Covenants Relating to Conduct of Business Pending the Mergers. Section 6.1 Conduct of Business by REIT III. (a) REIT III covenants and agrees that, between the date of this Agreement and the earlier to occur of the REIT Merger Effective Time and the date, if any, on which this Agreement is terminated pursuant to Section 9.1 (the “Interim Period”), except (1) to the extent required by Law, (2) as may be consented to in advance in writing by the REIT II Special Committee (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, each of the REIT III Parties shall, and shall cause each of the other REIT III Subsidiaries to, (i) conduct its business in all material respects in the ordinary course and in a manner consistent with past practices, and (ii) use all reasonable efforts to (A) preserve intact its current business organization, goodwill, ongoing businesses and significant relationships with third parties and (B) maintain the status of REIT III as a REIT. (b) Without limiting the foregoing, REIT III covenants and agrees that, during the Interim Period, except (1) to the extent required by Law, (2) as may be consented to in advance in writing by the REIT II Special Committee (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, the REIT III Parties shall not, and shall not cause or permit any other REIT III Subsidiary to, do any of the following: (i) (A) amend or propose to amend the REIT III Governing Documents, (B) amend or propose to amend such equivalent organizational or governing documents of any REIT III Subsidiary material to REIT III and the REIT III Subsidiaries, (C) amend the REIT III DRP or the REIT III Share Redemption Program in a manner material to REIT III, or (D) waive the stock ownership limit or create an Excepted Holder Limit (as defined in the REIT III Charter) under the REIT III Charter; (ii) adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of REIT III or any REIT III Subsidiary (other than any Wholly Owned REIT III Subsidiary); (iii) declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of REIT III or any REIT III Subsidiary or other equity securities or ownership interests in REIT III or any REIT III Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment of dividends or other distributions to REIT III by any Wholly Owned REIT III Subsidiary and (B) distributions by any REIT III Subsidiary that is not wholly owned, directly or indirectly, by REIT III, in accordance with the requirements of the organizational documents of such REIT III Subsidiary; provided, that, notwithstanding the restriction on dividends and other distributions in this Section 6.1(b), REIT III and any REIT III Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for REIT III to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise Tax under the Code; (iv) redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of REIT III or a REIT III Subsidiary; provided, that, after the filing of the Form S-4, REIT III may effect redemptions upon a stockholder’s death, “qualifying disability” or confinement to a long-term care facility in accordance with the REIT III Share Redemption Program; (v) except for transactions among REIT III and one or more Wholly Owned REIT III Subsidiaries or among one or more Wholly Owned REIT III Subsidiaries, issue, sell, pledge, dispose, encumber or grant any shares of capital stock of REIT III or any of the REIT III Subsidiaries’ capital stock (including the REIT III OP Units) or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock of REIT III or any of the REIT III Subsidiaries’ capital stock or other equity interests; (vi) acquire or agree to acquire any material assets, except (A) acquisitions by REIT III or any Wholly Owned REIT III Subsidiary of or from an existing Wholly Owned REIT III Subsidiary, (B) acquisitions described in Section 6.1(b)(vi) of the REIT III Disclosure Letter, and (C) other acquisitions of personal property for a purchase price of less than $500,000 in the aggregate; (vii) except as described in Section 6.1(b)(vii) of the REIT III Disclosure Letter or as permitted by clause (viii) below, sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with (x) the satisfaction of any margin call or (y) the posting of collateral in connection with any Contract to which REIT III or any REIT III Subsidiary is a party shall be considered to be done in the ordinary course of business; (viii) incur, create, assume, guarantee, refinance, replace or prepay any Indebtedness for borrowed money or issue or materially amend the terms of any Indebtedness of REIT III or any of the REIT III Subsidiaries, except (A) Indebtedness incurred under REIT III’s existing Debt Facilities in the ordinary course of business (including to the extent necessary to pay dividends permitted by Section 6.1(b)(iii)), (B) funding any transactions permitted by this Section 6.1(b), (C) Indebtedness that does not, in the aggregate, exceed $250,000; and (D) refinancing of existing Indebtedness (provided, that the terms of such new Indebtedness shall not be materially more onerous on REIT III compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacing); (ix) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, other than by REIT III or a Wholly Owned REIT III Subsidiary to REIT III or a Wholly Owned REIT III Subsidiary; (x) other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any REIT III Material Contract (or any Contract that, if existing as of the date hereof, would be a REIT III Material Contract) in any material respect, other than (A) any termination or renewal in accordance with the terms of any existing REIT III Material Contract that occurs automatically without any action (other than notice of renewal) by REIT III or any REIT III Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement; (xi) make any payment, direct or indirect, of any liability of REIT III or any REIT III Subsidiary before the same comes due in accordance with its terms, other than (A) in the ordinary course of business or (B) in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder; (xii) waive, release, assign, settle or compromise any material Action, other than waivers, releases, assignments, settlements or compromises that (A) with respect to the payment of monetary damages, involve only the payment of monetary damages (excluding any portion of such payment payable under an existing property-level insurance policy) (x) equal to or less than the amounts specifically reserved with respect thereto on the most recent balance sheet of REIT III made available to REIT II prior to the date of this Agreement or (y) that do not exceed $25,000 individually or $63,000 in the aggregate, (B) do not involve the imposition of injunctive relief against REIT III or any REIT III Subsidiary or the Surviving Entity, (C) do not provide for any admission of material liability by REIT III or any of the REIT III Subsidiaries and (D) with respect to any Action involving any present, former or purported holder or group of holders of REIT III Common Stock comply with Section 7.6(c) (excluding in each case any such matter related to Taxes (which, for the avoidance of doubt, shall be covered by Section 6.1(b)(xviii)); (A) hire or, except where due to cause, terminate any officer of REIT III or any REIT III Subsidiary, (B) materially increase in any manner the compensation or benefits of any of REIT III’s officers or directors except for increases in annual compensation in the ordinary course of business or as set forth in such individual’s Contract, or (C) enter into, adopt, amend or terminate any employment, bonus, severance or retirement Contract or Employee Benefit Plan or other compensation or employee benefits arrangement, except as may be required to comply with applicable Law; (xiv) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect at December 31, 2019, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC; (xv) enter into any new line of business; (xvi) form any new funds, joint ventures or non-traded real estate investment trusts or other pooled-investment vehicles; (xvii) fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law; (xviii) enter into or modify in a manner adverse to REIT III any REIT III Tax Protection Agreement, make, change or rescind any material election relating to Taxes, change a material method of Tax accounting, file or amend any material Tax Return, settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund or give or request any waiver of a statute of limitation with respect to any material Tax Return except, in each case, (A) to the extent required by Law or (B) to the extent necessary (x) to preserve REIT III’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any REIT III Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be; (xix) take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause REIT III to fail to qualify as a REIT or any REIT III Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be; (xx) make or commit to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts or for emergency repairs; (xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by Section 6.1(b)(vi) or Section 6.1(b)(vii) in a manner that would not reasonably be expected to be materially adverse to REIT III or to prevent or impair the ability of the REIT III Parties to consummate the Mergers; (xxii) amend or modify the engagement letters entered into with the Persons listed on Section 4.19 of the REIT III Disclosure Letter, in a manner adverse to REIT III or engage other financial advisors in connection with the transactions contemplated by this Agreement; (xxiii) permit any Encumbrances, except Permitted Encumbrances; (xxiv) materially modify or reduce the amount of any insurance coverage provided by the REIT III Insurance Policies; (xxv) take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the REIT III Common Stock with respect to the Merger; (xxvi) enter into any transaction disclosable under item 404(a) of Regulation S-K promulgated under the Exchange Act except in the ordinary course of business or as provided for in this Agreement; or (xxvii) authorize, or enter into any Contract to do any of the foregoing. (c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit REIT III from taking any action, or refraining to take any action, at any time or from time to time, if, in the reasonable judgment of the REIT III Board, such action or inaction is reasonably necessary (i) for REIT III to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the REIT Merger Effective Time or (ii) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that REIT III or any REIT III Subsidiary be registered as an investment company under the Investment Company Act, including in the case of clause (i) only, making dividend or any other actual, constructive or deemed distribution payments to stockholders of REIT III in accordance with this Agreement or otherwise as permitted pursuant to Section 6.1(b)(iii).
Appears in 2 contracts
Samples: Merger Agreement (Resource Real Estate Opportunity REIT II, Inc.), Merger Agreement (Resource Apartment REIT III, Inc.)
Covenants Relating to Conduct of Business Pending the Mergers. Section 6.1 5.1. Conduct of Business by REIT IIIthe Company and its Subsidiaries.
(a) REIT III covenants and agrees that, between During the period from the date of this Agreement and to the earlier to occur of the REIT Merger Effective Time and the date, if any, on which termination of this Agreement is terminated pursuant to Section 9.1 (or the “Interim Period”)Effective Time, except (1) to the extent required by Law, (2) as may be consented to in advance in writing by the REIT II Special Committee (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, each of the REIT III Parties Company shall, and shall cause each of the other REIT III Company Subsidiaries to, (i) conduct carry on its business in all material respects businesses in the usual, regular and ordinary course and in a substantially the same manner as heretofore conducted and, to the extent consistent with past practicestherewith, and (ii) use all commercially reasonable efforts to (A) preserve intact its current business organization, goodwillgoodwill and ongoing businesses, ongoing businesses (iii) preserve the Company's status as a REIT within the meaning of the Code, and significant (iv) use all commercially reasonable efforts to keep available the services of its present trustees, officers, managers and employees and preserve its relationships with third parties customers, suppliers, business partners, distributors and (Bothers having business dealings with the Company and any of the Company Subsidiaries. The Company Parties shall confer on a regular and frequent basis with Acquiror, report on operational matters and promptly advise Acquiror orally and in writing of any Company Material Adverse Effect or any matter which could reasonably be expected to result in the Company Parties being unable to deliver the certificate described in Section 7.2(c) maintain the status of REIT III as a REITthis Agreement.
(b) Without limiting the generality of the foregoing, REIT III covenants and agrees that, during the Interim Periodperiod from the date of this Agreement until the earlier of the termination of this Agreement or the Effective Time, except (1) as expressly required or permitted in this Agreement or otherwise expressly agreed to the extent required by Law, (2) as may be consented to in advance in writing by Acquiror, the REIT II Special Committee (which consent Company shall not be unreasonably withheld, delayed and shall not authorize or conditioned), (3) as may be expressly contemplated, expressly required commit or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, the REIT III Parties shall notagree to, and shall cause the Company Subsidiaries not cause to (and not to authorize or permit any other REIT III Subsidiary commit or agree to, do any of the following:):
(i) (A) amend or propose to amend the REIT III Governing Documents, (B) amend or propose to amend such equivalent organizational or governing documents of any REIT III Subsidiary material to REIT III and the REIT III Subsidiaries, (C) amend the REIT III DRP or the REIT III Share Redemption Program in a manner material to REIT III, or (D) waive the stock ownership limit or create an Excepted Holder Limit (as defined in the REIT III Charter) under the REIT III Charter;
(ii) adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of REIT III or any REIT III Subsidiary (other than any Wholly Owned REIT III Subsidiary);
(iii) declare, set aside or pay any dividend on distributions on, or make any other actualdistributions in respect of, constructive any Company Shares or deemed distributions the partnership interests, stock or other equity interests in any Company Subsidiary that is not directly or indirectly wholly owned by the Company, provided, the Company may (whether in cashi) pay the 2004 Fourth Quarter Distributions, stock, property or otherwise(ii) declare and pay regular xxxxxxxxx xxxx xxxtributions with respect to shares the Series B-1 Preferred Shares and the Series E Preferred Shares (and the Operating Partnership and Montgomery may declare and pay the corresponding cash distributxxxx xxxx respect to the Operating Partnership Units and the Montgomery OP Units), and (iii) declare and pay any distribution in xxxxxct of capital stock of Company Shares (and the Operating Partnership and Montgomery may declare and pay the corresponding cash distributxxxx xxxx respect to the Operating Partnership Units and the Montgomery OP Units) that it is required to make by the Code in xxxxx xx maintain REIT III or status and those that are sufficient to eliminate any REIT III Subsidiary or other equity securities or ownership interests in REIT III or any REIT III Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as suchfederal tax liability; provided, except for (A) however, that the declaration and payment of any distribution with respect to Common Shares described in clause (iii) shall reduce the Common Share Merger Consideration (and any declaration and payment of any distribution with respect to the OP Common Units or the Eligible Montgomery LP Units shall reduce the OP Merger Consideration and xxx Xxxxxxxery Merger Consideration, respectively) dollar for dollar and xxxxl be determined by including the REIT Merger Consideration as a distribution qualifying for the dividends or other distributions to REIT III by any Wholly Owned REIT III Subsidiary paid deduction under Sections 561 and 562 of the Code; (B) distributions by reclassify, recapitalize, split, reverse split or combine, exchange or readjust any REIT III Subsidiary that is not wholly ownedshares of beneficial interest, directly stock, partnership interests or indirectlyother equity interests, by REIT IIIor issue (except for the issuance of Common Shares in connection with the redemption of any LP Units or Montgomery LP Units, upon conversion of any Series B-1 Preferrex Xxxxx xx xxon any exercise of Company Options) or authorize the issuance of any other securities in respect of, in lieu of or in substitution for, such shares of beneficial interest, stock, partnership interests or other equity interests; or (C) purchase, redeem (except for the redemption of any LP Units or Montgomery LP Units for Common Shares in accordance with their xxxxx) xx xxxerwise acquire any Company Shares or the partnership interests, stock or other equity interests in any Company Subsidiary or any options, warrants or rights to acquire, or security convertible into, Company Shares or the partnership interests, stock or other equity interests in any Company Subsidiary, except with respect to any of the foregoing in connection with satisfying the requirements of Section 3.2 or the organizational documents use of Company Shares to pay the exercise price or Tax withholding obligation upon the exercise of a Company Option or upon the lapse of any restrictions on Common Shares to the extent permissible under the Company Stock Option Plans;
(ii) issue, deliver, sell or grant any option or other right in respect of any shares of beneficial interest, stock, any other voting or redeemable securities (including Operating Partnership Units, Montgomery OP Units or other partnership interests) of the Company or x Xompany Subsidiary or any securities convertible into, or any rights, warrants or options to acquire, any such REIT III Subsidiary; providedshares, thatvoting securities or convertible or redeemable securities, notwithstanding except (A) as required under the restriction on dividends and other distributions Operating Partnership Agreement or the Montgomery Partnership Agreement as presently in effect, or (B) xx xxxxxxtion with the exercise of outstanding Company Options under the Company Stock Option Plans or the redemption of OP Common Units or Montgomery LP Units for Common Shares pursuant to the terms of xxxx xxxxx;
(iii) except as necessary to give effect to the transactions contemplated by this Section 6.1(b)Agreement, REIT III and amend the Company Charter or the Company Bylaws, the Operating Partnership Agreement or the Montgomery Partnership Agreement prior to the Effective Time, pxxxxxxx xxat any REIT III Subsidiary such amendment shall be permitted in a form reasonably satisfactory to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for REIT III to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise Tax under the CodeAcquiror;
(iv) redeemmerge, repurchase consolidate or otherwise acquire, directly or indirectly, enter into any shares of its capital stock or other equity interests of REIT III or a REIT III Subsidiary; provided, that, after the filing of the Form S-4, REIT III may effect redemptions upon a stockholder’s death, “qualifying disability” or confinement to a long-term care facility in accordance business combination transaction with the REIT III Share Redemption Programany Person;
(v) except for transactions among REIT III and one or more Wholly Owned REIT III Subsidiaries or among one or more Wholly Owned REIT III Subsidiaries, issue, sell, pledge, dispose, encumber or grant (A) enter into any shares of capital stock of REIT III new commitment obligating the Company or any Company Subsidiary to make capital expenditures or acquire, enter into any option to acquire, exercise an option or other right or election or enter into any commitment or contractual obligation for the acquisition of any personal or real property (each of the REIT III Subsidiaries’ foregoing, a "RE Commitment"), other than any RE Commitment referred to in Section
5.1 (b)(v) of the Company Parties Disclosure Schedule, in excess of $2.0 million individually or $10.0 million in the aggregate, provided that on a weekly basis, the Company Parties shall provide Acquiror with notice of any new RE Commitments entered into irrespective of the amount thereof; (B) incur additional Indebtedness (secured or unsecured) under the Existing Credit Facility, provided that any Indebtedness incurred under this clause (B) shall only be used by the Company or a Company Subsidiary to fund capital stock expenditures set forth on Section 5.1(b)(v) of the Company Parties Disclosure Schedule (including or otherwise agreed to in writing by Acquiror), make interest payments or dividends in the REIT III OP Unitsordinary course of business of the Company or a Company Subsidiary, or pay trade payables and other debts incurred in the ordinary course of business of the Company or a Company Subsidiary; provided, further, that no Indebtedness incurred under this clause (B) shall be used to fund or otherwise make payments to Representatives of the Company or any optionsCompany Subsidiary in connection with the transactions contemplated by this Agreement without the prior written consent of Acquiror; (C) except as permitted by the immediately preceding clause (B), warrantsincur additional Indebtedness (secured or unsecured) in excess of $1.0 million, convertible securities except refinancings or other rights extensions of existing Indebtedness in an amount not to exceed the amount refinanced or extended, or prepay or amend any existing Indebtedness irrespective of the amount thereof; provided that the Company Parties shall provide Acquiror with prompt notice of any kind refinancings, extensions or amendments of existing Indebtedness permitted hereunder; provided, however, that the Company Parties may make reasonable modifications to acquire existing Indebtedness in connection with obtaining any shares consent, approval or waiver required pursuant to the terms of capital stock this Agreement as long as Acquiror has had the opportunity to review and comment upon any such consent, approval or waiver; or (D) enter into, amend or modify in any material way or terminate any lease, provided that any Company Party may enter into a new lease with respect to 5,000 square feet or less of REIT III or space in the ordinary course of business of such Company Party without the prior written consent of Acquiror, provided that such Company Party shall promptly provide Acquior with notice of entry into any such new lease and an executed copy of the REIT III Subsidiaries’ capital stock or other equity interestssuch lease;
(vi) acquire sell, mortgage, subject to Lien or otherwise dispose of or agree to acquire do any material assetsof the foregoing with respect to any of the Company Properties, except (A) acquisitions by REIT III or any Wholly Owned REIT III Subsidiary of or from an existing Wholly Owned REIT III Subsidiary, (B) acquisitions described those that are disclosed in Section 6.1(b)(vi5.1(b)(vi) of the REIT III Company Parties Disclosure LetterSchedule;
(vii) sell, and (C) other acquisitions lease, mortgage, subject to Lien or otherwise dispose of or agree to do any of the foregoing with respect to any of its personal or intangible property for a purchase price in excess of less than $500,000 1.0 million, individually or in the aggregate;
(viiviii) except as described set forth in Section 6.1(b)(vii5.1(b)(viii) of the REIT III Company Parties Disclosure Letter Schedule, guarantee the indebtedness of another Person, enter into any "keep well" or as permitted by clause (viii) below, sell, mortgage, pledge, lease, assign, transfer, dispose other agreement to maintain any financial statement condition of another Person or encumber, or enter into any arrangement having the economic effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with (x) the satisfaction of any margin call or (y) the posting of collateral in connection with any Contract to which REIT III or any REIT III Subsidiary is a party shall be considered to be done in the ordinary course of business;
(viii) incur, create, assume, guarantee, refinance, replace or prepay any Indebtedness for borrowed money or issue or materially amend the terms of any Indebtedness of REIT III or any of the REIT III Subsidiaries, except (A) Indebtedness incurred under REIT III’s existing Debt Facilities foregoing or make any investments in the ordinary course any other Person in excess of business (including to the extent necessary to pay dividends permitted by Section 6.1(b)(iii)), (B) funding any transactions permitted by this Section 6.1(b), (C) Indebtedness that does not, in the aggregate, exceed $250,000; and (D) refinancing of existing Indebtedness (provided, that the terms of such new Indebtedness shall not be materially more onerous on REIT III compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater 500,000 other than the Indebtedness it is replacing)a Company Subsidiary;
(ix) make or rescind any loanselection relating to Taxes unless the Company reasonably determines, advances after prior consultation with Acquiror, that such action is (A) required by Law; or capital contributions to, (B) necessary or investments in, appropriate to preserve the Company's status as a REIT or the partnership status of the Operating Partnership or any other Person Company Subsidiary which files Tax Returns as a partnership for federal tax purposes;
(including to A) change any of its officersmethods, directorsprinciples or practices of accounting in effect other than as required by any changes in GAAP after the date hereof, Affiliatesprovided that Acquiror receives notice of any required changes; or (B) settle or compromise any claim, agents action, suit, litigation, proceeding, arbitration, investigation, audit or consultants)controversy relating to Taxes;
(xi) except as set forth in Section 5.1(b)(xi) of the Company Parties Disclosure Schedule, adopt any new employee benefit plan, incentive plan, severance plan, bonus plan, share option or similar plan, make any change new grants under any Company Stock Option Plan, amend any Company Benefit Plan, or enter into or amend any employment agreement or similar agreement or arrangement or grant or become obligated to grant any increase in its existing borrowing the compensation of officers or lending arrangements for employees, except such changes as are required by Law or on behalf which are not more favorable to participants than provisions presently in effect; or terminate the employment of such Personsany key employee, take any affirmative action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding under any Company Benefit Plan;
(xii) settle or compromise any material litigation, including, without limitation, any shareholder derivative or class action claims arising out of or in connection with any of the transactions contemplated by this Agreement or waive, release or assign any material rights or claims;
(xiii) except as set forth in Section 5.1(b)(xiii) of the Company Parties Disclosure Schedule and excluding the matters covered by Section 5.1(b)(xi) above, enter into or amend or otherwise modify any agreement or arrangement with Persons that are Affiliates of the Company (other than by REIT III agreements with Company Subsidiaries) or, as of the date of this Agreement, are employees, officers, trustees, partners or a Wholly Owned REIT III Subsidiary to REIT III directors of the Company or a Wholly Owned REIT III any Company Subsidiary;
(xxiv) other than authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation or dissolution of the Company or any of the Company Subsidiaries;
(xv) fail to use its commercially reasonable efforts to maintain with financially responsible insurance companies insurance in the ordinary course of business, enter into, renew, modify, such amounts and against such risks and losses as are customary for companies engaged in their respective businesses;
(xvi) (A) materially amend or terminate, or waive, release, compromise waive compliance with the terms of or assign breaches under any rights or claims under, any REIT III Material Contract (or any Contract that, if existing as of the date hereof, would be a REIT III Material Contract, or (B) fail to comply, in any material respect, other than (A) any termination or renewal in accordance with the terms of any existing REIT III Material Contract that occurs automatically without any action (other than notice of renewal) by REIT III or any REIT III Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;
(xi) make any payment, direct or indirect, of any liability of REIT III or any REIT III Subsidiary before the same comes due in accordance with its terms, other than (A) in the ordinary course of business or (B) in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;
(xii) waive, release, assign, settle or compromise any material Action, other than waivers, releases, assignments, settlements or compromises that (A) with respect to the payment of monetary damages, involve only the payment of monetary damages (excluding any portion of such payment payable under an existing property-level insurance policy) (x) equal to or less than the amounts specifically reserved with respect thereto on the most recent balance sheet of REIT III made available to REIT II prior to the date of this Agreement or (y) that do not exceed $25,000 individually or $63,000 in the aggregate, (B) do not involve the imposition of injunctive relief against REIT III or any REIT III Subsidiary or the Surviving Entity, (C) do not provide for any admission of material liability by REIT III or any of the REIT III Subsidiaries and (D) with respect to any Action involving any present, former or purported holder or group of holders of REIT III Common Stock comply with Section 7.6(c) (excluding in each case any such matter related to Taxes (which, for the avoidance of doubt, shall be covered by Section 6.1(b)(xviii));
(A) hire or, except where due to cause, terminate any officer of REIT III or any REIT III Subsidiary, (B) materially increase in any manner the compensation or benefits of any of REIT III’s officers or directors except for increases in annual compensation in the ordinary course of business or as set forth in such individual’s Contract, or (C) enter intointo a new contract, adoptagreement or arrangement that, amend or terminate any employmentif entered into prior to the date of this Agreement, bonus, severance or retirement Contract or Employee Benefit Plan or other compensation or employee benefits arrangement, except as may be would have been required to comply with applicable Law;
(xivbe listed in Section 4.1(r)(i) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect at December 31, 2019, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;
(xv) enter into any new line of business;
(xvi) form any new funds, joint ventures or non-traded real estate investment trusts or other pooled-investment vehiclesCompany Parties Disclosure Schedule;
(xvii) fail to duly and timely file use its commercially reasonable efforts to comply or remain in compliance with all material reports terms and other material documents required provisions of any agreement relating to be filed with any Governmental Authority, subject to extensions permitted by Lawoutstanding indebtedness of the Company or any Company Subsidiary;
(xviii) enter into or modify in a manner adverse to REIT III any REIT III Tax Protection Agreement, make, change or rescind any material election relating to Taxes, change a material method of Tax accounting, file or amend any material Tax Return, settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund or give or request any waiver of a statute of limitation with respect to any material Tax Return except, in each case, (A) to the extent required by Law or (B) to the extent necessary (x) to preserve REIT III’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any REIT III Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xix) take any action that would, or fail to take any action, the failure of which to be taken would, that would reasonably be expected to cause REIT III to fail to qualify as a REIT or any REIT III Subsidiary to cease to be treated as any of to, result in (A) a partnership or disregarded entity for federal income tax purposes any of the representations and warranties of the Company Parties set forth in this Agreement becoming untrue in any material respect or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 any of the Code, as the case may be;conditions specified in Section 7.1 or 7.2 not being satisfied; and
(xxxix) make agree in writing or commit otherwise to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts or for emergency repairs;
(xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by Section 6.1(b)(vi) or Section 6.1(b)(vii) in a manner that would not reasonably be expected to be materially adverse to REIT III or to prevent or impair the ability of the REIT III Parties to consummate the Mergers;
(xxii) amend or modify the engagement letters entered into with the Persons listed on Section 4.19 of the REIT III Disclosure Letter, in a manner adverse to REIT III or engage other financial advisors in connection with the transactions contemplated by this Agreement;
(xxiii) permit any Encumbrances, except Permitted Encumbrances;
(xxiv) materially modify or reduce the amount of any insurance coverage provided by the REIT III Insurance Policies;
(xxv) take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the REIT III Common Stock inconsistent with respect to the Merger;
(xxvi) enter into any transaction disclosable under item 404(a) of Regulation S-K promulgated under the Exchange Act except in the ordinary course of business or as provided for in this Agreement; or
(xxvii) authorize, or enter into any Contract to do any of the foregoing.
(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit REIT III from taking any action, or refraining to take any action, at any time or from time to time, if, in the reasonable judgment of the REIT III Board, such action or inaction is reasonably necessary (i) for REIT III to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the REIT Merger Effective Time or (ii) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that REIT III or any REIT III Subsidiary be registered as an investment company under the Investment Company Act, including in the case of clause (i) only, making dividend or any other actual, constructive or deemed distribution payments to stockholders of REIT III in accordance with this Agreement or otherwise as permitted pursuant to Section 6.1(b)(iii).
Appears in 1 contract
Samples: Agreement and Plan of Merger (Kramont Realty Trust)
Covenants Relating to Conduct of Business Pending the Mergers. Section 6.1 4.1 Conduct of Business by REIT IIIAMLI.
(a) REIT III covenants and agrees that, between During the period from the date of this Agreement and to the earlier to occur of the REIT termination of this Agreement or the Partnership Merger Effective Time Time, AMLI and the date, if any, on which this Agreement is terminated pursuant to Section 9.1 (the “Interim Period”), except (1) to the extent required by Law, (2) as may be consented to in advance in writing by the REIT II Special Committee (which consent shall not be unreasonably withheld, delayed or conditioned), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, each of the REIT III Parties AMLI LP shall, and shall cause each of the other REIT III AMLI Subsidiaries to, to (i) conduct carry on its business businesses in the usual, regular and ordinary course consistent with past practice and in compliance in all material respects in the ordinary course and in a manner consistent with past practices, applicable Law and (ii) to the extent consistent with the foregoing clause (i), use all its commercially reasonable efforts to (A) preserve intact in all material respects its current business organization, goodwill, ongoing businesses and significant relationships with third parties parties, to keep available the services of their present officers and (B) employees and to maintain the status of REIT III AMLI and each applicable AMLI Subsidiary as a REITREIT within the meaning of the Code.
(b) Without limiting the generality of the foregoing, REIT III covenants and agrees that, during the Interim Periodperiod from the date of this Agreement to the earlier of the termination of this Agreement or the Partnership Merger Effective Time, except (1) as otherwise expressly provided by this Agreement or the Transaction Documents or to the extent required by Law, (2) as may be consented to by Purchaser in advance and in writing by the REIT II Special Committee (which consent writing, AMLI and AMLI LP shall not be unreasonably withheld, delayed and shall not authorize or conditioned), (3) as may be expressly contemplated, expressly required commit or expressly permitted by this Agreement, or (4) as set forth in Section 6.1(b) of the REIT III Disclosure Letter, the REIT III Parties shall notagree to, and shall cause the other AMLI Subsidiaries not cause to (and not to authorize or permit any other REIT III Subsidiary commit or agree to, do any of the following:):
(i) (A) amend or propose to amend the REIT III Governing Documents, (B) amend or propose to amend such equivalent organizational or governing documents of any REIT III Subsidiary material to REIT III and the REIT III Subsidiaries, (C) amend the REIT III DRP or the REIT III Share Redemption Program in a manner material to REIT III, or (D) waive the stock ownership limit or create an Excepted Holder Limit (as defined in the REIT III Charter) under the REIT III Charter;
(ii) adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of REIT III or any REIT III Subsidiary (other than any Wholly Owned REIT III Subsidiary);
(iii) declare, set aside for payment or pay any dividend on dividends on, or make any other actual, constructive or deemed distributions (whether in cash, stockshares, property or otherwise) with in respect to shares of, any of capital AMLI's shares, stock of REIT III or any REIT III Subsidiary the partnership interests, shares, stock or other equity securities or ownership interests in REIT III or any REIT III Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment of dividends or other distributions to REIT III by any Wholly Owned REIT III Subsidiary and (B) distributions by any REIT III AMLI Subsidiary that is not directly or indirectly wholly ownedowned by AMLI, other than (i) regular, cash distributions at a rate not in excess of (x) $0.48 per share of AMLI Common Shares, declared and paid quarterly, (y) $0.48 per Series B Preferred Share, declared and paid quarterly and (z) $0.540625 per Series D Preferred Shares, declared and paid quarterly, in each case, in accordance with past practice, (ii) corresponding distributions payable to each holders of LP Units, GP Units, and payable with respect to the Series B units of limited partnership interests of AMLI LP and the Series D units of limited partnership interest of AMLI LP and (iii) dividends or distributions, declared, set aside or paid by any wholly owned AMLI Subsidiary to AMLI or any AMLI Subsidiary that is, directly or indirectly, wholly owned by REIT IIIAMLI and provided, that AMLI may, in accordance with Section 5.4(f), make dividend payments it is required to make by the requirements Code required to maintain REIT status and those that are sufficient to eliminate any U.S. federal income tax liability, (B) except as set forth in Section 4.1(b)(i) of the AMLI Disclosure Letter, split, combine or reclassify any shares, stock, partnership interests or other equity interests or issue or authorize the issuance of any securities in respect of, in lieu of or in substitution for shares of such shares, stock, partnership interests or other equity interests or (C) purchase, redeem (except for the redemption of LP Units for shares of AMLI Common Shares in accordance with the AMLI LP Agreement) or otherwise acquire any AMLI Common Shares, stock, other equity interests or securities of AMLI or the partnership interests, stock, other equity interests or securities of any AMLI Subsidiary or any options, warrants or rights to acquire, or security convertible into, AMLI Common Shares, stock, other equity interest or securities of AMLI or the partnership interests, stock or other equity interests in any AMLI Subsidiary, except in connection with the use of AMLI Common Shares or LP Units to pay the exercise price or Tax withholding obligation upon the exercise of an AMLI Option as presently permitted under any AMLI Option Plan;
(ii) (A) classify or re-classify any unissued AMLI Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests) or stock based performance units of AMLI or any AMLI Subsidiary; (B) authorize for issuance, issue, deliver, sell, or grant AMLI Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests) or stock based performance units of AMLI or AMLI Subsidiaries, (C) authorize for issuance, issue, deliver, sell, or grant any option or other right in respect of, any AMLI Common Shares, shares of stock, units, interests, any other voting or redeemable securities (including LP Units or other partnership interests), or stock based performance units of AMLI or any AMLI Subsidiary or any securities convertible into, or any rights, warrants or options to acquire, any such shares, units, interests, voting securities or convertible or redeemable securities or (D) amend or waive any option to acquire AMLI Common Shares (except, with respect to the foregoing clause (A), (B) and (C), (1) as required under the AMLI LP Agreement as presently in effect, (2) as required under the terms of the Preferred Shares as presently in effect and (3) in connection with the exercise of AMLI Options outstanding as of the date hereof under the AMLI Option Plan as in effect as of the date hereof or the exchange of units of AMLI LP for AMLI Common Shares in accordance with the AMLI LP Agreement);
(iii) amend the AMLI Charter or the AMLI Bylaws, or any other comparable charter or organizational documents of such REIT III any AMLI Subsidiary; provided, that, notwithstanding the restriction on dividends and other distributions in this Section 6.1(b), REIT III and any REIT III Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for REIT III to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise Tax under the Code;
(iv) redeem(A) merge, repurchase consolidate or otherwise acquireenter into any other business combination transaction with any Person, directly except as provided in Section 5.5 and 5.6, (B) acquire (by merger, consolidation or indirectlyacquisition) any corporation, partnership or other entity or (C) purchase any equity interest in or all or substantially all of the assets of, any shares of its capital stock Person or other equity interests of REIT III any division or a REIT III Subsidiary; provided, that, after the filing of the Form S-4, REIT III may effect redemptions upon a stockholder’s death, “qualifying disability” or confinement to a long-term care facility in accordance with the REIT III Share Redemption Programbusiness thereof;
(vA) make, undertake or enter into any new commitments obligating AMLI or any AMLI Subsidiary to (I) make, capital expenditures (x) from the date hereof until December 31, 2005, in excess of 105% of the total amounts set forth in the capital expenditure budgets that have been previously provided to the Purchaser Parties by AMLI and (y) for the period beginning on January 1, 2006 and ending on the earlier of the termination of this Agreement and the Merger Agreement Effective Time, in excess of 105% of the total amounts set forth in the 2006 Capital Budgets, in each case not including the Commitments (as defined herein) set forth in Section 4.1(b)(v) of the AMLI Disclosure Letter, provided AMLI shall be permitted to enter into a commitment to make repairs and/or prevent damage to any AMLI Properties as is necessary in the event of an emergency situation as long as AMLI provides Purchaser with a copy of such commitment within two (2) Business Days after such commitment is entered into or (II) undertake any substantial renovation or rehabilitation of any AMLI Properxx, (X) xxxxxxx, xxxxx xxxx xxx xxxxxx xx xxxxxxx, xx xxxxxxxx xx option or other right or election or enter into any other commitment or contractual obligation (each, a "Commitment") for the acquisition of any real property, including by the acquisition of equity securities in an entity that holds any such real property, or other transaction (other than (i) any Commitment described in Section 4.1(b)(v) of the AMLI Disclosure Letter, (ii) any exchange of real property pursuant to Section 1031 of the Code described in Section 4.1(b)(v) of the AMLI Disclosure Letter, (iii) entering into leases (other than ground leases) as landlord in the ordinary course of business and incurring any reasonable and customary expenditures related thereto or (iv) incurring or expending up to an aggregate amount not to exceed $1,500,000 with respect to the pursuit of the potential acquisition by an AMLI Subsidiary of one or more real properties), or amend any Commitment in any material respect, (C) commence construction of, or enter into any Commitment to develop or construct, other real estate projects involving in excess of $500,000 (other than any Commitment described in Section 4.1(b)(v) of the AMLI Disclosure Letter), (D) incur indebtedness (secured or unsecured) except for transactions among REIT III draws under its revolving line(s) of credit for working capital purposes and one or more Wholly Owned REIT III Subsidiaries or among one or more Wholly Owned REIT III Subsidiaries, issue, sell, pledge, dispose, encumber or grant indebtedness (limited to its revolving line(s) of credit and any shares indebtedness described in Section 4.1(b)(v) of capital stock of REIT III or the AMLI Disclosure Letter) to fund any of the REIT III Subsidiaries’ capital stock Commitments described (including and within the REIT III OP Unitslimits so described) or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock of REIT III or any in Section 4.1(b)(v) of the REIT III Subsidiaries’ capital stock AMLI Disclosure Letter or other equity interests(E) modify, amend, terminate or enter into any commitment to modify, amend or terminate any indebtedness in existence as of the date hereof;
(vi) acquire or agree to acquire any material assets, except (A) acquisitions by REIT III or any Wholly Owned REIT III Subsidiary of or from an existing Wholly Owned REIT III Subsidiary, (B) acquisitions described in Section 6.1(b)(vi) of the REIT III Disclosure Letter, and (C) other acquisitions of personal property for a purchase price of less than $500,000 in the aggregate;
(vii) except as described in Section 6.1(b)(vii) of the REIT III Disclosure Letter or as permitted by clause (viii) below, sell, mortgage, pledgesubject to Lien (or, leasein the case of an involuntary Lien, assignfail to take action within thirty (30) days of the creation thereof to have such Lien removed), transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except lease (other than leases (other than ground leases) as landlord in the ordinary course of business, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition ) or deed in connection with (x) the satisfaction otherwise dispose of any margin call or (y) the posting of collateral in connection with any Contract to which REIT III or any REIT III Subsidiary is a party shall be considered to be done in the ordinary course of business;
(viii) incur, create, assume, guarantee, refinance, replace or prepay any Indebtedness for borrowed money or issue or materially amend the terms of any Indebtedness of REIT III or any of the REIT III SubsidiariesAMLI Properties, including by the disposition or issuance of equity securities in an entity that owns an AMLI Property, except (A) Indebtedness incurred under REIT III’s existing Debt Facilities as described in Section 4.1(b)(vi) of the AMLI Disclosure Letter (and in the amounts so described), or (B) made in the ordinary course of business consistent with past practice pursuant to a binding sales contract in existence on the date of this Agreement and set forth in Section 4.1(b)(vi) of the AMLI Disclosure Letter;
(including vii) sell, lease, mortgage, subject to Lien or otherwise dispose of any of its personal or intangible property, except in transactions made in the extent necessary to pay dividends permitted by Section 6.1(b)(iii))ordinary course of business consistent with past practice and which are not material, (B) funding any transactions permitted by this Section 6.1(b), (C) Indebtedness that does not, individually or in the aggregate, exceed $250,000; and or in connection with sales of any AMLI Properties as permitted under Section 4.1(b)(vi);
(Dviii) refinancing acquire any personal or intangible property, except in transactions made in the ordinary course of existing Indebtedness (provided, that the terms of such new Indebtedness shall not be materially more onerous on REIT III compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacingbusiness consistent with past practice or in connection with acquisitions permitted under Section 4.1(b)(v);
(ix) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, other than by REIT III or a Wholly Owned REIT III Subsidiary to REIT III or a Wholly Owned REIT III Subsidiary;
(x) other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any REIT III Material Contract (or any Contract that, if existing as of the date hereof, would be a REIT III Material Contract) in any material respect, other than (A) any termination or renewal in accordance with the terms of any existing REIT III Material Contract that occurs automatically without any action (other than notice of renewal) by REIT III or any REIT III Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;
(xi) make any payment, direct or indirect, of any liability of REIT III or any REIT III Subsidiary before the same comes due in accordance with its terms, other than (A) in the ordinary course of business or (B) in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;
(xii) waive, release, assign, settle or compromise any material Action, other than waivers, releases, assignments, settlements or compromises that (A) with respect to the payment of monetary damages, involve only the payment of monetary damages (excluding any portion of such payment payable under an existing property-level insurance policy) (x) equal to or less than the amounts specifically reserved with respect thereto on the most recent balance sheet of REIT III made available to REIT II prior to the date of this Agreement or (y) that do not exceed $25,000 individually or $63,000 in the aggregate, (B) do not involve the imposition of injunctive relief against REIT III or any REIT III Subsidiary or the Surviving Entity, (C) do not provide for any admission of material liability by REIT III or any of the REIT III Subsidiaries and (D) with respect to any Action involving any present, former or purported holder or group of holders of REIT III Common Stock comply with Section 7.6(c) (excluding in each case any such matter related to Taxes (which, for the avoidance of doubt, shall be covered by Section 6.1(b)(xviii));
(A) hire or, except where due to cause, terminate any officer of REIT III or any REIT III Subsidiary, (B) materially increase in any manner the compensation or benefits of any of REIT III’s officers or directors except for increases in annual compensation in the ordinary course of business or as set forth in such individual’s Contract, or (CSection 4.1(b)(ix) enter into, adopt, amend or terminate any employment, bonus, severance or retirement Contract or Employee Benefit Plan or other compensation or employee benefits arrangement, except as may be required to comply with applicable Law;
(xiv) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect at December 31, 2019, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;
(xv) enter into any new line of business;
(xvi) form any new funds, joint ventures or non-traded real estate investment trusts or other pooled-investment vehicles;
(xvii) fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law;
(xviii) enter into or modify in a manner adverse to REIT III any REIT III Tax Protection Agreement, make, change or rescind any material election relating to Taxes, change a material method of Tax accounting, file or amend any material Tax Return, settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund or give or request any waiver of a statute of limitation with respect to any material Tax Return except, in each caseAMLI Disclosure Letter, (A) to assume or guarantee the extent required by Law or (B) to the extent necessary (x) to preserve REIT III’s qualification as a REIT under the Code or (y) to qualify or preserve the status indebtedness of any REIT III Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Codeanother Person, as the case may be;
(xix) take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause REIT III to fail to qualify as a REIT or any REIT III Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;
(xx) make or commit to make any material capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts or for emergency repairs;
(xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted by Section 6.1(b)(vi) or Section 6.1(b)(vii) in a manner that would not reasonably be expected to be materially adverse to REIT III or to prevent or impair the ability of the REIT III Parties to consummate the Mergers;
(xxii) amend or modify the engagement letters entered into with the Persons listed on Section 4.19 of the REIT III Disclosure Letter, in a manner adverse to REIT III or engage other financial advisors in connection with the transactions contemplated by this Agreement;
(xxiii) permit any Encumbrances, except Permitted Encumbrances;
(xxiv) materially modify or reduce the amount of any insurance coverage provided by the REIT III Insurance Policies;
(xxv) take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the REIT III Common Stock with respect to the Merger;
(xxvi) enter into any transaction disclosable under item 404(a) of Regulation S-K promulgated under the Exchange Act except in the ordinary course of business or as provided for in this Agreement; or
(xxvii) authorize, or enter into any Contract to do any of the foregoing.
(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit REIT III from taking any action, or refraining to take any action, at any time or from time to time, if, in the reasonable judgment of the REIT III Board, such action or inaction is reasonably necessary (i) for REIT III to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the REIT Merger Effective Time or (ii) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that REIT III or any REIT III Subsidiary be registered as an investment company under the Investment Company Act, including in the case of clause (i) only, making dividend or any other actual, constructive or deemed distribution payments to stockholders of REIT III in accordance with this Agreement or otherwise as permitted pursuant to Section 6.1(b)(iii).any
Appears in 1 contract
Samples: Merger Agreement (Amli Residential Properties Trust)
