Exhibit 10.38
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is entered into as of this 11th day of
March 1999, by and among CNL American Properties Fund, Inc., a Maryland
corporation ("APF"), CFA Acquisition Corp., a Maryland corporation and wholly-
owned subsidiary of APF ("Acquisition Corp."), CNL Fund Advisors, Inc., a
Florida corporation (the "Advisor"), and CNL Group, Inc., a Florida corporation,
Xxxxxx X. Xxxxxx, Xxxxxx X. XxXxxxxxxx, Xxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, and
Xxxxxx X. Xxxxxxxxxxx, the principal stockholders of the Advisor (collectively,
the "Stockholders"). APF, Acquisition Corp., the Advisor and the Stockholders
are referred to collectively herein as the "Parties" and individually as a
"Party."
RECITALS:
WHEREAS, the Parties hereto desire to consummate a merger (the "Merger")
whereby Acquisition Corp. will be merged with and into the Advisor and the
Advisor will be the surviving corporation in the Merger, upon the terms and
subject to the conditions of this Agreement and in accordance with the Maryland
General Corporation Law (the "Maryland GCL") and the Florida Business
Corporation Act (the "Florida BCA");
WHEREAS, the parties hereto anticipate that the Merger will further certain
of their business objectives (including, without limitation, allowing APF to
become an entirely self-administered and self-managed real estate investment
trust);
WHEREAS, the Special Committee (the "Special Committee") of the independent
members of the Board of Directors of APF has received a fairness opinion (the
"Fairness Opinion") from Xxxxxxx Xxxxx & Co. as to the fairness to APF from a
financial point of view of the consideration to be paid in connection with the
Merger;
WHEREAS, the Special Committee has recommended the Merger to the Board of
Directors of APF and the Board has approved the proposal to consummate the
Merger (the "Merger Proposal") and the related transactions;
WHEREAS, through a transaction completed on June 30, 1998 (the "Development
Company Acquisition"), the Advisor acquired CNL Restaurant Development, Inc., a
Florida corporation and wholly owned subsidiary of CNL Group, Inc. that
developed certain properties owned by APF (the "Development Company");
WHEREAS, the Board of Directors of the Advisor and the Stockholders have
unanimously approved the Merger Proposal; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended, pursuant to which each issued and outstanding
share of the Advisor's common stock shall be converted into the right to receive
shares of APF common stock.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the receipt and sufficiency of which are
acknowledged, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Terms Defined in this Agreement. As used in this Agreement, the
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following terms shall have the respective meanings set forth below:
"Acquisition Corp." has the meaning set forth in the preface above.
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"Acquisition Corp. Certificate of Merger" has the meaning set forth in
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Section 2.2 below.
"Advisor" has the meaning set forth in the preface above.
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"Advisor Certificate of Merger" has the meaning set forth in Section 2.2
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below.
"Advisor Common Share Certificates" has the meaning set forth in Section
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4.1(a) below.
"Advisor Common Shares" means the shares of the common stock, $1.00 par
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value, and the shares of the Class B common stock, $1.00 par value, of the
Advisor.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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(S)1504, or any similar group defined under a similar provision of state, local
or foreign law.
"Agreement" means this Agreement, as amended from time to time.
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"APF" has the meaning set forth in the preface above.
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"APF Common Shares" shall mean the shares of common stock, par value $0.01,
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of APF.
"APF Indemnity Claim" has the meaning set forth in Section 12.1 below.
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"Basis" means any past or present fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms the basis for any specified
consequence.
"Board Changes" shall mean the date that a majority of the Board of
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Directors of APF shall be persons other than persons (i) whose election proxies
shall have been solicited by the Board of Directors of APF or (ii) who are
serving as directors appointed by the Board of Directors of APF to fill
vacancies caused by death or resignation (but not by removal) or to fill newly
created directorships.
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"Business Combination" has the meaning set forth in Section 4.1(b) below.
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"Change in Control" means (i) the sale or transfer of substantially all of
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the assets of APF, whether in one transaction or a series of transactions,
except a sale to a successor corporation in which the Stockholders immediately
prior to the transaction hold, directly or indirectly, at least 50% of the Total
Voting Power of the successor corporation immediately after the transaction,
(ii) any merger or consolidation between APF and another corporation
immediately after which the Stockholders hold, directly or indirectly, less than
50% of the Total Voting Power of the surviving corporation, (iii) the
dissolution or liquidation of APF, (iv) the acquisition by any Person or group
of Persons of direct or indirect beneficial ownership of APF Common Shares
representing more than 50% of the common stock of APF, or (v) the date the Board
Changes.
"Closing" has the meaning set forth in Section 2.3 below.
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"Closing Date" has the meaning set forth in Section 2.3 below.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the businesses
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and affairs of the Advisor or APF, if any, that is not already generally
available to the public or generally known by persons who are not affiliated
with such companies.
"Development Company" has the meaning set forth in the fifth paragraph of
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the Recitals above.
"Development Company Acquisition" has the meaning set forth in the fifth
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paragraph of Recitals above.
"Disclosure Schedule" has the meaning set forth in the first paragraph of
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Article VII below.
"Effective Time" has the meaning set forth in Section 2.2 below.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
tax-qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) tax-qualified defined benefit retirement plan
or arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(1).
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"Environmental, Health, and Safety Laws" means the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the
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environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"Extremely Hazardous Substance" has the meaning set forth in (S)302 of the
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Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fairness Opinion" has the meaning set forth in the third paragraph of the
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Recitals above.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
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"Financial Statements" has the meaning set forth in Section 7.7 below.
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"Florida BCA" has the meaning set forth in the first paragraph of the
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Recitals above.
"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation, but excluding commercially available shrink wrapped
software), (g) all other proprietary rights, and (h) all copies and tangible
embodiments thereof (in whatever form or medium).
"IRS" means the Internal Revenue Service.
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"Knowledge" means in the case of Advisor, CNL Group, Inc., and APF, the
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actual knowledge of a director or an executive officer after reasonable
investigation and, in the case of the Stockholders, the collective actual
Knowledge of all of the Stockholders after reasonable investigation. For the
purposes of this Agreement, the Knowledge of one Stockholder shall be attributed
to the other Stockholders.
"Known" and "Knowingly" mean that the Advisor, the Stockholders or APF, as
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applicable, had Knowledge of the particular matter or took the action described
with prior Knowledge.
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"Liability" means any liability (whether Known or unknown, whether asserted
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or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Maryland GCL" has the meaning set forth in the first paragraph of the
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Recitals above.
"Material Adverse Effect" means, as to any Party, a material adverse effect
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on the business, properties, operations, or condition (financial or otherwise)
which is not related to an industry-wide change in the economy or market or
other conditions affecting all business in the industry of the Party to which
the term is applied.
"Merger" has the meaning set forth in the first paragraph of the Recitals
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above.
"Merger Proposal" has the meaning set forth in fourth paragraph of the
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Recitals above.
"Minority Stockholder" means any holder of Advisor Common Shares other than
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a Stockholder.
"Most Recent Balance Sheet" means the balance sheet contained within the
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Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in Section 7.7
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below.
"Most Recent Fiscal Month End" has the meaning set forth in Section 7.7
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below.
"Most Recent Fiscal Year End" has the meaning set forth in Section 7.7
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below.
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
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"NYSE" means the New York Stock Exchange.
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"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" or "Parties" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Person" means an individual, a partnership, a corporation, an association,
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a joint stock company, a trust, a joint venture, a limited liability company, an
unincorporated organization, a governmental entity (or any department, agency,
or political subdivision thereof) or other entity.
"Prohibited Transaction" has the meaning set forth in ERISA (S)406 and Code
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(S)4975.
"Reportable Event" has the meaning set forth in ERISA (S)4043.
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"Representative" has the meaning set forth in Section 12.3 below.
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"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
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or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Share Consideration" has the meaning set forth in Section 4.1(a) below.
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"Special Committee" has the meaning set forth in the third paragraph to the
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Recitals above.
"Stockholder Indemnity Claim" has the meaning set forth in Section 12.2
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below.
"Stockholders" has the meaning set forth in the preface above.
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"Subsidiary" means any corporation, partnership, joint venture, limited
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liability company or other entity with respect to which a specified Person (or a
Subsidiary thereof) owns a majority of the common stock or other voting
interests or has the power to vote or direct the voting of sufficient securities
or interests to elect a majority of the directors or otherwise control the
management.
"Surviving Corporation" has the meaning set forth in Section 2.1 below.
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"Takeover Statute" has the meaning set forth in Section 8.10 below.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code (S)59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third-Party Claim" has the meaning set forth in Section 12.4 below.
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"Total Voting Power" means the total number of votes which may be cast in
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the election of directors of a company by all stockholders entitled to vote in
such an election.
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ARTICLE II
MERGER; EFFECTIVE TIME; CLOSING
2.1 Merger. Subject to the terms and conditions of this Agreement, the
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Maryland GCL and the Florida BCA, at the Effective Time, Acquisition Corp. and
the Advisor shall consummate the Merger in which (i) Acquisition Corp. shall be
merged with and into the Advisor and the separate corporate existence of
Acquisition Corp. shall thereupon cease, (ii) the Advisor shall be the successor
or surviving corporation in the Merger and shall continue to be governed by the
laws of the State of Florida and (iii) the separate corporate existence of the
Advisor with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The corporation surviving the Merger is
sometimes hereinafter referred to as the "Surviving Corporation." The Merger
shall have the effects set forth in the Maryland GCL and the Florida BCA.
2.2 Effective Time. On the Closing Date, subject to the terms and
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conditions of this Agreement, Acquisition Corp. and the Advisor shall (i) cause
to be executed (A) a Certificate of Merger in the form required by the Maryland
GCL (the "Acquisition Corp. Certificate of Merger") and (B) a Certificate of
Merger in the form required by the Florida BCA (the "Advisor Certificate of
Merger"), and (ii) cause the Acquisition Corp. Certificate of Merger to be
filed with the Maryland Department of Assessments and Taxation as provided in
the Maryland GCL and the Advisor Certificate of Merger to be filed with the
Florida Secretary of State as provided in the Florida BCA. The Merger shall
become effective at (i) such time as the Acquisition Corp. Certificate of Merger
has been duly filed with the Maryland Department of Assessments and Taxation and
the Advisor Certificate of Merger has been duly filed with the Florida Secretary
of State or (ii) such other time as is agreed upon by the Stockholders and APF
and specified in the Acquisition Corp. Certificate of Merger and the Advisor
Certificate of Merger. Such time is hereinafter referred to as the "Effective
Time."
2.3 The Closing. The closing of the transactions contemplated by this
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Agreement (the "Closing") shall take place at the offices of Xxxx Xxxxxxx Xxxxx
& Xxxxxxxxxx, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, commencing at 9:00
a.m. local time on such date as within five (5) business days following the
fulfillment or waiver of the conditions set forth in Article X (other than
conditions which by their nature are intended to be fulfilled at the Closing) or
such other place or time or on such other date as APF and the Stockholders may
agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article X but in no event later than December 31, 1999
(the "Closing Date").
ARTICLE III
ARTICLES OF INCORPORATION; BY-LAWS; AND
DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
3.1 Articles of Incorporation. The articles of incorporation of the
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Advisor, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter amended
as provided therein.
3.2 By-Laws. The by-laws of the Advisor, as in effect immediately prior to
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the Effective Time, shall be the by-laws of the Surviving Corporation.
3.3 Directors and Officers. The directors and officers of the Advisor
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immediately prior to the Effective Time shall be the directors and officers of
the Surviving Corporation from and after the Effective
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Time until their successors have been duly elected, appointed or qualified or
until their earlier death, resignation or removal in accordance with the
articles of incorporation and by-laws of the Surviving Corporation.
ARTICLE IV
SHARE CONSIDERATION; PAYMENT OF SHARE CONSIDERATION
4.1 Share Consideration; Conversion or Cancellation of Advisor Common
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Shares in Merger.
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(a) At the Effective Time, by virtue of the Merger and without any
action by the Parties, (A) all of the outstanding Advisor Common Shares (i)
shall be converted into the right to receive 7,600,000 APF Common Shares
(3,800,000 APF Common Shares if the Reverse Split [defined below] occurs prior
to the Closing) (the "Share Consideration") pursuant to the terms of Section 4.2
below, (ii) shall cease to be outstanding, and (iii) shall be cancelled and
retired and shall cease to exist, and each Stockholder and Minority Stockholder,
as the holder of certificates representing such the Advisor Common Shares (the
"Advisor Common Share Certificates"), shall cease to have any rights with
respect thereto, except the right to receive APF Common Shares therefor upon the
surrender of such certificates in accordance with this Section 4.1 and Section
4.3, and (B) each share of common stock of Acquisition Corp outstanding shall be
converted into one share of common stock of the Surviving Corporation. Subject
to the approval of the APF's shareholders of an amendment to its article of
incorporation, APF anticipates that prior to the Closing it will effect a one
for two reverse stock split (the "Reverse Split") pursuant to which each two
shares of APF Common Shares outstanding will be exchanged for one share of APF
Common Shares.
(b) Except for the anticipated Reverse Split described in Section
4.1(a), prior to the Effective Time, APF shall not split or combine the APF
Common Shares, or pay a stock dividend or other stock distribution in APF Common
Shares, or in rights or securities exchangeable or convertible into or
exercisable for APF Common Shares, or otherwise change APF Common Shares into,
or exchange APF Common Shares for, any other securities (whether pursuant to or
as part of a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation of APF as a result of which APF
stockholders receive cash, stock, or other property in exchange for, or in
connection with, their APF Common Shares (a "Business Combination") or
otherwise), or make any other dividend or distribution on or of APF Common
Shares (other than regular quarterly cash dividends paid on APF Common Shares or
any distribution pursuant to APF's dividend reinvestment plan), without the
parties hereto having first entered into an amendment to this Agreement pursuant
to which the Share Consideration will be adjusted to reflect such split,
combination, dividend, distribution, Business Combination, or change.
(c) At the Effective Time, by virtue of the Merger and without any
action by holders thereof, all of the APF Common Shares issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding.
4.2 Payment of Share Consideration. At the Closing, upon surrender to
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APF of the Advisor Common Share Certificates by the Stockholders and the
Minority Stockholders for cancellation, together with any other required
documents, the Stockholders and the Minority Stockholders shall receive an
aggregate of 100% APF Common Shares, pro rata based on their relative equity
interests in the Advisor as of the Closing Date, representing 100% of the Share
Consideration to be issued in the Merger and the Advisor Common Share
Certificates so surrendered shall forthwith be cancelled.
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4.3 Fractional APF Common Shares. No certificates representing fractional
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APF Common Shares shall be issued upon surrender of any Advisor Common Share
Certificates. Each Stockholder or Minority Stockholder who would otherwise be
entitled to fractional APF Common Shares will receive one APF Common Share for
each fractional interest representing 50% or more of one APF Common Share. No
APF Common Shares will be issued for a fractional interest representing less
than 50% of one APF Common Share.
4.4 Transfer of Advisor Common Shares. Except as contemplated in and
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permitted under the provisions of Section 8.4(a), (a) no transfers of Advisor
Common Shares shall be made on the stock transfer books of the Advisor after the
date of this Agreement, and (b) each Stockholder agrees not to transfer any
Advisor Common Shares after the date of this Agreement and before the Closing
Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE INDIVIDUAL STOCKHOLDERS
Each of the Stockholders, severally, but not jointly, represents and
warrants to Acquisition Corp. and APF that the statements contained in this
Article V are correct and complete as of the date hereof with respect to himself
or itself:
5.1 Authorization of Transaction. The Stockholder has full power and
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authority (including, as applicable, full corporate power and authority) to
execute and deliver this Agreement and to perform his obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of the
Stockholder, enforceable in accordance with its terms and conditions. The
Stockholder does not need to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement, except
in connection with federal securities laws and any applicable "Blue Sky" or
state securities laws.
5.2 Noncontravention. Except as set forth in Section 5.2 of the Disclosure
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Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which such Stockholder is subject or, to the extent applicable, any
provision of such Stockholder's articles of incorporation, bylaws or other
organizational documents.
5.3 Investment. The Stockholder (A) understands that the APF Common Shares
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to be acquired by such Stockholder pursuant to this Agreement have not been
registered under the Securities Act, or under any state securities laws, and are
being exchanged in reliance upon federal and state exemptions for transactions
not involving a public offering, (B) is acquiring the APF Common Shares solely
for his own account for investment purposes, and not with a view towards the
distribution thereof, (C) is a sophisticated investor with knowledge and
experience in business and financial matters, (D) has received certain
information concerning APF, including, without limitation, (i) the most recent
annual report on Form 10-K, (ii) the three most recent quarterly reports on Form
10-Q, (iii) any current reports on Form 8-K since December 31, 1996, in each
case as filed by APF under the Securities Exchange Act, and (iv) the most recent
annual report to stockholders of APF, and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and the risks
inherent in holding APF Common Shares, and (E)
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is able to bear the economic risk and lack of liquidity inherent in holding APF
Common Shares which have not been registered under the Securities Act.
5.4 Advisor Common Shares. Except as set forth in Section 7.2 of the
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Disclosure Schedule, each of the Stockholders holds of record and owns
beneficially the number of the Advisor Common Shares set forth next to his name
in Section 7.2 of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), Taxes, Security Interests, options, warrants, purchase rights,
contracts, commitments, equities, claims, and demands. Except for the agreements
set forth in Section 5.4 of the Disclosure Schedule (which, except as otherwise
provided on the Disclosure Schedule, will be terminated prior to the execution
of this Agreement), the Stockholder is not a party to any option, warrant,
purchase right, or other contract or commitment that could require such
Stockholder to sell, transfer, or otherwise dispose of any of the Advisor Common
Shares (other than pursuant to this Agreement) or is a party to any voting
trust, proxy, or other agreement or understanding with respect to the voting of
any of the Advisor Common Shares.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUISITION CORP. AND APF
Acquisition Corp. and APF jointly and severally represent and warrant to
the Stockholders and the Advisor that the statements contained in this Article
VI are correct and complete as of the date hereof:
6.1 Organization of Acquisition Corp. and APF. Each of Acquisition Corp.
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and APF is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Maryland. Except as disclosed in Section 6.1 of
Schedule 1 hereto, APF has no other Subsidiaries and does not own, directly or
indirectly, beneficially or of record, any shares of capital stock or other
security of any other entity or any other investment in any other entity. APF
has heretofore delivered to the Advisor accurate and complete copies of the
Certificate of Incorporation and Bylaws, as currently in effect, of APF and
Acquisition Corp. Each of APF and its Subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have a Material Adverse Effect on APF.
6.2 Capital Stock. The authorized capital stock of APF consists of
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125,000,000 shares of common stock, $.01 par value (the "APF Common Shares"), of
which 74,696,927 are outstanding as of January 31, 1999. Since January 31,
1999, APF has not issued any shares of capital stock. All outstanding APF
Common Shares are, and all APF Common Shares issuable under any stock option
plans of APF, will be when issued in accordance with the terms thereof, duly
authorized, validly issued, fully paid and nonassessable. Except for the
61,000,000 APF Common Shares (30,500,000 APF Common Shares if the Reverse Split
has occurred) which may be issued in connection with APF's acquisition of CNL
Income Funds I through, XVIII (assuming APF's stockholders approve the Second
Amended and Restated Articles of Incorporation), and the 4,700,000 APF Common
Shares (2,350,000 APF Common Shares if the Reverse Split has occurred) which may
be issued in connection with APF's acquisition of CNL Financial Corp. and CNL
Financial Services, Inc., there are outstanding on the date hereof no options,
warrants, calls, rights, commitments or any other agreements of any character to
which APF is a party or by which it may be bound, requiring it to issue,
transfer, sell, purchase, register, redeem, or acquire any shares of capital
stock
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or any securities or rights convertible into, exchangeable for or evidencing the
right to subscribe for or acquire any shares of its capital stock.
6.3 Authorization for Common Stock. The Share Consideration will, when
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issued, be duly authorized, validly issued, fully paid and nonassessable, and no
stockholder of APF will have any preemptive right or similar rights of
subscription or purchase in respect thereof. The Share Consideration will,
subject to the accuracy of the Stockholders' representations contained in
Section 5.3 hereof, be exempt from registration under the Securities Act and
will be registered or exempt from registration under all applicable state
securities laws.
6.4 Authorization of Transaction. Each of Acquisition Corp. and APF has
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full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform its respective obligations
hereunder. The execution, delivery and performance by APF and Acquisition Corp.
of this Agreement have been duly and validly authorized by the boards of
directors of APF and Acquisition Corp. This Agreement constitutes the valid and
legally binding obligation of each of Acquisition Corp. and APF, enforceable in
accordance with its terms and conditions. Neither Acquisition Corp. nor APF need
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement, except in connection with federal
securities laws and any applicable "Blue Sky" or state securities laws.
6.5 S-4; Proxy Statement. None of the information supplied or to be
--------------------
supplied by APF or Acquisition Corp. for inclusion or incorporation by reference
in (i) the S-4 to be filed by APF with SEC in connection with the Merger will,
at the time the S-4 becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading and (ii) the proxy
statement sent by APF to its shareholders pertaining to the Merger will, at the
date mailed to shareholders and at the times of the meeting of shareholders to
be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior
to the Effective Time any event with respect to APF, its officers and directors
or any of its Subsidiaries should occur which is required to be described in an
amendment of, or a supplement to, the S-4 or the proxy statement, APF shall
promptly so advise the Advisor and such event shall be so described, and such
amendment or supplement (which the Advisor shall have a reasonable opportunity
to review) shall be promptly filed with SEC. The S-4 will comply as to form in
all material respects with the provisions of the Securities Act and the rules
and regulations thereunder.
6.6 Consents and Noncontravention. Except for filings, permits,
-----------------------------
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Securities Exchange Act,
state securities or blue sky laws, the Xxxx Xxxxx Xxxxxx Act, if applicable, and
the filing and recordation of the certificate of merger, no filing with or
notice to, and no permit, authorization, consent or approval of, any
governmental entity is necessary for the execution and delivery by APF or
Acquisition Corp. of this Agreement or the consummation by APF or Acquisition
Corp. of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Material Adverse Effect on APF.
Neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
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restriction of any government, governmental agency, or court to which either
Acquisition Corp. or APF is subject or any provision of its articles of
incorporation or by-laws.
6.7 Title to Assets. APF has good title to, or a valid leasehold interest
---------------
in, the properties and assets used by it and shown on its December 31, 1998
consolidated balance sheet or acquired after the date thereof, free and clear of
all Security Interests (other than those disclosed in such consolidated balance
sheet) except for properties and assets disposed of in the Ordinary Course of
Business since December 31, 1998.
6.8 No Undisclosed Liabilities; Absence of Changes. Except as and to the
----------------------------------------------
extent publicly disclosed by APF in its reports filed with SEC or disclosed in
Schedule 1, as of December 31, 1998, none of APF or its Subsidiaries had any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, and whether due or to become due or asserted or unasserted, which are
not fully reflected in, reserved against or otherwise described in the
consolidated balance sheet of APF and its consolidated Subsidiaries (including
the notes thereto) as of such date or which could reasonably be expected to have
a Material Adverse Effect on APF. Except as publicly disclosed by APF in any
reports filed by it with SEC Reports, since December 31, 1998, the business of
APF and its Subsidiaries has been carried on only in the ordinary and usual
course, none of APF or its Subsidiaries has incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, and whether due or to
become due or asserted or unasserted, which could reasonably be expected to
have, and there have been no events, changes or effects with respect to APF or
its Subsidiaries Known to APF having or which could reasonably be expected to
have, a Material Adverse Effect on APF.
6.9 Litigation. Except as publicly disclosed by APF in its reports to the
----------
SEC or on Schedule 1, there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of APF, threatened against APF or any
of its Subsidiaries or any of their respective properties or assets which (a) if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on APF or (b) as of the date hereof, questions the validity of this
Agreement or any action to be taken by APF in connection with the consummation
of the transactions contemplated hereby or could otherwise prevent or delay the
consummation of the transactions contemplated by this Agreement. Except as
publicly disclosed by APF in any report to SEC, none of APF or its Subsidiaries
is subject to any outstanding order, writ, injunction or decree which, insofar
as can be reasonably foreseen in the future, could reasonably be expected to
have a Material Adverse Effect on APF or would prevent or delay the consummation
of the transactions contemplated hereby.
6.10 Compliance with Applicable Law. Except as publicly disclosed by APF
------------------------------
in its reports to SEC, APF and its Subsidiaries hold all permits, licenses,
variances, exemptions, order and approvals of all governmental entities
necessary for the lawful conduct of their respective businesses, except for
failures to hold such permits, licenses, variances, exemptions, orders and
approvals which could not reasonably be expected to have a Material Adverse
Effect on APF. Except as publicly disclosed by APF in its reports to SEC, APF
and its Subsidiaries are in compliance with the material terms of its permits,
except where the failure so to comply could not reasonably be expected to have a
Material Adverse Effect on APF. Except as publicly disclosed by APF, the
businesses of APF and its Subsidiaries are not, being conducted in violation of
any law, ordinance or regulation of any governmental entity except that no
representation or warranty is made in this Section 6.9 with respect to
environmental laws and except for violations or possible violations which do
not, and, insofar as reasonably can be foreseen, in the future will not, have a
Material
-12-
Adverse Effect on APF. Except as publicly disclosed by APF in its reports to
SEC, no investigation or review by any governmental entity with respect to APF
or its Subsidiaries is pending or, to the Knowledge of APF, threatened, nor, to
the Knowledge of APF, has any government entity indicated an intention to
conduct the same, other than, in each case, those which APF reasonably believes
will not have a Material Adverse Effect on APF.
6.11 Tax Matters. Except as disclosed in writing to the Advisor:
-----------
(i) APF and its Subsidiaries have timely filed, or been included in,
all material federal, state, local and foreign Tax Returns to be filed by them.
(ii) Except to the extent adequately reserved for in accordance with
GAAP, all income and franchise Taxes and material other Taxes due and payable by
APF and any of its Subsidiaries have been timely paid in full. The consolidated
financial statements contained in the most recent report filed by APF with SEC
reflect an adequate reserve for all Taxes payable by APF and any of its
Subsidiaries for all taxable periods and portions thereof through the date of
such financial statements.
(iii) No material deficiencies for any Taxes have been proposed,
asserted or assessed in writing against APF or any of its Subsidiaries that have
not been fully paid or adequately provided for in the appropriate financial
statements of APF and its Subsidiaries. No material issues relating to Taxes
have been raised in writing by any governmental authority during any presently
pending audit or examination.
(iv) None of APF or any of its Subsidiaries has taken or agreed to
take any action that would prevent or impede the Merger from qualifying as a
tax-free reorganization under Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code").
6.12 Brokers' Fees. Except for the fees and expenses paid to Xxxxxxx
-------------
Xxxxx & Co. with respect to the delivery of the Fairness Opinion to the Special
Committee and except for fees and expenses paid to Xxxxxxx Xxxxx Barney with
respect to advisory services provided to the Special Committee, neither
Acquisition Corp. nor APF has any Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement.
6.13 Disclosure. APF is in compliance in all material respects with
----------
its obligation under the Securities Exchange Act to publicly disclose material
information in a timely fashion. The representations and warranties contained
in this Article VI do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements and
information contained in this Article VI not misleading.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES CONCERNING THE ADVISOR
Each of the Stockholders and the Advisor severally represent and warrant to
Acquisition Corp. and APF that the statements contained in this Article VII are
correct and complete as of the date hereof, except as set forth in the
disclosure schedule delivered by the Stockholders and the Advisor to Acquisition
Corp. and APF in accordance with the provisions of Section 8.1 (the "Disclosure
Schedule"). Solely for the purposes of this Article VII and except as otherwise
indicated, any reference to the "Advisor" shall be deemed to be a reference to
both the Advisor and the Development Company and any representation made with
respect to the "Advisor" shall include both the Advisor and the Development
Company. References
-13-
to the Development Company within a representation and warranty are made solely
for clarification purposes and no implication shall be drawn from the failure to
reference the Development Company in any other representation and warranty that
such representation and warranty is inapplicable to the Development Company. The
mere listing (or inclusion of a copy) of a document or other item shall not be
deemed adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence of
the document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Article VII.
7.1 Organization, Qualification, and Corporate Power. The Advisor is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of Florida. The Advisor is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the failure to so qualify or obtain authorization would
not have a Material Adverse Effect on the Advisor. Except as set forth in
Section 7.1(a) of the Disclosure Schedule, the Advisor has full corporate power
and authority and all licenses, permits, and authorizations necessary to carry
on the businesses in which it is engaged and to own and use the properties owned
and used by it except where the failure to be so licensed, permitted or
authorized would not have a Material Adverse Effect on the Advisor. Section
7.1(b) of the Disclosure Schedule lists the directors and officers of the
Advisor. The Stockholders have made available to Acquisition Corp. and APF
correct and complete copies of the articles of incorporation and by-laws of the
Advisor (as amended to date). The minute books (containing the records of
meetings of the stockholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
the Advisor have been delivered to Acquisition Corp. and APF and are correct and
complete in all material respects. The Advisor is not in default under or in
violation of any provision of its articles of incorporation or by-laws.
7.2 Capitalization. The entire authorized capital stock of the Advisor
--------------
(the "Advisor Common Shares") consists of (i) 10,000 shares of Class A common
stock, $1.00 par value, of which 6,400 shares are issued and outstanding, and
(ii) 5,000 shares of the Class B common stock, $1.00 par value, of which 3,600
shares are issued and outstanding. No Advisor Common Shares are held in
treasury. All of the issued and outstanding Advisor Common Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, and are held of
record by the respective Stockholders as set forth in Section 7.2 of the
Disclosure Schedule. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Advisor to issue, sell, or
otherwise cause to become outstanding any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Advisor. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the Advisor Common Shares.
7.3 Authorization of Transaction. The Advisor has full power and authority
----------------------------
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement constitutes
the valid and legally binding obligation of the Advisor, enforceable in
accordance with its terms and conditions. The Advisor is not required give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement, except in connection with federal
securities laws and any applicable "Blue Sky" or state securities laws.
-14-
7.4 Noncontravention. Except as set forth in Section 7.4 of the Disclosure
----------------
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Advisor is subject or any provision of the articles of
incorporation or bylaws of the Advisor or (ii) result in a breach of, constitute
a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel any agreement, contract, lease,
license, instrument, or other arrangement to which the Advisor is a party or by
which it is bound.
7.5 Title to Assets. The Advisor has good title to, or a valid leasehold
---------------
interest in, the properties and assets used by it, located on its premises, and
shown on the Most Recent Balance Sheet or acquired after the date thereof, free
and clear of all Security Interests (other than those disclosed in the Most
Recent Balance Sheet), except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet .
7.6 Subsidiaries. The Advisor does not have any Subsidiaries, operating
------------
or otherwise, other than the Development Company.
7.7 Financial Statements. The Advisor has delivered to APF and Acquisition
--------------------
Corp. its (i) audited balance sheets and statements of income, changes in
stockholders' equity, and cash flow as of and for the fiscal year ended June 30,
1997 and June 30, 1998 (the "Most Recent Fiscal Year End") and (ii) unaudited
balance sheets and statements of income, changes in stockholders' equity, and
cash flow (the "Most Recent Financial Statements") as of and for the three
months ended (the "Most Recent Fiscal Quarter End") (the financial statements
described in clauses (i) and (ii), collectively, the "Financial Statements").
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Advisor as of
such dates and the results of operations of the Advisor for such periods, and
are consistent with the books and records of the Advisor (which books and
records are correct and complete in all material respects).
7.8 Events Subsequent to Most Recent Fiscal Year End. Since the Most
------------------------------------------------
Recent Fiscal Year End nothing has had a Material Adverse Effect as to the
Advisor. Without limiting the generality of the foregoing, since that date,
except as set forth in the appropriately lettered paragraph of Section 7.8 of
the Disclosure Schedule:
(a) the Advisor has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration in the
Ordinary Course of Business;
(b) the Advisor has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
involving more than $100,000 ($500,000 in the aggregate) and outside the
Ordinary Course of Business;
(c) no party (including the Advisor) has accelerated, terminated,
modified, or cancelled any material agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) to which the
Advisor is a party or by which it is bound, other than in the Ordinary Course of
Business;
(d) the Advisor has not imposed any Security Interest upon any of its
assets, tangible or intangible other than in the Ordinary Course of Business;
-15-
(e) the Advisor has not made any capital expenditure (or series of
related capital expenditures) either involving more than $100,000 ($500,000 in
the aggregate) or outside the Ordinary Course of Business;
(f) the Advisor has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of any other Person (or series of
related capital investments, loans, and acquisitions);
(g) the Advisor has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation other than in the Ordinary Course of Business;
(h) the Advisor has not delayed or postponed the payment of accounts
payable and other Liabilities outside the Ordinary Course of Business;
(i) the Advisor has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) outside the Ordinary
Course of Business;
(j) the Advisor has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the articles of
incorporation or by-laws of the Advisor;
(l) the Advisor has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to purchase
or obtain (including upon conversion, exchange, or exercise) any of its capital
stock;
(m) the Advisor has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, purchased, or otherwise acquired any of its capital stock
outside the Ordinary Course of Business except to reduce to zero the Advisor's
accumulated and current earnings and profits.
(n) the Advisor has not experienced any material damage, destruction, or
loss (whether or not covered by insurance) to its property;
(o) the Advisor has not made any loan to, or entered into any other
transaction with, any of its directors, officers, or employees outside the
Ordinary Course of Business;
(p) the Advisor has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(q) the Advisor has not granted any increase in the base compensation of
any of its directors, officers, or employees other than in the Ordinary Course
of Business;
(r) the Advisor has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, or employees (or
taken any such action with respect to any other Employee Benefit Plan);
-16-
(s) the Advisor has not made any other change in employment terms for
any of its directors, officers, or employees outside the Ordinary Course of
Business or in the terms of its agreements with any independent contractors
unless the Special Committee agreed therewith;
(t) the Advisor has not made or pledged to make any charitable or other
capital contribution outside the Ordinary Course of Business unless the Special
Committee agreed therewith;
(u) to the Knowledge of the Stockholders and the Advisor, there has not
been any other material occurrence, event, incident, action, failure to act, or
transaction outside the Ordinary Course of Business involving the Advisor; and
(v) to the Knowledge of the Stockholders and the Advisor, the Advisor is
not under any legal obligation, whether written or oral, to do any of the
foregoing.
7.9 Undisclosed Liabilities. The Advisor does not have any Liability
-----------------------
(and, to the Advisor's and the Stockholders' Knowledge, there is no Basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against it giving rise to any Liability), except for
(i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Quarter End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law) and are not in the aggregate material.
7.10 Legal Compliance. The Advisor (including the Development Company)
----------------
has complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), the violation of which could cause a Material Adverse Effect
to the Advisor, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against it
alleging any failure so to comply, except as disclosed in Section 7.10 of the
Disclosure Schedule.
7.11 Tax Matters.
-----------
(a) The Advisor has filed all Tax Returns that it was required to file,
including, without limitation, any Tax Returns required to be filed with any
state. All such Tax Returns were correct and complete in all material respects.
All Taxes of the Advisor due as shown on any filed Tax Return have been paid.
Except as disclosed in Section 7.11(a) of the Disclosure Schedule, the Advisor
is not currently the beneficiary of any extension of time within which to file
any Tax Return. No claim has ever been made by an authority in a jurisdiction
where the Advisor does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of the
assets of the Advisor that arose in connection with any failure (or alleged
failure) to pay any Tax.
(b) The Advisor has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(c) No Stockholder expects any authority to assess any additional Taxes
for any period for which Tax Returns have been filed. There is no dispute or
claim concerning any Tax Liability of the Advisor either (A) claimed or raised
by any authority in writing or (B) as to which any of the Stockholders has
Knowledge.
-17-
Section 7.11(c) of the Disclosure Schedule lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Advisor for taxable periods
ended on or after June 30, 1995, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Stockholders have made available to Acquisition Corp. and APF correct
and complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Advisor since
June 30, 1995.
(d) The Advisor has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The Advisor has not filed a consent under Code (S)341(f) concerning
collapsible corporations. The Advisor has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code (S)280G. The Advisor has disclosed on its federal income
Tax Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code (S)6662. The
Advisor is not a party to any Tax allocation or sharing agreement, except as
disclosed in Section 7.11(e) of the Disclosure Schedule. The Advisor does not
have any Liability for the Taxes of any Person (other than the Advisor) under
Treas. Reg. (S)1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
7.12 Real Property.
-------------
Section 7.12(a) of the Disclosure Schedule lists and describes briefly all
real property owned, leased or subleased by the Advisor. Section 7.12(b) of the
Disclosure Schedule lists all leases and subleases to which the Advisor is a
party, and the Stockholders have delivered to Acquisition Corp. and APF correct
and complete copies of all such leases and subleases (as amended to date). With
respect to each lease and sublease listed in Section 7.12(b) of the Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable, and in
full force and effect;
(b) no consent is required with respect to the lease or sublease as a
result of this Agreement, and the actions contemplated by this Agreement will
not result in the change of any terms of the lease or sublease or otherwise
affect the ongoing validity of the lease or sublease;
(c) no party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(d) no party to the lease or sublease has repudiated any provision
thereof;
(e) there are no disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(f) the Advisor has not assigned, transferred, conveyed, mortgaged,
deeded in trust, or encumbered any interest in the leasehold or subleasehold;
(g) all facilities leased or subleased thereunder have received all
approvals of governmental authorities (including licenses and permits) required
by the Advisor in connection with the operation thereof
-18-
and have been operated and maintained by the Advisor in accordance with
applicable laws, rules, and regulations;
(h) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities; and
(i) in the case of the Stockholders, the above representations and
warranties are limited to and qualified by the Knowledge of the Stockholders.
7.13 Intellectual Property.
---------------------
(a) Except as set forth on Section 7.13 of the disclosure Schedule, the
Advisor owns or has the right to use pursuant to license, sublicense, agreement,
or permission all Intellectual Property used in the operation of the businesses
of the Advisor as presently conducted. Each item of Intellectual Property owned
or used by the Advisor immediately prior to the Closing hereunder will be owned
or available for use by the Advisor on identical terms and conditions
immediately subsequent to the Closing hereunder. The Advisor has taken all
necessary action to maintain and protect each item of Intellectual Property that
it owns or uses.
(b) The Advisor has not Knowingly interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and the directors and
officers (and employees with responsibility for Intellectual Property matters)
of the Advisor has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Advisor must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of the
Advisor and the Stockholders, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of the Advisor.
(c) The Advisor has no patent or registration which has been issued to
the Advisor with respect to any of its Intellectual Property.
(d) Section 7.13(d) of the Disclosure Schedule identifies each item of
Intellectual Property that any third party owns and that the Advisor uses
pursuant to license, sublicense, agreement, or permission. The Stockholders have
delivered to Acquisition Corp. and APF correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
(e) To the Knowledge of the Advisor and the Stockholders, nothing will
interfere with, infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third parties as a result of the
continued operation of the Advisor's business as presently conducted.
7.14 Tangible Assets. The Advisor owns or leases all buildings,
---------------
machinery, equipment, and other tangible assets used in the conduct of its
business as presently conducted and as presently proposed to be conducted. Each
such tangible asset is free from all material defects, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used. The Most Recent Balance Sheet sets forth all of the
assets necessary, in the Advisor's opinion, to conduct the Advisor's business as
it is currently being conducted.
-19-
7.15 Contracts. Section 7.15 of the Disclosure Schedule lists all of the
---------
following types of contracts and other agreements to which the Advisor
(including the Development Company) is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $50,000 per annum;
(b) any partnership or joint venture agreement;
(c) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed money,
or any capitalized lease obligation or under which it has imposed a Security
Interest on any of its assets, tangible or intangible;
(d) any agreement concerning noncompetition;
(e) any agreement with any of the Stockholders and their Affiliates
(other than the Advisor);
(f) except as disclosed in Section 7.22 of the Disclosure Schedule, any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit
of its current or former directors, officers, or employees;
(g) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis providing annual compensation in excess of
$100,000 or providing severance benefits;
(h) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees outside the Ordinary Course of
Business; or
(i) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect.
The Stockholders have delivered to Acquisition Corp. and APF each material
written agreement listed in Section 7.15 of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
material oral agreement referred to in Section 7.15 of the Disclosure Schedule.
With respect to each agreement set forth in Section 7.15 of the Disclosure
Schedule: (A) the agreement is legal, valid, binding, enforceable, and in full
force and effect; (B) the agreement will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (C) the Advisor is not,
and to the Knowledge of the Advisor and the Stockholders, no other party is in
breach or default, under the agreement; and (D) no party has given notice to the
Advisor that it has repudiated any provision of the agreement.
7.16 Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
the Advisor are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims Known to the Advisor or the
Stockholders, and are current and collectible in accordance with their terms at
their recorded amounts, subject only to the reserve for bad debts set forth on
the face of the Most Recent Balance Sheet as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Advisor (and, as applicable, the Development Company).
7.17 Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Advisor, except as disclosed in Section 7.17 of the
Disclosure Schedule.
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7.18 Insurance. Section 7.18 of the Disclosure Schedule sets forth the
---------
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Advisor (including the Development
Company) has been a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past five years: (i) the name, address, and
telephone number of the agent; (ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured; and (iii) the policy number
and the period of coverage. With respect to each such insurance policy to the
Knowledge of the Stockholders and the Advisor: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Advisor (including the Development Company) nor any
other party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (D) no
party to the policy has repudiated any provision thereof. The Advisor
(including the Development Company) has been covered during the past five years
by insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. Section 7.18 of the
Disclosure Schedule describes any self-insurance arrangements affecting the
Advisor (including the Development Company).
7.19 Litigation. Section 7.19 of the Disclosure Schedule sets forth each
----------
instance in which the Advisor (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party to, or to the
Knowledge of the Advisor, is threatened to be made a party to any action, suit,
proceeding, hearing, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in Section 7.19 of the Disclosure
Schedule could result in any Material Adverse Effect on the Advisor. None of the
Stockholders has any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Advisor.
7.20 Construction and Development Liability. The Advisor (including the
--------------------------------------
Development Company) does not have any Liability (and to the Knowledge of the
Advisor and the Stockholders, there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any Liability) arising out of any injury to
individuals or property as a result of faulty or inadequate construction or
development by the Advisor or the Development Company.
7.21 Employees. To the Knowledge of the Stockholders and the Advisor, no
---------
executive, key employee, or group of employees currently has any plans to
terminate employment with the Advisor (including the Development Company) as a
result of this Agreement. The Advisor has not Knowingly committed any unfair
labor practice. None of the Stockholders or the Advisor has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Advisor. The Disclosure Schedule
sets forth the names of all employees necessary, in the opinion of the Advisor,
in order to conduct the Advisor's business as it is currently being conducted.
7.22 Employee Benefits.
-----------------
(a) Section 7.22 of the Disclosure Schedule lists each Employee Benefit
Plan that the Advisor (including the Development Company) maintains or to which
the Advisor (including the Development Company) contributes.
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(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all respects with the
applicable requirements of ERISA, the Code, and other applicable laws.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been filed
or distributed appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code
(S)4980B have been met with respect to each such Employee Benefit Plan which is
an Employee Welfare Benefit Plan.
(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date which are not
yet due have been paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Advisor. All premiums or
other payments for all periods ending on or before the Closing Date have been
paid with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code (S)401(a) and has
received, within the last two years, a favorable determination letter from the
Internal Revenue Service.
(f) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multiemployer Plan),
subject to Title IV of ERISA, equals or exceeds the present value of all vested
and nonvested Liabilities thereunder determined in accordance with PBGC methods,
factors, and assumptions applicable to an Employee Pension Benefit Plan
terminating on the date for determination.
(g) The Stockholders have made available to Acquisition Corp. and APF
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
(h) Except as set forth in Section 7.22(h) of the Disclosure Schedule,
with respect to each Employee Benefit Plan that the Advisor maintains or ever
has maintained or to which it contributes, ever has contributed, or ever has
been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan), subject to Title IV of
ERISA, has been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted or
threatened.
(ii) There have been no Prohibited Transactions with respect to any
such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration
-22-
or the investment of the assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or threatened. None of the
Stockholders has any Knowledge of any Basis for any such action, suit,
proceeding, hearing, or investigation.
(iii) the Advisor (including the Development Company) has not
incurred, and none of the Stockholders and the directors and officers
(and employees with responsibility for employee benefits matters) of the
Advisor has any reason to expect that the Advisor will incur, any
Liability to the PBGC (other than PBGC premium payments) or otherwise
under Title IV of ERISA (including any withdrawal Liability) or under
the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(i) the Advisor (including the Development Company) does not contribute
to, has never contributed to, and never has been required to contribute to any
Multiemployer Plan and has never had any Liability (including withdrawal
Liability) under any Multiemployer Plan.
(j) the Advisor (including the Development Company) does not maintain or
contribute, has never maintained or contributed, and has never been required to
contribute to any Employee Welfare Benefit Plan providing medical, health, or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses, or their dependents (other than in
accordance with Code (S)4980B).
7.23 Guaranties. Except as provided in Section 7.23 of the Disclosure
----------
Schedule, the Advisor is not a guarantor and is not otherwise liable for any
Liability or obligation (including indebtedness) of any other Person.
7.24 No Real Property. Neither the Advisor nor the Development Company
----------------
owns or at any time has owned any real property or any interest in real
property.
7.25 Relationships with Tenants. The Stockholders and the Advisor
--------------------------
believe that Advisor's relationships with APF's existing primary tenants are
sound, and there is no Basis to believe that any of APF's primary tenants will
materially and adversely change the manner in which they currently conduct
business with APF as a result of the Merger.
7.26 Disclosure. The representations and warranties contained in this
----------
Article VII do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Article VII not misleading.
ARTICLE VIII
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing.
8.1 Delivery and Approval of Disclosure Schedule and Schedule 1. Within
-----------------------------------------------------------
fifteen (15) Business Days after the date of this Agreement the Advisor and the
Stockholders shall deliver to APF the Disclosure Schedule and APF shall deliver
to the Advisor and the Stockholders Schedule 1. Within fifteen (15) Business
Days after APF receives the Disclosure Schedule it shall give the Advisor notice
either that the disclosures in the Disclosure Schedule are, as to substance,
satisfactory to APF, in its sole and absolute discretion, or that they are not
satisfactory and that APF and Acquisition Corp. terminate this Merger
-23-
Agreement pursuant to Section 11.2. Likewise, within fifteen (15) Business Days
after the Advisor and the Stockholders receive Schedule 1, a majority in
interest of the Stockholders shall give APF notice either that the disclosures
in Schedule 1 are, as to substance, satisfactory to them, in their sole and
absolute discretion, or that they are not satisfactory and that such majority in
interest of the Stockholders terminates the Merger Agreement pursuant to Section
11.2 In the case of both APF and the majority in interest of the Stockholders,
the failure of either to give the notice specified above within the applicable
fifteen (15) Business Day period shall constitute approval of the Disclosure
Schedule or Schedule 1, as applicable.
8.2 General. Each of the Parties will use his or its reasonable best
-------
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in Article X below).
8.3 Notices and Consents. The Advisor shall give any notices to third
--------------------
parties and shall diligently seek to obtain any third party consents which are
required as referred to in Sections 5.1, 5.2, 7.3 and 7.4 above and the related
sections of the Disclosure Schedule. Each of the Parties shall give any notices
to, make any filings with, and use its reasonable best efforts to obtain any
authorizations, consents, and approvals of governments and governmental agencies
in connection with the matters referred to in Section 5.1, Section 6.4, and
Section 7.3 above.
8.4 Maintenance of Business; Prohibited Acts. During the period from the
----------------------------------------
date of this Agreement to the Effective Time, the Stockholders will not, and
will not cause the Advisor to, take any action that adversely affects the
ability of the Advisor (including the Development Company) (i) to pursue its
business in the ordinary course, (ii) to seek to preserve intact its current
business organizations, (iii) to keep available the services of its current
officers and employees, and (iv) preserve its relationships with customers,
suppliers, and others having business dealings with it; and the Stockholders
will not allow the Advisor (including the Development Company) to, without APF's
prior written consent:
(a) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, delivery, sale, disposition or pledge or
other encumbrance of (i) any additional shares of its capital stock of any class
(including the Advisor Common Shares), or any securities or rights convertible
into, exchangeable for or evidencing the right to subscribe for any shares of
its capital stock, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares of its
capital stock or any other securities or rights convertible into, exchangeable
for or evidencing the right to subscribe for any shares of its capital stock, or
(ii) any other securities in respect of, in lieu of or in substitution for the
Advisor Common Shares outstanding on the date hereof; provided, however, the
restrictions on transfer of the Advisor Common Shares contained in this Section
8.4(a) shall not apply to (x) transfers by CNL Group, Inc. to certain officers
and employees of the Advisor and its Affiliates so long as the total number of
Advisor Common Shares transferred does not exceed 1,500 and each such transferee
executes and delivers to APF the representation letter attached hereto as
Exhibit A, and (y) transfers by any individual Stockholders to their spouses,
children or other family members or to trusts for the benefit of any of such
persons, provided that the total number of Advisor Common Shares so transferred
does not exceed 3,600;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including the
Advisor Common Shares);
-24-
(c) split, combine, subdivide or reclassify any shares of its capital
stock or otherwise make any payments to the Stockholders in their capacities as
stockholders of the Advisor; provided, however, that nothing shall prohibit: (i)
the payment of any ordinary distribution or dividend in respect of its capital
stock at such times and in such manner and amount as may be consistent with the
Advisor's past practice (which in any event shall include any and all
compensation paid or payable or expenses reimbursed or reimbursable for the
period from June 30, 1998 through the Effective Time, to the extent not
otherwise paid or distributed to the Stockholders), (ii) the payment of any
dividend as shall be required to be paid by the Advisor in order to permit
McDirmit, Davis, Lauteria, Xxxxxxx & Company, P.A. to issue the letter required
by Section 10.2(c), (iii) any distribution of property necessary for the
representation and warranty set forth in Section 7.11 to be true and correct, or
(iv) distributions to reduce to zero the Advisor's accumulated and current
earnings and profits;
(d) (i) grant any increases in the compensation of any of its directors,
officers or executives (except as approved by the Special Committee) or grant
any increases in compensation to any of its employees outside the Ordinary
Course of Business (except as approved by the Special Committee), (ii) pay or
agree to pay any pension retirement allowance or other employee benefit not
required or contemplated by any Employee Benefit Plan as in effect on the date
hereof to any such director, officer or employee, whether, past or present,
(iii) enter into any new or amend any existing employment or severance agreement
with any such director, officer or employee, except as approved by APF in its
sole discretion, (iv) pay or agree to pay any bonus to any director, officer or
employee (whether in the form of cash, capital stock or otherwise) except as
approved by the Special Committee, or (v) except as may be required to comply
with applicable law, amend any existing, or become obligated under any new
Employee Benefit Plan, except in the case of (i) through (v) inclusive, under
and pursuant to the employment agreements referred to in Section 10.1(d),
provided that approval of the Special Committee shall not be required to make
any payment described above from the Advisor's accumulated and current earnings
and profits where no obligation is created that extends beyond the Closing;
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
(other than the Merger and the Development Company Acquisition);
(f) except with regard to the acquisition of the Development Company,
make any acquisition, by means of merger, consolidation or otherwise, of any
direct or indirect ownership interest in or assets comprising any business
enterprise or operation;
(g) adopt any amendments to its articles of incorporation or by-laws;
(h) incur any indebtedness for borrowed money or guarantee such
indebtedness or agree to become contingently liable, by guaranty or otherwise,
for the obligations or indebtedness of any other person or make any loans,
advances or capital contributions to, or investments in, any other corporation,
any partnership or other legal entity or to any other persons, except for bank
deposits and other investments in marketable securities and cash equivalents
made in the Ordinary Course of Business;
(i) engage in the conduct of any business the nature of which is
materially different from the business in which the Advisor or the Development
Company is currently engaged;
-25-
(j) enter into any agreement providing for acceleration of payment or
performance or other consequence as a result of a change of control of the
Advisor except under the employment agreements referred to in Section 10.1(d);
(k) forgive any indebtedness owed to the Advisor or convert or
contribute by way of capital contribution any such indebtedness owed;
(l) authorize or enter into any agreement providing for management
services to be provided by the Advisor to any third party or an increase in
management fees paid by any third party under existing management agreements;
(m) except as set forth in Section 7.23 of the Disclosure Schedule,
mortgage, pledge, encumber, sell, lease or transfer any material assets of the
Advisor except with the prior written consent of APF or as contemplated by this
Agreement;
(n) authorize or announce an intention to do any of the foregoing, or
enter into any contract, agreement, commitment or arrangement to do any of the
foregoing; or
(o) perform any act or omit to take any action that would make any of
the representations made above inaccurate or materially misleading as of the
Effective Time.
8.5 Full Access. The Advisor shall permit representatives of APF and
-----------
Acquisition Corp. to have full access at all reasonable times, and in a manner
so as not to interfere with the normal business operations of the Advisor to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to the Advisor.
8.6 Notice of Developments. Each of the Stockholders and the Advisor
----------------------
shall give prompt written notice to APF and Acquisition Corp. of any material
adverse development causing a breach of any of the representations and
warranties in Article VII above of which any of them obtains Knowledge. Each
Party will give prompt written notice to the others of any Material Adverse
Event of which it becomes aware related to such Party. No disclosure by any
Party pursuant to this Section 8.6, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant, unless otherwise agreed to by the
non-disclosing Parties.
8.7 Tax Matters. Each of the Stockholders, the Advisor and APF agrees to
-----------
report the Merger on all Tax Returns and, if applicable, other filings as a
reorganization under Section 368(a)(1)(A) of the Code to the extent permitted by
law.
8.8 Reorganization. From and after the date hereof and prior to the
--------------
Effective Time, except for the transactions contemplated or permitted herein,
none of the Advisor, the Stockholders or APF shall Knowingly take any action
that would be inconsistent with the representations and warranties made by it
herein, including, but not limited to, Knowingly taking any action, or Knowingly
failing to take any action, that is Known to cause disqualification of the
Merger as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code. Furthermore, from and after the date hereof and prior to the Effective
Time, except for the transactions contemplated or permitted herein, each of APF,
the Stockholders and the Advisor shall use reasonable efforts to conduct its
business and file Tax Returns in a manner that would not Knowingly jeopardize
the qualification of APF after the Effective Time as a real estate investment
trust as defined within Section 856 of the Code.
-26-
8.9 Advisor Stockholder Approval. Each of the Stockholders hereby agrees
----------------------------
to vote, at the Advisor Stockholders Meeting, the Advisor Common Shares owned by
such Stockholder in favor of the Agreement and the transactions contemplated
hereby.
8.10 State Takeover Statutes. APF and its Board of Directors and the
-----------------------
Advisor and the Stockholders shall (i) take all action necessary so that no
"fair price," "business combination," "moratorium," "control share acquisition"
or any other anti-takeover statute or similar statute enacted under state or
federal laws of the United States or similar statute or regulation, including
without limitation, the control share acquisition provisions of Section 3-701 et
--
seq. of the Maryland GCL and the business combination provisions of Section 3-
---
601 et seq. of the Maryland GCL (each, a "Takeover Statute"), is or becomes
-- ---
applicable to the Merger, this Agreement or any of the other transactions
contemplated by this Agreement and (ii) if any Takeover Statute becomes
applicable to the Merger, this Agreement or any other transaction contemplated
by this Agreement, take all action necessary to minimize the effect of such
Takeover Statute on the Merger and the other transactions contemplated by this
Agreement.
8.11 Exclusivity. None of the Stockholders or the Advisor shall (i)
-----------
solicit, initiate, or encourage the submission of any proposal or offer from any
Person relating to the acquisition of any capital stock or other voting
securities or any substantial portion of the assets of the Advisor (including
any acquisition structured as a merger, consolidation, or share exchange) or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. None of the Stockholders shall vote their Advisor Common Shares in
favor of any such acquisition structured as a merger, consolidation, or share
exchange. The Stockholders and the Advisor shall notify APF immediately if any
Person makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
ARTICLE IX
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
9.1 General. In the event that at any time after the Closing any further
-------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Article XII below). The Stockholders acknowledge and agree that from and after
the Closing, the Surviving Corporation and APF will be entitled to possession of
all documents, books, records (including Tax records), agreements, and financial
data of any sort relating to the Advisor.
9.2 Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Advisor, each of the other Parties will
cooperate with him and his counsel in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or
-27-
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Article XII below).
9.3 Transition. None of the Stockholders will take any action that is
----------
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of the Advisor from maintaining
the same business relationships with the Surviving Corporation after the Closing
as it maintained with the Advisor prior to the Closing.
9.4 Confidentiality. Each of the Stockholders will treat and hold as
---------------
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to APF or destroy, at the request and option of APF, all tangible
embodiments (and all copies) of the Confidential Information which are in his
possession. In the event that any of the Stockholders is requested or required
(by oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, the Stockholders will notify
APF promptly of the request or requirement so that APF may seek an appropriate
protective order or waive compliance with the provisions of this Section 9.4.
If, in the absence of a protective order or the receipt of a waiver hereunder,
any of the Stockholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, then
the Stockholders may disclose the Confidential Information to such tribunal;
provided, however, that the disclosing Stockholder shall use his best efforts to
obtain, at the request of APF, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as APF shall designate.
9.5 Covenant Not to Compete. Unless employed by the Surviving
-----------------------
Corporation or APF after the Closing, for a period of three (3) years from and
after the Closing Date, none of the Stockholders will engage directly or
indirectly in any business serving the restaurant industry that the Surviving
Corporation or APF conducts as of the Closing Date, except existing restaurant
businesses and properties currently owned or advised by affiliates of CNL Group,
Inc., including CNL Advisory Services, Inc. In addition, and not in lieu of the
foregoing, for a period of three years from and after the Closing Date, Xxxxx X.
Xxxxxx, Xx., the majority stockholder of CNL Group, Inc., hereby covenants and
agrees not to engage or participate, directly or indirectly, as principal,
agent, executive, employee, employer, consultant, stockholder, partner or in any
other individual capacity whatsoever, in the conduct or management of, or own
any stock or any other equity investment in or debt of, any business that
relates to the ownership, acquisition or development of "restaurant operations";
provided, however, for the purposes of this Agreement, "restaurant operations"
shall not include the ownership, acquisition or development of hotel and health
care properties that contain restaurant operations and those entities set forth
on Schedule 9.5, and provided further, the noncompetition covenant shall not
operate to preclude Xx. Xxxxxx'x ownership of APF Common Shares and of up to 5%
of the equity securities of companies whose common stock is publicly traded that
are engaged in owning, operating, franchising or making are engaged in owning,
operating, franchising or making loans to restaurants and restaurant companies.
If the final judgment of a court of competent jurisdiction declares that any
term or provision of this Section 9.5 is invalid or unenforceable, the Parties
agree that the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area of the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified after the expiration of the time within which the judgment may be
appealed.
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9.6 APF Common Shares. Each certificate issued to the Stockholders
-----------------
representing the APF Common Shares will be imprinted with a legend substantially
in the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION CONTAINED IN SECTION 4(2) OF THE 1933 ACT
AND REGULATION D OF THE RULES AND REGULATIONS PROMULGATED UNDER THE 1933
ACT, AND IN RELIANCE UPON THE REPRESENTATION BY THE HOLDER THAT THEY HAVE
BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO RESALE
OR FURTHER DISTRIBUTION. SUCH SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, HYPOTHECATED, NOR WILL ANY ASSIGNEE OR ENDORSEE
HEREOF BE RECOGNIZED AS AN OWNER HEREOF BY THE ISSUER FOR ANY PURPOSE,
UNLESS A REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WITH RESPECT TO SUCH SHARES SHALL THEN BE IN EFFECT OR UNLESS
THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION SHALL BE ESTABLISHED TO
THE REASONABLE SATISFACTION OF COUNSEL TO THE ISSUER.
Each Stockholder desiring to transfer any of the APF Common Shares received in
connection with the Merger, other than in a registered offering or pursuant to a
sale which counsel for APF confirms is in compliance with Rule 144 of the
Securities Act, must first furnish APF with (i) a written opinion satisfactory
to APF in form and substance from counsel reasonably satisfactory to APF to the
effect that such Stockholder may transfer the APF Common Shares as desired
without registration under the Securities Act and (ii) a written undertaking
executed by the desired transferee reasonably satisfactory to APF in form and
substance agreeing to be bound by the restrictions on transfer contained herein.
9.7 Share Consideration. Each Stockholder must retain at least one-half
-------------------
of the APF Common Shares received by such Stockholder on the Closing Date for a
period of 12 months following the date of receipt of such Share Consideration.
9.8 Tax Matters.
-----------
(a) If there is an adjustment to any item reported on a pre-closing Tax
Return that results in an increase in the Taxes payable by the Advisor or the
Stockholders, and such adjustment results in a corresponding adjustment to
items reported on a post-closing Tax Return with the result that the Taxes
payable either by APF, Acquisition Corp., any of their Subsidiaries, or by any
consolidated group of companies of which APF, Acquisition Corp., or any
Subsidiary are then members are reduced, or a refund of Taxes is increased, then
any APF Indemnity Claim that the Stockholders owe APF pursuant to Article XII
below shall be reduced by the amount by which such Taxes are reduced or such
refunds are increased. The amount of reduction of any APF Indemnity Claim under
this Section 9.8(a) shall be the excess of (i) the Tax liability of APF,
Acquisition Corp., or such Subsidiary or, if applicable, APF's, Acquisition
Corp.'s or such Subsidiary's consolidated group for the tax period in question
computed without regard to such adjustment or amendment, over (ii) the actual
Tax liability of APF, Acquisition Corp., or such Subsidiary or, if applicable,
APF's, Acquisition Corp.'s or such Subsidiary's consolidated group for the tax
period in question.
-29-
(b) Any refund or credit of Taxes (including any statutory interest
thereon) received by APF, Acquisition Corp. or any of their Subsidiaries
attributable to periods ending on or prior to or including the Closing Date that
were paid by Advisor pursuant to this Agreement shall reduce any APF Indemnity
Claim that the Stockholders owe APF pursuant to Article XII below by an amount
equal to the amount of such refund or credit.
(c) In the event that APF, Acquisition Corp. or any of their
Subsidiaries receives notice, whether orally or in writing, of any pending or
threatened federal, state, local or foreign tax examinations, claims
settlements, proposed adjustments or related matters with respect to Taxes that
could affect Advisor or any of the Stockholders, or if the Advisor or any of the
Stockholders receives notice of such matters that could affect APF, Acquisition
Corp. or any of their Subsidiaries, the party receiving such notice shall notify
in writing the potentially affected party within ten (10) days thereof. The
failure of either party to give the notice required by this Section 9.8(c) shall
not impair such party's rights under this Agreement except to the extent that
the other party demonstrates that it has been damaged thereby.
(d) The Stockholders shall have the responsibility for, and shall be
entitled, at their expense, to contest, control, compromise, settle or appeal
all proceedings with respect to pre-closing Taxes.
9.9 CNL License. CNL Group, Inc. hereby grants an irrevocable non-
-----------
exclusive license to APF and its Affiliates to use the "CNL" name and logo until
such time, if ever, that a Change in Control occurs or Xxxxx X. Xxxxxx, Xx.,
involuntarily (other than through death or disability), is no longer on the
Board of Directors of APF. At no time during the term of the license shall APF
be obligated to pay license fees to CNL Group, Inc. with respect to the license.
At such time as a Change in Control occurs or Xxxxx X. Xxxxxx, Xx. involuntarily
ceases (other than through death or disability) to be on the Board of Directors
of APF, all rights to the "CNL" name and logo shall revert back to CNL Group,
Inc. and the successor Person and its Affiliates shall have no rights, without
the express written consent of CNL Group, Inc., to utilize the "CNL" name or
logo in its business or any Affiliate's business.
ARTICLE X
CONDITIONS TO OBLIGATION TO CLOSE
10.1 Conditions to Each Party's Obligation. The respective obligations
-------------------------------------
of APF, Acquisition Corp., the Advisor and the Stockholders to consummate the
transactions contemplated by this Agreement are subject to the fulfillment at or
prior to the Closing Date of each of the following conditions, which conditions
may be waived upon the written consent of APF and the Stockholders:
(a) Governmental Approvals. The Parties shall have received all other
----------------------
authorizations, consents, and approvals of governments and governmental agencies
referred to in Section 5.1, Section 6.4, and Section 7.3 above.
(b) No Injunction or Proceedings. There shall not be any action, suit,
----------------------------
or proceeding pending or threatened before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would, in the reasonable judgment of APF or the
Advisor, (A) prevent consummation of any of the transactions contemplated by
this Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of APF to
own the capital stock of the Surviving Corporation, or (D) affect adversely the
right of the Surviving Corporation to own
-30-
its assets and to operate its businesses (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect).
(c) No Suspension of Trading, Etc. At the Effective Time, there shall
-----------------------------
be no declaration of a banking moratorium by federal or state authorities or any
suspension of payments by banks in the United States (whether mandatory or not)
or of the extension of credit by lending institutions in the United States, or
commencement of war or other international, armed hostility or national calamity
directly or indirectly involving the United States, which war, hostility or
calamity (or any material acceleration or worsening thereof), in the sole
judgment of APF, would have a Material Adverse Effect on the Advisor or, in the
sole judgment of the Stockholders, would have a Material Adverse Effect on APF.
(d) Employment Agreements. Xxxxxx X. XxXxxxxxxx, Xxxx X. Xxxxxx, Xxxxxx
---------------------
X. Xxxxxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxx, Xxxxxxx X. Xxxx and Xxxx Xxxxxx
shall have entered into mutually acceptable employment agreements with APF.
(e) Registration Rights Agreement. The Stockholders and APF shall have
-----------------------------
entered into a mutually acceptable Registration Rights Agreement.
10.2 Conditions to Obligation of Acquisition Corp. and APF. The
-----------------------------------------------------
obligations of Acquisition Corp. and APF to consummate the transactions
contemplated hereby and take the actions to be performed by them in connection
with the Closing are subject to satisfaction of the following conditions:
(a) the Stockholders and the Advisor shall have delivered to Acquisition
Corp. and APF a certificate to the effect that:
(i) the representations and warranties set forth in Article V and
Article VII above are true and correct in all material respects at and as
of the Closing Date, except as disclosed in the Certificate;
(ii) the Stockholders and the Advisor have performed and complied
with all of their covenants hereunder in all material respects at and as of
the Closing Date;
(iii) the Stockholders and the Advisor have procured all of the
third party consents specified in, respectively, Section 5.2 and Section
7.4 above and the related Sections of the Disclosure Schedule; and
(iv) no action, suit, or proceeding is pending or threatened before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect adversely the right of
APF to own the capital stock of the Surviving Corporation, or (D) affect
adversely the right of the Surviving Corporation to own its assets and to
operate its businesses (and no such injunction, judgment, order, decree,
ruling, or charge is in effect);
-31-
(b) Acquisition Corp. and APF shall have received an opinion dated as of
the Closing Date from [Lowndes Drosdick Xxxxxx Xxxxxx & Xxxx], counsel to the
Stockholders and the Advisor, in form and substance satisfactory to Acquisition
Corp. and APF;
(c) APF and Acquisition Corp. shall have received written comfort in
form and substance reasonably satisfactory to it from McDirmit, Davis, Lauteria,
Xxxxxxx & Company, P.A. that the Advisor will not have any accumulated or
current earnings and profits within the meaning of Section 312 of the Code as of
the Effective Time. The Stockholders shall provide to McDirmit, Davis,
Lauteria, Xxxxxxx & Company, P.A. all information reasonably available to the
Stockholders that is necessary to calculate the accumulated and current earnings
and profits of the Advisor as of the Effective Time, including, but not limited
to, all federal income Tax Returns of the Advisor and any consolidated group of
which the Advisor and the Stockholders are or have been members, working papers
created with respect to such Tax Returns, and information with respect to any
federal income Tax controversy, either pending or resolved, with respect to such
returns. Any information shall be treated as strictly confidential by McDirmit,
Davis, Lauteria, Xxxxxxx & Company, P.A. and every employee of, and advisor to,
APF and McDirmit, Davis, Lauteria, Xxxxxxx & Company, P.A.;
(d) Xxxxxxx Xxxxx & Co. shall not have withdrawn its Fairness Opinion
issued in connection with the Merger;
(e) The Advisor and CNL Group, Inc. (or Affiliates thereof) shall have
executed a mutually acceptable space sublease approved by the Special Committee.
Further, APF and CNL Group, Inc. shall have executed a mutually acceptable
agreement relating to the provision by CNL Group, Inc. of certain services,
including, without limitation, payroll functions, benefit plan administration,
certain management information functions, health insurance administration and
office administration;
(f) APF shall have received the resignations, effective as of the
Closing, of each director and officer of the Advisor other than those whom APF
shall have specified in writing prior to the Closing; and
(g) APF shall have received satisfactory evidence that all bonus plans
under which officers, directors or employees of the Advisor are beneficiaries
have been terminated as of the Closing Date.
APF may waive any condition specified in this Section 10.2 if it executes a
writing so stating at or prior to the Closing. If the Closing occurs, APF shall
be deemed to have waived any right to suit or claim as to matters disclosed in
the Disclosure Schedule prior to Closing.
10.3 Conditions to Obligation of the Stockholders and the Advisor. The
------------------------------------------------------------
obligations of the Stockholders and the Advisor to consummate the transactions
contemplated hereby and take the actions to be performed by them in connection
with the Closing are subject to satisfaction of the following conditions:
(a) Acquisition Corp. and APF shall have delivered to the Stockholders
and the Advisor a certificate to the effect that:
(i) the representations and warranties set forth in Article VI
above are true and correct in all material respects at and as of the
Closing Date;
(ii) Acquisition Corp. and APF have performed and complied with all
of their covenants hereunder in all material respects through the Closing;
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(iii) Acquisition Corp. and APF have obtained all of the third-
party consents specified in, respectively, Section 5.2 and Section 7.4 above and
the related sections of the Disclosure Schedule; and
(iv) no action, suit, or proceeding is pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(A) prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge is in effect);
(b) APF shall have delivered to the Stockholders the Share Consideration
pursuant to Section 4.2;
(c) since December 31, 1998, there shall not have occurred any material
adverse changes in the business, properties, operations or condition (financial
or otherwise) of APF; and
(d) the Stockholders shall have received an opinion dated as of the
Closing Date from Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx, counsel to Acquisition Corp.
and APF, in form and substance satisfactory to the Stockholders.
The Stockholders may waive any condition specified in this Section 10.3 if they
execute a writing so stating at or prior to the Closing.
ARTICLE XI
TERMINATION
11.1 Termination by Mutual Consent. This Agreement may be terminated and
-----------------------------
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the Stockholders or the stockholder of Acquisition Corp.,
respectively, either by the mutual written consent of APF and the Stockholders
or by mutual action of the Board of Directors of the Advisor and the Special
Committee.
11.2 Termination by Either APF or the Advisor. This Agreement may be
----------------------------------------
terminated and the Merger may be abandoned (a) by action of the Special
Committee in the event of a failure of a condition to the obligations of APF and
Acquisition Corp. set forth in Section 10.2 of this Agreement; (b) by majority
vote of the Stockholders in the event of a failure of a condition to the
obligations of Stockholders or the Advisor set forth in Section 10.3 of this
Agreement; or (c) if a United States federal or state court of competent
jurisdiction or United States federal or state governmental agency shall have
issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall have become
final and non-appealable; provided, in the case of a termination pursuant to
clause (a) or (b) above, that the terminating party shall not have breached in
any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the occurrence of the failure referred to
in said clause.
11.3 Effect of Termination and Abandonment. In the event of termination
-------------------------------------
of this Agreement and abandonment of the Merger pursuant to this Article XI, no
Party hereto (or any of its directors or officers)
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shall have any liability or further obligation to any other Party to this
Agreement, except that nothing herein will relieve any Party from liability for
any breach of this Agreement.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnity Obligations of the Stockholders. Subject to Sections
-----------------------------------------
12.5 and 12.6 hereof, each of the Stockholders, severally, in accordance with
his percentage interest in the Share Consideration and limited in amount to the
value of the APF Common Shares received by him, based upon the average per share
closing price of the APF Common Shares for the first twenty trading days after
the APF Common Shares are listed on NYSE (the "20 Day Average Price"), hereby
agrees to indemnify and hold APF and the Surviving Corporation harmless from,
and to reimburse APF and the Surviving Corporation for, any APF Indemnity Claims
arising under the terms and conditions of this Agreement. For purposes of this
Agreement, the term "APF Indemnity Claim" shall mean any loss, damage,
deficiency, claim, liability, obligation, suit, action, fee, cost, or expense of
any nature whatsoever resulting from (i) any material breach of any
representation and warranty of the Stockholders or the Advisor which is
contained in this Agreement or any Schedule, Exhibit, or certificate delivered
pursuant hereto; (ii) any material breach or non-fulfillment of, or any material
failure to perform, any of the covenants, agreements, or undertakings of the
Stockholders or the Advisor which are contained in or made pursuant to this
Agreement; and (iii) all interest, penalties, costs, and expenses (including,
without limitation, all reasonable fees and disbursements of counsel) arising
out of or related to any indemnification made under this Section 12.1.
12.2 Indemnity Obligations of APF. Subject to Sections 12.5 and 12.6
----------------------------
hereof, APF and the Surviving Corporation hereby jointly and severally agree to
indemnify and hold each of the Stockholders harmless from, and to reimburse each
of the Stockholders for, any Stockholder Indemnity Claims arising under the
terms and conditions of this Agreement. For purposes of this Agreement, the
term "Stockholder Indemnity Claim" shall mean any loss, damage, deficiency,
claim, liability, suit, action, fee, cost, or expense of any nature whatsoever
incurred by any of the Stockholders resulting from (i) any material breach of
any representation and warranty of Acquisition Corp. and APF which is contained
in this Agreement or any Schedule, Exhibit, or certificate delivered pursuant
hereto; (ii) any material breach or non-fulfillment of, or failure to perform,
any of the covenants, agreements, or undertakings of Acquisition Corp. or APF
which are contained in or made pursuant to the terms and conditions of this
Agreement; and (iii) all interest, penalties, costs, and expenses (including,
without limitation, all reasonable fees and disbursements of counsel) arising
out of or related to any indemnification made under this Section 12.2.
12.3 Appointment of Representative. Xxxxx X. Xxxxxx, Xx. is hereby
-----------------------------
appointed as the exclusive agent for each of the Stockholders to act on its
behalf with respect to any and all Stockholder Indemnity Claims and any and all
APF Indemnity Claims arising under this Agreement or such other representative
as may be hereafter appointed by a majority in interest of the Stockholders.
Such agent is herein referred to as the "Representative." The Representative
shall take, and the Stockholders agree that the Representative shall take, any
and all actions which the Representative believes are necessary or appropriate
under this Agreement for and on behalf of the Stockholders, as fully as if such
parties were acting on their own behalf, including, without limitation,
asserting Stockholder Indemnity Claims against APF, defending all APF Indemnity
Claims, consenting to, compromising, or settling all Stockholder Indemnity
Claims and APF Indemnity Claims, conducting negotiations with APF and its
representatives regarding such claims, taking any and all other actions
specified in or contemplated by this Agreement and engaging counsel,
accountants, or other representatives in connection with the foregoing matters.
APF shall have the right to rely upon all
-34-
actions taken or omitted to be taken by the Representative pursuant to this
Agreement, all of which actions or omissions shall be legally binding upon the
Stockholders. The Representative, acting pursuant to this Section 12.3, shall
not be liable to any Stockholder for any act or omission, except in connection
with any act or omission that was the result of the Representative's bad faith
or gross negligence.
12.4 Notification of Claims. Subject to the provisions of Section
----------------------
12.5, in the event of the occurrence of an event which any Party asserts
constitutes a APF Indemnity Claim or a Stockholder Indemnity Claim, as
applicable, such Party shall provide the indemnifying party with prompt notice
of such event and shall otherwise make available to the indemnifying party all
relevant information which is material to the claim and which is in the
possession of the indemnified party. If such event involves the claim of any
third party (a "Third-Party Claim"), the indemnifying party shall have the right
to elect to join in the defense, settlement, adjustment, or compromise of any
such Third-Party Claim, and to employ counsel to assist such indemnifying party
in connection with the handling of such claim, at the sole expense of the
indemnifying party, and no such claim shall be settled, adjusted or compromised,
or the defense thereof terminated, without the prior consent of the indemnifying
party unless and until the indemnifying party shall have failed, after the lapse
of a reasonable period of time, but in no event more than 30 days after written
notice to it of the Third-Party Claim, to join in the defense, settlement,
adjustment, or compromise of the same. An indemnified party's failure to give
timely notice or to furnish the indemnifying party with any relevant data and
documents in connection with any Third-Party Claim shall not constitute a
defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any material
prejudice to the indemnifying party. Any indemnifying party may elect, at such
party's sole expense, to assume control of the defense, settlement, adjustment,
or compromise of any Third-Party Claim, with counsel reasonably acceptable to
the indemnified parties, insofar as such claim relates to the liability of the
indemnifying party, provided that such indemnifying party shall obtain the
consent of all indemnified parties before entering into any settlement,
adjustment, or compromise of such claims, or ceasing to defend against such
claims, unless such settlement is a cash settlement and contains an
unconditional release of the indemnified party from all existing and future
claims with respect to the matter being contested. In connection with any
Third-Party Claim, the indemnified party, or the indemnifying party if it has
assumed the defense of such claim pursuant to the preceding sentence, shall
diligently pursue the defense of such Third-Party Claim.
12.5 Survival. All representations and warranties, and, except as
--------
otherwise provided in this Agreement, all covenants and agreements of the
Parties contained in or made pursuant to this Agreement, and the rights of the
Parties to seek indemnification with respect thereto, shall survive until
eighteen months from the Closing Date; provided, however, the representations
and warranties contained in Sections 6.3 and 7.11 shall survive until the
expiration of the applicable statute of limitations with respect to the matters
covered thereby. No claim shall be made after the applicable survival period.
12.6 Limitations. Notwithstanding the foregoing, any claim by an
-----------
indemnified party against any indemnifying party under this Agreement shall be
payable by the indemnifying party only in the event, and to the extent, that the
accumulated amount of the claims in respect of such indemnifying party's
obligations to indemnify under this Agreement and the other claims described in
Article XIII exceed in the aggregate the dollar amount specified in Article
XIII. As to APF Indemnity Claims, the liability of each Stockholder shall be
limited as provided in Article XIII.
12.7 Exclusive Provisions; No Rescission. Except as set forth in this
------------------------------------
Agreement, no party hereto is making any representation, warranty, covenant, or
agreement with respect to the matters contained herein.
-35-
Anything herein to the contrary notwithstanding, no breach of any
representation, warranty, covenant, or agreement contained herein or in any
certificate or other document delivered pursuant hereto relating to the Merger
shall give rise to any right on the part of any party hereto, after the
consummation of the Merger, to rescind this Agreement or the transactions
contemplated by this Agreement. Following the consummation of the Merger, the
rights of the parties under the provisions of this Article XII and Article XIII
shall be the sole and exclusive remedy available to the parties with respect to
claims, assertions, events, or proceedings arising out of or relating to the
Merger.
ARTICLE XIII
LIMITATION OF LIABILITY
Notwithstanding anything to the contrary stated in this Agreement, in no
event (i) shall the Stockholders or any of them have any liability to APF and/or
Acquisition Corp. on account of any APF Indemnity Claim or for any claim for
breach of warranty or for misrepresentation, or any other claim whatsoever
arising under this Agreement or in connection with the transaction contemplated
herein (individually a "Claim" and collectively, "Claims") or for any loss,
damage, deficiency, liability, obligation, suit, action, judgment, fee, cost or
expense of any nature whatsoever directly resulting from Claims (collectively,
"Losses") unless, until and only to the extent that the accumulated amount of
all Losses exceeds the amount of $750,000 in the aggregate, nor (ii) shall the
individual or aggregate liability of the Stockholders on account of Claims and
Losses exceed the value of APF Common Shares actually issued to the Stockholders
valued at the 20 Day Average Price (as defined in Section 12.1). To the extent
that any Claim is asserted against one or more than one Stockholder, each
Stockholder shall be liable only for such Stockholder's proportionate share of
the Claim based on the percentage that the APF Common Shares received by such
Stockholder in the Merger is of the total APF Commons Shares comprising the
Share Consideration. Any Claim against a Stockholder, including an APF Indemnity
Claim, may be satisfied by such Stockholder, in its/his/her sole discretion, by
surrendering to the claimant(s) APF Common Shares at a value equal to the
closing price per share of such shares on the NYSE on the last trading day
preceding the date such APF Common Shares are surrendered.
ARTICLE XIV
MISCELLANEOUS
14.1 Press Releases and Public Announcements. No Party shall issue
---------------------------------------
any press release or make any public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of APF
and the Stockholders; provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its best efforts to advise the other Parties
prior to making the disclosure).
14.2 No Third-Party Beneficiaries. This Agreement shall not confer
----------------------------
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
14.3 Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
-36-
14.4 Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his rights, interests, or obligations hereunder without the prior written
approval of APF and the Stockholders; provided, however, that APF may (i) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases APF nonetheless shall remain
responsible for the performance of all of its obligations hereunder).
14.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
14.6 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.7 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given, as of the date two
business days after mailing, if it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Advisor or the Stockholders:
-------------------------------------
c/o Xxxxx X. Xxxxxx, Xx.
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
With a copy to:
--------------
Lowndes, Drosdick, Doster, Xxxxxx & Xxxx, P.A.
000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esquire
Telecopy: (000) 000-0000
If to APF and Acquisition Corp.:
-------------------------------
Xxxxxx X. XxXxxxxxxx
President
CNL American Properties, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
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With a copy to:
--------------
Xxxx Xxxxxxx Xxxxx & Xxxxxxxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxx X. XxXxxxxx, Esq.
Telecopy: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
14.8 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of FLORIDA without giving effect to any
choice or conflict of law provision or rules (whether of the State of FLORIDA or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of FLORIDA.
14.9 Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by APF
and the Stockholders. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
14.10 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
14.11 Expenses. Each of the Parties will bear his, her or its own
--------
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby. The Stockholders
agree that the Advisor has not borne and will not bear any of the Stockholders'
costs and expenses (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
14.12 Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not
-38-
breached shall not detract from or mitigate the fact that the Party is in breach
of the first representation, warranty, or covenant.
14.13 Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
14.14 Specific Performance. Each of the Parties acknowledges and
--------------------
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 13.15 below), in addition to any other remedy to which they may
be entitled, at law or in equity.
14.15 Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in the State of FLORIDA, in
any action or proceeding arising out of or relating to this Agreement and agrees
that all claims in respect of the action or proceeding may be heard and
determined in any such court.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date first above written.
CNL AMERICAN PROPERTIES FUND, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
----------------------------------------
Its: Chief Executive Officer
----------------------------------------
CFA ACQUISITION CORP.:
By: /s/ Xxxxxx X. XxXxxxxxxx
----------------------------------------
Its: Chief Executive Officer
----------------------------------------
CNL FUND ADVISORS, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
----------------------------------------
Its: Chief Executive Officer
----------------------------------------
-39-
STOCKHOLDERS:
CNL GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx, Xx.
--------------------------------------
Its: Chief Executive Officer
-------------------------------------
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. XxXxxxxxxx
-----------------------------------------
Xxxxxx X. XxXxxxxxxx
/s/ Xxxx X. Xxxxxx
-----------------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxxxxxx
-40-
Exhibit A
Stockholder Representation Letter
I, the undersigned stockholder of CNL Fund Advisors, Inc., a Florida
corporation (the "Advisor"), hereby represent and warrant to CNL American
Properties Fund, Inc., a Maryland corporation ("APF") and APF Acquisition Corp.,
a Maryland corporation ("Acquisition Corp.") as follows:
I am the owner of _______ shares of common stock of the Advisor, all of
which shares I received by transfer from CNL Group, Inc;
I understand that the Advisor is a party to an Agreement and Plan of
Merger, dated as of ________________, 19__, among APF, Acquisition Corp., the
Advisor and certain stockholders of the Advisor, pursuant to which the Advisor
will be merged (the "Merger") with and into Acquisition Corp. and the
stockholders of the Advisor will receive shares of common stock in APF (the "APF
Common Stock");
I understand that the APF Common Stock I will receive will not be
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or under any state securities laws and will be issued in reliance upon Federal
and state exemptions for transactions not involving a public offering;
I am acquiring APF Common Stock solely for my own account for investment
purposes and not with a view toward the distribution thereof;
I am a sophisticated investor with knowledge and experience in business
and financial matters;
I have received certain information concerning APF, including, without
limitation, (i) the most recent annual report on Form 10-K, (ii) the three most
receive quarterly reports on Form 10-Q, (iii) any current reports on Form 8-K
since December 31, 1996, in each case as filed by APF under the Securities
Exchange Act of 1934, as amended, and (iv) the most recent annual report to
stockholders of APF, and have had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent in
holding APF Common Shares; and
I am able to bear the economic risk and lack of liquidity inherent in
holding APF Common Shares which have not been registered under the Securities
Act.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
__________________, 1999.
----------------------------
