mean the Board of Trustees of the Company. "Bylaws" shall mean the Company's Amended and Restated Bylaws, as now in effect or as amended from time to time. "Capital Expenditures" shall mean, on an annual basis, an amount equal to the product of (a) the sum of the total square footage with respect to all completed properties of the Company and its consolidated subsidiaries as of the last day of each of the immediately preceding five calendar quarters, divided by five, and (b) $0.15. "Commission" shall mean the Securities and Exchange Commission or any successor agency or entity thereto. "Common Shares" shall have the meaning set forth in the preamble of this Agreement. "Company" shall have the meaning set forth in the first paragraph of this Agreement. "Declaration of Trust" shall mean the Company's Restated Declaration of Trust, as amended and supplemented, as now in effect or as amended from time to time. "Disqualified Shares" shall mean any of the Company's shares of beneficial interest which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable or exercisable) (a) matures or is subject to mandatory redemption, pursuant to a sinking fund obligation or otherwise, (b) is convertible into or exchangeable or exercisable for a Liability or Disqualified Shares during the term of this Agreement, (c) is redeemable during the term of this Agreement at the option of the holder of such security or (d) otherwise requires any payments by the Company during the term of this Agreement. "Distribution" shall mean, with respect to any shares of beneficial interest or other equity security of the Company, (a) the retirement, redemption, purchase or other acquisition for value of those securities by the Company, (b) the declaration or payment of any dividend on or with respect to those securities by the Company, (c) any loan or advance by the Company to, or other investment by the Company in, the holder of any of those securities and (d) any other payment by the Company with respect to those securities. -2- "Fixed Charge Coverage Ratio" shall mean, as of any date, the ratio of (a)(i) Funds from Operations, plus (ii) Interest Expense, minus (iii) Capital Expenditures, to (b) the sum of (i) Interest Expense, plus (ii) Distributions of any kind or character or other proceeds paid or payable with respect to Disqualified Shares, plus (iii) any regularly scheduled principal payments on Total Indebtedness (excluding (1) any regularly scheduled principal payments on Company's revolving line of credit with Texas Commerce Bank National Association and Wells Fargo Realty Advisors Funding, Incorporated, or any renewals, extensions or replacements thereof, and (2) any regularly scheduled principal payments on any Total Indebtedness which pays such Total Indebtedness in full, but only to the extent that the amount of such final payment is greater than the scheduled principal payment immediately preceding such final payment), in each case for the four fiscal quarters ending on the date of determination. "Funds from Operations" shall mean for the Company and its consolidated subsidiaries, net income plus depreciation and amortization (exclusive of amortization of financing costs), all as determined in accordance with generally accepted accounting principles; provided, that there shall not be included in such calculation (a) any proceeds of any insurance policy other than rental or business interruption insurance received by the Company, (b) any gain or loss which is classified as "extraordinary" in accordance with generally accepted accounting principles or (c) capital gains and taxes on capital gains (in each case exclusive of such amounts that are attributable to PTR Development Services Incorporated). Funds from Operations shall be calculated as if all minority interests in the Company's consolidated subsidiaries have been converted into capital securities of the Company. Funds from Operations shall not be increased or decreased by gains or losses from sales of properties (in each case exclusive of amounts that are attributable to PTR Development Services Incorporated). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Group" shall have the meaning assigned thereto in Section 13(d)(3) of the Exchange Act. "Interest Expense" shall mean all of the Company's paid, accrued or capitalized interest expense on it Total Indebtedness (whether direct, indirect, or contingent, and including interest on all convertible liabilities), but excluding Interest Expense that is not paid or payable in cash and excluding Interest Expense for the construction of Company projects which is capitalized in accordance with generally accepted accounting principles. "Interest Expense Coverage Ratio" shall mean, as of any date, the ratio of (a) the sum of (i) the Company's Funds from Operations and (ii) the Company's Interest Expense to (b) the sum of (i) Interest Expense and (ii) Distributions of any kind or character or other proceeds paid or payable with respect to Disqualified Shares, of the Company and is consolidated subsidiaries for the four fiscal quarters ending on the date of determination. "Liabilities" shall mean, without duplication, (a) any obligations required by generally accepted accounting principles to be classified upon the Company's balance sheet as liabilities, (b) any liabilities secured (or for which the holder of the Liability has an existing right, remedy, power or privilege, contingent or otherwise, to be so secured) by any Lien existing on property -3- owned or acquired by the Company, (c) any obligations that have been (or under generally accepted accounting principles should be) capitalized for financial reporting purposes and (d) any guaranties, endorsements and other contingent obligations with respect to Liabilities or obligations of others. "Lien" shall mean any lien, mortgage, security interest, pledge, assignment, charge, title retention, agreement or encumbrance of any kind and any other substantially similar arrangement for a creditor's claim to be satisfied from assets or proceeds prior to the claims of other creditors or the owners. "Lender" shall have the meaning set forth in Section 7(i) of this Agreement. "Member" shall have the meaning set forth in Section 4 of this Agreement. "Nominee" shall have the meaning set forth in Section 5(a) of this Agreement. "Person" shall mean any individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust, unincorporated organization, or other entity. "Registrable Securities" shall have the meaning set forth in Section 7(h) of this Agreement. "SCG" shall have the meaning set forth in the first paragraph of this Agreement. "SCG Group" shall have the meaning set forth in Section 4 of this Agreement. "Securities Act" shall mean the Securities Act of 1933, as amended. "Senior Officer" shall mean any Senior Vice President, Managing Director, President, Chairman or Co-Chairman of the Company. "Total Indebtedness" shall mean all Liabilities of the Company that are (a) a Liability for borrowed money, (b) evidenced by bonds, debentures, notes or similar instruments, (c) an obligation to pay the deferred purchase price of property or services, except trade payables arising in the ordinary course of business, (d) secured by a Lien existing on any property or any interest therein, whether or not such Liability shall have been assumed by the Company, (e) any capital lease or sublease that has been (or under generally accepted accounting principles should be) capitalized on a balance sheet, (f) a guaranty, endorsement or other contingent obligation (other than endorsements in the ordinary course of business of negotiable or documents for deposit or collection) and (g) accounts payable, dividends of any kind or character or other proceeds payable with respect to any shares, accrued expenses and other liabilities which in the aggregate are in excess of 5% of the amount of the Company's total assets (determined in accordance with generally accepted accounting principles) plus the amount of any accumulated depreciation with respect to such assets, as of the date of determination. -4- "Transaction" shall have the meaning set forth in the preamble of this Agreement. "Value" shall mean the reported last sale price of a unit of security regular way on a given day or, in case no such sale takes place on such day, the average of the reported closing bid and asked prices regular way, in each case on the New York Stock Exchange Composite Tape, or, if such securities are not listed or admitted to trading on such exchange, on the principal national securities exchange on which such securities are listed or admitted to trading; or, if such securities are not listed or admitted to trading on any national securities exchange, the closing sales price, or, if there is no closing sales price, the average of the closing bid and asked prices, in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System, or, if not so reported, as reported by the National Quotation Bureau, Incorporated, or any successor thereof; or, if not so reported, the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose; or, if no such prices are furnished, the fair market value of such security as estimated by a nationally recognized investment banking firm selected by SCG (subject to the Company's approval, which will not be unreasonably withheld), which estimate shall be prepared at the expense of the Company; provided, however, that any determination of the "Value" of a security hereunder shall be based on the assumption that such security is freely transferable without registration under the Securities Act. "Violation" shall have the meaning set forth in Section 7(f)(i) of this Agreement. 2. Representations and Warranties of the Company. The Company hereby represents and warrants to SCG as follows: (a) Organization and Standing. The Company has been duly organized and is validly existing as a real estate investment trust in good standing under the laws of the State of Maryland, with full power and authority to own its properties and conduct its business as now conducted and as proposed by it to be conducted. (b) No Defaults. The performance of this Agreement and the consummation of the transactions herein contemplated will not conflict with the Declaration of Trust, Bylaws or other governing documents of the Company. (c) Authority. The Company has full right, power and authority to enter into this Agreement and to carry out its obligations hereunder. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company enforceable against it in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and judicial limitations on the right of specific performance or by general equitable principles, and except as enforceability of indemnification provisions hereof may be limited by federal securities laws. -5- (d) Investment Company Act. The Company is not required to be registered under the Investment Company Act of 1940, as amended. 3. Representations and Warranties of SCG. SCG hereby represents and warrants to the Company as follows: (a) Organization and Standing. SCG has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Maryland, with corporate power and authority to own its properties and conduct its business as now conducted. (b) Authorization. SCG has full right, power and authority to enter into this Agreement and to carry out its obligations hereunder. This Agreement has been duly authorized, executed and delivered by SCG and constitutes a valid and binding agreement of SCG enforceable against it in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization or other laws affecting the enforcement of creditors' rights generally and judicial limitations on the right of specific performance or by general equitable principles. The performance by SCG of all of its obligations under this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument to which SCG is a party or by which SCG is bound or to which any of the property or assets of SCG is subject, nor will any such action result in any violation of the provisions of the Articles of Incorporation or the By-Laws of SCG or any applicable law or statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over SCG or any of its properties. (c) Investment Company Act. SCG is not required to be registered under the Investment Company Act of 1940, as amended. 4. Corporate Configuration. SCG and its affiliates, including the Company (collectively, the "SCG Group and each, a "Member"), constitute a group of businesses engaged in real estate research, investment and management. Since inception, the SCG Group has compiled an excellent record of growth in its business. The parties recognize that the SCG Group has a distinct character that is reflected in its objectives, principles, operating policies and management style and that the SCG Group's overall objective is to create the maximum value for Members and the shareholders thereof. The parties further recognize that an important element of the SCG Group's success has been its ability to attract, motivate, develop and retain talented individuals. Historically, this has been accomplished by combining the operational aspects of a Member with the organizational, management, technical and financial strengths of SCG. Following the consummation of the Transaction, the parties desire that the distinctive character of the SCG Group continue as between the Company, SCG and the other Members and, accordingly, agree to the following provisions of this Section 4. -6- (a) Statement of Purpose and Objectives. The parties believe that the creation of value for the shareholders of the Company and the other Members is dependent in large part on the ability of the Members to attract, motivate, develop and retain talented individuals. The parties further recognize that each Member enjoys the benefits and support derived from its affiliates within the SCG Group and that these benefits and support are important for the continued success of each of the Members. In that regard, the Company and SCG agree that the provisions of this Section 4 are necessary to continue the development of a corporate structure and depth of management capable of sustaining a high rate of value-creation over a long period of time. Further, the Company and SCG agree that it is critical to the accomplishment of its goals to (i) recognize the intrinsic value of each employee as an individual, (ii) treat each employee and applicant for employment without discrimination as to race, creed, color, sex, age, orientation or national origin, (iii) maintain an atmosphere that combines professional achievement with personal enjoyment, (iv) provide training opportunities that permit employees to perform their jobs in a better and more meaningful manner, (v) provide each employee with opportunity for career growth and advancement within the SCG Group based upon individual ability and performance, (v) recognize the value and potential of self- motivation of people who thoroughly understand their jobs so that individual initiative and thought will be encouraged in the accomplishment of all tasks, (vi) compensate employees fairly and competitively and (vii) maintain and enhance the strengths of each Member. (b) Transferability of Employees. To accomplish the foregoing objectives, each of the parties hereto agrees that SCG may notify the Company's officers and employees of employment opportunities with other Members of the SCG Group (including SCG) and may make such opportunities available to such officers and employees; provided, that prior to making any such opportunity available to any Senior Officer, SCG shall first give the Board written notice of its intention to make any such opportunity available to a Senior Officer at least 14 days prior to any discussions with a Senior Officer regarding such opportunity. No Member (or any director, trustee, officer, employee or shareholder of such Member) shall have any liability to any other Member (or any director, trustee, officer, employee or shareholder of such Member) as a result of the compliance by such Member with the provisions of this Section 4. In the event that any claims are made by any Person as a result of the compliance by a Member with the provisions of this Section 4, each Member shall be responsible for its own costs of defending against such claim. (c) Termination. The provisions of this Section 4 shall continue and remain in full force and effect until such time as the Company shall cease to be a Member. 5. Covenants of the Company. The Company covenants and agrees with SCG as follows: (a) Board Representation. From and after the date hereof and for so long thereafter as SCG Beneficially Owns 10% or more of the outstanding Common Shares, -7- the Company shall not increase the number of members of its Board to more than eight (8), and SCG shall be entitled to designate one or more Persons for nomination to the Board (such Person, a "Nominee") as follows and the Company will use its best efforts to cause the election of such Nominee or Nominees: (i) So long as SCG Beneficially Owns at least 10% but less than 25% of the outstanding Common Shares, one (1) Nominee; (ii) So long as SCG Beneficially Owns 25% or more of the outstanding Common Shares, that number of Nominees as shall bear approximately the same ratio (rounded down to the nearest whole number) to the total number of members of the Board as the number of Common Shares Beneficially Owned by SCG bears to the total number of outstanding Common Shares, provided, that (A) SCG shall be entitled to designate not more than three (3) Nominees so long as the Board consists of not more than eight (8) members; and (B) any Person who is employed by SCG or who is an employee or a director of any corporation of which SCG is a 25% shareholder (except for the Company) shall be deemed to be a designee of SCG. (b) File Reports. For as long as SCG shall continue to Beneficially Own any Common Shares, the Company shall file on a timely basis all annual, quarterly and other reports required to be filed by it under Sections 13 and 15(d) of the Exchange Act, and the Rules and Regulations of the Commission thereunder, as amended from time to time. (c) Advice of Actions. Without first having consulted with the Nominee or Nominees of SCG designated by SCG in writing, the Company will not seek approval by the Board of any proposal relating to: (i) Budget. The Company's annual budget. (ii) Expenses. Incurring expenses in any year exceeding (A) any line item in the annual budget by the greater of $500,000 or 20% or and (B) the total expenses set forth in the annual budget by 15%. (iii) Assets. The acquisition or sale of any assets in any single transaction or any series of related transactions in the ordinary course of the Company's business where the aggregate purchase price paid or received by the Company exceeds $25,000,000. (iv) Contracts. Entering into any new contract with a service provider (A) for investment management, property management, or leasing services or (B) that reasonably contemplates annual contract payments by the Company in excess of $1,000,000. -8- Notwithstanding the foregoing, the Company shall have no obligation to accept or comply with any advice offered by SCG or its designated Nominees in any consultation pursuant to this Section 5(c). (d) Approval Rights. So long as SCG Beneficially Owns 25% or more of the Common Shares outstanding, SCG shall have the right (each, an "Approval Right") to approve the following matters as proposed by the Company: (i) Equity Securities. The (A) issuance or sale of any Common Shares, (B) grant of any rights, options or warrants to subscribe for or purchase Common Shares or any security convertible into or exchangeable for Common Shares or (C) the issuance or sale of any security convertible into or exchangeable for Common Shares, in any such case, at a price per share less than the Value of a Common Share on the date of such issuance, sale or grant. For purposes of the preceding sentence Common Shares shall be deemed to be issued at less than Value if the price per share for which Common Shares issuable upon exercise of rights, options or warrants or upon conversion or exchange of convertible or exchangeable securities is less than the Value on the date of issuance. The provisions of this Section 5(d)(i) shall not apply to (A) the sale or grant of any options to purchase shares of beneficial interest of the Company pursuant to the provisions of any benefit plan approved by the shareholders of the Company, (B) the issuance or sale of shares of beneficial interest upon the exercise of any rights, options or warrants granted, or upon the conversion or exchange of any convertible or exchangeable security issued or sold, prior to the date of this Agreement or in accordance with the provisions of this Section 5, (C) the issuance and sale of any shares of beneficial interest of the Company pursuant to any dividend reinvestment and share purchase plan approved by the Board or (D) the issuance, grant of distribution of rights, options or warrants to all holders of Common Shares entitling them to subscribe for or purchase shares of beneficial interest of the Company or securities convertible into or exercisable for shares of beneficial interest. (ii) Fixed Charges. The issuance and sale of any Disqualified Shares if, as a result thereof, the Company's Fixed Charge Coverage Ratio would be less than 1.4 to 1.0. (iii) Benefit Plans and Compensation. The adoption of any employee benefit plan pursuant to which shares of beneficial interest of the Company or any securities convertible into shares of beneficial interest of the Company may be issued and any action with respect to the compensation of the Senior Officers (including the granting or award of any bonuses or share-based incentive awards); provided, however, that SCG will not have an Approval Right as to any action with respect to the compensation of a Senior Officer as to whom SCG has delivered a notice under Section 4, for so long as the employment opportunity that is the subject of such notice is available to such Senior Officer. -9- (iv) Indebtedness. The incurrence of any additional indebtedness (including guarantees and including renegotiations and restructurings of existing indebtedness) if, as a result thereof, the Company's Interest Expense Coverage Ratio would be less than 2.0 to 1.0. Notwithstanding anything to the contrary contained herein, the Approval Rights of SCG shall terminate and be of no further force or effect at such time as SCG Beneficially Owns less than 25% of the Common Shares outstanding. (e) Approval Right Procedures. The Company shall submit any proposed action with respect to any Approval Right for consideration by SCG, together with information which sets forth in reasonable detail the background and reasons for such action, reasonably in advance of the date any action would be required to be taken by or on behalf of the Company to permit SCG to review the information and make an informed decision. The approval of SCG pursuant to Section 5(d), other than where written approval is expressly required, shall be deemed to have been received if SCG does not communicate otherwise to the Company by the fifteenth day after SCG shall have received a written request for such approval. (f) Company Support. If there is a final judicial determination before any court of competent jurisdiction that any or all of the Approval Rights are not enforceable or exercisable in any manner by SCG, whether by reason of Maryland statutory or common law or otherwise, the Company agrees to defer any action proposed by the Company which is the subject of any of the Approval Right which was so determined not to be enforceable or exercisable and SCG shall have the right to cause the Company to call a special meeting of shareholders at which meeting SCG may present an alternative slate of trustees for election (which slate may include some of the same nominees as the then current Board). The Company and SCG agree that they will each use their best efforts to prepare and file with the Commission definitive proxy material, to have such material cleared by the Commission and to mail such material to the Company's shareholders, as soon as practicable. The Company shall in any event provide SCG with a list of the shareholders of record for such meeting and a complete list of non- objecting beneficial holders and deposits in securities positions listings as of such date. The Company and SCG shall not, and their respective directors, trustees, officers, employees and agents shall not, take any action that would have the effect of delaying, preventing or impeding the special meeting of shareholders or the mailing of proxy materials in respect of such meeting, including the commencement of any action, suit or proceeding at law or in equity seeking to enjoin, delay or impede the special meeting or the mailing of proxy materials in respect of such meeting. The parties shall each bear their own costs in connection with any special meeting of shareholders pursuant to this Section 5(f); provided, that the Company shall bear all costs typically borne by companies in connection with annual meetings of shareholders. (g) Non-interference. The Company shall not provide any Person with rights which are similar or more extensive than the Approval Rights provided to SCG hereunder -10- and shall not grant to any Person or Group the right to nominate a greater number of members to the Company's Board than the number SCG is entitled to designate pursuant to Section 5(a), in each case, without the prior approval of SCG, which may be withheld in SCG's sole and absolute discretion; the Company shall not enter into any agreement or arrangement with any Person which shall impede or impair the Approval Rights in any manner. (h) Inspection. At any time during regular business hours and as often as reasonably requested of the Company's officers, the Company will permit SCG or any authorized employee, agent or representative of SCG to examine and make copies and abstracts from the records and books of account of, and to visit the properties of, the Company and to discuss the affairs, finances, and accounts of the Company with any of its officers or directors; provided, that all costs and expenses of such inspection shall be borne by SCG. (i) Continuing Exemption. The Company hereby covenants and agrees that (i) the Board resolution exempting SCG from the application of the provisions of Article 2, Section 7(c) of the Declaration of Trust to the extent that SCG acquires or shall have acquired securities of the Company giving it Beneficial Ownership of an aggregate of not more than 49% of the outstanding Common Shares, (ii) the Board resolution irrevocably exempting SCG from the application of Title 3, Subtitle 6 of the Corporations and Associations Article of the Annotated Code of Maryland entitled "Special Voting Requirements" (Section 3-601 through and including Section 3-604) so long as SCG Beneficially Owns 49% or less of the outstanding Common Shares, and (iii) the Bylaw amendment exempting SCG from the application of the provisions of Title 3, Subtitle 7 of the Corporations and Associations Article of the Annotated Code of Maryland entitled "Voting Rights of Certain Control Shares" (Section 3-701 through and including Section 3-709) with respect to any Common Shares acquired in connection with the Original Agreement, will not be rendered ineffective, and will continue to exempt the transactions contemplated hereby from the application of the provisions of Article 2, Section 7(c) of the Declaration of Trust, and Title 3, Subtitles 6 and 7 of the Corporations and Associations Article of the Annotated Code of Maryland, notwithstanding the Beneficial Ownership of SCG of more than 49% of the outstanding Common Shares, when such ownership results solely from (i) a reduction in the number of outstanding Common Shares as a result of acquisitions of Common Shares by the Company, or (ii) any other action taken solely by the Company or any Person other than SCG or its Affiliates. 6. Covenants of SCG. (a) During the term of this Agreement, neither (x) SCG nor (y) any person acting in concert with SCG pursuant to a written or oral agreement to acquire Beneficial Ownership of more than 49% of the outstanding Common Shares, will, directly or indirectly (including through the acquisition of ownership of more than 25% of the interest in a Person owning Common Shares or securities convertible or exchangeable into or exercisable for Common Shares) (it being understood that SCG shall not structure -11- its shareholder interests or its ownership interests in other entities so as to intentionally circumvent the provisions of this Section 6(a)), acquire any Common Shares or securities convertible or exchangeable into or exercisable for Common Shares if the effect of such acquisition would be to increase the Beneficial Ownership of all Common Shares then owned by the Persons included within clauses (x) and (y) of this Section 6(a) to greater than 49% of the outstanding Common Shares; provided that, such Persons or SCG may acquire Common Shares or securities convertible or exchangeable into or exercisable for Common Shares without regard to the foregoing limitation pursuant to a tender offer for Company securities that meets the following conditions: (i) the tender offer is made for all Company securities not held by SCG; (ii) the consideration offered is all cash and is offered equally to all holders; and (iii) the tender offer is held open for at least 90 days. (b) The Board shall have no restrictions on its ability to oppose any such tender offer, including the activation of its shareholder defenses and attempting to find better offers. (c) Notwithstanding anything in this Agreement to the contrary, SCG may make a tender offer for Common Shares at any time and having whatever terms that SCG deems appropriate (including terms inconsistent with (i) - (iii), inclusive, of Section 6(a)), and purchase any Common Shares tendered, if such tender offer is made in response to a tender offer made by a party which is not an Affiliate of SCG and is not instigated by SCG for the purpose of avoiding its obligations under this Agreement. (d) During the term of this Agreement, neither SCG, any officer or director of SCG nor any Person that owns, directly or indirectly, more than 20% of SCG's then outstanding voting securities will, directly or indirectly, act in concert with any other Person or Persons or form a Group for the purpose of acquiring Common Shares or securities convertible or exchangeable into or exercisable for Common Shares; provided, however, nothing in this Section 6(d) shall prohibit SCG from acquiring Common Shares or securities convertible or exchangeable into or exercisable for Common Shares pursuant to Section 6(a) of this Agreement. 7. Registration Rights. (a) Demand. At any time after the date hereof and for so long thereafter as SCG shall continue to own any Registrable Securities, SCG may request registration of all or any part of its Registrable Securities pursuant to Rule 415 under the Securities Act by delivering written notice to the Company specifying the number of Registrable -12- Securities that SCG desires to sell, and the Company shall use its reasonable efforts to effect the registration of such Registrable Securities under the Securities Act. (b) Registration Procedures. If and whenever the Company is required by any of the provisions of this Section 7 to use its reasonable efforts to effect the registration of any of the Registrable Securities under the Securities Act, the Company shall: (i) prepare and file with the Commission a registration statement with respect to such securities and use its reasonable efforts to cause such registration statement to become effective and remain effective for as long as shall be necessary to complete the distribution of at least 90% of the Registrable Securities so registered; (ii) prepare and file with the Commission such amendments and supplements to such registration statement, and the prospectus used in connection therewith, as may be necessary to keep such registration statement effective for so long as shall be necessary to complete the distribution of at least 90% of the Registrable Securities so registered and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all securities covered by such registration statement whenever SCG shall desire to sell or otherwise dispose of the same within such period; (iii) furnish to SCG such numbers of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement, including any preliminary prospectus, and any amendment or supplement thereto, and such other documents, as may be reasonably requested in order to facilitate the sale or other disposition of the Registrable Securities owned by SCG; (iv) use its reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as SCG shall reasonably request, and do any and all other acts and things reasonably requested by SCG to assist the public sale or other disposition by SCG in such jurisdictions of the securities owned by SCG, except that the Company shall not for any such purpose be required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified or to file therein any general consent to service of process; (v) otherwise use its reasonable efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months, beginning with the first fiscal quarter beginning after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; -13- (vi) use its reasonable efforts to list such securities on any securities exchange or quotation system on which any securities of the Company are then listed, if the listing of such securities is then permitted under the rules of such exchange or quotation system; and (vii) notify SCG, at any time when a prospectus relating to the Registrable Securities is required to be delivered under the Securities Act, of the happening of any event of which it has knowledge as a result of which the prospectus included in such registration statement, as then in effect, contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. (c) Number of Registrations. SCG shall be entitled to request one registration of its Registrable Securities pursuant to Section 7(a) for each $100 million in Value of Registrable Securities Beneficially Owned by SCG on the date of such request. (d) Company's Ability to Postpone. The Company shall have the right to postpone the filing of a registration statement under this Section 7 for a reasonable period of time (not exceeding 60 days) if the Company furnishes SCG with a certificate signed by any Senior Officer stating that, in its good faith judgment, the Board has determined that effecting the registration at such time would adversely affect a material financing, acquisition, disposition of assets or shares, merger or other comparable transaction or would require the Company to make public disclosure of information the public disclosure of which would have a material adverse effect upon the Company. (e) Expenses. All expenses incurred in the registration of Registrable Securities under this Agreement shall be paid by the Company. The expenses shall include, without limitation, the expenses of preparing the registration statement and the prospectus used in connection therewith and any amendment or supplement thereto, printing and photocopying expenses, all registration and filing fees under Federal and state securities laws, and expenses of complying with the securities or blue sky laws of any jurisdictions; provided, however, that SCG shall be responsible for paying the fees and disbursements of its own counsel and any underwriting discounts, commissions and fees. (f) Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 7: (i) Indemnity by Company. Without limitation of any other indemnity provided to SCG, to the extent permitted by law, the Company will indemnify and hold harmless SCG and its officers, directors and each Person, if any, who controls SCG (within the meaning of the Securities Act or the Exchange Act), against any losses, claims, damages, liabilities and expenses (joint or several) to which they may become subject under the Securities Act, the Exchange Act or -14- other federal or state law, insofar as such losses, claims, damages, liabilities and expenses (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement (including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto), (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law, and the Company will reimburse SCG and its officers, directors and any controlling person thereof for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability, expense or action; provided, however, that the Company shall not be liable in any such case for any such loss, claim, damage, liability, expense or action to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by SCG or any officer, director or controlling person thereof. (ii) Indemnity by SCG. In connection with any registration statement in which SCG is participating, SCG will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its trustees and officers and each Person who controls the Company (within the meaning of the Securities Act or Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any Violation, but only to the extent that such Violation is contained in any information or affidavit so furnished in writing by SCG; provided, that the obligation to indemnify will be several and not joint and several with any other Person and will be limited to the net amount received by SCG from the sale of Registrable Securities pursuant to such registration statement. (iii) Notice; Right to Defend. Promptly after receipt by an indemnified party under this Section 7(f) of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 7(f), deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, if the indemnifying party agrees in writing that it will be responsible for any costs, expenses, judgments, damages and losses incurred by the indemnified party with respect to such claim, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own -15- counsel, with the fees and expenses to be paid by the indemnifying party, if the indemnified party reasonably believes that representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 7(f) only if and to the extent that such failure is prejudicial to its ability to defend such action, and the omission to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party other than under this Section 7(f). (iv) Contribution. If the indemnification provided for in this Section 7(f) is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other hand in connection with the statements or omissions which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relevant fault of the indemnifying party and the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Notwithstanding the foregoing, the amount SCG shall be obligated to contribute pursuant to this Section 7(f)(iv) shall be limited to an amount equal to the proceeds to SCG of the Registrable Securities sold pursuant to the registration statement which gives rise to such obligation to contribute (less the aggregate amount of any damages which SCG has otherwise been required to pay in respect of such loss, claim, damage, liability or action or any substantially similar loss, claim, damage, liability or action arising from the sale of such Registrable Securities). (v) Survival of Indemnity. The indemnification provided by this Section 7(f) shall be a continuing right to indemnification and shall survive the registration and sale of any securities by any Person entitled to indemnification hereunder and the expiration or termination of this Agreement. -16- (g) Limitations on Registration Rights. (i) The Company shall not, without the prior written consent of SCG, include in any registration in which SCG has a right to participate pursuant to this Agreement any securities of any Person other than SCG. (ii) SCG shall not, without the prior written consent of the Company, effect any public sale or distribution (including sales pursuant to Rule 144 under the Securities Act) of securities of the Company during any period commencing 30 days prior to and ending 60 days after the effective date of any registration statement filed by the Company on behalf of any Person (including the Company), other than a registration statement on Form S-8 or any successor form. (h) Registrable Securities. The term "Registrable Securities" means (i) any Common Shares now owned or hereafter acquired by SCG and (ii) any Common Shares or other securities that may subsequently be issued with respect to such Common Shares as a result of a share split or dividend or any sale, transfer, assignment or other transaction by the Company involving the Common Shares and any securities into which the Common Shares may thereafter be changed as a result of merger, consolidation, recapitalization or otherwise. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been distributed to the public pursuant to an offering registered under the Securities Act. All Registrable Securities shall cease to be Registrable Securities when all such securities may be sold in any three- month period pursuant to Rule 144, or any successor to such rule, under the Securities Act. (i) Assignment. SCG may assign without the consent of the Company its rights under this Section 7 with respect to any Registrable Securities to any party (a "Lender") to whom it provides a bona fide pledge, assignment or hypothecation of such Registrable Securities. If (i) SCG assigns its rights under this Section 7 with respect to Registrable Securities having an aggregate offering value of at least $100,000,000 to a Lender and (ii) any Event of Default occurs and is continuing under the related loan agreement between SCG (or one of its subsidiaries) and the Lender, the Lender may request one registration of all or part of its Registrable Securities having an aggregate offering value of at least $100,000,000 on Form S-3 (or any successor form) under the Securities Act by delivering written notice to the Company specifying the number of Registrable Securities that the Lender desires to sell and the Company shall use its reasonable efforts to effect the registration of such Registrable Securities under the Securities Act in accordance with and subject to the provisions of this Section 7. 8. Miscellaneous. (a) Survival of Representations, Warranties and Covenants. All representations, warranties and covenants contained herein shall survive the execution of this Agreement and -17- shall remain in full force and effect until terminated in accordance with the provisions of this Agreement. (b) Successors and Assigns. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors, assigns and affiliates, but (except as provided in Section 7(i)) shall not be assignable by any party hereto without the prior written consent of the other party hereto. (c) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, sent via a recognized overnight courier with delivery confirmed in writing or sent via facsimile to the parties at the following addresses (or such other address for a party as shall be specified by like notice): If to the Company: Security Capital Pacific Trust 125 Lincoln Avenue Sante Fe, New Mexico 87501 Attention: R. Scot Sellers Facsimile: (505) 989-8533 If to SCG: Security Capital Group Incorporated 125 Lincoln Avenue Santa Fe, New Mexico 87501 Attention: Jeffrey A. Klopf Facsimile: (505) 988-8920 (d) Waiver. No party may waive any of the terms or conditions of this Agreement, except by a duly executed writing referring to the specific provision to be waived. (e) Amendment. This Agreement may be amended only by a writing duly executed by both the Company and SCG. (f) Severability. Insofar as is possible, each provision of this Agreement shall be interpreted so as to render it valid and enforceable under applicable law and severable from the remainder of this Agreement. A finding that any such provision is invalid or unenforceable in any jurisdiction shall not affect the validity or enforceability of any other provision or the validity or enforceability of such provision under the laws of any other jurisdiction. (g) Entire Agreement. This Agreement constitutes the entire agreement, and supersedes all other prior agreements and understandings, both written and oral, among the parties hereto and their affiliates, with respect to the subject matter hereof. -18- (h) Expenses. Except as otherwise expressly contemplated herein to the contrary, regardless of whether the transactions contemplated hereby are consummated, each party hereto shall pay its own expenses incident to preparing for, entering into and carrying out this Agreement and the consummation of the transactions contemplated hereby. (i) Captions. The Section and Paragraph captions herein are for convenience of reference only, do not constitute part of this Agreement and shall not be deemed to limit or otherwise affect any of the provisions hereof. (j) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. (k) Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland. (l) Specific Performance. Each of the parties hereto acknowledges that the obligations undertaken by it pursuant to this Agreement are unique and that the other party will not have an adequate remedy at law if it shall fail to perform any of its obligations hereunder, and each of the parties hereto therefore confirms that the right of the other party to specific performance of the terms of this Agreement is essential to protect the rights and interests of such party. Accordingly, in addition to any other remedies that either party hereto may have at law or in equity, SCG shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by the other party, and each party shall have the right to obtain preliminary and permanent injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement by the other party. (m) Limitation of Liability. Any obligation or liability whatsoever of the Company which may arise at any time under this Agreement or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be satisfied, if at all, out of the Company's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of its shareholders, trustees, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. * * * * * -19- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the day and year first above written. SECURITY CAPITAL PACIFIC TRUST By: ----------------------------------- R. Scot Sellers Managing Director SECURITY CAPITAL GROUP INCORPORATED By: ----------------------------------- Jeffrey A. Klopf Senior Vice President and Secretary -20- EX-10.2 4 ADMINISTRATIVE SERVICES AGREEMENT EXHIBIT 10.2 ADMINISTRATIVE SERVICES AGREEMENT --------------------------------- THIS ADMINISTRATIVE SERVICES AGREEMENT (this "Agreement") is made and entered into as of this _____ day of __________, 1997, by and between Security Capital Pacific Trust, a Maryland real estate investment trust (the "Company"), and SC Group Incorporated, a Texas corporation ("SC Group"), and a wholly owned direct or indirect subsidiary of Security Capital Group Incorporated. WHEREAS, the Company wishes to purchase from SC Group certain administrative services designed to assist the Company in the cost-efficient management of the Company's trust and business affairs in the manner and pursuant to terms and conditions as more specifically described herein; and WHEREAS, SC Group desires to provide or cause to be provided those services requested by the Company under such terms and conditions; and WHEREAS, SC Group will perform similar administrative services for other entities (collectively "SC Group Clients") which may vary from time to time; and WHEREAS, the Company will retain the sole and absolute right and authority to fully and completely operate and manage its business and properties. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows: Section 1. Services. 1.1 Services to be Rendered. SC Group shall provide the Company with the services described below (each, a "Service", and collectively, the "Services") as selected from time to time by the Company: (a) Insurance Administration. Assistance in securing all forms of insurance, including property, casualty, workers' compensation and trustees' and officers' liability coverage; managing insurance policies; negotiation of premiums; arranging payment terms; managing claims; and preparation of loss fund analysis. The amount and levels of insurance shall be determined in the sole and absolute discretion of the Company. (b) Accounts Payable. Provision of all accounts payable functions (currently all non site-level invoices); processing of all employee expense reports and reimbursements of travel and entertainment expenses; and maintenance of accounts payable and cash disbursement systems, including reasonable internal controls. (c) Internal Audit. Provision of internal audit coverage and audit support, including property audits, financial audits, operational audits and information system audits, as requested and authorized in advance by the Company. (d) Cash Management. Operation and maintenance of collection systems, concentration systems, and electronic disbursements (including wire transfers, ACH payments and short term investing); maintenance of bank accounts, including opening and closing of operating, security deposits, local depository and petty cash accounts; bank administration, and maintenance of bank relationships. (e) Human Resources. (i) Benefit Administration. Negotiation and administration of all health, dental, vision, life and long-term and short-term disability insurance plans as well as 401(k) and flexible spending plans; and administration of other miscellaneous employee benefits. (ii) Human Resources Information Systems. Administration and employee and labor relations including statutory compliance with all governmental agencies, affirmative action, work force demographics; processing wage and hour claims and utilization and EEO charges; and compliance with annual reporting requirements. (iii) Payroll. Production of payroll and related items; maintenance of required records; compliance with federal and state wage and hour regulations; tracking benefit hours; tracking and paying wage garnishments and related orders; maintenance of Forms W-2; and production and processing of special payroll checks. (iv) Pre-Employment. Development of employment policies and procedures; verification of applicant information such as drivers license numbers, social security numbers, education, criminal offenses, and past employment; and drug testing. (v) Recruiting. Recruiting and retaining employees of the Company for the El Paso Operations Center who will perform services for the Company, including placement of newspaper advertisements, contracting and negotiating with search consultants, screening of candidates, interviews and employee orientation; processing new hires, terminations, transfers, leaves of absence and miscellaneous status changes as requested and authorized in advance by the Company. -2- (f) Management Information Systems. (i) Applications Development. Development, maintenance and continuing evolution of system applications to provide technology solutions to business needs and problems, as requested and authorized in advance by the Company. (ii) Telecommunications. Design, operation and maintenance of network infrastructure, including telephone and data transmission lines, voice mail, facsimile machines, cellular phones, pager, etc.; negotiation of contracts with third party vendors and suppliers; and local area network and wide area network communications support. (iii) Operations/Technical Support and User Support. Design, maintenance and operation of the computing environment, including business specific applications, network wide applications, electronic mail and other systems; purchase and maintenance of equipment, including hardware and software; configuration, installation and support of computer equipment; and education and training of the user community. (g) Tax Administration. Supervision and direction of the preparation, review and filing of all federal, state and other required tax returns; supervision and direction of ad hoc requests for assistance on tax related matters; and coordination of all activities with the Company's outside tax preparer, as requested and authorized in advance by the Company. All tax matters shall be determined by the Company in its absolute and sole discretion. (h) Special Projects. Direction and support of all special projects, as requested and authorized in advance by the Company. (i) Legal. Coordination and supervision of all third party legal services; assistance in the preparation of public filings and registration statements; and oversight of processing of claims against the Company. (j) Research. Provision of periodic market research reports and special research assignments as requested by the Company. (k) Investor Relations/Communications. (i) Capital Markets. Advice and services relating to capital raising transactions and relationship with shareholders, but not including solicitation of investors as a broker, dealer or underwriter in any capital raising transactions of the Company. -3- (ii) Communications. Preparation and coordination of annual and quarterly reports to shareholders; presentations to public; public relations; preparation of marketing materials; and investor relations services. (l) Debt Financing. Advice and services relating to revolving lines of credit and other issuances of indebtedness. 1.2 Scope of Services and Charges. The parties will agree from time to time on the Services to be provided, the scope of Services listed in Section 1.1 and the charges for such Services. The scope of Services shall consist of the estimated amount of items to be processed or hours to be spent for a category of the Services in any year as agreed to by the parties. The charges for Services shall consist of an amount equal to SC Group's costs incurred in providing such Services, multiplied by 120%. If the scope of Services actually performed by SC Group in any category of Services is different than that agreed to by the parties, or if the scope of Services is increased at the request of the Company, then the parties shall negotiate in good faith to revise the scope of Services and to adjust the charges for such Services. The parties shall review annually the Services provided, the scope of Services and the charges for such Services and negotiate in good faith and make appropriate adjustments. The parties agree to complete each annual review not later than November 30 in each year of this Agreement. 1.3 Performance of Services. SC Group covenants that it will perform or cause to be performed the Services in a timely, efficient and workmanlike manner and in substantially the same manner in which SC Group is providing such services to the Company currently. SC Group further covenants that it will maintain or contract for a sufficient staff of trained personnel to enable it to perform the Services hereunder. SC Group may retain third parties or its affiliates to provide certain of the Services hereunder. In such cases, and notwithstanding anything herein to the contrary, the Company shall reimburse SC Group for only its actual cost for arranging for such Services. Any arrangements between SC Group and its affiliates for the provision of Services hereunder shall be commercially reasonable and on terms not less favorable than those which could be obtained from unaffiliated third parties. 1.4 Payment for Services. SC Group shall bill the Company, at the end of each calendar month, one-twelfth of the amount agreed to from time to time pursuant to Section 1.2 for the applicable Service. Such amount shall be payable by the Company in full within 30 days of receipt thereof by the Company. On the forty-fifth day following the end of each calendar year, SC Group shall provide to the Company a statement, certified by a senior officer of SC Group, setting forth by category of Service the amount and nature of such Services actually performed during the period covered by such statement. Such statement shall also set forth the dollar amount, if any, by which the amounts previously paid by the Company for the provision of each specific category of Services for such period is greater or less than the charges agreed for such Services (in each such case, an "excess", and, if a shortfall, a "shortfall"). Any such excess or shortfall shall be refunded to the Company or paid by the Company, as applicable, within 30 days of the receipt of the statement. Notwithstanding anything in this -4- Agreement to the contrary, the aggregate fees for Services provided by SC Group to the Company (exclusive of reimbursements of third-party costs) shall not exceed $7,717,447 during the Initial Term (subject to the actual usage of Services by the Company not being materially in excess of that set forth in the budget previously provided by SC Group to the Company). 1.5 Reimbursement. The Company shall reimburse SC Group for all reasonable third party out-of-pocket expenses it incurs on behalf of the Company not billed directly to the Company within 30 days of receipt of the invoice therefor. Section 2. Facilities. SC Group hereby grants to the Company the right to use the Facilities set forth on Exhibit A. The Company shall not pay any additional compensation to SC Group for the use of such Facilities during the twelve-month period following the date of this Agreement. From and after the expiration of such twelve-month period, the Company shall pay SC Group rental for the use of such Facilities as may be agreed between the parties negotiating in good faith. SC Group and the Company agree that during the term of this Agreement they shall cooperate and use reasonable efforts in order to allocate the Facilities in accordance with the reasonable requests (based on their business needs) of each of SC Group, the Company and other SC Group Clients. The Company acknowledges and agrees that within 60 days of the expiration of the term of this Agreement, it shall leave the Facilities in the same condition as at the commencement of the term of the Agreement, ordinary wear and tear and damage by casualty excepted. Section 3. Term. The initial term of this Agreement shall commence on the date hereof and shall be through December 31, 1998 (the "Initial Term") and shall be renewable by the Company every year thereafter, subject to approval by a majority of the Independent Trustees (which they may withhold or grant in their sole discretion). Absent written notice of non-renewal as provided in this Section 3, this Agreement shall be automatically renewed for successive one-year terms (each, a "Renewal Term") upon the expiration of the Initial Term and each Renewal Term. Notice of non-renewal, if given, shall be given in writing by either party hereto not less than ninety (90) calendar days before the expiration of the Initial Term or any Renewal Term. Upon termination of this Agreement, SC Group shall promptly return to the Company all monies, books, records and other materials held by it for or on behalf of the Company. As used herein, the term "Independent Trustees" means each member of the Company's Board of Trustees who is not affiliated with Security Capital Group Incorporated ("SCG") or any of its affiliates, directly or indirectly, whether by ownership of, ownership interest in, employment by, any material business or professional relationship with, or service as an officer of SCG or any of its affiliates, and is not serving as a trustee or director for more than three real estate investment trusts organized by a sponsor of the Company. Section 4. Audit of Services. At any time during regular business hours and as often as reasonably requested by the Company's officers, SC Group shall permit the Company or its authorized representatives to examine and make copies and abstracts from the records and books of SC Group for the purpose of auditing the performance of, and the charges of, SC Group -5- under the terms of this Agreement; provided, that all costs and expenses of such inspection shall be borne by the Company. Section 5. Prevention of Performance. SC Group shall not be determined to be in violation of this Agreement if it is prevented from performing any Services hereunder for any reason beyond its reasonable control, including without limitation, acts of God, nature, or of public enemy, strikes, or limitations of law, regulations or rules of the Federal or of any state or local government or of any agency thereof. Section 6. Indemnification. 6.1 By the Company. The Company shall indemnify, defend and hold SC Group, and its directors, officers, and employees harmless from and against all damages, losses and reasonable out-of-pocket expenses (including fees) incurred by them in the course of performing the duties on behalf of the Company and its subsidiaries as prescribed hereby, except for matters covered by subsection 6.2 hereof. 6.2 By SC Group. SC Group shall indemnify, defend and hold the Company, its trustees, officers and employees harmless from and against all damages, losses and reasonable out-of-pocket expenses (including fees) caused by or arising out of any willful misconduct or gross negligence in the performance of any obligation or agreement of SC Group herein. 6.3 Remedy. Except as otherwise provided in subsection 6.2 hereof, SC Group does not assume any responsibility under this Agreement other than to render the services called for under this Agreement in good faith and in a manner reasonably believed to be in the best interests of the Company. Except as otherwise provided in subsection 6.2 hereof, the Company's sole remedy on account of the failure of SC Group to render the services as and when required hereunder shall be to procure services elsewhere and to charge SC Group the difference between the reasonable increased cost, if any, to procure new services, and the current cost to the Company to procure services under this Agreement. Section 7. Notices. 7.1 Manner of Delivery. Each notice, demand, request, consent, report, approval or communication (each a "Notice") which is or may be required to be given by either party to the other party in connection with this Agreement and the transactions contemplated hereby, shall be in writing, and given by telecopy, personal delivery, receipted delivery service, or by certified mail, return receipt requested, prepaid and properly addressed to the party to be served. -6- 7.2 Addresses. Notices shall be addressed as follows: If to the Company: Security Capital Pacific Trust 125 Lincoln Avenue Santa Fe, New Mexico 87501 Attention: R. Scot Sellers If to SC Group: SC Group Incorporated 7777 Market Center Avenue El Paso, Texas 79912 Attention: Gerald R. Morgan, Jr. 7.3 Effective Date. Notices shall be effective on the date sent via telecopy, the date delivered personally or by receipted delivery service, or three (3) days after the date mailed. 7.4 Change of Address. Each party may designate by notice to the others in writing, given in the foregoing manner, a new address to which any notice may thereafter be so given, served or sent. Section 8. Entire Agreement. This Agreement, together with the Exhibit hereto, constitutes and sets forth the entire agreement and understanding of the parties pertaining to the subject matter hereof, and no prior or contemporaneous written or oral agreements, understandings, undertakings, negotiations, promises, discussions, warranties or covenants not specifically referred to or contained herein or attached hereto shall be valid and enforceable. No supplement, modification, termination in whole or in part, or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision hereof (whether or not similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided. Section 9. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, each of their respective successors and permitted assigns, but may not be assigned by either party without the prior written consent of the other party, and no other persons shall have or derive any right, benefit or obligation hereunder. Section 10. Headings. The headings and titles of the various paragraphs of this Agreement are inserted merely for the purpose of convenience, and do not expressly or by -7- implication limit, define, extend or affect the meaning or interpretation of this Agreement or the specific terms or text of the paragraph so designated. Section 11. Governing Law. This Agreement shall be governed in all respects, whether as to validity, construction, capacity, performance or otherwise, by the laws of the State of Texas. Section 12. Severability. If any provision of this Agreement shall be held invalid by a court with jurisdiction over the parties to this Agreement, then and in that event such provision shall be deleted from the Agreement, which shall then be construed to give effect to the remaining provisions thereof. If any one or more of the provisions contained in this Agreement or in any other instrument referred to herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, then in that event, to the maximum extent permitted by law, such invalidity, illegality or enforceability shall not affect any other provisions of this Agreement or any other such instrument. Section 13. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall be considered one and the same instrument. -8- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SECURITY CAPITAL PACIFIC TRUST By: ----------------------------------- R. Scot Sellers Managing Director SC GROUP INCORPORATED By: ----------------------------------- Gerald R. Morgan, Jr. Vice President S-1 EXHIBIT A Description of Facilities ------------------------- For purposes of the Administrative Services Agreement, Facilities shall mean the facilities maintained by SC Group or one of its affiliates at the following addresses: 7777 Market Center Avenue El Paso, Texas 79912 125 Lincoln Avenue Santa Fe, New Mexico 87501 Facilities shall also include any other premises owned, leased or subleased by SC Group at which the Company desires to utilize such premises as well as the utilities, fixtures, furniture and equipment used in connection with the operation of such premises. EX-10.3 5 PROTECTION OF BUSINES AGREEMENT EXHIBIT 10.3 PROTECTION OF BUSINESS AGREEMENT -------------------------------- THIS PROTECTION OF BUSINESS AGREEMENT (this "Agreement") is entered into as of ________ __, 1997, by and among Security Capital Pacific Trust, a Maryland real estate investment trust ("PTR"), and Security Capital Group Incorporated, a Maryland corporation ("Security Capital"). WHEREAS, on the date hereof the parties are consummating a series of related transactions as described in that certain Merger and Issuance Agreement, dated as of March __, 1997, between PTR and Security Capital (the "Merger Agreement"), pursuant to which, among other things, Security Capital will cause its subsidiaries engaged in the conduct of the real estate investment trust ("REIT") management and property management businesses relating to the Multifamily Property business of PTR to be merged with and into a subsidiary of PTR; WHEREAS, PTR, Security Capital and their respective affiliates will continue to engage in certain businesses after the date hereof; and WHEREAS, as a condition to the consummation of the transactions contemplated by the Merger Agreement, the parties hereto desire to enter into certain agreements restricting the activities of Security Capital and its affiliates. NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: Section 1. Definitions. Capitalized terms used herein shall have the meanings set forth below: "Affiliate" with regard to any Person, means (a) any Person directly or indirectly controlling, controlled by or under common control with such Person, (b) any Person directly or indirectly owning or controlling 10% or more of the outstanding voting interests of such Person or (c) any Person of which such Person directly or indirectly owns or controls 10% or more of the voting interests. The term "Affiliates" and "Affiliated" shall have correlative meanings. For purposes of this Agreement, the term "Affiliate" shall not include Security Capital U.S. Realty, a Luxembourg corporation, or any Person controlled by Security Capital U.S. Realty and no party hereto shall be deemed to be an Affiliate of any other party hereto. "Multifamily Property" means real property that is or is planned to be used primarily for garden style multifamily dwellings which are generally leased for six-month to twelve-month periods and require security deposits, including real property that is or is planned to be used primarily for master-planned apartment neighborhoods. "Person" means an individual or any corporation, partnership, trust, unincorporated association or any other legal entity. "Restricted Area" means the United States. Section 2. Agreement not to Engage in Certain Activities. During the term provided in Section 5 hereof, neither Security Capital nor any REIT management company (or companies) or property management company (or companies) Affiliated with it will, directly or indirectly, provide substantially the same advice and services as those provided by Security Capital Pacific Incorporated pursuant to the Fifth Amended and Restated REIT Management Agreement, dated as of May 21, 1996, or by SCG Realty Services Incorporated pursuant to the Management Agreement, dated as of October 1, 1996, on the day preceding the date of this Agreement, to any Person owning or operating Multifamily Properties, anywhere within the Restricted Area. Section 3. Limitations on Protection of Business. Notwithstanding anything to the contrary contained in this Agreement, each of Security Capital and its Affiliates may be an owner of securities of any class of PTR or Security Capital Atlantic Incorporated. Section 4. Reasonable and Necessary Restrictions. Each of the parties hereto acknowledges that the restrictions, prohibitions and other provisions hereof are reasonable, fair and equitable in scope, terms and duration, are necessary to protect the legitimate business interests of each of the other parties hereto, and are a material inducement to such party to enter into the transactions contemplated by the Merger Agreement. Section 5. Term. 5.1 General. Subject to earlier termination pursuant to Section 5.2, this Agreement shall be effective from and after the date hereof and shall continue in effect until the third anniversary of the date hereof. 5.2 Change in Control. Notwithstanding anything to the contrary contained herein, the provisions of Section 2 of this Agreement shall terminate and be of no further force or effect upon the occurrence of a Change in Control. As used herein, "Change in Control" means the acquisition, directly or indirectly (other than by purchase from Security Capital or any of its Affiliates), by any Person (or group of Persons acting in concert), other than Security Capital or its Affiliates, of the greater of (i) 25% or more of the outstanding shares of voting securities of PTR and (ii) the percentage of outstanding voting securities of PTR owned directly or indirectly by Security Capital and its Affiliates, in either case without the prior written consent of the Board of Trustees of PTR. Section 6. Specific Performance. Security Capital acknowledges that the obligations undertaken by it pursuant to this Agreement are unique and that PTR will not have an adequate remedy at law if Security Capital shall fail to perform any of its obligations hereunder, and -2- Security Capital therefore confirms that the right of PTR to specific performance of the terms of this Agreement is essential to protect the rights and interests of PTR. Accordingly, in addition to any other remedies that PTR may have at law or in equity, PTR shall have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Security Capital, and PTR shall have the right to obtain preliminary and permanent injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement by Security Capital. Section 7. Operations of Affiliated Parties. Security Capital agrees that it will refrain from authorizing or permitting any Affiliated party to perform any activities that would be prohibited by the terms of this Agreement if such activities were performed by it. Section 8. Ancillary Agreements. Nothing contained in this Agreement shall in any way restrict or impair the obligations and rights of any party under the terms of any agreement entered into in connection with the transactions contemplated by the Merger Agreement. Section 9. Miscellaneous Provisions. 9.1 Interpretation. The parties hereto acknowledge that the fundamental policies of this Agreement are to protect PTR's interest in its business and to eliminate potential conflicts of interest that may exist as a result of actions taken or proposed to be taken by Security Capital, and this Agreement shall be construed and enforced in a manner consistent with and in furtherance of these policies. 9.2 Binding Effect. Subject to any provisions hereof restricting assignment, all covenants and agreements in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of their respective successors, assigns, heirs, and personal representatives. 9.3 Assignment. None of the parties hereto may assign any of its rights under this Agreement, or attempt to have any other entity or individual assume any of its obligations hereunder. 9.4 Severability. If performance of any provision of this Agreement, at the time such performance shall be due, shall transcend the limit of validity prescribed by law, then the obligation to be performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate to invalidate this Agreement, in whole or in part, then such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. The parties shall negotiate in good faith a replacement clause or provision as consistent with the ineffective clause or provision as is practicable under law. -3- 9.5 Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto shall be governed by and construed in accordance with the laws of the State of Maryland, not including the choice-of-law rules thereof. 9.6 Amendment. Except as otherwise expressly provided in this Agreement, no amendment, modification or discharge of this Agreement shall be valid or binding unless set forth in writing and duly executed by each of the parties hereto. 9.7 Waiver. Any waiver by any party or consent by any party to any variation from any provision of this Agreement shall be valid only if in writing and only in the specific instance in which it is given, and such waiver or consent shall not be construed as a waiver of any other provision or as a consent with respect to any similar instance or circumstance. 9.8 Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 9.9 No Presumption Against Drafter. Each of the parties hereto have jointly participated in the negotiation and drafting of this Agreement. In the event of an ambiguity or a question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by each of the parties hereto and no presumptions or burdens of proof shall arise favoring any party by virtue of the authorship of any of the provisions of this Agreement. 9.10 Execution in Counterparts. This Agreement may be executed in one or more counterparts, none of which need contain the signatures of each of the parties hereto and each of which shall be deemed an original. 9.11 Limitation of Liability. Any obligation or liability whatsoever of PTR which may arise at any time under this Agreement or any obligation or liability which may be incurred by it pursuant to any other instrument, transaction or undertaking contemplated hereby shall be satisfied, if at all, out of PTR's assets only. No such obligation or liability shall be personally binding upon, nor shall resort for the enforcement thereof be had to, the property of any of its shareholders, trustees, officers, employees or agents, regardless of whether such obligation or liability is in the nature of contract, tort or otherwise. * * * * * -4- IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or caused this Agreement to be duly executed on its behalf, as of the date first set forth above. SECURITY CAPITAL PACIFIC TRUST By: _________________________ R. Scot Sellers Managing Director SECURITY CAPITAL GROUP INCORPORATED By: _________________________ Jeffrey A. Klopf Senior Vice President -5- EX-99.1 6 PRESS RELEASE DATED MARCH 24, 1997 EXHIBIT 99.1 Press Release - -For Immediate Release- SECURITY CAPITAL PACIFIC TRUST Announces Board Approval of Proposal to Become Internally Managed REIT March 24, 1997 -- Security Capital Pacific Trust (New York Stock Exchange Symbol: PTR) today announced that its Board of Trustees has unanimously approved an agreement with Security Capital Group Incorporated to exchange Security Capital Group's REIT management and property management companies for $75.8 million of PTR common stock. As a result of the transaction, PTR will become an internally managed real estate investment trust (REIT) with Security Capital Group continuing as its largest shareholder. Personnel employed by the REIT management and property management companies will become employees of PTR. Based on PTR's 1997 forecast, the transaction will be immediately accretive to PTR's per share Funds for Operations (FFO). PTR Managing Director R. Scot Sellers said PTR's management believes the proposed transaction will result in several important benefits for PTR and its shareholders. "We believe the transaction's positive impact on long-term growth in FFO will be significant. As PTR continues to deploy capital, PTR shareholders will receive the incremental benefit of economies of scale. In addition, the transaction will position PTR to pursue possible acquisitions during a period of significant REIT consolidation." Mr. Sellers added that PTR's management believes the market will view an internally managed structure more favorably, which over time is expected to enhance shareholder value. Under the terms of the agreement, PTR will issue $75.8 million of PTR common stock to Security Capital Group in exchange for Security Capital Group's REIT management and property management companies and operating systems. The price per PTR common share issued as part of the transaction will be based on the average closing price of PTR's common shares reported by the New York Stock Exchange for the five-day period prior to the PTR shareholder record date for voting on the transaction. PTR and Security Capital Group have agreed that the number of shares issued to Security Capital Group will not exceed a maximum of approximately 3.5 million shares (equivalent to $21.64 per share) or fall below a minimum of approximately 2.8 million shares (equivalent to $27.12 per share). PTR will also conduct a concurrent rights offering during the time proxies are solicited from PTR shareholders to allow existing shareholders to maintain their relative ownership interests in PTR. Holders of PTR common shares will have the right to purchase $135 million of PTR common stock at the same price paid by Security Capital Group. However, if the market price when the rights offering commences is less than $21.64 per share, the offering will be conducted at the lower price. The rights offering will be subject to a maximum price of $27.12 per share. As part of the transaction, Security Capital Group will issue warrants to acquire $102 million of Security Capital Group Class B common stock to PTR common and convertible preferred shareholders. The warrants are expected to be publicly traded, will have a term of 12 months and will have an exercise price equal to the Class B trading price at the record date established for the warrant distribution. The issuance of the Security Capital Group warrants will occur within 60 days after the closing of the proposed transaction. Security Capital Group expects to file a registration statement with the Securities and Exchange Commission (SEC) covering the Class B shares within the next several weeks and to conduct an initial public offering of its Class B shares in the third quarter of 1997. In January, PTR's Board of Trustees formed a special committee of independent trustees to review the proposed transaction. The special committee retained its own counsel and engaged the investment banking firm of Robertson Stephens & Company to advise the committee on the fairness of the transaction to PTR and its shareholders other than Security Capital Group. Following receipt of the fairness opinion, the special committee unanimously recommended that the proposed transaction be approved by the full board. The transaction is subject to approval by holders of two-thirds of PTR's outstanding common shares, receipt of favorable tax opinions and customary closing conditions. The closing of the rights offering and the warrant distribution will be subject to the closing of the agreement between PTR and Security Capital Group. PTR and Security Capital Group will file a combined registration statement and proxy statement relating to the proposed transaction with the SEC. Any securities issued in connection with the rights offering and the warrant distribution will be offered only by means of a prospectus. Management expects a shareholder vote to occur in the third quarter of 1997, and if approved, the transaction and the rights offering are expected to be concluded during the third quarter of 1997. The statements contained in this press release that are not historical facts are forward-looking statements under the federal securities laws. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which PTR operates, management's beliefs and assumptions made by management. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. PTR is focused on becoming the preeminent real estate operating company for the development, acquisition, operation and long-term ownership of multifamily properties in the growing markets of the western United States. PTR's primary objective is generating long-term, sustainable growth in per share cash flow. As of February 28, 1997, PTR's portfolio of garden-style multifamily communities included 42,556 operating units, 5,671 units under construction and an estimated 6,232 units in planning. In addition, PTR owns land for future development of an expected 4,492 additional units. FOR MORE INFORMATION, CONTACT: K. Scott Canon (800) 982-9293 or Gerard de Gunzburg (212) 838-9292 -----END PRIVACY-ENHANCED MESSAGE-----