AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
PRIME RETAIL, INC.,
PRIME RETAIL, L.P.,
HORIZON GROUP, INC.,
SKY MERGER CORP.,
HORIZON GROUP PROPERTIES, INC.,
HORIZON GROUP PROPERTIES, L.P.
AND
HORIZON/XXXX OUTLET CENTERS LIMITED PARTNERSHIP
DATED AS OF FEBRUARY 1, 1998
TABLE OF CONTENTS
PAGE
ARTICLE I
THE MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 THE PARTNERSHIP MERGER. . . . . . . . . . . . . . . . . . . . 4
1.2 THE HORIZON/SUBSIDIARY MERGER . . . . . . . . . . . . . . . . 5
1.3 THE PRIME/HORIZON MERGER. . . . . . . . . . . . . . . . . . . 6
1.4 CLOSING OF MERGERS. . . . . . . . . . . . . . . . . . . . . . 6
1.5 EFFECTIVE TIMES . . . . . . . . . . . . . . . . . . . . . . . 6
1.6 EFFECT OF PRIME/HORIZON MERGER ON ARTICLES OF INCORPORATION
AND BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.7 EFFECT OF PARTNERSHIP MERGER ON AGREEMENT OF LIMITED
PARTNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.8 DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.9 EFFECT ON SHARES. . . . . . . . . . . . . . . . . . . . . . . 7
1.10 EFFECT ON PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . 7
1.11 MERGER CONSIDERATION. . . . . . . . . . . . . . . . . . . . . 8
1.12 REGISTRATION RIGHTS AGREEMENT. . . . . . . . . . . . . . . . 9
1.13 APPRAISAL RIGHTS. . . . . . . . . . . . . . . . . . . . . . . 9
1.14 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS;
FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . 9
1.15 CONTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . 15
1.16 PRIME PARTNERSHIP SPECIAL DISTRIBUTION; PRIME SPECIAL
DISTRIBUTION; PRIME PARTNERSHIP COMMON DISTRIBUTION;
THE PRIME CORPORATE CONTRIBUTION; PRIME CORPORATE
COMMON DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 15
1.17 TRANSFERRED PRIME PROPERTIES. . . . . . . . . . . . . . . . . 17
1.18 SALE OF DESIGNATED PROPERTIES PRIOR TO CLOSING. . . . . . . . 17
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HORIZON . . . . . . . . . . . . 17
2.1 ORGANIZATION, STANDING AND POWER OF HORIZON . . . . . . . . . 17
2.2 HORIZON SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . 18
2.3 CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . 19
2.4 OTHER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 20
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS . . . . . . . . . . . . 20
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. 23
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 23
2.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.9 PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.10 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.11 RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
2.12 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 28
2.13 RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . 29
2.14 EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . 30
2.15 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 32
2.16 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.17 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS . . . . . . . 33
2.18 BROKER; SCHEDULE OF FEES AND EXPENSES . . . . . . . . . . . . 33
2.19 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . 33
2.20 CONTRACTS; DEBT INSTRUMENTS . . . . . . . . . . . . . . . . . 34
2.21 OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . . . 36
2.22 STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . . 36
2.23 INVESTMENT COMPANY ACT OF 1940. . . . . . . . . . . . . . . . 36
2.24 HORIZON NOT AN INTERESTED STOCKHOLDER . . . . . . . . . . . . 36
2.25 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . 36
2.26 TRADEMARKS, PATENTS AND COPYRIGHTS. . . . . . . . . . . . . . 36
2.27 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 37
2.28 DEFINITION OF KNOWLEDGE OF HORIZON. . . . . . . . . . . . . . 37
2.29 C&C/XXXXXXX AGREEMENTS. . . . . . . . . . . . . . . . . . . . 37
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRIME . . . . . . . . . . . . . 37
3.1 ORGANIZATION, STANDING AND POWER OF PRIME . . . . . . . . . . 37
3.2 PRIME SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . 38
3.3 CAPITAL STRUCTURE . . . . . . . . . . . . . . . . . . . . . . 38
3.4 OTHER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . 40
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS . . . . . . . . . . . . 40
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. 42
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 42
3.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.9 PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.10 LEASES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3.11 RENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
3.12 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . 47
3.13 TAXES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
3.14 BROKERS; SCHEDULE OF FEES AND EXPENSES. . . . . . . . . . . . 49
3.15 COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . 49
3.16 CONTRACTS; DEBT INSTRUMENTS . . . . . . . . . . . . . . . . . 49
3.17 OPINION OF FINANCIAL ADVISOR. . . . . . . . . . . . . . . . . 50
3.18 STATE TAKEOVER STATUTES . . . . . . . . . . . . . . . . . . . 50
3.19 INVESTMENT COMPANY ACT OF 1940. . . . . . . . . . . . . . . . 50
3.20 DEFINITION OF KNOWLEDGE OF PRIME. . . . . . . . . . . . . . . 50
3.21 VOTE REQUIRED . . . . . . . . . . . . . . . . . . . . . . . . 50
ii
ARTICLE IV
COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
4.1 CONDUCT OF HORIZON'S, HORIZON PARTNERSHIP'S AND SKY MERGER'S
BUSINESS PENDING MERGERS . . . . . . . . . . . . . . . . . . 50
4.2 CONDUCT OF PRIME'S AND PRIME PARTNERSHIP'S BUSINESS PENDING
MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
4.3 NO SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . 56
4.4 AFFILIATES. . . . . . . . . . . . . . . . . . . . . . . . . . 57
4.5 OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE V
ADDITIONAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . 58
5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY
STATEMENT; HORIZON SHAREHOLDERS AND PARTNERS MEETINGS AND
PRIME SHAREHOLDERS AND PARTNERS MEETINGS. . . . . . . . . . . 58
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. . . . . . . . . . . . 62
5.3 REASONABLE BEST EFFORTS; NOTIFICATION . . . . . . . . . . . . 62
5.4 TAX TREATMENT . . . . . . . . . . . . . . . . . . . . . . . . 63
5.5 PUBLIC ANNOUNCEMENTS. . . . . . . . . . . . . . . . . . . . . 64
5.6 LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
5.7 TRANSFER AND GAINS TAXES. . . . . . . . . . . . . . . . . . . 65
5.8 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS.. . . . . . . . 65
5.9 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 67
5.10 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . 68
5.11 TRANSFER OF SHARES/INTERESTS IN NON-WHOLLY OWNED
SUBSIDIARIES OF HORIZON; C&C/XXXXXXX AGREEMENTS . . . . . . . 69
5.12 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5.13 RESIGNATIONS. . . . . . . . . . . . . . . . . . . . . . . . . 69
5.14 THIRD PARTY MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . 69
5.15 CONTRIBUTION AGREEMENT. . . . . . . . . . . . . . . . . . . . 70
5.16 ACTIONS UPON ISSUANCE OF INJUNCTION OR RESTRAINT. . . . . . . 70
5.17 DESIGNATED PROPERTIES.. . . . . . . . . . . . . . . . . . . . 70
ARTICLE VI
CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS . 70
6.2 CONDITIONS TO OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP. . . 71
6.3 CONDITIONS TO OBLIGATIONS OF HORIZON AND HORIZON PARTNERSHIP. 73
iii
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . 74
7.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 74
7.2 CERTAIN FEES AND EXPENSES . . . . . . . . . . . . . . . . . . 75
7.3 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . 77
7.4 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 77
7.5 EXTENSION; WAIVER . . . . . . . . . . . . . . . . . . . . . . 78
ARTICLE VIII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 78
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . 78
8.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
8.3 INTERPRETATION. . . . . . . . . . . . . . . . . . . . . . . . 79
8.4 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . 79
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. . . . . . . . 79
8.6 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 80
8.7 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.8 ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 80
8.9 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . 80
EXHIBITS
EXHIBIT A CONTRIBUTION AGREEMENT
EXHIBIT B DELAWARE CERTIFICATE OF MERGER
EXHIBIT C-1 HORIZON/SUBSIDIARY ARTICLES OF MERGER (MARYLAND)
EXHIBIT C-2 HORIZON/SUBSIDIARY CERTIFICATE OF MERGER (MICHIGAN)
EXHIBIT D PRIME/HORIZON ARTICLES OF MERGER (MARYLAND)
EXHIBIT E SKY MERGER AMENDED AND RESTATED ARTICLES OF INCORPORATION
EXHIBIT F SKY MERGER BYLAWS
EXHIBIT G SECOND AMENDED AND RESTATED PRIME PARTNERSHIP AGREEMENT
EXHIBIT H AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
iv
INDEX OF DEFINED TERMS
ACQUISITION PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . . 4.3(a)
AFFILIATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.13
AFFILIATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
AICPA STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(b)
BASE AMOUNT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
BREAK-UP FEE TAX OPINION . . . . . . . . . . . . . . . . . . . . . . . 7.2
C&C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL W
C&C RETAIL . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL W
C&C/HORIZON CONTRIBUTION AGREEMENT . . . . . . . . . . . . . . . RECITAL W
C&C/XXXXXXX AGREEMENTS . . . . . . . . . . . . . . . . . . . . . RECITAL W
C&C/PRIME LLC . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL W
CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(c)(i)
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
CLOSING DATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.4
CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL Q
COMMITMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)
CONFIDENTIALITY AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 5.2
CONTRIBUTION AGREEMENT . . . . . . . . . . . . . . . . . . . . . . RECITAL F
CONTROLLED GROUP MEMBER . . . . . . . . . . . . . . . . . . . . . . . . .2.14
CORPORATE EXCHANGE FUND . . . . . . . . . . . . . . . . . . . . . .1.14(b)(i)
DELAWARE CERTIFICATE OF MERGER . . . . . . . . . . . . . . . . . . RECITAL J
DELAWARE SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . .1.5(a)
DESIGNATED PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . .1.18
DISSENTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 1.13(b)
DRULPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.1(a)
EMPLOYEE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
ENCUMBRANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . .2.12
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.14
EXCESS SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(g)(ii)
EXCHANGE ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
EXCHANGE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(a)
EXCHANGE FUND . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(b)(ii)
EXCHANGE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(g)(ii)
FINAL COMPANY DIVIDEND . . . . . . . . . . . . . . . . . . . . . .1.14(d)(i)
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6
GOVERNMENTAL ENTITY. . . . . . . . . . . . . . . . . . . . . . . . . . .5(d)
HAZARDOUS SUBSTANCES . . . . . . . . . . . . . . . . . . . . . . . . 2.12
HORIZON. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .PREAMBLE
v
HORIZON ARTICLES OF INCORPORATION. . . . . . . . . . . . . . . . . . . 2.1
HORIZON BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
HORIZON CAPITAL BUDGET . . . . . . . . . . . . . . . . . . . . . . . 4.1(i)
HORIZON COMMON SHARE . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
HORIZON DIRECTOR STOCK OPTION PLAN . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON DISCLOSURE LETTER. . . . . . . . . . . . . . . . . . . . . . 2.2(a)
HORIZON ECONOMIC LOSSES. . . . . . . . . . . . . . . . . . . . . . . 6.2(a)
HORIZON ENVIRONMENTAL REPORTS. . . . . . . . . . . . . . . . . . . . . 2.12
HORIZON FINANCIAL STATEMENT DATE . . . . . . . . . . . . . . . . . . . 2.7
HORIZON LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . 2.10(b)
HORIZON LONG-TERM INCENTIVE PLAN . . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . 2.7
HORIZON MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . 2.1
HORIZON/MERGER ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . 1.2
HORIZON/MERGER BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . 1.2
HORIZON OP UNIT. . . . . . . . . . . . . . . . . . . . . . . . . . .1.11(b)
HORIZON PARTNER APPROVALS. . . . . . . . . . . . . . . . . . . . . . 5.1(g)
HORIZON PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
HORIZON PARTNERSHIP CONTRIBUTION . . . . . . . . . . . . . . . . RECITAL F
HORIZON PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.19
HORIZON PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
HORIZON SEC DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . 2.6
HORIZON SHAREHOLDER APPROVALS. . . . . . . . . . . . . . . . . . . . 2.5(a)
HORIZON SHAREHOLDERS MEETING . . . . . . . . . . . . . . . . . . . . 5.1(d)
HORIZON STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
HORIZON/SUBSIDIARY ARTICLES OF MERGER. . . . . . . . . . . . . . RECITAL L
HORIZON/SUBSIDIARY CERTIFICATE OF MERGER . . . . . . . . . . . . RECITAL L
HORIZON/SUBSIDIARY MERGER. . . . . . . . . . . . . . . . . . . . RECITAL L
HORIZON/SUBSIDIARY MERGER EFFECTIVE TIME . . . . . . . . . . . . . . 1.5(b)
HORIZON TITLE INSURANCE POLICIES . . . . . . . . . . . . . . . . . . 2.9(b)
HORIZON 1993 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . . 2.3(b)
HORIZON 1997 STOCK OPTION PLAN . . . . . . . . . . . . . . . . . . . 2.3(b)
INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.20(b)
INDEMNIFIED LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . 5.9(a)
INDEMNIFIED PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . 5.9(a)
INTERESTED STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . 2.24
IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.14(b)
KNOWLEDGE OF PRIME . . . . . . . . . . . . . . . . . . . . . . . . . . 3.20
KNOWLEDGE OF HORIZON . . . . . . . . . . . . . . . . . . . . . . . . . 2.28
LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(d)
LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(b)
MARYLAND DEPARTMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1.5(b)
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
vi
MERGERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RECITAL C
MERGER CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . 1.11(e)
MGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
MICHIGAN DEPARTMENT. . . . . . . . . . . . . . . . . . . . . . . . . 1.5(b)
XXXXXXX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .RECITAL W
XXXXXXX/PACIFIC AGREEMENT. . . . . . . . . . . . . . . . . . . . .RECITAL W
NEWCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
NEWCO COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . .RECITAL O
NEWCO LP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
NEWCO LP COMMON UNIT . . . . . . . . . . . . . . . . . . . . . . . 1.16(c)
NEWCO PARTNER APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.14(g)(ii)
ORIGINAL MERGER AGREEMENT. . . . . . . . . . . . . . . . . . . . RECITAL A
OUTSIDE PROPERTY MANAGEMENT AGREEMENTS . . . . . . . . . . . . . . 2.20(f)
PACIFIC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . RECITAL W
PARTNER APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
PARTNERSHIP EXCHANGE FUND. . . . . . . . . . . . . . . . . . . 1.14(b)(ii)
PARTNERSHIP MERGER . . . . . . . . . . . . . . . . . . . . . . . RECITAL I
PARTNERSHIP MERGER CONSIDERATION . . . . . . . . . . . . . . . . . 1.11(c)
PARTNERSHIP MERGER EFFECTIVE TIME. . . . . . . . . . . . . . . . . . 1.5(a)
PAYOR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
PENSION PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.14
PERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
PRIME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
PRIME ARTICLES OF INCORPORATION. . . . . . . . . . . . . . . . . . . . 3.1
PRIME BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
PRIME COMMON SHARES. . . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME COMMON UNIT. . . . . . . . . . . . . . . . . . . . . . . . . 1.11(b)
PRIME CORPORATE COMMON DISTRIBUTION. . . . . . . . . . . . . . . RECITAL P
PRIME CORPORATE CONTRIBUTION . . . . . . . . . . . . . . . . . . .RECITAL O
PRIME DISCLOSURE LETTER. . . . . . . . . . . . . . . . . . . . . . . 3.2(a)
PRIME ECONOMIC LOSSES. . . . . . . . . . . . . . . . . . . . . . . . 6.3(a)
PRIME FINANCIAL STATEMENT DATE . . . . . . . . . . . . . . . . . . . . 3.7
PRIME/HORIZON ARTICLES OF MERGER . . . . . . . . . . . . . . . . RECITAL M
PRIME/HORIZON MERGER EFFECTIVE TIME. . . . . . . . . . . . . . . . . 1.5(c)
PRIME/HORIZON MERGER . . . . . . . . . . . . . . . . . . . . . . RECITAL M
PRIME/HORIZON MERGER CONSIDERATION . . . . . . . . . . . . . . . . .1.11(d)
PRIME LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . .3.10(b)
PRIME MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . . 3.7
PRIME MATERIAL ADVERSE EFFECT. . . . . . . . . . . . . . . . . . . . . 3.1
PRIME OP UNITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3(e)
PRIME PARTNER APPROVALS. . . . . . . . . . . . . . . . . . . . . . . 5.1(g)
PRIME PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
PRIME PARTNERSHIP AGREEMENT. . . . . . . . . . . . . . . . . . . 1.14(d)(i)
vii
PRIME PARTNERSHIP COMMON DISTRIBUTION. . . . . . . . . . . . . . RECITAL K
PRIME PARTNERSHIP SPECIAL DISTRIBUTION . . . . . . . . . . . . . RECITAL G
PRIME PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15
PRIME PREFERRED SHARES . . . . . . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9(a)
PRIME REGULAR QUARTERLY DISTRIBUTIONS. . . . . . . . . . . . . . . . . 3.7
PRIME SEC DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . 3.6
PRIME SERIES A PREFERRED SHARES. . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES B PREFERRED SHARES . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES C PREFERRED SHARES. . . . . . . . . . . . . . . . . . . 3.3(a)
PRIME SERIES A PREFERRED UNIT. . . . . . . . . . . . . . . . . . . . 3.3(e)
PRIME SERIES B PREFERRED UNIT. . . . . . . . . . . . . . . . . . . . 1.11(b)
PRIME SERIES C PREFERRED UNIT. . . . . . . . . . . . . . . . . . . . 3.3(e)
PRIME SHAREHOLDER APPROVALS. . . . . . . . . . . . . . . . . . . . . 3.5(a)
PRIME SHAREHOLDERS MEETING . . . . . . . . . . . . . . . . . . . . . 5.1(c)
PRIME SPECIAL DISTRIBUTION . . . . . . . . . . . . . . . . . . . . RECITAL H
PRIME STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 3.3(b)
PRIME SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
PRIME TITLE INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . 3.9(b)
PROHIBITED TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . 2.14(c)
PROPERTY RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . 2.9(a)
PROXY STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . .5.1(a)
QUALIFYING INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
RECIPIENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . 5.1(a)
REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16(b)
REIT REQUIREMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5(d)
SECOND AMENDED AND RESTATED PRIME PARTNERSHIP AGREEMENT. . . . . . . . . 1.7
SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
SHAREHOLDER APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . 3.5(a)
SKY MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . PREAMBLE
SKY MERGER ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . 2.1
SKY MERGER BYLAWS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
SKY MERGER COMMON SHARE. . . . . . . . . . . . . . . . . . . . . . . . . 1.2
SKY MERGER SHAREHOLDER APPROVALS . . . . . . . . . . . . . . . . . . .2.5(b)
SKY MERGER STOCK OPTION. . . . . . . . . . . . . . . . . . . . . . . . . 1.2
STOCK PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . RECITAL V
SUBJECT PRINCIPAL AMOUNT . . . . . . . . . . . . . . . . . . . . . . 1.1(b)
SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2(a)
SUPERIOR ACQUISITION PROPOSAL. . . . . . . . . . . . . . . . . . . . 4.3(d)
SURVIVING COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3
SURVIVING COMPANY COMMON SHARE . . . . . . . . . . . . . . . . . . . 1.11(d)
SURVIVING COMPANY SERIES B PREFERRED SHARE . . . . . . . . . . . . . 1.11(d)
viii
SURVIVING PARTNERSHIP. . . . . . . . . . . . . . . . . . . . . . . . 1.1(a)
TAKEOVER STATUTE . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.22
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16(a)
TAX PROTECTION AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 2.20(j)
THIRD PARTY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 8.5
TIER THREE PERCENTAGE. . . . . . . . . . . . . . . . . . . . . . .5.4(c)(ii)
TRANSFER AND GAINS TAXES . . . . . . . . . . . . . . . . . . . . . . . . 5.7
TRANSFERRED PRIME PROPERTIES . . . . . . . . . . . . . . . . . . . . . .1.17
WELFARE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.14
1940 ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.23
ix
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") dated as of February 1, 1998 by and among PRIME RETAIL, INC., a
Maryland corporation ("Prime"), PRIME RETAIL, L.P., a Delaware limited
partnership ("Prime Partnership"), HORIZON GROUP, INC., a Michigan
corporation ("Horizon"), SKY MERGER CORP., a Maryland corporation ("Sky
Merger"), HORIZON GROUP PROPERTIES, INC., a Maryland corporation ("Newco"),
HORIZON GROUP PROPERTIES, L.P., a Delaware limited partnership ("Newco LP"),
and HORIZON/XXXX OUTLET CENTERS LIMITED PARTNERSHIP, a Delaware limited
partnership ("Horizon Partnership").
R E C I T A L S:
A. The parties hereto (other than Newco) are parties to that certain
Agreement and Plan of Merger dated as of November 12, 1997 by and among the
parties hereto (the "Original Merger Agreement").
B. The parties hereto wish to amend and restate, supersede and replace
the Original Merger Agreement in its entirety by the execution and delivery
of this Agreement.
C. The Board of Directors of each of Prime and Horizon deems it
advisable and in the best interests of their respective shareholders that
Prime acquire certain of the assets and business of Horizon and operate under
the name "Prime Retail, Inc."; such acquisition to be effected by the
consummation of the transactions set forth herein, including without
limitation, the Horizon Partnership Contribution, the Prime Partnership
Special Distribution, the Prime Special Distribution, the Partnership Merger,
the Prime Partnership Common Distribution, the Horizon/Subsidiary Merger, the
Prime/Horizon Merger, the Prime Corporate Contribution and the Prime
Corporate Common Distribution (each as defined below; the Partnership Merger,
the Horizon/Subsidiary Merger and the Prime/Horizon Merger are collectively
referred to herein as the "Mergers").
D. Newco is a Maryland corporation which, prior to the date hereof,
was formed by Horizon as its wholly-owned subsidiary.
E. Newco LP is a Delaware limited partnership, the general partnership
interests and limited partnership interests of which are owned by Newco and
Horizon Partnership, respectively.
F. Upon the terms and subject to the conditions set forth herein,
immediately prior to the declaration of the Prime Partnership Special
Distribution, it is contemplated that on the Closing Date (as hereinafter
defined) Horizon Partnership shall contribute to Newco LP certain of its
assets to Newco LP subject to obligations and liabilities relating to such
properties (collectively, the "Horizon Partnership Contribution"), all as
provided in the Contribution Agreement in substantially the form attached
hereto as Exhibit A (the "Contribution Agreement").
G. Upon the terms and subject to the conditions set forth herein,
immediately after the Horizon Partnership Contribution, it is contemplated
that on the Closing Date Prime Partnership shall declare a cash distribution
(the "Prime Partnership Special Distribution") to the record holders of
certain partnership interests in Prime Partnership immediately prior to the
consummation of the Partnership Merger, as provided in Section 1.16(a)
hereof. .
H. Upon the terms and subject to the conditions set forth herein, on
the Closing Date immediately after the declaration of the Prime Partnership
Special Distribution and immediately prior to the consummation of the
Partnership Merger, Prime shall declare a cash distribution (the "Prime
Special Distribution") to the record holders of Prime Common Shares, Prime
Series B Preferred Shares and Prime Series C Preferred Shares (each as
defined below) immediately prior to the consummation of the Partnership
Merger, as provided in Section 1.16(b) hereof.
I. Under the terms and subject to the conditions set forth herein,
after the declaration of the Prime Special Distribution, Prime, as the sole
general partner of Prime Partnership, and Horizon, as the sole general
partner of Horizon Partnership, deem it advisable and in the best interests
of their respective limited partners, subject to the conditions and other
provisions contained herein, that Horizon Partnership shall merge with and
into Prime Partnership, with the holders of partnership interests in Horizon
Partnership receiving the consideration set forth herein (the "Partnership
Merger").
J. Upon the terms and subject to the conditions set forth herein,
Prime Partnership and Horizon Partnership shall execute a Certificate of
Merger (the "Delaware Certificate of Merger") in substantially the form
attached hereto as Exhibit B and shall file such Delaware Certificate of
Merger in accordance with Delaware law to effectuate the Partnership Merger.
K. Upon the terms and subject to the conditions set forth herein, on
the Closing Date and immediately after the consummation of the Partnership
Merger, Prime Partnership shall declare a distribution of all of the Newco LP
Common Units (as defined below) to the record holders of certain partnership
interests in Prime Partnership immediately after the consummation of the
Partnership Merger (the "Prime Partnership Common Distribution"), as provided
in Section 1.16(c) hereof.
L. Upon the terms and subject to the conditions set forth herein,
immediately following the declaration of the Prime Partnership Common
Distribution, Horizon and Sky Merger shall execute (i) the Articles of Merger
(the "Horizon/Subsidiary Articles of Merger") in substantially the form
attached hereto as Exhibit C-1 and shall file such Horizon/Subsidiary
Articles of Merger in accordance with Maryland law and (ii) the Certificate
of Merger (the "Horizon/Subsidiary Certificate of Merger") in substantially
the form attached hereto as Exhibit C-2 and file such Horizon/Subsidiary
Certificate of Merger in accordance with Michigan law, in each case to
effectuate the merger of Horizon into Sky Merger (the "Horizon/Subsidiary
Merger") pursuant to which Sky Merger shall survive as a Maryland
corporation.
2
M. Upon the terms and subject to the conditions set forth herein,
immediately following the consummation of the Horizon/Subsidiary Merger,
Prime and Sky Merger shall execute the Articles of Merger (the "Prime/Horizon
Articles of Merger") in substantially the form attached hereto as Exhibit D
and shall file such Prime/Horizon Articles of Merger in accordance with
Maryland law in order to effectuate the merger of Prime and Sky Merger (the
"Prime/Horizon Merger") pursuant to which Sky Merger shall survive as a
Maryland corporation.
N. Upon the terms and subject to the conditions set forth herein,
after consummation of the Prime/Horizon Merger, Prime Partnership shall make
the Prime Partnership Common Distribution, as provided in Section 1.16(c)
hereof.
O. Upon the terms and subject to the conditions set forth herein,
after the consummation of the Prime Partnership Common Distribution,
Surviving Company (as defined below) shall contribute to Newco all of the
Newco LP Common Units that it receives pursuant to the Prime Partnership
Common Distribution and all of the Newco Common Shares (as defined below)
held by Prime as a result of the Prime/Horizon Merger, and Newco shall issue
to Prime shares of Newco common stock (each a "Newco Common Share")
(collectively, the "Prime Corporate Contribution"), as provided in Section
1.16(d) hereof.
P. Upon the terms and subject to the conditions set forth herein,
after the consummation of the Prime Corporate Contribution, Surviving Company
shall declare and make a distribution (the "Prime Corporate Common
Distribution") of the Newco Common Shares to the record holders of Prime
Common Shares, Prime Series B Preferred Shares and Prime Series C Preferred
Shares (each as defined below) immediately after the consummation of the
Prime/Horizon Merger, all as provided in Section 1.16(e) hereof.
Q. For federal income tax purposes, it is intended that the
Partnership Merger, regardless of form, be treated as a contribution by
Horizon Partnership of all of its assets to Prime Partnership in exchange for
partnership interests in Prime Partnership, as provided for herein, under
Section 721 of the Internal Revenue Code of 1986, as amended (the "Code"),
and a liquidating distribution of such partnership interests by Newco LP to
its partners under Section 731 of the Code.
R. For federal income tax purposes, it is intended that the
Horizon/Subsidiary Merger shall qualify as a tax-free reorganization under
Section 368(a)(1)(F) of the Code, and that this Agreement shall constitute a
plan of reorganization under Section 368(a)(1)(F) of the Code.
S. For federal income tax purposes, it is intended that the
Prime/Horizon Merger shall qualify as a tax-free reorganization under Section
368(a)(1)(A) of the Code, and that this Agreement shall constitute a plan of
reorganization under Section 368(a)(1)(A) of the Code.
T. Prime, Prime Partnership, Horizon and Horizon Partnership have each
received a fairness opinion relating to the transactions contemplated hereby
as more fully described herein.
3
U. Prime, Prime Partnership, Horizon and Horizon Partnership desire to
make certain representations, warranties and agreements in connection with
the Mergers.
V. Concurrently with the execution of this Agreement and as an
inducement to Prime and Prime Partnership to enter into this Agreement,
Xxxxxx Xxxxxxxx has entered into the Amended and Restated Stock Purchase
Agreement dated as of the date hereof relating to the voting capital stock of
each of First HGI, Inc., HGI Perryville, Inc., MG Third Party Services Corp.,
HGI Management Corp. and Second HGI, Inc. (the "Stock Purchase Agreement"),
providing for the sale by Xxxxxx Xxxxxxxx of all of the outstanding voting
capital stock (other than any such voting capital stock held by Horizon
Partnership) of such companies to Prime Retail Services, Inc. or its
designees or assigns.
W. Concurrently with the execution of this Agreement and with the
consent of Prime, (i) Castle & Xxxxx Properties, Inc., a Hawaii corporation
("C&C"), Castle & Xxxxx Retail, Inc., a California corporation ("C&C
Retail"), and Horizon Partnership have entered into a Contribution Agreement
(the "C&C/Horizon Contribution Agreement"), pursuant to which the parties
thereto desire to form Castle & Xxxxx/Prime Retail, LLC, a Delaware limited
liability company ("C&C/Prime LLC"), and (ii) Prime, Horizon, Xx. Xxxxx X.
Xxxxxxx, a resident of the State of California ("Xxxxxxx"), and Pacific
Holding Company, a sole proprietorship of Xxxxxxx ("Pacific"), have entered
into an Agreement (the "Xxxxxxx/Pacific Agreement") which contains certain
obligations of Xxxxxxx and Pacific regarding the transactions contemplated
hereunder, as more fully described in the Xxxxxxx/Pacific Agreement (the
C&C/Horizon Contribution Agreement and the Xxxxxxx/Pacific Agreement are
collectively referred to herein as the "C&C/Xxxxxxx Agreements").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGERS
1.1 THE PARTNERSHIP MERGER.
(a) Upon the terms and subject to the conditions of this
Agreement, and in accordance with Title 6, Chapter 17 of the Delaware Code
Annotated, as amended (the "DRULPA"), Horizon Partnership shall be merged
with and into Prime Partnership with Prime Partnership as the surviving
limited partnership (the "Surviving Partnership"), with the holders of
partnership interests in Horizon Partnership receiving the consideration set
forth in Sections 1.10 and 1.11(c).
(b) After the Partnership Merger, Newco LP shall issue and
distribute to the Surviving Partnership an unsecured negotiable recourse
promissory note, payable to the order of the Surviving Partnership on demand,
in the Subject Principal Amount (as defined below). The unpaid balance of
such note shall bear interest daily at a rate per annum equal to 10% until
paid in full. As
4
used herein, "Subject Principal Amount" shall mean the excess, if any, of (i)
the aggregate unpaid principal balance of mortgage loans to which the
Contributed Assets (as defined in the Contribution Agreement) are subject
immediately prior to the consummation of the Horizon Partnership
Contribution, over (ii) the aggregate unpaid principal balance of mortgage
loans transferred to and assumed by Newco LP as Assumed Liabilities at the
Time of Contribution (each as defined in the Contribution Agreement).
1.2 THE HORIZON/SUBSIDIARY MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Maryland
General Corporation Law ("MGCL") and the Michigan Business Corporation Act
("MBCA"), immediately following the Partnership Merger Effective Time (as
defined below), Horizon shall be merged with and into Sky Merger, with Sky
Merger as the surviving company. Following the Horizon/Subsidiary Merger,
the separate corporate existence of Horizon shall cease, and Sky Merger shall
succeed to and assume all the rights and obligations of Horizon in accordance
with the MGCL and the MBCA. The articles of incorporation of Sky Merger and
the bylaws of Sky Merger shall each be amended and restated pursuant to the
Horizon/Subsidiary Merger substantially in the forms attached hereto as
Exhibits E and F, respectively (the "Horizon/Merger Articles of
Incorporation" and the "Horizon/Merger Bylaws", respectively), and shall
continue in full force and effect thereafter until further amended in
accordance with applicable Maryland law. In the Horizon/Subsidiary Merger,
each outstanding share of common stock of Sky Merger held by Horizon shall be
canceled, and each issued and outstanding share of common stock, $0.01 par
value per share of Horizon (each, a "Horizon Common Share") (other than
Horizon Common Shares owned by Horizon or any Horizon Subsidiary, which shall
automatically be canceled and retired and all rights with respect thereto
shall cease to exist), shall be converted into one share of common stock,
$0.01 par value per share, of Sky Merger (each, a "Sky Merger Common Share").
Each certificate representing issued and outstanding Horizon Common Shares
shall upon consummation of the Horizon/Subsidiary be deemed to represent the
same number of Sky Merger Common Shares, until consummation of the
Prime/Horizon Merger in accordance with Section 1.3. There shall be no
further registration of transfers on the stock transfer books of Horizon of
the Horizon Common Shares which were outstanding immediately prior to the
Horizon/Subsidiary Merger Effective Time (as defined below). If, after the
Horizon/Subsidiary Merger Effective Time, Certificates (as defined below) are
presented to the Surviving Company (as defined below) for any reason, they
shall be canceled and exchanged as provided in Section 1.14. As of the
Horizon/Subsidiary Merger Effective Time, each outstanding Horizon Stock
Option (as defined in Section 2.3(b)) shall be assumed by Sky Merger and
shall be deemed to constitute an option to acquire (each a "Sky Merger Stock
Option"), on the same terms and conditions applicable under such Horizon
Stock Option, the same number of Sky Merger Common Shares as the holder of
such Horizon Stock Option would have been entitled to receive pursuant to the
Horizon/Subsidiary Merger had such holder exercised such Horizon Stock Option
in full immediately prior to the Horizon/Subsidiary Merger Effective Time at
a price per share equal to the aggregate exercise price for the shares
subject to such Horizon Stock Option divided by the number of full Sky Merger
Common Shares deemed to be purchasable pursuant to such Horizon Stock Option.
5
1.3 THE PRIME/HORIZON MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the MGCL,
immediately following the Horizon/Subsidiary Merger Effective Time, Prime shall
be merged with and into Sky Merger with Sky Merger as the surviving company (the
"Surviving Company"). Following the Prime/Horizon Merger, the separate
corporate existence of Prime shall cease, and Sky Merger as Surviving Company
shall continue and shall succeed to and assume all the rights and obligations in
accordance with the MGCL. The name of the Surviving Company shall be "Prime
Retail, Inc."
1.4 CLOSING OF MERGERS. The closing of the Mergers (the "Closing")
will take place at 10:00 a.m., local time on the date to be specified by the
parties, which (subject to satisfaction or waiver of the conditions set forth
in Article 6) shall be no later than the third business day after
satisfaction or waiver of the conditions set forth in Section 6.1(a) (the
"Closing Date"), at the offices of Winston & Xxxxxx, 00 Xxxx Xxxxxx Xxxxx,
Xxxxxxx, Xxxxxxxx 00000, unless another date or place is agreed to in writing
by the parties.
1.5 EFFECTIVE TIMES. As soon as practicable following the satisfaction
or waiver of the conditions set forth in Article 6:
(a) Prime Partnership and Horizon Partnership shall execute and
file the Delaware Certificate of Merger, executed in accordance with the
DRULPA, with the Office of the Secretary of State of the State of Delaware
(the "Delaware Secretary"). The Partnership Merger shall become effective
(the "Partnership Merger Effective Time") at such time as shall be specified
in the Delaware Certificate of Merger.
(b) Immediately following the Partnership Merger Effective Time,
Horizon and Sky Merger shall execute and file (i) the Horizon/Subsidiary
Articles of Merger, executed in accordance with the MGCL, with the State
Department of Assessments and Taxation of Maryland (the "Maryland
Department"), and (ii) the Horizon/Subsidiary Certificate of Merger, executed
in accordance with the MBCA, with the Department of Commerce of the State of
Michigan (the "Michigan Department"). The Horizon/Subsidiary Merger shall
become effective (the "Horizon/Subsidiary Merger Effective Time") at such
time as shall be specified in the Horizon/Subsidiary Articles of Merger and
the Horizon/Subsidiary Certificate of Merger.
(c) Immediately following the Horizon/Subsidiary Merger Effective
Time, Sky Merger and Prime shall execute and file the Prime/Horizon Articles
of Merger, executed in accordance with the MGCL, with the Maryland
Department. The Prime/Horizon Merger shall become effective (the
"Prime/Horizon Merger Effective Time") at such time as shall be specified in
the Prime/Horizon Articles of Merger.
Prime, Prime Partnership, Horizon, Sky Merger, Newco, Newco LP, Horizon
Partnership and the Surviving Company shall execute and file all other
filings and recordings required, with respect to the Horizon/Subsidiary
Merger and the Prime/Horizon Merger, under the MGCL or the MBCA or, with
respect to the Partnership Merger, under the DRULPA. Unless otherwise
agreed, the parties shall cause the each Prime/Horizon Merger Effective Time,
the Horizon Subsidiary Effective Time
6
and the Partnership Merger Effective Time to occur on the Closing Date in the
sequence provided for in the Recitals hereto.
1.6 EFFECT OF PRIME/HORIZON MERGER ON ARTICLES OF INCORPORATION AND
BYLAWS. The Articles of Incorporation and the Bylaws of Sky Merger as in
effect immediately after the Horizon/Subsidiary Merger, shall continue in
full force and effect after the Prime/Horizon Merger until further amended in
accordance with applicable Maryland law.
1.7 EFFECT OF PARTNERSHIP MERGER ON AGREEMENT OF LIMITED PARTNERSHIP.
The Second Amended and Restated Agreement of Limited Partnership of Prime
Partnership in substantially the form of Exhibit G attached hereto (the
"Second Amended and Restated Prime Partnership Agreement"), shall continue in
full force and effect after the Partnership Merger until further amended in
accordance with applicable Delaware law.
1.8 DIRECTORS. At the Prime/Horizon Merger Effective Time, the
directors of the Surviving Company shall consist of twelve persons, including
those nine persons named in the Prime/Horizon Articles of Merger (or such
other persons as shall be designated by Prime prior to the Closing), each of
whom shall serve for the terms specified in the Prime/Horizon Articles of
Merger or until their earlier death, resignation or removal, as the case may
be, together with three persons to be designated by Horizon prior to Closing,
each of whom shall, on the third business day after the Prime/Horizon Merger
Effective Time (or such earlier time as shall be required in order to comply
with applicable disclosure requirements of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), become a director of the Surviving Company with
one of such three persons having terms expiring at the third, second and
first annual meeting of shareholders of the Surviving Company held following
the Prime/Horizon Merger Effective Time. The names of the three persons
designated by Horizon and their respective terms of office shall be furnished
to Prime prior to the time the Proxy Statement (as hereinafter defined) is
mailed to the shareholders of Prime and Horizon. Prime and Horizon agree to
take whatever action may be necessary to accomplish the foregoing.
1.9 EFFECT ON SHARES. The effect of the Horizon/Subsidiary Merger on
the shares of capital stock of Horizon and Sky Merger shall be as provided in
the Horizon/Subsidiary Articles of Merger and the Horizon/Subsidiary
Certificate of Merger. The effect of the Prime/Horizon Merger on the shares
of capital stock of Prime and Sky Merger shall be as provided in Section 1.14
and in the Prime/Horizon Articles of Merger.
1.10 EFFECT ON PARTNERSHIP INTERESTS. The effect of the Partnership
Merger on the partnership interests of Horizon Partnership shall be as
provided in Section 1.11(c) and in the Delaware Certificate of Merger. The
Partnership Merger shall not change the partnership interests of Prime
Partnership outstanding immediately prior to the Partnership Merger.
7
1.11 MERGER CONSIDERATION.
(a) In connection with the Horizon/Subsidiary Merger, each issued
and outstanding Horizon Common Share and each outstanding Horizon Stock
Option shall be treated as set forth in Section 1.2.
(b) As of the Prime/Horizon Merger Effective Time, each Horizon
Common Share and Sky Merger Common Share that is owned by Horizon or any
Horizon Subsidiary (as defined below) shall in each case automatically be
canceled and retired and all rights with respect thereto shall cease to
exist, and no Prime/Horizon Merger Consideration (as defined below) shall be
delivered in exchange therefor. As of the Partnership Merger Effective Time,
the issued and outstanding common units of Horizon Partnership (each, a
"Horizon OP Unit") that are owned by Horizon shall convert into the right to
receive, for each such Horizon OP Unit, that number of common units of Prime
Partnership (each, a "Prime Common Unit") and convertible Series B preferred
units of Prime Partnership (each, a "Prime Series B Preferred Unit") equal
to the number of Surviving Company Common Shares and Surviving Company Series
B Preferred Shares, respectively, into which each Horizon Common Share is
converted pursuant to the Prime/Horizon Merger.
(c) Subject to Section 1.14(g), each Horizon OP Unit (other than
units held by Horizon or any Horizon Subsidiary) shall be converted by the
Partnership Merger into the right to receive, 0.9193 of a Prime Common Unit
(the "Partnership Merger Consideration"). As of the Partnership Merger
Effective Time, all such Horizon OP Units shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of record of Horizon OP Units shall cease to have any rights
thereto, except the right to receive the Partnership Merger Consideration,
any dividend or other distribution to which such holder is entitled pursuant
to Section 1.14(d) and any cash in lieu of fractional units to be issued or
paid in consideration therefor upon surrender of such Horizon OP Units in
accordance with Section 1.14(g), without interest.
(d) Subject to Section 1.14(g), each issued and outstanding Sky
Merger Common Share (other than shares held by Horizon or any Horizon
Subsidiary) shall be converted by the Prime/Horizon Merger into the right to
receive 0.20 of a share of 8.5% Series B Cumulative Participating Convertible
Preferred Stock, $.0.01 par value per share, of the Surviving Company (the
"Surviving Company Series B Preferred Share") and 0.597 of a share of common
stock, $0.01 par value per share, of the Surviving Company (the "Surviving
Company Common Share") (the "Prime/Horizon Merger Consideration"). As of the
Prime/Horizon Merger Effective Time, all such Sky Merger Common Shares shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Sky Merger Common Shares shall cease to have any rights thereto, except the
right to receive the Prime/Horizon Merger Consideration, any dividend or
other distribution to which such holder is entitled pursuant to Section
1.14(d) and any cash in lieu of fractional shares to be issued or paid in
consideration therefor upon surrender of such certificate in accordance with
Section 1.14(g), without interest.
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(e) "Merger Consideration" shall mean either the Partnership
Merger Consideration or the Prime/Horizon Merger Consideration, as the
context may require.
1.12 REGISTRATION RIGHTS AGREEMENT. On the Closing Date, the Surviving
Company will enter into the Amended and Restated Registration Rights
Agreement substantially in the form of Exhibit H attached hereto under which
Surviving Company will assume in writing and succeed to all rights and
obligations of Horizon and Prime pursuant to the Registration Rights
Agreements listed on Schedule 2.3(g) to the Horizon Disclosure Letter and
pursuant to the Registration Rights Agreements listed on Schedule 3.3(h) to
the Prime Disclosure Letter, respectively.
1.13 APPRAISAL RIGHTS.
(a) NO APPRAISAL RIGHTS. The holders of Horizon Common Shares,
Prime Common Shares, Prime Series B Preferred Shares, Sky Merger Common
Shares, Horizon OP Units and Prime OP Units (as defined below) are not
entitled under applicable law to appraisal rights as a result of the Mergers.
(b) PRIME SERIES A AND SERIES C PREFERRED SHARES. Notwithstanding
anything in this Agreement to the contrary, holders of Prime Series A
Preferred Shares and Prime Series C Preferred Shares (each as defined in
Section 3.3(a)) that have, as of the Effective Time, complied with all
procedures necessary to assert appraisal rights in accordance with the MGCL,
if applicable, shall have such rights, if any, as they may have pursuant to
Section 3-202 of the MGCL and such Prime Series A Preferred Shares and Prime
Series C Preferred Shares shall not be converted or be exchangeable as
provided in this Article I, but such holders shall be entitled to receive
such payment as may be determined to be due to such holders pursuant to the
MGCL; PROVIDED, HOWEVER, that if such holder shall have failed to perfect or
shall have effectively withdrawn or lost his right to appraisal and payment
under the MGCL, such holder's Prime Series A Preferred Shares and Prime
Series C Preferred Shares shall thereupon be deemed to have been converted
and to have become exchangeable, as of the Prime/Horizon Merger Effective
Time, into the Prime/Sky Merger Consideration. The Prime Series A Preferred
Shares and Prime Series C Preferred Shares described in this Section 1.13(b)
held by holders who exercise and perfect appraisal rights are referred to
herein as "Dissenting Shares." Sky Merger shall give Prime prompt notice of
any demands for appraisal of shares received by Sky Merger (and shall also
give Prime prompt notice of any withdrawals of such demands for appraisal
rights) and Prime shall have the opportunity and right to participate in and
direct all negotiations with respect to such demands. Sky Merger shall not,
except with the prior written consent of Prime, make any payment with respect
to, settle or otherwise negotiate or offer to settle any such demand for
appraisal rights. Prime agrees that it shall make all payments with respect
to appraisal rights and that the funds therefor shall not come, directly or
indirectly, from Sky Merger.
1.14 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS; FRACTIONAL SHARES.
(a) EXCHANGE AGENT. Prior to the Closing Date, Prime shall
appoint American Stock Transfer and Trust Company, or another bank or trust
company reasonably acceptable to
9
Horizon, to act as exchange agent (the "Exchange Agent") for the exchange of
the Prime/Horizon Merger Consideration upon surrender of certificates
representing issued and outstanding Sky Merger Common Shares and the exchange
of the Partnership Merger Consideration in connection with the Partnership
Merger.
(b) MERGER CONSIDERATION.
(i) The Surviving Company shall provide or cause to be
provided to the Exchange Agent on or before the Partnership Merger Effective
Time, for the benefit of those Persons who are holders of Sky Merger Common
Shares after the Horizon/Subsidiary Merger Effective Time, Surviving Company
Common Shares and Surviving Company Series B Preferred Shares (the "Corporate
Exchange Fund") issuable in exchange for the issued and outstanding Horizon
Common Shares pursuant to Section 1.11. Horizon shall provide to the Exchange
Agent on or before the Partnership Merger Effective Time, for the benefit of
the holders of Horizon Common Shares, cash payable in respect of any
dividends required pursuant to Section 1.14(d)(i) or (ii).
(ii) Prime Partnership shall provide to the Exchange Agent,
for the benefit of the holders of Horizon OP Units, Prime Common Units (the
"Partnership Exchange Fund", and together with the Corporate Exchange Fund,
the "Exchange Fund") issuable in exchange for, issued and outstanding Horizon
OP Units pursuant to Section 1.11. Horizon shall provide to the Exchange
Agent on or before the Partnership Merger Effective Time, for the benefit of
the holders of Horizon OP Units, cash payable in respect of any distributions
required pursuant to Section 1.14(d).
(c) EXCHANGE PROCEDURE.
(i) As soon as reasonably practicable after the Prime/Horizon
Merger Effective Time, the Exchange Agent shall mail to each holder of record
of a certificate or certificates which immediately prior to the Prime/Horizon
Merger Effective Time represented outstanding Sky Merger Common Shares (the
"Certificates") whose shares were converted into the right to receive the
Prime/Horizon Merger Consideration pursuant to Section 1.11 (d) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as the Surviving Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Prime/Horizon Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Surviving Company, together with such
letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Prime/Horizon Merger
Consideration into which the Sky Merger Common Shares theretofore represented
by such Certificate shall have been converted pursuant to Section 1.11, as
well as any dividends or other distributions to which such holder is entitled
pursuant to Section 1.14(d), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of Sky Merger
Common Shares which is not registered in the transfer records of Sky Merger,
payment may be made to a person other than the person in whose name the
Certificate so surrendered is registered
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if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the person requesting such payment either shall pay any
transfer or other taxes required by reason of such payment being made to a
person other than the registered holder of such Certificate or establish to
the satisfaction of the Surviving Company that such tax or taxes have been
paid or are not applicable. Until surrendered as contemplated by this Section
1.14, each Certificate shall be deemed at any time after the Prime/Horizon
Merger Effective Time to represent only the right to receive upon such
surrender the Prime/Horizon Merger Consideration, without interest, into
which the Sky Merger Common Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.11, and any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.14(d). No interest will be paid or will accrue on the Prime/Horizon
Merger Consideration upon the surrender of any Certificate or on any cash
payable pursuant to Section 1.14(d) or Section 1.14(g).
(ii) Contemporaneous with or as soon as reasonably practicable
after the Partnership Merger Effective Time, Prime Partnership shall mail or
otherwise make available to each holder of record of Horizon OP Units whose
interest in Horizon Partnership was converted into the right to receive the
Partnership Merger Consideration a letter of transmittal with instructions
for execution and delivery of the Amended and Restated Prime Partnership
Agreement which shall specify that delivery of the Partnership Merger
Consideration shall be effected only upon execution and delivery of the
Amended and Restated Prime Partnership Agreement and such other documentation
as Prime Partnership may reasonably specify as necessary in connection with
the consummation of the transactions contemplated hereby. Upon execution and
delivery of the Amended and Restated Prime Partnership Agreement and such
other documentation as is reasonably specified by Prime Partnership in
connection with the consummation of the transactions contemplated hereby,
each holder of Horizon OP Units shall be entitled to receive from Prime
Partnership a copy of the Amended and Restated Prime Partnership Agreement,
duly amended to reflect the Partnership Merger Consideration to be received
by such holder pursuant to Section 1.11, as well as any dividends or
distributions to which such holder is entitled pursuant to Section 1.14(d).
Only holders of record on the books and records of Horizon Partnership shall
be entitled to the Partnership Merger Consideration and to become a limited
partner in Prime Partnership pursuant to this Agreement. Until the execution
and delivery of the Amended and Restated Prime Partnership Agreement by a
holder of Horizon OP Units, and the other documentation reasonably specified
by Prime, such Horizon OP Units shall be deemed at any time after the
Partnership Merger Effective Time to represent only the rights to receive the
Partnership Merger Consideration into which such Horizon OP Units shall have
been converted pursuant to Section 1.11 hereof, without interest, and any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.14(d), without interest.
(d) RECORD DATES FOR FINAL DIVIDENDS; DISTRIBUTIONS WITH RESPECT
TO UNEXCHANGED SHARES.
(i) To the extent necessary to satisfy the requirements of
Section 857(a)(1) of the Code for the taxable year of Prime ending at the
Closing Date (and avoid the payment of tax with respect to undistributed
income), Prime shall (i) declare a dividend (the "Final
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Company Dividend") first to holders of Prime Preferred Shares (as defined
below) and then, and only to the extent necessary, to holders of Prime Common
Shares (as defined below), the record date for which shall be the close of
business on the last business day prior to the Closing Date, in an amount
equal to the minimum dividend sufficient to permit Prime to satisfy such
requirements and (ii) Prime Partnership shall pay a corresponding
distribution to holders of Prime OP Units (as defined in Section 3.3(e))
pursuant to Section 6.2 of the Amended and Restated Agreement of Limited
Partnership of Prime Retail, L.P. dated as of September 8, 1997, as amended
(the "Prime Partnership Agreement"). If Prime determines it necessary to
declare a portion of the Final Company Dividend to holders of Prime Common
Shares, it shall notify Horizon at least ten (10) days prior to the date for
the Prime Shareholders Meeting (as defined in Section 5.1), and Horizon shall
(i) declare a dividend per share to holders of Horizon Common Shares, the
record date for which shall be the close of business on the last business day
prior to the Closing Date, in an amount per Horizon Common Share equal to the
product obtained by multiplying (x) the Final Company Dividend per Prime
Common Share paid by Prime by (y) 0.9193. Horizon Partnership shall pay a
corresponding distribution to the holders of Horizon OP Units pursuant to the
Horizon Partnership Agreement. The dividends payable hereunder to holders of
Horizon Common Shares shall be paid upon presentation of the certificates of
Horizon Common Shares for exchange in accordance with this Section 1.14 and
the distributions payable to holders of Horizon OP Units shall be paid upon
delivery of the executed Second Amended and Restated Prime Partnership
Agreement in accordance with this Section 1.14.
(ii) (A) No dividends or other distributions with respect to
Surviving Company Common Shares or Surviving Company Series B Preferred
Shares with a record date after the Closing Date shall be paid to the holder
of any unsurrendered Certificate with respect to the Surviving Company Common
Shares or Surviving Company Series B Preferred Shares represented thereby,
and no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to Section 1.14(g), in each case until the surrender of such
Certificate in accordance with this Section 1.14. Subject to the effect of
applicable escheat laws, following surrender of any such Certificate there
shall be paid to the holder of such Certificate, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of any
fractional Surviving Company Common Shares or Surviving Company Series B
Preferred Shares to which such holder is entitled pursuant to Section 1.14(g)
and (ii) if such Certificate is exchangeable for one or more whole Surviving
Company Common Shares or Surviving Company Series B Preferred Shares, (x) at
the time of such surrender the amount of dividends or other distributions
with a record date after the Closing Date theretofore paid with respect to
such whole Surviving Company Common Shares or Surviving Company Series B
Preferred Shares and (y) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Closing Date
but prior to such surrender and with a payment date subsequent to such
surrender payable with respect to such whole Surviving Company Common Shares
or Surviving Company Series B Preferred Shares.
(B) No dividends or distributions with respect to
Surviving Company Common Units or Surviving Company Series B Preferred Units
with a record date after the Closing Date shall be paid to any holder of
Horizon OP Units, and no cash payable in lieu of fractional units shall be
paid to any such holder pursuant to Section 1.14(g), in each case until such
12
holder has executed and delivered the Amended and Restated Prime Partnership
Agreement and other documentation in accordance with this Section 1.14.
Subject to the effect of the applicable escheat laws, following execution and
delivery of requisite documents as contemplated by this Section 1.14, there
shall be paid to a holder of Horizon OP Units, without interest, (i) at the
time of such delivery, the amount of any cash payable in lieu of any
fractional Prime Common Units to which such holder is entitled pursuant to
Section 1.14(g) and (ii) if such Horizon OP Units are exchangeable into one
or more whole Prime Common Units, (x) the amount of any dividend or other
distributions with a record date after the Closing Date theretofore paid with
respect to such whole Prime Common Units, and (y) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Closing Date but prior to such date and with a payment date subsequent to
such date, which are payable with respect to such whole Prime Common Units.
(e) NO FURTHER OWNERSHIP RIGHTS IN HORIZON COMMON SHARES, SKY
MERGER COMMON SHARES AND HORIZON OP UNITS.
(i) All Prime/Horizon Merger Consideration paid upon the
surrender of Certificates in accordance with the terms of this Section 1.14
(and any cash paid pursuant to Section 1.14(g)) shall be deemed to have been
paid in full satisfaction of all rights pertaining to the Horizon Common
Shares and Sky Merger Common Shares, theretofore represented by such
Certificates; provided, however, that Horizon shall transfer to the Exchange
Agent cash sufficient to pay any dividends or make any other distributions
with a record date prior to the Closing Date which may have been declared or
made by Horizon on such Horizon Common Shares which were converted into Sky
Merger Common Shares pursuant to the Horizon/Subsidiary Merger in accordance
with the terms of this Agreement or prior to the date of this Agreement and
which remain unpaid at the Closing Date and have not been paid prior to such
surrender, and there shall be no further registration of transfers on the
stock transfer books of Sky Merger of the Sky Merger Common Shares which were
outstanding immediately prior to the Closing Date. If, after the Closing
Date, Certificates are presented to the Surviving Company for any reason,
they shall be canceled and exchanged as provided in this Section 1.14.
(ii) All Partnership Merger Consideration payable to
holders of Horizon OP Units pursuant to the terms of this Section 1.14 (and
any cash payable pursuant to Section 1.14(g)) shall be payable, and when paid
shall be deemed to have been paid, in full satisfaction of all rights
pertaining to Horizon OP Units.
(f) NO LIABILITY. None of Horizon, Prime, the Surviving Company,
Prime Partnership, Horizon Partnership, Newco, Newco LP or the Exchange Agent
shall be liable to any person in respect of any Prime/Horizon Merger
Consideration or Partnership Merger Consideration or dividends or
distributions delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. Any portion of the Exchange Fund
delivered to the Exchange Agent pursuant to this Agreement that remains
unclaimed for six (6) months after the Closing Date shall be redelivered by
the Exchange Agent to Prime, upon demand, and any holders of Certificates or
Horizon OP Units who have not theretofore complied with Section 1.14(c) shall
thereafter look only
13
to Prime for delivery of the Partnership Merger Consideration and any unpaid
dividends or distributions, subject to applicable escheat and other similar
laws.
(g) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional
Surviving Company Common Shares or Surviving Company Series B Preferred
Shares shall be issued upon the surrender for exchange of Certificates, and
such fractional share interests will not entitle the owner thereof to vote,
to receive dividends or to any other rights of a shareholder of Surviving
Company.
(ii) Notwithstanding any other provision of this Agreement,
each holder of Sky Merger Common Shares exchanged pursuant to the
Prime/Horizon Merger who would otherwise have been entitled to receive a
fraction of a Surviving Company Common Share or a Surviving Company Series B
Preferred Share (after taking into account all Certificates delivered by such
holder) shall receive, from the Exchange Agent in accordance with the
provisions of this Section 1.14(g), a cash payment in lieu of such fractional
shares, as applicable, representing such holder's proportionate interest, if
any, in the net proceeds from the sale by the Exchange Agent in one or more
transactions (which sale transactions shall be made at such times, in such
manner and on such terms as the Exchange Agent shall determine in its
reasonable discretion) on behalf of all such holders of the aggregate of the
fractional Surviving Company Common Shares and Surviving Company Series B
Preferred Shares, as applicable, which would otherwise have been issued (the
"Excess Shares"). The sale of the Excess Shares by the Exchange Agent shall
be executed on the New York Stock Exchange (the "NYSE") through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates, the Exchange Agent will hold such
proceeds in trust (the "Exchange Trust") for the holders of Certificates.
Prime shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with this sale of the Excess Shares. As soon
as practicable after the determination of the amount of cash, if any, to be
paid to holders of Certificates in lieu of any fractional Surviving Company
Common Shares or Surviving Company Series B Preferred Shares, as applicable,
the Exchange Agent shall make available such amounts to such holders of
Certificates without interest.
(iii) No fractional Prime Common Units shall be issued in
exchange for Horizon OP Units, and no fractional interests shall entitle any
holder thereof to vote, receive distributions or have any other rights in,
from or to Prime Partnership. In lieu of the issuance of any fractional
Prime Common Units, each holder of Horizon OP Units, upon execution and
delivery of the documentation contemplated by this Section 1.14, shall be
paid an amount in cash (without interest), rounded to the nearest cent, equal
to the product of (1) the average price at which Surviving Company Common
Shares constituting Excess Shares sold by the Exchange Agent pursuant to the
foregoing clause (ii) and (2) the fractional amount of Prime Common Units
which such holder would otherwise be entitled to receive under this Section
1.14.
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(h) WITHHOLDING RIGHTS. (A) The Surviving Company or the Exchange
Agent shall be entitled to deduct and withhold from the Prime/Horizon Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
Sky Merger Common Shares such amounts as the Surviving Company or the
Exchange Agent is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by Surviving Company or
the Exchange Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Sky
Merger Common Stock in respect of which such deduction and withholding was
made by Surviving Company or the Exchange Agent.
(B) Prime Partnership shall be entitled to deduct and
withhold from the Partnership Merger Consideration otherwise payable pursuant
to this Agreement to a holder of Horizon OP Units such amounts as Prime
Partnership is required to deduct and withhold with respect to the making of
such payment under the Code or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by Prime Partnership, such
withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of such Horizon OP Units in respect of which
such deduction and withholding was made by Prime Partnership.
(i) At the Prime/Horizon Merger Effective Time, each certificate
representing an outstanding Prime Common Share, Prime Series A Preferred
Share, Prime Series B Preferred Share and Prime Series C Preferred Share
will, without any action on the part of the holder thereof, thereafter
represent one Surviving Company Common Share, one share of Surviving Company
10.5% Series A Senior Cumulative Preferred Stock, $.01 par value per share,
one Surviving Company Series B Preferred Share or one share of Surviving
Company Series C Cumulative Convertible Redeemable Preferred Stock, $0.01 par
value per share, as the case may be, pursuant to the terms of the
Prime/Horizon Articles of Merger.
1.15 CONTRIBUTION. As provided in the Contribution Agreement,
immediately prior to the declaration of the Prime Partnership Special
Distribution, Horizon Partnership and Newco LP shall effect the Horizon
Partnership Contribution.
1.16 PRIME PARTNERSHIP SPECIAL DISTRIBUTION; PRIME SPECIAL DISTRIBUTION;
PRIME PARTNERSHIP COMMON DISTRIBUTION; THE PRIME CORPORATE CONTRIBUTION;
PRIME CORPORATE COMMON DISTRIBUTION.
(a) PRIME PARTNERSHIP SPECIAL DISTRIBUTION. On the Closing Date
immediately after the Horizon Partnership Contribution and immediately prior
to the declaration of the Prime Special Distribution, Prime Partnership shall
formally declare a cash distribution of (i) $0.50 per outstanding Prime
Common Unit and Prime Series C Preferred Unit and (ii) $0.60 per outstanding
Prime Series B Preferred Unit, in each case to each holder of record of Prime
Common Units, Prime Series B Preferred Units and Prime Series C Preferred
Units as of the close of the transfer books of Prime Partnership immediately
prior to the Partnership Merger. The payment date with respect to the Prime
Partnership Special Distribution shall be determined at Closing at the sole
discretion of Prime Partnership.
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(b) PRIME SPECIAL DISTRIBUTION. On the Closing Date immediately
after the declaration of the Prime Partnership Special Distribution and
immediately prior to the Partnership Merger, Prime shall formally declare a
cash distribution of (i) $0.50 per outstanding Prime Common Share and Prime
Series C Preferred Share and (ii) $0.60 per outstanding Prime Series B
Preferred Share, in each case to each holder of record of Prime Common
Shares, Prime Series B Preferred Shares and Prime Series C Preferred Shares
as of the close of the transfer books of Prime immediately prior to the
Partnership Merger. The payment date with respect to the Prime Special
Distribution shall be determined at Closing at the sole discretion of Prime
Partnership.
(c) PRIME PARTNERSHIP COMMON DISTRIBUTION. On the Closing Date
immediately after consummation of the Partnership Merger, the Prime
Partnership Common Distribution shall be effected by the distribution of each
issued and outstanding common unit of Newco LP (each, a "Newco LP Common
Unit") to each holder of record of Prime Common Units, Prime Series B
Preferred Units and Prime Series C Preferred Units as of the close of the
transfer books of Prime Partnership immediately after the consummation of the
Partnership Merger such that (i) each Prime Series B Preferred Unit shall
entitle the holder to receive Newco LP Common Units equal to 1.196 multiplied
by the number of Newco LP Common Units being distributed in respect of each
Prime Common Unit, and (ii) each Prime Series C Preferred Unit shall entitle
the holder to receive that number of Newco LP Common Units distributed in
respect of each Prime Common Unit. The number of Newco LP Common Units to be
distributed in respect of each Prime OP Unit and the payment date with
respect to the Prime Partnership Common Distribution shall be determined at
Closing at the sole discretion of Prime Partnership. Immediately after the
Partnership Merger Effective Time, Prime Partnership shall formally declare
the Prime Partnership Common Distribution.
(d) PRIME CORPORATE CONTRIBUTION. Immediately following the
consummation of the Prime/Horizon Merger, Surviving Company shall transfer,
assign and convey to Newco as a capital contribution (i) all Newco LP Common
Units held by Surviving Company and (ii) all Newco Common Shares held by
Surviving Company, and Newco shall issue to Surviving Company that number of
Newco Common Shares equal to the number of Newco LP Common Units so
contributed by Surviving Company.
(e) PRIME CORPORATE COMMON DISTRIBUTION. The Prime Corporate
Common Distribution shall be effected by the distribution of the Newco Common
Shares received by Surviving Company pursuant to the Prime Corporate
Contribution to each holder of record of Surviving Company Common Shares,
Surviving Company Series B Preferred Shares and Surviving Company Series C
Preferred Shares as of the close of the transfer books of Surviving Company
immediately following the consummation of the Prime/Horizon Merger such that
(i) each Surviving Company Series B Preferred Share shall entitle the holder
to receive Newco Common Shares equal to 1.196 multiplied by the number of
Newco Common Shares being distributed in respect of each Surviving Company
Common Share, and (ii) each Surviving Company Series C Preferred Share shall
entitle the holder to receive that number of Newco Common Shares distributed
in respect of each Surviving Company Common Share. The number of Newco
Common Shares to be distributed in respect of each Surviving Company Common
Share, Surviving Company Series B Preferred
16
Share and Surviving Company Series C Preferred Share pursuant to the Prime
Corporate Common Distribution shall be identical to the number of Newco
Common Units distributed in respect of each Prime Common Unit, Prime Series B
Preferred Unit and Prime Series C Preferred Unit, respectively, pursuant to
the Prime Partnership Distribution, and the payment of the Prime Corporate
Common Distribution shall occur immediately following the payment of the
Prime Partnership Common Distribution. Immediately following the
Prime/Horizon Merger Effective Time or on such earlier date as may be
required to comply with applicable laws and regulations (including without
limitation regulations of the New York Stock Exchange), Surviving Company
shall formally declare the Prime Corporate Common Distribution.
1.17 TRANSFERRED PRIME PROPERTIES. Immediately after the consummation
of the Prime/Horizon Merger, the Surviving Partnership shall cause each of
Indianapolis Factory Shops Limited Partnership and Nebraska Crossing Factory
Shops to transfer to Newco all of their respective rights and interests in
Indiana Factory Shops in Daleville, Indiana, and Nebraska Crossing Factory
Stores in Gretna, Nebraska (the "Transferred Prime Properties") in
consideration for cash in amount equal to the aggregate mortgage indebtedness
incurred by Newco in respect of the Transferred Prime Properties.
1.18 SALE OF DESIGNATED PROPERTIES PRIOR TO CLOSING. The parties hereto
acknowledge that prior to the Closing, Horizon and Horizon Partnership may
explore the sale of all or a portion of the assets and properties which are
designated to be transferred to Newco LP pursuant to the Horizon Partnership
Contribution (the "Designated Properties"). Notwithstanding anything herein
to the contrary, in the event that on or prior to the Closing Date Prime
determines in its sole discretion that it is advisable not to effectuate the
transactions under Section 1.15 and Sections 1.16(c), (d) and (e) hereof,
then (x) the Horizon Partnership Contribution, Prime Partnership Common
Distribution, Prime Corporate Contribution and Prime Corporate Common
Distribution shall not be effectuated hereunder and Section 1.15 and Sections
1.16(c), (d) and (e) hereof shall be deemed to be void and of no force or
effect, and (y) the Mergers and the other transactions contemplated hereby
shall otherwise be consummated on the terms and conditions set forth in this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HORIZON
Horizon and Horizon Partnership represent and warrant to Prime and Prime
Partnership as follows:
2.1 ORGANIZATION, STANDING AND POWER OF HORIZON. Horizon and Sky Merger
are each a corporation duly organized, validly existing and in good standing
under the laws of Michigan and Maryland, respectively. Horizon has all
requisite corporate power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Horizon is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
17
qualified or licensed, individually or in the aggregate, would not have a
material adverse effect on the business, properties, assets, financial
condition or results of operations of Horizon and the Horizon Subsidiaries
(as defined below), taken as a whole (a "Horizon Material Adverse Effect").
Horizon has delivered to Prime complete and correct copies of the Amended and
Restated Articles of Incorporation of Horizon (the "Horizon Articles of
Incorporation") and the Amended and Restated Bylaws of Horizon (the "Horizon
Bylaws"), in each case, as amended or supplemented to the date of this
Agreement. Sky Merger has delivered to Prime complete and correct copies of
the Sky Merger Articles of Incorporation (the "Sky Merger Articles of
Incorporation") and the Sky Merger Bylaws (the "Sky Merger Bylaws"), in each
case, as amended or supplemented to the date of this Agreement.
2.2 HORIZON SUBSIDIARIES.
(a) Schedule 2.2 to the letter of even date herewith signed by
each of the chief executive officer and chief financial officer of Horizon
and delivered to Prime prior to the execution hereof (the "Horizon Disclosure
Letter") sets forth (i) each Subsidiary (as defined below) of Horizon (the
"Horizon Subsidiaries"), (ii) the ownership interest therein of Horizon
(other than, as of the Closing Date, changes thereto between February 1, 1998
and the Closing Date which result from the conversion of Horizon OP Units
into Horizon Common Shares pursuant to the terms of the Horizon Partnership
Agreement), (iii) if not wholly owned by Horizon, the identity and ownership
interest of each of the other owners of such Horizon Subsidiary (other than,
as of the Closing Date, changes thereto between February 1, 1998 and the
Closing Date which result from the conversion of Horizon OP Units into
Horizon Common Shares pursuant to the terms of the Horizon Partnership
Agreement) and (iv) each factory outlet center and other commercial property
owned by such Subsidiary. As used in this Agreement, "Subsidiary" of any
Person (as defined below) means any corporation, partnership, limited
liability company, joint venture, trust or other legal entity of which such
Person owns (either directly or through or together with another Subsidiary
of such Person) either (i) a general partner, managing member or other
similar interest, or (ii)(A) 10% or more of the voting power of the voting
capital stock or other equity interests, or (B) 10% or more of the
outstanding voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity. As used herein, "Person" means an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity. Schedule 2.2 to the Horizon
Disclosure Letter sets forth a true and complete list of the equity
securities owned by Horizon, directly or indirectly, in any corporation,
partnership, limited liability company, joint venture or other legal entity,
excluding Horizon Subsidiaries.
(b) Except as set forth in Schedule 2.2 to the Horizon Disclosure
Letter, (i) all of the outstanding shares of capital stock of each Horizon
Subsidiary that is a corporation have been duly authorized, validly issued
and are (A) fully paid and nonassessable and not subject to preemptive
rights, (B) owned by Horizon or by another Horizon Subsidiary and (C) owned
free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively, "Liens")
and (ii) all equity interests in each Horizon Subsidiary that is a
partnership, joint venture, limited liability company or trust which are
owned by Horizon, by another
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Horizon Subsidiary or by Horizon and another Horizon Subsidiary are owned
free and clear of all Liens. Each Horizon Subsidiary that is a corporation is
duly incorporated, validly existing and in good standing under the laws of
its jurisdiction of incorporation and has the requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted, and each Horizon Subsidiary that is a
partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has the requisite power and authority to own, operate, lease
and encumber its properties and carry on its business as now being conducted.
Each Horizon Subsidiary is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed, individually or in the aggregate, would not have a
Horizon Material Adverse Effect. Complete and correct copies of the articles
of incorporation, bylaws, organization documents and partnership, joint
venture and operating agreements of each Horizon Subsidiary, as amended to
the date of this Agreement, have been previously delivered or made available
to Prime. No effective amendment has been made to the Horizon Partnership
Agreement since the date of this Agreement.
2.3 CAPITAL STRUCTURE.
(a) The authorized shares of capital stock of Horizon consist of
3,000,000 shares of preferred stock, $0.01 par value per share, none of which
are issued and outstanding on the date of this Agreement, 10,000,000 shares
of excess stock, $0.01 par value per share, none of which are issued or
outstanding on the date of this Agreement, and 47,000,000 Horizon Common
Shares, 24,066,635 of which were issued and outstanding as of February 1,
1998. The authorized shares of capital stock of Sky Merger consist of
50,000,000 shares of common stock, $0.01 par value per share, 1,000 of which
are issued or outstanding as of February 1, 1998.
(b) Set forth in Schedule 2.3(b) to the Horizon Disclosure Letter
is a true and complete list of the following: (i) each qualified or
nonqualified option to purchase shares of Horizon's capital stock granted
under Horizon's Amended and Restated 1993 Stock Option Plan (the "Horizon
1993 Stock Option Plan"), Horizon's 1997 Stock Option Plan (the "Horizon 1997
Stock Option Plan"), the Horizon 1993 Long-Term Incentive Plan (the "Horizon
Long-Term Incentive Plan"), Horizon's Director Stock Option Plan (the
"Horizon Director Stock Option Plan") or any other formal or informal
arrangement (collectively, the "Horizon Stock Options") and (ii) all other
warrants or other rights to acquire shares of Horizon's capital stock, all
limited stock appreciation rights, phantom stock, dividend equivalents,
performance units and performance shares. Schedule 2.3(b) to the Horizon
Disclosure Letter sets forth for each Horizon Stock Option the name of the
grantee, the date of the grant, status of the option as qualified or
nonqualified under Section 422 of the Code, the number and type of shares of
Horizon's capital stock subject to such option, the number and type of shares
subject to options that are currently exercisable, the exercise price per
share, and the number and type of such shares subject to share appreciation
rights. On the date of this Agreement, except as set forth in this Section
2.3 or in Schedule 2.3(b) to the Horizon Disclosure Letter, no shares of
Horizon's capital stock were outstanding or reserved for issuance.
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(c) All outstanding shares of Horizon's and Sky Merger's capital
stock are duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no bonds, debentures, notes or
other indebtedness of Horizon or Sky Merger having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote)
on any matters on which shareholders of Horizon may vote.
(d) Except (i) as set forth in this Section 2.3 or in Schedule
2.3(d) to the Horizon Disclosure Letter or as otherwise contemplated by this
Agreement, and (ii) for Horizon OP Units, which may be redeemed for cash or,
at the option of Horizon, Horizon Common Shares in accordance with the
Horizon Partnership Agreement, as of the date of this Agreement, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Horizon, Sky
Merger or any Horizon Subsidiary is a party or by which such entity is bound,
obligating Horizon, Sky Merger or any Horizon Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock, voting securities or other ownership interests of Horizon, Sky Merger
or any Horizon Subsidiary or obligating Horizon, Sky Merger or any Horizon
Subsidiary to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking
(other than to Horizon, Sky Merger or a Horizon Subsidiary).
(e) As of February 1, 1998, 28,293,699 units of Horizon
Partnership are duly and validly issued, of which 24,066,635 are owned by
Horizon and 28,293,699 units of Newco LP are duly and validly issued, of
which 24,066,635 are owned by Horizon. Schedule 2.3(e) to the Horizon
Disclosure Letter sets forth the name of each holder of Horizon OP Units and
Newco LP Common Units and the number of Horizon OP Units and Newco LP Common
Units owned by each such holder in each case as of the date of this
Agreement. The Horizon OP Units are subject to no restrictions except as set
forth in the Horizon Partnership Agreement. Except as provided in the
Horizon Partnership Agreement or in Schedule 2.3(e) to the Horizon Disclosure
Letter, neither Horizon Partnership nor Newco LP has issued or granted and
neither is a party to any outstanding commitments of any kind relating to, or
any presently effective agreements or understandings with respect to, the
issuance or sale of interests in Horizon Partnership or Newco LP, whether
issued or unissued, or securities convertible or exchangeable into interests
in Horizon Partnership or Newco LP, except as contemplated by this Agreement.
(f) All dividends on Horizon Common Shares, and all distributions
on Horizon OP Units and Newco LP Common Units, which have been declared prior
to the date of this Agreement have been paid in full.
(g) Set forth on Schedule 2.3(g) to the Horizon Disclosure Letter
is a list of each Registration Rights Agreement pursuant to which Horizon or
any of the Horizon Subsidiaries is obligated to register any securities.
2.4 OTHER INTERESTS. Neither Horizon nor any Horizon Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, joint
20
venture, business, trust or other entity (other than investments in
short-term investment securities or an interest in a Horizon Subsidiary).
2.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Horizon has the requisite corporate power and authority to
enter into this Agreement and the C&C/Xxxxxxx Agreements to which it is a
party and, subject to the requisite shareholder approval of the Mergers and
the other transactions contemplated hereby requiring shareholder approval
(the "Horizon Shareholder Approvals"), to consummate the transactions
contemplated by this Agreement and the C&C/Xxxxxxx Agreements to which
Horizon is a party. The execution and delivery of this Agreement by Horizon
and the C&C/Xxxxxxx Agreements to which Horizon is a party and the
consummation by Horizon of the transactions contemplated by this Agreement
and the C&C/Xxxxxxx Agreements to which Horizon is a party have been duly
authorized by all necessary action on the part of Horizon, except for and
subject to the Horizon Shareholder Approvals and the Horizon Partner
Approvals (as defined in Section 5.1(g)). This Agreement and the C&C/Xxxxxxx
Agreements to which Horizon is a party each has been duly executed and
delivered by Horizon and constitutes a valid and binding obligation of
Horizon, enforceable against Horizon in accordance with and subject to its
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
(b) Sky Merger has the requisite corporate power and authority to
enter into this Agreement and, subject to the requisite shareholder approval
of the Horizon/Subsidiary Merger and the Prime/Horizon Merger and the other
transactions contemplated hereby requiring shareholder approval (the "Sky
Merger Shareholder Approvals"), to consummate the transactions contemplated
by this Agreement to which Sky Merger is a party. The execution and delivery
of this Agreement by Sky Merger and the consummation by Sky Merger of the
transactions contemplated by this Agreement to which Sky Merger is a party
have been duly authorized by all necessary action on the part of Sky Merger,
except for and subject to the Sky Merger Shareholder Approval. This
Agreement has been duly executed and delivered by Sky Merger and constitutes
a valid and binding obligation of Sky Merger, enforceable against Sky Merger
in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(c) Horizon Partnership and Newco LP each has the requisite
partnership power and authority to enter into this Agreement and the
C&C/Xxxxxxx Agreements to which Horizon Partnership or Newco LP is a party,
subject to the requisite Horizon Partner Approvals and Newco LP Partner
Approvals (as defined in Section 5.1(g)), to consummate the transactions
contemplated by this Agreement and the C&C/Xxxxxxx Agreements to which
Horizon Partnership or Newco LP is a party. The execution and delivery of
this Agreement and the C&C/Xxxxxxx Agreements to which Horizon Partnership or
Newco LP is a party by Horizon Partnership and Newco LP, and the consummation
by Horizon Partnership and Newco LP of the transactions contemplated by this
Agreement and the C&C/Xxxxxxx Agreements to which Horizon Partnership or
Newco LP is a party, have been duly authorized by all necessary action on the
part of Horizon Partnership and
21
Newco LP, as applicable, except for and subject to the Horizon Shareholder
Approvals, the Horizon Partner Approvals and Newco LP Partner Approvals. This
Agreement and the C&C/Xxxxxxx Agreements to which Horizon Partnership or
Newco LP is a party each has been duly executed and delivered by Horizon
Partnership and Newco LP, as applicable, and constitutes a valid and binding
obligation of Horizon Partnership and Newco LP, enforceable against Horizon
Partnership and Newco LP in accordance with and subject to its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
(d) Except as set forth in Schedule 2.5(d)(1) to the Horizon
Disclosure Letter, the execution and delivery of this Agreement and the
C&C/Xxxxxxx Agreements by Horizon, Horizon Partnership and Sky Merger, as
applicable, do not, and the consummation of the transactions contemplated by
this Agreement and the C&C/Xxxxxxx Agreements to which Horizon, Horizon
Partnership or Sky Merger is a party and compliance by Horizon, Horizon
Partnership and Sky Merger with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to material loss of a
benefit under, or result in the creation of any Lien upon any of the properties
or assets of Horizon, Sky Merger or any Horizon Subsidiary under, (i) the
Horizon or Sky Merger Articles of Incorporation or the Horizon or Sky Merger
Bylaws or the comparable charter or organizational documents or partnership,
operating, or similar agreement (as the case may be) of any Horizon Subsidiary,
each as amended or supplemented, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, reciprocal easement agreement, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Horizon or
any Horizon Subsidiary or their respective properties or assets or (iii) subject
to the governmental filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law, ordinance, rule or
regulation (collectively, "Laws") applicable to Horizon or any Horizon
Subsidiary, or their respective properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, loss or
Liens that individually or in the aggregate would not (x) have a Horizon
Material Adverse Effect or (y) prevent the consummation of the transactions
contemplated by this Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to Horizon or any Horizon Subsidiary in
connection with the execution and delivery of this Agreement or the C&C/Xxxxxxx
Agreements by Horizon or Horizon Partnership or the consummation by Horizon or
Horizon Partnership of the transactions contemplated by this Agreement or the
C&C/Xxxxxxx Agreements, except for (i) the filing with the Securities and
Exchange Commission (the "SEC") of the Proxy Statement (as defined in Section
5.1) and such reports under Section 13(a) of the Exchange Act, (ii) the
acceptance for record of the Horizon/Subsidiary Articles of Merger by the
Maryland Department and the Horizon/Subsidiary Certificate of Merger with the
Michigan Department, (iii) the filing of the Delaware Certificate of Merger with
the Delaware Secretary, (iv) the filing of the Prime/Horizon Articles or Merger
with the Maryland Department, (v) such filings with and approvals of the NYSE to
permit the Surviving Company Common Shares and/or Surviving Company Series B
Preferred Shares that are to be issued pursuant to the Prime/Horizon Merger and
the Horizon Stock Options to be listed on the NYSE, (vi) such filings as may be
required
22
in connection with the payment of any transfer and gains taxes and
(vii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings (A) as are set forth in Schedule 2.5(d)(2) to the
Horizon Disclosure Letter, (B) as may be required under (x) laws requiring
transfer, recordation or gains tax filings, (y) federal, state or local
environmental laws or (z) the "blue sky" laws of various states, to the extent
applicable or (C) which, if not obtained or made, would not prevent or delay the
consummation of any of the transactions contemplated by this Agreement or the
C&C/Xxxxxxx Agreements or otherwise prevent either Horizon or Horizon
Partnership from performing its obligations under this Agreement or the
C&C/Xxxxxxx Agreements in any respect or have, individually or in the aggregate,
a Horizon Material Adverse Effect. None of Sky Merger, Newco or Newco LP has
entered into an agreement of any kind, including, but not limited to, any loan,
credit or other debt agreements, employment agreements, benefit plans or stock
option agreements, or pledge agreements except as contemplated by this
Agreement.
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Horizon
and Horizon Partnership have filed all required reports, schedules, forms,
statements and other documents with the SEC since November 2, 1993 and March 13,
1995, respectively, through the date hereof (together, the "Horizon SEC
Documents"). Schedule 2.6(a) to the Horizon Disclosure Letter contains a
complete list of all Horizon SEC Documents filed by Horizon with the SEC since
January 1, 1997 and on or prior to the date of this Agreement. All of the
Horizon SEC Documents (other than preliminary material), as of their respective
filing dates, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, and, in each case, the rules and
regulations promulgated thereunder applicable to such Horizon SEC Documents.
None of the Horizon SEC Documents at the time of filing contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading, except to the
extent such statements have been modified or superseded by later Horizon SEC
Documents filed and publicly available prior to the date of this Agreement. The
consolidated financial statements of Horizon and its Subsidiaries or Horizon
Partnership and its Subsidiaries, as the case may be, included in the Horizon
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements, as
permitted by the applicable rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position of Horizon and its Subsidiaries or Horizon
Partnership and its Subsidiaries, as the case may be, in each case taken as a
whole, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
Schedule 2.6(b) to the Horizon Disclosure Letter, Horizon has no Subsidiaries
which are not consolidated for accounting purposes. Except for liabilities and
obligations set forth or reflected in the Horizon SEC Documents or in Schedule
2.6(c) to the Horizon Disclosure Letter, as of the date hereof neither Horizon
nor any of the Horizon Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required
23
by GAAP to be set forth on a consolidated balance sheet of Horizon or in the
notes thereto and which, individually or in the aggregate, would have a
Horizon Material Adverse Effect.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Horizon SEC Documents or in Schedule 2.7 to the Horizon Disclosure Letter,
since the date of the most recent audited financial statements included in
Horizon SEC Documents (the "Horizon Financial Statement Date") and to the
date of this Agreement, Horizon and its Subsidiaries have conducted their
business only in the ordinary course (taking into account prior practices,
including the acquisition of properties and issuance of securities) and there
has not been (a) any material adverse change in the business, financial
condition or results of operations of Horizon and its Subsidiaries taken as a
whole (a "Horizon Material Adverse Change"), nor has there been any
occurrence or circumstance that with the passage of time would reasonably be
expected to result in a Horizon Material Adverse Change, (b) except for
regular quarterly distributions not in excess of $0.35 declared in each of
the first, second and third quarter of 1997 per Horizon Common Share or
Horizon OP Unit, respectively (or, with respect to the period commencing on
the date hereof and ending on the Closing Date, distributions permitted
pursuant to Section 5.10), in each case with customary record and payment
dates, any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the Horizon Common Shares, Horizon OP Units or Newco LP Common
Units, (c) any split, combination or reclassification of the Horizon Common
Shares, the Horizon OP Units or Newco LP Common Units or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of stock of Horizon or partnership interests in Horizon
Partnership or Newco LP or any issuance of an ownership interest in, any
Horizon Subsidiary, (d) any damage, destruction or loss, whether or not
covered by insurance, that has or would have a Horizon Material Adverse
Effect, (e) any change in accounting methods, principles or practices by
Horizon or any Horizon Subsidiary materially affecting its assets,
liabilities or business, except insofar as may have been disclosed in Horizon
SEC Documents or required by a change in GAAP, or (f) any amendment of any
employment, consulting, severance, retention or any other agreement between
Horizon and any current or former officer, director, employee or consultant
of Horizon.
2.8 LITIGATION. Except as disclosed in the Horizon SEC Documents or in
Schedule 2.8 to the Horizon Disclosure Letter, there is no suit, action or
proceeding pending (in which service of process has been received by an
employee of Horizon or a Horizon Subsidiary) or, to the Knowledge of Horizon
(as hereinafter defined), threatened in writing against or affecting Horizon
or any Horizon Subsidiary that, individually or in the aggregate, could
reasonably be expected to (i) have a Horizon Material Adverse Effect or (ii)
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of
any court or Governmental Entity or arbitrator outstanding against Horizon or
any of its Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future would have, any such effect. Notwithstanding the
foregoing, (y) Schedule 2.8 to the Horizon Disclosure Letter sets forth each
and every uninsured claim including but not limited to claims relating to the
employment of labor, such as claims relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity, payment and withholding of taxes, the Immigration Reform and
Control Act, the Worker Adjustment and Retraining Notification Act, and the
Drug-Free
24
Workplace Act pending or, to the Knowledge of Horizon, threatened
as of the date hereof which, if adversely determined, could reasonably be
expected to result in a Horizon Material Adverse Effect, in each case with a
brief summary of such claim or threatened claim, and (z) except as set forth
on Schedule 2.8 to the Horizon Disclosure Letter, no claim has been made
under any directors' and officers' liability insurance policy maintained at
any time by Horizon or any of the Horizon Subsidiaries.
2.9 PROPERTIES.
(a) Schedule 2.9(a) to the Horizon Disclosure Letter sets forth a
list of all real property outlet centers owned or leased by Horizon or one of
the Horizon Subsidiaries and sets forth the name of the owner or lessee, as
applicable, of each such property. Horizon or a Horizon Subsidiary owns fee
simple title or has a valid leasehold interest in all real property owned or
leased by Horizon or one of the Horizon Subsidiaries (the "Horizon
Properties"), which are all of the real estate properties owned or leased by
them. Other than as shown on the Horizon Title Insurance Policies (as
defined in Section 2.9(b)), each of the Horizon Properties is owned or
leased, as applicable, free and clear of liens, mortgages or deeds of trust,
claims against title, charges which are liens, security interests or other
encumbrances on title ("Encumbrances") except for those Encumbrances which,
individually or in the aggregate with any other condition or omission
resulting in a breach of the representations and warranties set forth in this
Section 2.9, could not be reasonably be expected to result in a Horizon
Material Adverse Effect. Except as set forth in Schedule 2.9(a) to the
Horizon Disclosure Letter, none of the Horizon Properties is subject to any
restriction on the sale or other disposition thereof or on the financing or
release of financing thereon except those which, individually or in the
aggregate with any other condition or omission resulting in a breach of the
representations and warranties set forth in this Section 2.9, could not be
reasonably be expected to result in a Horizon Material Adverse Effect. The
Horizon Properties are not subject to any rights of way, written agreements,
laws, ordinances and regulations affecting building use or occupancy, or
reservations of an interest in title (collectively, "Property Restrictions")
or Encumbrances, except for (i) Property Restrictions and Encumbrances set
forth in Schedule 2.9(a) to the Horizon Disclosure Letter, and (ii) Property
Restrictions for which the Horizon Properties comply or for which
non-compliance, individually or in the aggregate with any other condition or
omission resulting in a breach of the representations and warranties set
forth in this Section 2.9, could not be reasonably expected to result in a
Horizon Material Adverse Effect. Schedule 2.9(a) to the Horizon Disclosure
Letter lists each of the Horizon Properties which are under development as of
the date of this Agreement and describes the status of such development as of
the date hereof.
(b) Except as provided in Schedule 2.9(b) to the Horizon
Disclosure Letter, valid policies of title insurance (the "Horizon Title
Insurance Policies") have been issued insuring Horizon Partnership or the
other applicable Horizon Subsidiary's fee simple title or leasehold estate,
as the case may be, to the Horizon Properties owned by it. Such policies
are, at the date hereof, in full force and effect. Except as set forth in
Schedule 2.9(b) to the Horizon Disclosure Letter, no claim has been made
against any such policy. A true and correct copy of each Horizon Title
Insurance Policy has previously been delivered to Prime.
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(c) Except as provided in Schedule 2.9(c) to the Horizon
Disclosure Letter, Horizon has no Knowledge (i) that, any certificate, permit
or license from any governmental authority having jurisdiction over any of
the Horizon Properties or any agreement, easement or other right which is
necessary to permit the lawful use and operation of the buildings and
improvements on any of the Horizon Properties or which is necessary to permit
the lawful use and operation of all driveways, roads and other means of
egress and ingress to and from any of the Horizon Properties has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same which failure to obtain,
modification or cancellation would have a Horizon Material Adverse Effect, or
(ii) of any violation of any federal, state or municipal law, ordinance,
order, regulation or requirement affecting any of the Horizon Properties
issued by any governmental authority, or of any structural defects relating
to any Horizon Property, or of any Horizon Property whose building systems
are not in working order, or of any physical damage to any Horizon Property
which in any such case under this clause (ii) could, individually or in the
aggregate with any other condition or omission resulting in a breach of the
representations and warranties set forth in this Section 2.9, reasonably be
expected to result in a Horizon Material Adverse Effect.
(d) Neither Horizon nor any Horizon Subsidiary has received any
written or published notice to the effect that (i) any condemnation or
rezoning proceedings are pending or threatened with respect to any of the
Horizon Properties or (ii) any zoning, building or similar law, code,
ordinance, order or regulation is or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any
of the Horizon Properties or by the continued maintenance, operation or use
of the parking areas, except for such violations which, individually or in
the aggregate with any other condition or omission resulting in a breach of
the representations and warranties set forth in this Section 2.9, could not
be reasonably be expected to result in a Horizon Material Adverse Effect.
(e) Except as set forth in Schedule 2.9(e) to the Horizon
Disclosure Letter, all work required to be performed, payments required to be
made and actions required to be taken prior to the date hereof pursuant to
any agreement entered into with a governmental body or authority in
connection with a site approval, zoning reclassification or other similar
action relating to any Horizon Properties (e.g., local improvement district,
road improvement district, environmental mitigation) have been performed,
paid or taken, as the case may be, other than those where, individually or in
the aggregate with any other condition or omission resulting in a breach of
the representations and warranties set forth in this Section 2.9, the failure
would not have a Horizon Material Adverse Effect, and Horizon has no
Knowledge of any material work, payments or actions that are required after
the date hereof pursuant to such agreements, except as set forth in
development or operating budgets for such Horizon Properties delivered to
Prime and Prime Partnership prior to the date hereof.
(f) Horizon and each of the Horizon Subsidiaries have good and
sufficient title to all their personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the consolidated balance sheet of Horizon as of December 31, 1996,
except as since sold or otherwise disposed of in the ordinary course of
26
business), free and clear of all liens and encumbrances, except such as are
reflected on the consolidated balance sheet of Horizon as of December 31,
1996, and the notes thereto, and except for liens for current taxes not yet
due and payable, and liens or encumbrances which are normal to the business
of Horizon and the Horizon Subsidiaries and are not, in the aggregate,
material in relation to the assets of Horizon on a consolidated basis and
except also for such imperfections of title, easement and encumbrances, if
any, as do not materially interfere with the present use of the properties
subject thereto or affected thereby, or otherwise materially impair the
consolidated business operations of Horizon.
2.10 LEASES.
(a) The rent roll for the Horizon Properties as of January 1, 1998
previously delivered by Horizon to Prime is correct and complete in all
material respects as of the date thereof.
(b) Except as provided in Schedule 2.10(b) to the Horizon
Disclosure Letter, (i) each of the leases and tenancies for all or any
portion of the Horizon Properties (the "Horizon Leases") is valid and
subsisting and in full force and effect except where the failure thereof,
individually with respect to any Horizon Lease or in the aggregate with more
than one Horizon Leases, could not be reasonably be expected to result in a
Horizon Material Adverse Effect, and has not been amended, modified or
supplemented since the date of the rent roll described in Section 2.10(a);
and (ii) neither Horizon nor any of the Horizon Subsidiaries has received any
written notice from any tenant of any intention to vacate which vacation
would have a Horizon Material Adverse Effect. Except as provided in Schedule
2.10(b) to the Horizon Disclosure Letter neither Horizon nor any of the
Horizon Subsidiaries has collected payment of rent (other than security
deposits) accruing for a period which is more than one month beyond the date
of collection.
(c) Horizon has previously delivered or made available to Prime a
true and correct copy of all Horizon Leases.
(d) Except as shown in Schedule 2.10(d) to the Horizon Disclosure
Letter, as of the last day of the calendar month immediately preceding the
date hereof, none of the lessees of Horizon Properties set forth on Schedule
2.10(d) to the Horizon Disclosure Letter has asserted any claim of which
Horizon or any of the Horizon Subsidiaries has received written notice which
would materially affect the collection of rent from such tenant and neither
Horizon nor any of the Horizon Subsidiaries has received written notice of
any material default or breach on the part of Horizon or any of the Horizon
Subsidiaries under any of the Horizon Leases with such a tenant which has not
been cured.
(e) Schedule 2.10(e) to the Horizon Disclosure Letter sets forth a
complete and correct list as of February 1, 1998, of all written commitments
made by Horizon or any of the Horizon Subsidiaries to lease any of the
Horizon Properties which has not yet been reduced to a written lease, and
provides with respect to each such commitment the principal terms of such
commitment, including, if applicable, (i) the space to be occupied, (ii) the
name of the tenant, (iii) the length of the original term thereof and any
right or option to renew or extend the lease term, (iv)
27
the monthly minimum rental, (v) rental escalations, (vi) the terms with
respect to percentage rent or other overage rent, (vii) any provisions for
tenant allowances and (viii) the right of any third-party broker to any
outstanding brokerage or other commission incident thereto. Horizon has
previously delivered or made available to Prime a true and correct copy of
each such commitment.
(f) Any material leases pursuant to which Horizon or any Horizon
Subsidiary, as lessee, leases real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any material existing default or any event
which with notice or lapse of time or both would constitute such a default,
nor do any of such leases contain any provision which would preclude the
Surviving Company, Prime Partnership or Horizon Partnership, as applicable,
from occupying and using the leased premises for the same purposes and upon
substantially the same rental and other terms as are applicable to the
occupation and use by Horizon and the Horizon Subsidiaries, or which would
have a Horizon Material Adverse Effect.
2.11 RENTS. The rents and other income and charges set forth in the
rent roll described in Section 2.10(a) are the actual rents, income and
charges presently being charged by Horizon or the Subsidiaries, as
applicable, under the Horizon Leases as of January 1, 1998. Other than set
forth on Schedule 2.11 to the Horizon Disclosure Letter, no tenant under any
of the Horizon Leases is entitled to any purchase option. None of the
Horizon Leases and none of the rents or other amounts payable thereunder have
been assigned, pledged or encumbered, other than to lenders, as described on
Schedule 2.11 to the Horizon Disclosure Letter. No brokerage or leasing
commission or other compensation will be due or payable to any person, firm,
corporation or other entity with respect to or on account of any of the
Horizon Leases or any extensions or renewals thereof as of the Prime/Horizon
Merger Effective Time except in the ordinary course of business consistent
with past practice, except as set forth on Schedule 2.11 to the Horizon
Disclosure Letter.
2.12 ENVIRONMENTAL MATTERS. Horizon has delivered to Prime a true and
complete copy of the environmental reports listed on Schedule 2.12 of the
Horizon Disclosure Letter (the "Horizon Environmental Reports"). To
Horizon's Knowledge, the Horizon Environmental Reports constitute all final
environmental reports (including without limitation all final versions of
environmental investigations and testing or analysis made by or on behalf of
Horizon or any of the Horizon Subsidiaries) with respect to the Horizon
Properties in the possession of Horizon or any Horizon Subsidiary. With
respect to each Horizon Property, since the day of the most recent
Environmental Report relating to such Horizon Property, except for any
condition that individually or in the aggregate would not be reasonably
likely to have a Horizon Material Adverse Effect, (a) no Hazardous Substances
(as defined below) have been used, stored, manufactured, treated, processed
or transported to or from any such Horizon Property except as necessary to
the conduct of business and in compliance with Environmental Laws (as defined
below); (b) there have been no spills, releases, discharges or disposal of
Hazardous Substances to have occurred or be presently occurring on or from
such Horizon Property; (c) such Horizon Property and the business conducted
thereon are not in violation of Environmental Laws; (d) Horizon and its
Subsidiaries have not received and do not reasonably expect to receive any
notice of potential responsibility, letter of inquiry or notice of alleged
liability from any Person regarding such Horizon Property or the business
conducted
28
thereon. For the purposes of this Paragraph 2.12 only, "Horizon Properties"
shall include property currently or formerly owned, operated or leased by
Horizon or its Subsidiaries.
"Environmental Laws" shall mean any applicable statute, code, enactment,
ordinance, rule, regulation, permit, consent, approval, authorization,
judgment, order, common law rule (including without limitation the common law
respecting nuisance and tortious liability), decree, injunction, or other
requirement having the force and effect of law, whether local, state,
territorial or national, at any time in force or effect relating to:
(a) emissions, discharges, spills, releases or threatened releases
of Hazardous Substances into ambient air, surface water, groundwater,
watercourses, publicly or privately owned treatment works, drains, sewer
systems, wetlands, septic systems or onto land;
(b) the use, treatment, storage, disposal, handling,
manufacturing, transportation or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or
(d) otherwise relating to pollution or the protection of human
health or the environment.
"Hazardous Substances" shall mean all substances, wastes, pollutants,
contaminants and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any law,
by any local, state, territorial or federal governmental authority, or with
respect to which such a governmental authority otherwise requires
environmental investigation, monitoring, reporting, or remediation; including
but not limited to,
(a) all substances, wastes, pollutants, contaminants and materials
regulated, or defined or designated as hazardous, extremely or imminently
hazardous, dangerous or toxic, under the following federal statutes and their
state counterparts, as well as their statutes' implementing regulations: the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. section 9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
section 2601 et seq., the Clean Water Act, 33 U.S.C. section 1251 et seq.,
the Clean Air Act, 42 U.S.C. section 7401 et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. section 11011 et seq., the Safe
Drinking Water Act, 33 U.S.C. section 300f et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. section 136 et seq., the Atomic
Energy Act, 42 U.S.C. section 22011 et seq., and the Hazardous Materials
Transportation Act, 42 U.S.C. section 1801 et seq.;
(b) petroleum and petroleum products including crude oil and any
fractions thereof;
(c) natural gas, synthetic gas, and any mixtures thereof; and
29
(d) radon, radioactive substances, asbestos, urea formaldehyde,
polychlorinated biphenyls and electromagnetic field radiation.
2.13 RELATED PARTY TRANSACTIONS. Except as discussed in the Horizon SEC
Documents, set forth in Schedule 2.13 to the Horizon Disclosure Letter is a list
of all material arrangements, agreements and contracts entered into by Horizon
or any of the Horizon Subsidiaries under which there are continuing obligations
on the part of Horizon or any Horizon Subsidiary that will continue on and after
the Closing Date with (a) any investment banker or financial advisor, (b) any
person who is a current or former officer, director or Affiliate (as defined
below) of Horizon or any of its Subsidiaries or any entity of which any of the
foregoing is an Affiliate except arrangements available to employees generally
or (c) any person who acquired Horizon Common Shares or Horizon OP Units in a
private placement. Such documents, copies of all of which have previously been
delivered or made available to Prime, are listed in Schedule 2.13 to the Horizon
Disclosure Letter. As used in this Agreement, the term "Affiliate" shall have
the same meaning as such term is defined in Rule 405 promulgated under the
Securities Act.
2.14 EMPLOYEE BENEFITS. As used herein, the term "Employee Plan" includes
any pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, tuition reimbursement, severance pay, or
other employee benefit plan, trust, agreement, contract, agreement, policy or
commitment (including, without limitation, any pension plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA") ("Pension Plan"),
and any welfare plan as defined in Section 3(1) of ERISA ("Welfare Plan")),
whether any of the foregoing is funded, insured or self-funded, written or oral,
(i) sponsored or maintained by Horizon or its Subsidiaries (each a "Controlled
Group Member") and covering any Controlled Group Member's active or former
employees (or their beneficiaries), (ii) to which any Controlled Group Member is
a party or by which any Controlled Group Member (or any of the rights,
properties or assets thereof) is bound or (iii) with respect to which any
current Controlled Group Member may otherwise have any material liability
(whether or not such Controlled Group Member still maintains such Employee
Plan). Each Employee Plan is listed on Schedule 2.14 to the Horizon Disclosure
Letter. With respect to the Employee Plans:
(a) Except as disclosed in Schedule 2.14(a) to the Horizon Disclosure
Letter, no Controlled Group Member has any continuing liability under any
Welfare Plan which provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment, except as may be required by Section 4980B of the
Code or Section 601 (et seq.) of ERISA, or under any applicable state law, and
at the expense of the participant or the beneficiary of the participant.
(b) Each Employee Plan complies with the applicable requirements of
ERISA and any other applicable law governing such Employee Plan, and, to the
best Knowledge of Horizon, each Employee Plan has at all times been properly
administered in accordance with all such requirements of law, and in accordance
with its terms and the terms of any applicable collective bargaining agreement
to the extent consistent with all such requirements of law, except when the
30
failure to comply or improper administration could not reasonably be expected to
result in a Material Adverse Effect. Each Pension Plan which is intended to be
qualified is qualified under Section 401(a) of the Code, has received a
favorable determination letter from the Internal Revenue Service ("IRS") stating
that such plan meets the requirements of Section 401(a) of the Code and that the
trust associated with such plan is tax-exempt under Section 501(a) of the Code
and, to the best Knowledge of Horizon, no event has occurred which would
jeopardize the qualified status of any such plan or the tax exempt status of any
such trust under Sections 401(a) and Section 501(a) of the Code, respectively.
No lawsuits, claims (other than routine claims for benefits) or complaints to,
or by, any person or governmental entity have been filed, are pending, to the
best Knowledge of Horizon, threatened with respect to any Employee Plan and, to
the best Knowledge of Horizon, there is no fact or contemplated event which
would be expected to give rise to any such lawsuit, claim (other than routine
claims for benefits) or complaint with respect to any Pension Plan. Without
limiting the foregoing, the following are true with respect to each Employee
Plan:
(i) all Controlled Group Members have complied with the
reporting and disclosure requirements of ERISA, the Code, or both,
with respect to each Employee Plan and no Controlled Group Member has
incurred any material liability in connection with such reporting or
disclosure except when the failure to comply or when such liability
could not reasonably be expected to result in a Material Adverse
Effect;
(ii) all contributions and payments with respect to Employee
Plans that are required to be made by a Controlled Group Member with
respect to periods ending on or before the Closing Date (including
periods from the first day of the current plan or policy year to the
Closing Date) have been, or will be, made or accrued before the
Closing Date in accordance with the appropriate plan document,
actuarial report, collective bargaining agreements or insurance
contracts or arrangements or as otherwise required by ERISA or the
Code; and
(iii) with respect to each such Employee Plan, to the extent
applicable, Horizon has delivered to or has made available to Prime
true and complete copies of (A) plan documents, or any and all other
documents that establish the existence of the plan, trust,
arrangement, contract, policy or commitment and all amendments
thereto, (B) the most recent determination letter, if any, received
from the IRS, (C) the three most recent Form 5500 Annual Reports (and
all schedules and reports relating thereto) and actuarial reports and
(D) all related trust agreements, insurance contract or other funding
agreements that implement each such Employee Plan.
(c) With respect to each Employee Plan, to the best Knowledge of
Horizon, there has not occurred, and no person or entity is contractually bound
to enter into, any "prohibited transaction" within the meaning of Section
4975(c) of the Code or Section 406 of ERISA, which transaction is not exempt
under Section 4975(d) of the Code or Section 408 of ERISA and which could
subject Horizon or any Controlled Group Member to material liability.
31
(d) Except as disclosed in Schedule 2.14(d) to the Horizon Disclosure
Letter, no Controlled Group Member has maintained or been obligated to
contribute to any Employee Plan subject to Code Section 412 or Section 302 or
Title IV of ERISA. No Employee Plan subject to Code Section 412 or Section 302
or Title IV of ERISA has been terminated.
(e) With respect to each pension plan maintained by any Controlled
Group Member, such plans provide the plan sponsor the authority to amend or
terminate the Plan at any time, subject to applicable requirements of ERISA and
the Code.
2.15 LABOR MATTERS. Neither Horizon nor any of the Horizon Subsidiaries
is a party to, or bound by, any collective bargaining agreement, contract or
other agreement or understanding with a labor union or other labor
organization, nor has Horizon or any of the Horizon Subsidiaries agreed that
any unit of their employees is appropriate for collective bargaining. No
union or other labor organization has been certified as bargaining
representative for any of Horizon's employees. To the Knowledge of Horizon
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of Horizon or any of the Horizon Subsidiaries. During the past
five (5) years, Horizon has not experienced any strikes, work stoppages, work
slowdowns, grievances or arbitration proceedings, unfair labor practice
charges or complaints or other significant labor difficulties of any nature,
nor have any such labor difficulties been threatened. The employee handbook
of Horizon was previously delivered in its entirety to Prime and fairly and
accurately summarizes all material employee policies, including but not
limited to policies concerning vacations, payroll practices, leaves of
absence, affirmative action, equal employment opportunity, and policies
relating to employee counseling, discipline and discharge.
2.16 TAXES.
(a) Each of Horizon and the Horizon Subsidiaries (A) has filed all
tax returns and reports required to be filed by it (after giving effect to
any filing extension properly granted by a Governmental Entity having
authority to do so) and all such returns and reports are accurate and
complete in all material respects, and (B) has paid (or Horizon has paid on
its behalf) all Taxes (as defined below) shown on such returns and reports as
required to be paid by it, except those where the failure to file such tax
returns and reports or pay such Taxes would not have a Horizon Material
Adverse Effect. The most recent audited financial statements contained in the
Horizon SEC Documents reflect an adequate reserve for all material Taxes
payable by Horizon and the Horizon Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. Since the
Horizon Financial Statement Date, Horizon has incurred no liability for Taxes
under Sections 857(b), 860(c) or 4981 of the Code, including without
limitation any tax arising from a prohibited transaction described in Section
857(b)(6) of the Code, and neither Horizon nor any Horizon Subsidiary has
incurred any material liability for Taxes other than in the ordinary course
of business. No event has occurred, and no condition or circumstance exists,
which presents a material risk that any material tax described in the
preceding sentence will be imposed upon Horizon. To the Knowledge of Horizon,
no deficiencies for any Taxes have been proposed, asserted or assessed
against Horizon or any of the Horizon Subsidiaries, and no requests for
waivers of the
32
time to assess any such Taxes are pending. As used in this Agreement, "Taxes"
shall include all federal, state, local and foreign income, property, sales,
franchise, employment, excise and other taxes, tariffs or governmental
charges of any nature whatsoever, together with penalties, interest or
additions to tax with respect thereto.
(b) Horizon (i) for each of its taxable years ending after
December 31, 1993, and before the Closing Date, has been subject to taxation
as a real estate investment trust (a "REIT") within the meaning of Section
856 of the Code and has satisfied all requirements to qualify as a REIT for
such years, (ii) has operated since the end of its latest taxable year,
ending before the Closing Date, to the date of this representation, and will
continue to operate, in such a manner as to qualify as a REIT for each
taxable year ending on or immediately following the Closing Date, and (iii)
has not taken or omitted to take any action which would reasonably be
expected to result in a challenge to its status as a REIT and, to Horizon's
Knowledge, no such challenge is pending or threatened. Each Horizon
Subsidiary which has been formed as a partnership, joint venture or limited
liability company has been since its formation and continues to be for
federal income tax purposes as a partnership and not a corporation or an
association or publicly traded partnership taxable as a corporation and has
not since the later of its formation or the acquisition by Horizon of a
direct or indirect interest therein, owned any assets (including, without
limitation, securities) that would cause Horizon to violate Section 856(c)(5)
of the Code. Except as provided in Schedule 2.16 hereto, neither Horizon nor
any Horizon Subsidiary holds any asset (x) the disposition of which would be
subject to rules similar to Section 1374 of the Code as a result of a notice
under IRS Notice 88-19 or (y) which is subject to a consent filed pursuant to
Section 341(f) of the Code and the regulations thereunder.
2.17 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS. Schedule 2.17 to
the Horizon Disclosure Letter contains a true and complete list of all
material arrangements, agreements or plans pursuant to which cash and
non-cash payments (other than consideration issued pursuant to any of the
Mergers) which will become payable (and the maximum aggregate amount which
may be payable thereunder) to each employee, officer or director of Horizon
or any Horizon Subsidiary as a result of the Mergers or a termination of
service subsequent to the consummation of the Mergers, other than the Merger
Consideration. Except as described in Schedule 2.17 to the Horizon Disclosure
Letter, or as otherwise provided for in this Agreement, there is no
employment or severance contract, or other agreement requiring payments,
cancellation of indebtedness or other obligation to be made on a change of
control or otherwise as a result of the consummation of any of the
transactions contemplated by this Agreement or as a result of a termination
of service subsequent to the consummation of any of the transactions
contemplated by this Agreement, with respect to any employee, officer or
director of Horizon or any Horizon Subsidiary.
2.18 BROKER; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than Xxxxxx Brothers, the
fees and expenses of which are described in the engagement letter dated
September 25, 1997, between Xxxxxx Brothers and Horizon, a true, correct and
complete copy of which has previously been given to Prime, is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions
33
contemplated hereby based upon arrangements made by or on behalf of Horizon
or any Horizon Subsidiary.
2.19 COMPLIANCE WITH LAWS. Horizon and its Subsidiaries hold all
permits, licenses, variances, exceptions, orders, registrations and approvals
of all Governmental Entities which are required for the operation of the
business of Horizon and its Subsidiaries (the "Horizon Permits"), except
where the failure to have any such Horizon Permits individually or in the
aggregate would not have a Horizon Material Adverse Effect. Since November
12, 1992, neither Horizon nor any of the Horizon Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable to its
business, properties or operations (except any Environmental Law, as to which
the representation in Section 2.12 shall apply), except to the extent that
such violation or failure would not, individually or in the aggregate, have a
Horizon Material Adverse Effect.
2.20 CONTRACTS; DEBT INSTRUMENTS.
(a) To the Knowledge of Horizon, except as disclosed in the
Horizon SEC Documents or in Schedule 2.20(a) or (b) to the Horizon Disclosure
Letter, there is no contract or agreement that purports to limit in any
material respect the names or the geographic location in which Horizon and
its Subsidiaries conduct or may conduct their business. Neither Horizon nor
any Horizon Subsidiary has received a written notice that Horizon or any
Horizon Subsidiary is in violation of or in default under (nor to the
Knowledge of Horizon does there exist any condition which upon the passage of
time or the giving of notice or both would cause such a violation of or
default under) any material loan or credit agreement, note, bond, mortgage,
indenture, concession or any other similar type of material contract,
agreement, arrangement or understanding, to which it is a party or by which
it or any of its properties or assets is bound, nor to the Knowledge of
Horizon does such a violation or default exist, except to the extent that
such violation or default, individually or in the aggregate, would not have a
Horizon Material Adverse Effect.
(b) Except for any of the following expressly identified in
Horizon SEC Documents, Schedule 2.20(b) to the Horizon Disclosure Letter sets
forth a list of each material loan or credit agreement, note, bond, mortgage,
indenture and any other agreement or instrument pursuant to which any
Indebtedness (as defined below) of Horizon or any of the Horizon Subsidiaries
is outstanding or may be incurred. For purposes of this Section 2.20,
"Indebtedness" shall mean (i) indebtedness for borrowed money, whether
secured or unsecured, (ii) obligations under conditional sale or other title
retention agreements relating to property purchased by such person, (iii)
capitalized lease obligations, (iv) obligations under interest rate cap,
swap, collar or similar transaction or currency hedging transactions (valued
at the termination value thereof) and (v) guarantees of any such indebtedness
of any other person.
(c) To the extent not set forth in response to the requirements of
Section 2.20(b), Schedule 2.20(c) to the Horizon Disclosure Letter sets forth
each interest rate cap, interest rate collar, interest rate swap, currency
hedging transaction, and any other agreement relating to a similar
transaction to which Horizon or any Horizon Subsidiary is a party or an
obligor with respect thereto.
34
(d) Except as set forth in Schedule 2.20(d) to the Horizon
Disclosure Letter, neither Horizon nor any of the Horizon Subsidiaries is a
party to any agreement which would restrict any of them from prepaying any of
their Indebtedness without penalty or premium at any time or which requires
any of them to maintain any amount of Indebtedness with respect to any of the
Horizon Properties.
(e) Except as set forth in Schedule 2.20(e) to the Horizon
Disclosure Letter, neither Horizon nor any Horizon Subsidiary is a party to
any agreement relating to the management of any Horizon Property by any
Person other than a Horizon Subsidiary.
(f) Neither Horizon nor any of the Horizon Subsidiaries is a party
to any agreement pursuant to which Horizon or any Horizon Subsidiary manages
or provides services with respect to any real properties other than Horizon
Properties, except for the agreements described in Schedule 2.20(f) to the
Horizon Disclosure Letter (the "Outside Property Management Agreements").
(g) Except for budgeted construction disclosed in the capital
budget attached as Schedule 2.20(g) to the Horizon Disclosure Letter,
Schedule 2.20(g) to the Horizon Disclosure Letter lists all material
agreements entered into by Horizon or any of the Horizon Subsidiaries
relating to the development or construction of, or additions or expansions
to, any Horizon Properties (or any properties with respect to which Horizon
has executed as of the date of this Agreement a purchase agreement or other
similar agreement) which are currently in effect and under which Horizon or
any of the Horizon Subsidiaries currently has, or expects to incur, an
obligation in excess of $250,000. True, correct and complete copies of such
agreements have previously been delivered or made available to Prime.
(h) Schedule 2.20(h) to the Horizon Disclosure Letter lists all
agreements entered into by Horizon or any Horizon Subsidiary providing for
the sale of, or option to sell, any Horizon Properties or the purchase of, or
option to purchase, by Horizon or any Horizon Subsidiary, on the one hand, or
the other party thereto, on the other hand, any real estate which are
currently in effect.
(i) Except as set forth in Schedule 2.20(i) to the Horizon
Disclosure Letter, neither Horizon nor any Horizon Subsidiary has any
material continuing contractual liability (A) for indemnification or
otherwise under any agreement relating to the sale of real estate previously
owned, whether directly or indirectly, by Horizon or any Horizon Subsidiary
or (B) to pay any additional purchase price for any of the Horizon Properties.
(j) Except as set forth in Schedule 2.20(j) to the Horizon
Disclosure Letter, neither Horizon nor any Horizon Subsidiary has entered
into or is subject, directly or indirectly, to any "Tax Protection
Agreements." As used herein, a Tax Protection Agreement is an agreement, oral
or written, (A) that has as one of its purposes to permit a person or entity
to take the position that such person or entity could defer federal taxable
income that otherwise might have been recognized upon a transfer of property
to the Horizon Partnership or any other Horizon Subsidiary that is treated as
a partnership for federal income tax purposes, and (B) that (i) prohibits or
restricts in any manner
35
the disposition of any assets of Horizon or any Horizon Subsidiary,
(including, without limitation, requiring Horizon or any Horizon Subsidiary
to indemnify any person for any tax liabilities resulting from any such
disposition), (ii) requires that Horizon or any Horizon Subsidiary maintain,
or put in place, or replace, indebtedness, whether or not secured by one or
more of the Horizon Properties, or (iii) requires that Horizon or any Horizon
Subsidiary offer to any person or entity at any time the opportunity to
guarantee or otherwise assume, directly or indirectly, the risk of loss for
federal income tax purposes for indebtedness or other liabilities of Horizon
or any Horizon Subsidiary.
(k) Except as set forth in Schedule 2.20(k) to the Horizon
Disclosure Letter, there are no material outstanding contractual obligations
of Horizon or any Horizon Subsidiary to provide any funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in, any
Horizon Subsidiary or any other person.
2.21 OPINION OF FINANCIAL ADVISOR. Horizon has received the written
opinion of Xxxxxx Brothers or an affiliate thereof, satisfactory to Horizon,
a signed version which has been provided to Prime, to the effect that the
proposed Prime/Horizon Merger Consideration and Partnership Merger
Consideration to be received by the holders of Horizon Common Shares and
Horizon OP Units, respectively, pursuant to the Mergers is fair to such
holders from a financial point of view.
2.22 STATE TAKEOVER STATUTES. Horizon has taken all action necessary to
exempt the transactions contemplated by this Agreement between Prime and
Horizon and its Affiliates from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute
or similar statute enacted under the state or federal laws of the United
States or similar statute or regulation (a "Takeover Statute").
2.23 INVESTMENT COMPANY ACT OF 1940. Neither Horizon nor any of the
Horizon Subsidiaries is, or at the Partnership Merger Effective Time will be,
required to be registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
2.24 HORIZON NOT AN INTERESTED STOCKHOLDER. Horizon is not an
"interested stockholder" of Prime pursuant to the Maryland "Business
Combination" statute at Sections 3-601 et seq. of the MGCL.
2.25 VOTE REQUIRED. The affirmative vote of at least two-thirds of the
outstanding Horizon Common Shares is the only vote of the holders of any
class or series of Horizon's capital stock necessary (under applicable law or
otherwise) to approve this Agreement and the transactions contemplated
hereby. The affirmative vote of the holders of a majority of the outstanding
Newco LP Common Units and Horizon OP Units, held by the limited partners of
Newco LP and Horizon Partnership, respectively, is the only vote by the
holders of any class or series of partnership interest therein necessary
(under applicable law or otherwise) to approve this Agreement and the
translations contemplated hereby.
2.26 TRADEMARKS, PATENTS AND COPYRIGHTS. Except as set forth in
Schedule 2.26 to the Horizon Disclosure Letter, or to the extent the
inaccuracy of any of the following (or the
36
circumstances giving rise to such inaccuracy) individually or in the
aggregate would not have a Horizon Material Adverse Effect on Horizon and
each of its Subsidiaries owns or possesses adequate licenses or other legal
rights to use all patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, trade secrets,
applications for trademarks and for service marks, know-how and other
proprietary rights and information used or held for use in connection with
the business of Horizon and its Subsidiaries as currently conducted or as
contemplated to be conducted, and Horizon of any assertion or claim
challenging the validity of any of the foregoing. The conduct of the
business of Horizon and the Horizon Subsidiaries as currently conducted and
as contemplated to be conducted did not, does not and will not infringe in
any way any patent, patent right, license, trademark, trademark right, trade
name, trade name right, service xxxx, or copyright of any third party that,
individually or in the aggregate, could have a Horizon Material Adverse
Effect. To Horizon's Knowledge, there are no infringements of any
proprietary rights owned by or licensed by or to Horizon or any Horizon
Subsidiary that individually or in the aggregate could have a Horizon
Material Adverse Effect.
2.27 INSURANCE. Except as set forth on Schedule 2.27 to the Horizon
Disclosure Letter, each of Horizon and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary
for companies conducting the business as conducted by Horizon and its
Subsidiaries during such time period. Except as set forth on Schedule 2.27
to the Horizon Disclosure Letter, neither Horizon nor its Subsidiaries has
received any notice of cancellation or termination with respect to any
material insurance policy of Horizon or its Subsidiaries. The insurance
policies of Horizon and each of its Subsidiaries are valid and enforceable
policies in all material respects.
2.28 DEFINITION OF KNOWLEDGE OF HORIZON. As used in this Agreement, the
phrase "Knowledge of Horizon" (or words of similar import) means the actual
knowledge of the officers and directors of Horizon and Horizon Partnership
identified in Schedule 2.28 to the Horizon Disclosure Letter.
2.29 C&C/XXXXXXX AGREEMENTS. Neither Horizon nor Horizon Partnership is
in default of any term or provision of any C&C/Xxxxxxx Agreement to which it
is a party.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PRIME
Prime and Prime Partnership represent and warrant to Horizon and
Horizon Partnership as follows:
3.1 ORGANIZATION, STANDING AND POWER OF PRIME. Prime is a corporation
duly organized, validly existing and in good standing under the laws of
Maryland and has all requisite power and authority to own, operate, lease and
encumber its properties and carry on its business as now being conducted.
Prime is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its
37
properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, assets, financial condition or results of
operations of Prime and the Subsidiaries of Prime (collectively, "Prime
Subsidiaries"), taken as a whole (a "Prime Material Adverse Effect"). Prime
has delivered to Horizon complete and correct copies of the Prime Articles of
Incorporation ("Prime Articles of Incorporation") and the Prime Bylaws
("Prime Bylaws"), as amended or supplemented to the date of this Agreement.
3.2 PRIME SUBSIDIARIES.
(a) Schedule 3.2(a) to the letter of even date herewith signed by
each of the chief executive officer and chief financial officer of Prime and
delivered to Horizon prior to the execution hereof (the "Prime Disclosure
Letter") sets forth (i) each Prime Subsidiary, (ii) the ownership interest
therein of Prime, (iii) if not wholly owned by Prime, the identity and
ownership interest of each of the other owners of such Prime Subsidiary and
(iv) each factory outlet center and other commercial property owned by such
Subsidiary.
(b) Except as set forth in Schedule 3.2(b) to the Prime Disclosure
Letter, (i) all the outstanding shares of capital stock of each Prime
Subsidiary that is a corporation have been duly authorized, validly issued
and are (A) fully paid and nonassessable and not subject to preemptive
rights, (B) owned by Prime or by another Prime Subsidiary and (C) owned free
and clear of all Liens and (ii) all equity interests in each Prime Subsidiary
that is a partnership, joint venture, limited liability company or trust
which are owned by Prime, by another Prime Subsidiary or by Prime and another
Prime Subsidiary are owned free and clear of all Liens. Each Prime Subsidiary
that is a corporation is duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite corporate power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted, and each
Prime Subsidiary that is a partnership, limited liability company or trust is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has the requisite power and authority to
own, operate, lease and encumber its properties and carry on its business as
now being conducted. Each Prime Subsidiary is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a Prime Material Adverse Effect. Complete and correct copies
of the articles of incorporation, bylaws, organization documents and
partnership, joint venture and operating agreements of each Prime Subsidiary,
as amended to the date of this Agreement, have been previously delivered or
made available to Horizon. No effective amendment has been made to the Prime
Partnership Agreement.
3.3 CAPITAL STRUCTURE.
(a) The authorized shares of capital stock of Prime consist of (i)
75,000,000 shares of common stock, $0.01 par value (the "Prime Common
Shares"), 27,294,951 of which are issued and outstanding as of the date of
this Merger Agreement, (ii) 24,315,000 shares of preferred
38
stock, $0.01 par value (the "Prime Preferred Shares"), (x) 2,300,000 of which
are issued and outstanding 10.5% Series A Senior Cumulative Preferred Stock
(the "Prime Series A Preferred Shares"), as of the date of this Agreement,
(y) 2,981,800 of which are issued and outstanding 8.5% Series B Cumulative
Participating Convertible Preferred Stock, $.01 par value per share (the
"Prime Series B Preferred Shares"), as of the date of this Agreement, and (z)
727,273 shares of Series C Cumulative Convertible Redeemable Preferred Stock
(the "Prime Series C Preferred Shares"), as of the date of this Agreement and
(iii) 51,000,000 shares of Excess Stock, par value $0.01 per share, none of
which are issued or outstanding as of the date of this Agreement.
(b) Set forth in Schedule 3.3(b) to the Prime Disclosure Letter is
a true and complete list of the following: (i) each qualified or nonqualified
option to purchase Prime's shares of capital stock granted under Prime's 1994
Stock Incentive Plan and 1995 Stock Incentive Plan or any other formal or
informal arrangement (collectively, the "Prime Stock Options"); and (ii) all
other warrants or other rights to acquire Prime's shares of capital stock,
all limited share appreciation rights, phantom shares, dividend equivalents,
performance units and performance shares which are outstanding on the date of
this Agreement. On the date of this Agreement, except as set forth in this
Section 3.3 or in Schedule 3.3(b) to the Prime Disclosure Letter, no shares
of Prime's capital stock were outstanding or reserved for issuance (except
for Prime Common Shares reserved for issuance upon exchange of Prime OP Units
(as defined below) or conversion of Prime Preferred Shares).
(c) All outstanding shares of capital stock of Prime are duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other
indebtedness of Prime having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which shareholders of Prime may vote.
(d) Except (i) as set forth in this Section 3.3 or in Schedule
3.3(d) to the Prime Disclosure Letter and (ii) Prime OP Units (as defined
below) or Prime Preferred Shares, which may be exchanged or converted, as the
case may be, for Prime Common Shares in accordance with the Prime Partnership
Agreement, as of the date of this Agreement, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Prime or any Prime
Subsidiary is a party or by which such entity is bound, obligating Prime or
any Prime Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock voting securities or
other ownership interests of Prime or any Prime Subsidiary or obligating
Prime or any Prime Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking (other than to Prime or a Prime Subsidiary).
(e) As of the date hereof, (i) 35,800,423 Prime Common Units are
duly and validly issued of which 27,294,951 are owned by Prime, (ii)
2,300,000 preferred units of Prime Partnership (each, a "Prime Series A
Preferred Unit") are duly and validly issued all of which are owned by Prime,
(iii) 2,981,800 Prime Series B Preferred Units are duly and validly issued
all of which are owned by Prime and (iv) 727,273 Series C Preferred units of
Prime Partnership (each, a "Prime Series C Preferred Unit" and together with
the Prime Common Units, the Prime Series A
39
Preferred Units and the Prime Series B Preferred Units, the "Prime OP Units")
are duly and validly issued none of which are owned by Prime or Prime
Subsidiaries. Schedule 3.3(e) to the Prime Disclosure Letter sets forth the
name of each holder of Prime OP Units and the number of Prime OP Units owned
by each such holder as of the date of this Agreement. Except as set forth in
this Agreement, the Prime OP Units are subject to no restrictions except as
set forth in the Prime Partnership Agreement. Prime Partnership has not
issued or granted and is not a party to any outstanding commitments of any
kind relating to, or any presently effective agreements or understandings
with respect to, interests in Prime Partnership, whether issued or unissued,
or securities convertible or exchangeable into interests in Prime Partnership
except as set forth in Schedule 3.3(e) to the Prime Disclosure Letter.
(f) All dividends on the Prime/Horizon Merger Consideration and
all distributions on the Partnership Merger Consideration which have been
declared prior to the date of this Agreement have been paid in full, except
that the dividends payable on the Prime/Horizon Merger Consideration (along
with the corresponding distributions payable on the Partnership Merger
Consideration) which were declared on January 14, 1998 and are payable on
February 17, 1998 have not yet been paid.
(g) The Partnership Merger Consideration to be issued by Prime
Partnership pursuant to this Agreement has been duly authorized, and upon
issuance will be duly and validly issued.
(h) Set forth on Schedule 3.3(h) to the Prime Disclosure Letter is
a list of each Registration Rights Agreement pursuant to which Prime or any
of the Prime Subsidiaries is obligated to register any securities.
3.4 OTHER INTERESTS. Except for interests in the Prime Subsidiaries,
neither Prime nor any of its Subsidiaries owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation,
partnership, joint venture, business, trust or other entity (other than
investments in short-term investment securities). With respect to such other
interests, Prime or Prime Partnership is a partner or shareholder in good
standing, and owns such interests free and clear of all Liens.
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Prime has the requisite power and authority to enter into this
Agreement and, subject to the requisite shareholder approval of the Mergers
and the other transactions contemplated hereby requiring shareholder approval
(the "Prime Shareholder Approvals" and, together with the Horizon Shareholder
Approvals, the "Shareholder Approvals"), to consummate the transactions
contemplated by this Agreement to which Prime is a party. The execution and
delivery of this Agreement by Prime and the consummation by Prime of the
transactions contemplated by this Agreement to which Prime is a party have
been duly authorized by all necessary action on the part of Prime, except for
and subject to the Prime Shareholder Approvals and the requisite approval, if
any is required, of the partners of Prime Partnership. This Agreement has
been duly executed and delivered by Prime and constitutes a valid and binding
obligation of Prime, enforceable against
40
Prime in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
(b) Prime Partnership has the requisite partnership power and,
subject to the requisite Prime Partner Approvals (as defined in section
5.1(g)), if any, authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement to which Prime Partnership is a
party. The execution and delivery of this Agreement by Prime Partnership and
the consummation by Prime Partnership of the transactions contemplated by
this Agreement to which Prime Partnership is a party have been duly
authorized by all necessary action on the part of Prime Partnership, except
for and subject to the Prime Shareholder Approvals. This Agreement has been
duly executed and delivered by Prime Partnership and constitutes a valid and
binding obligation of Prime Partnership, enforceable against Prime
Partnership in accordance with and subject to its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity.
(c) Except as set forth in Schedule 3.5(c)(1) to the Prime
Disclosure Letter, the execution and delivery of this Agreement by Prime and
Prime Partnership do not, and the consummation of the transactions
contemplated by this Agreement to which Prime or Prime Partnership is a party
and compliance by Prime or Prime Partnership with the provisions of this
Agreement will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any material obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Prime or any Prime Subsidiary under,
(i) the Prime Articles of Incorporation or the Prime Bylaws or the comparable
charter or organizational documents or partnership, operating or similar
agreement (as the case may be) of any other Prime Subsidiary, each as amended
or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or
license applicable to Prime or any Prime Subsidiary or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any Laws applicable to Prime
or any Prime Subsidiary or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations,
defaults, rights, loss or Liens that individually or in the aggregate would
not (x) have a Prime Material Adverse Effect or (y) prevent the consummation
of the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Prime or any Prime
Subsidiary in connection with the execution and delivery of this Agreement or
the consummation by Prime of any of the transactions contemplated by this
Agreement, except for (i) the filing with the SEC of (x) the Registration
Statement (as defined in Section 5.1) and (y) such reports under Section 13
(a) of the Exchange Act as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (ii) the acceptance for
record of the Prime/Horizon Articles of Merger by the Maryland Department and
Horizon/Subsidiary Certificate of Merger, (iii) the filing of the Delaware
Certificate of Merger with the Delaware Secretary, (iv) such filings with and
approvals of the NYSE to permit the Prime Common Shares and Prime Series B
Preferred Shares that are to be issued pursuant to the Prime/Horizon Merger
to be listed on the NYSE, (v) such filings
41
as may be required in connection with the payment of any transfer and gains
taxes and (vi) such other consents, approvals, orders, authorizations,
registrations, declarations and filings (A) as are set forth in Schedule
3.5(c)(2) to the Prime Disclosure Letter or (B) as may be required under (x)
federal, state or local environmental laws or (y) the "blue sky" laws of
various states, to the extent applicable, or (C) which, if not obtained or
made, would not prevent or delay in any material respect the consummation of
any of the transactions contemplated by this Agreement or otherwise prevent
Prime from performing its obligations under this Agreement in any material
respect or have, individually or in the aggregate, a Prime Material Adverse
Effect.
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. Prime
has filed all required reports, schedules, forms, statements and other documents
with the SEC since July 1993 through the date hereof (the "Prime SEC
Documents"). Schedule 3.6(a) to the Prime Disclosure Letter contains a complete
list of all Prime SEC Documents filed by Prime under the Exchange Act since
January 1, 1997 and on or prior to the date of this Agreement. All of the Prime
SEC Documents (other than preliminary material), as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and regulations
promulgated thereunder applicable to such Prime SEC Documents. None of the
Prime SEC Documents at the time of filing contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
such statements have been modified or superseded by later Prime SEC Documents
filed and publicly available prior to the date of this Agreement. The
consolidated financial statements of Prime and the Prime Subsidiaries included
in the Prime SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of Prime and the Prime Subsidiaries, taken as a whole, as of the dates thereof
and the consolidated results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except for liabilities and obligations set forth or reflected in
the Prime SEC Documents or in Schedule 3.6(b) to the Prime Disclosure Letter, as
of the date hereof neither Prime nor any Prime Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Prime or in
the notes thereto and which, individually or in the aggregate, would have a
Prime Material Adverse Effect.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Prime SEC Documents or in Schedule 3.7 to the Prime Disclosure Letter, since the
date of the most recent audited financial statements included in the Prime SEC
Documents (the "Prime Financial Statement Date"), Prime and the Prime
Subsidiaries have conducted their business only in the ordinary course (taking
into account prior practices, including the acquisition of properties and
issuance of securities) and there has not been (a) any material adverse change
in the business, financial condition
42
or results of operations of Prime and the Prime Subsidiaries taken as a whole
(a "Prime Material Adverse Change"), nor has there been any occurrence or
circumstance that with the passage of time would reasonably be expected to
result in a Prime Material Adverse Change, (b) except for regular quarterly
distributions not in excess of (i) $0.295 per Prime Common Share and $0.295
per Prime Common Unit, (ii) $0.65625 per Prime Series A Preferred Share and
$0.65625 per Prime Series A Preferred Unit, (iii) $0.53125 per Prime Series B
Preferred Share and $0.53125 per Prime Series B Preferred Unit, and (iv)
$0.295 per Prime Series C Preferred Share and $0.295 per Prime Series C
Preferred Unit (together, the "Prime Regular Quarterly Distributions"),
subject to rounding adjustments as necessary and with customary record and
payment dates, any authorization, declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to any of Prime's shares of capital stock (other than as contemplated
by Sections 1.16 and 1.17 hereof), (c) any split, combination or
reclassification of any of Prime's shares of capital stock, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would
have a Prime Material Adverse Effect or (e) any change made prior to the date
of this Agreement in accounting methods, principles or practices by Prime or
any Prime Subsidiary materially affecting its assets, liabilities or
business, except insofar as may have been disclosed in the Prime SEC
Documents or required by a change in GAAP, or any amendment of any
employment, consulting, severance, retention or any other agreement between
Prime and any current or former officer, director, employee or consultant of
Prime.
3.8 LITIGATION. Except as disclosed in the Prime SEC Documents or in
Schedule 3.8 to the Prime Disclosure Letter, there is no suit, action or
proceeding pending (in which service of process has been received by an employee
of Prime or a Prime Subsidiary) or, to the Knowledge of Prime (as hereinafter
defined), threatened in writing against or affecting Prime or any Prime
Subsidiary that, individually or in the aggregate, could reasonably be expected
to (i) have a Prime Material Adverse Effect or (ii) prevent the consummation of
any of the transactions contemplated by this Agreement, nor is there any
judgment, decree, injunction, rule or order of any court or Governmental Entity
or arbitrator outstanding against Prime or any of its Subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would have, any such
effect. Notwithstanding the foregoing, (y) Schedule 3.8 to the Prime Disclosure
Letter sets forth each and every uninsured claim including but not limited to
claims relating to the employment of labor, such as claims relating to wages,
hours, collective bargaining, unemployment insurance, workers' compensation,
equal employment opportunity, payment and withholding of taxes, the Immigration
Reform and Control Act, the Workers' Adjustment and Restraining Notification
Act, and the Drug-Free Workplace Act pending or, to the Knowledge of Prime,
threatened as of the date hereof, in each case with a brief summary of such
claim or threatened claim which, if adversely determined, could reasonably be
expected to result in a Prime Material Adverse Effect and (z) except as set
forth on Schedule 3.8 to the Prime Disclosure Letter, no claim has been made
under any directors' and officers' liability insurance policy maintained at any
time by Prime or any of the Prime Subsidiaries.
3.9 PROPERTIES.
(a) Schedule 3.9(a) to the Prime Disclosure Letter sets forth a list
of all real property outlet centers owned or leased by Prime or one of the Prime
Subsidiaries and sets forth
43
the name of the owner or lessee, as applicable, of each such property. Prime
or a Prime Subsidiary owns fee simple title or has a valid leasehold interest
in all real property owned or leased by Prime or one of the Prime
Subsidiaries (the "Prime Properties"), which are all of the real estate
properties owned or leased by them. Other than as shown on the Prime Title
Insurance Policies (as defined in Section 3.9(b)), each of the Prime
Properties is owned or leased, as applicable, free and clear of liens,
mortgages or deeds of trust, claims against title, charges which are liens,
security interests or other encumbrances on title ("Encumbrances") except for
those Encumbrances which, individually or in the aggregate with any other
condition resulting in a breach of the representations and warranties set
forth in this Section 3.9, could not reasonably be expected to result in a
Prime Material Adverse Effect. Except as set forth in Schedule 3.9(a) to the
Prime Disclosure Letter, none of the Prime Properties is subject to any
restriction on the sale or other disposition thereof or on the financing or
release of financing thereon except those which, individually or in the
aggregate with any other condition resulting in a breach of the
representations and warranties set forth in this Section 3.9, could not be
reasonably be expected to result in a Prime Material Adverse Effect. The
Prime Properties are not subject to any rights of way, written agreements,
laws, ordinances and regulations affecting building use or occupancy, or
reservations of an interest in title (collectively, "Property Restrictions")
or Encumbrances, except for (i) Property Restrictions and Encumbrances set
forth in Schedule 3.9(a) to the Prime Disclosure Letter, and (ii) Property
Restrictions for which the Prime Properties so comply or for which
non-compliance, individually or in the aggregate with any other condition
resulting in a breach of the representations and warranties set forth in this
Section 3.9, could not be reasonably expected to result in a Prime Material
Adverse Effect. Schedule 3.9(a) to the Prime Disclosure Letter lists each of
the Prime Properties which are under development as of the date of this
Agreement and describes the status of such development as of the date hereof.
(b) Except as provided in Schedule 3.9(b) to the Prime Disclosure
Letter, valid policies of title insurance (the "Prime Title Insurance Policies")
have been issued insuring the applicable Prime Subsidiary's fee simple title or
leasehold estate, as the case may be, to the Prime Properties owned by it. Such
policies are, at the date hereof, in full force and effect. Except as set forth
in Schedule 3.9(b) to the Prime Disclosure Letter, no claim has been made
against any such policy.
(c) Except as provided in Schedule 3.9(c) to the Prime Disclosure
Letter, Prime has no Knowledge (i) that, any certificate, permit or license from
any governmental authority having jurisdiction over any of the Prime Properties
or any agreement, easement or other right which is necessary to permit the
lawful use and operation of the buildings and improvements on any of the Prime
Properties or which is necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any of the
Prime Properties has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same which
failure to obtain, modification or cancellation would have a Prime Material
Adverse Effect, or (ii) of any violation of any federal, state or municipal law,
ordinance, order, regulation or requirement affecting any of the Prime
Properties issued by any governmental authority, or of any structural defects
relating to any Prime Property, or of any Prime Property whose building systems
are not in working order, or of any physical damage to any Prime Property which
in any such case under this clause (ii) could, individually or in the aggregate
with any other condition resulting in a
44
breach of the representations and warranties set forth in this Section 3.9,
reasonably be expected to result in a Prime Material Adverse Effect.
(d) Neither Prime nor any Prime Subsidiary has received any
written or published notice to the effect that (i) any condemnation or
rezoning proceedings are pending or threatened with respect to any of the
Prime Properties or (ii) any zoning, building or similar law, code,
ordinance, order or regulation is or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any
of the Prime Properties or by the continued maintenance, operation or use of
the parking areas, except for such violations which, individually or in the
aggregate with any other condition resulting in a breach of the
representations and warranties set forth in this Section 3.9, could not be
reasonably be expected to result in a Prime Material Adverse Effect.
(e) Except as set forth in Schedule 3.9(e) to the Prime Disclosure
Letter, all work required to be performed, payments required to be made and
actions required to be taken prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection
with a site approval, zoning reclassification or other similar action
relating to any Prime Properties (e.g., local improvement district, road
improvement district, environmental mitigation) have been performed, paid or
taken, as the case may be, other than those where, individually or in the
aggregate with any other condition resulting in a breach of the
representations and warranties set forth in this Section 3.9, the failure
would not have a Prime Material Adverse Effect, and Prime has no Knowledge of
any material work, payments or actions that are required after the date
hereof pursuant to such agreements, except as set forth in development or
operating budgets for such Prime Properties delivered to Horizon and Horizon
Partnership prior to the date hereof.
(f) Prime and each of the Prime Subsidiaries have good and
sufficient title to all their personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the consolidated balance sheet of Prime as of December 31, 1996,
except as since sold or otherwise disposed of in the ordinary course of
business), free and clear of all liens and encumbrances, except such as are
reflected on the consolidated balance sheet of Prime as of December 31, 1996,
and the notes thereto, and except for liens for current taxes not yet due and
payable, and liens or encumbrances which are normal to the business of Prime
and the Prime Subsidiaries and are not, in the aggregate, material in
relation to the assets of Prime on a consolidated basis and except also for
such imperfections of title, easement and encumbrances, if any, as do not
materially interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair the consolidated business
operations of Prime.
3.10 LEASES.
(a) The rent roll for the Prime Properties as of January 30, 1998
previously delivered by Prime to Horizon is correct and complete in all
material respects as of the date thereof.
(b) Except as provided in Schedule 3.10 to the Prime Disclosure
Letter, (i) each of the leases and tenancies for all or any portion of the Prime
Properties (the "Prime Leases") is valid
45
and subsisting and in full force and effect except where the failure thereof,
individually with respect to any Prime Lease or in the aggregate with more
than one Prime Lease, could not be reasonably be expected to result in a
Prime Material Adverse Effect, and has not been amended, modified or
supplemented since the date of the rent roll described in Section 3.10(a);
and (ii) neither Prime nor any of the Prime Subsidiaries has received any
written notice from any tenant of any intention to vacate which vacation
would have a Prime Material Adverse Effect. Except as provided in Schedule
3.10 to the Prime Disclosure Letter neither Prime nor any of the Prime
Subsidiaries has collected payment of rent (other than security deposits)
accruing for a period which is more than one month beyond the date of
collection.
(c) Prime has previously delivered or made available to Horizon a
true and correct copy of all Prime Leases.
(d) Except as shown in Schedule 3.10 to the Prime Disclosure
Letter, as of the last day of the calendar month immediately preceding the
date hereof, none of the lessees set forth on Schedule 3.10(d) to the Prime
Disclosure Letter has asserted any claim of which Prime or any of the Prime
Subsidiaries has received written notice which would materially affect the
collection of rent from such tenant and neither Prime nor any of the Prime
Subsidiaries has received written notice of any material default or breach on
the part of Prime or any of the Prime Subsidiaries under any of the Prime
Leases with such a tenant which has not been cured.
(e) Schedule 3.10 to the Prime Disclosure Letter sets forth a
complete and correct list as of January 30, 1998, of all written commitments
made by Prime or any of the Prime Subsidiaries to lease any of the Prime
Properties which has not yet been reduced to a written lease, and provides
with respect to each such commitment the principal terms of such commitment,
including, if applicable, (i) the space to be occupied, (ii) the name of the
tenant, (iii) the length of the original term thereof and any right or option
to renew or extend the lease term, (iv) the monthly minimum rental, (v)
rental escalations, (vi) the terms with respect to percentage rent or other
overage rent, (vii) any provisions for tenant allowances and (viii) the right
of any third-party broker to any outstanding brokerage or other commission
incident thereto. Prime has previously delivered or made available to
Horizon a true and correct copy of each such commitment.
(f) Any material leases pursuant to which Prime or any Prime
Subsidiary, as lessee, leases real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is
not, under any of such leases, any material existing default or any event
which with notice or lapse of time or both would constitute such a default,
nor do any of such leases contain any provision which would preclude the
Surviving Company or the Prime Partnership from occupying and using the
leased premises for the same purposes and upon substantially the same rental
and other terms as are applicable to the occupation and use by Prime and the
Prime Subsidiaries, or which would have a Prime Material Adverse Effect.
3.11 RENTS. The rents and other income and charges set forth in the
rent roll described in Section 3.10(a) are the actual rents, income and
charges presently being charged by Prime Subsidiaries under the Prime Leases.
Other than set forth on Schedule 3.10 to the Prime Disclosure
46
Letter, no tenant under any of the Prime Leases is entitled to any purchase
option. None of the Prime Leases and none of the rents or other amounts
payable thereunder have been assigned, pledged or encumbered, other than to
lenders as set forth in the Prime SEC Documents. No brokerage or leasing
commission or other compensation will be due or payable to any person, firm,
corporation or other entity with respect to or on account of any of the Prime
Leases or any extensions or renewals thereof as of the Horizon/Prime
Effective Time except in the ordinary course of business consistent with past
practices.
3.12 ENVIRONMENTAL MATTERS. To the knowledge of Prime, except as
disclosed in the Prime SEC Documents and on the environmental reports listed
on Schedule 3.12 to the Prime Disclosure Letter, and except what would not be
reasonably likely to have a Material Adverse Effect, (a) no Hazardous
Substances have been used, stood, manufactured, treated, processed or
transported to or from any of the Prime Properties except as necessary to the
conduct of business and in compliance with Environmental Laws; (b) there have
been no spills, releases, discharges or disposal of Hazardous Substances to
have occurred or be presently occurring on or from the Prime Properties; (c)
the Prime Properties and the business conducted thereon are not in violation
of Environmental Laws; (d) Prime and its Subsidiaries have not received and
do not reasonably expect to receive any notice of potential responsibility,
letter of inquiry or notice of alleged liability from any Person regarding
the Prime Properties or the business conducted thereon. Prime has previously
delivered or made available to Horizon complete copies of all final versions
of environmental investigations and testing or analysis made by or on behalf
of Prime or any of the Prime Subsidiaries that are in the possession of any
of them with respect to the environmental condition of the Prime Properties.
For the purposes of this Paragraph 3.12 only, "Prime Properties" shall
include property currently or formerly owned, operated or leased by Prime or
its Subsidiaries.
"Environmental Laws" shall mean any applicable statute, code, enactment,
ordinance, rule, regulation, permit, consent, approval, authorization,
judgment, order, common law rule (including without limitation the common law
respecting nuisance and tortious liability), decree, injunction, or other
requirement having the force and effect of law, whether local, state,
territorial or national, at any time in force or effect relating to:
(a) emissions, discharges, spills, releases or threatened releases
of Hazardous Substances into ambient air, surface water, groundwater,
watercourses, publicly or privately owned treatment works, drains, sewer
systems, wetlands, septic systems or onto land;
(b) the use, treatment, storage, disposal, handling,
manufacturing, transportation or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or
(d) otherwise relating to pollution or the protection of human
health or the environment.
47
"Hazardous Substances" shall mean all substances, wastes, pollutants,
contaminants and materials regulated or defined or designated as hazardous,
extremely or imminently hazardous, dangerous, or toxic pursuant to any law,
by any local, state, territorial or federal governmental authority, or with
respect to which such a governmental authority otherwise requires
environmental investigation, monitoring, reporting, or remediation; including
but not limited to,
(a) all substances, wastes, pollutants, contaminants and materials
regulated, or defined or designated as hazardous, extremely or imminently
hazardous, dangerous or toxic, under the following federal statutes and their
state counterparts, as well as their statutes' implementing regulations: the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. section 9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. section 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
section 2601 et seq., the Clean Water Act, 33 U.S.C. section 1251 et seq.,
the Clean Air Act, 42 U.S.C. section 7401 et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. section 11011 et seq., the Safe
Drinking Water Act, 33 U.S.C. section 300f et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 U.S.C. section 136 et seq., the Atomic
Energy Act, 42 U.S.C. section 22011 et seq., and the Hazardous Materials
Transportation Act, 42 U.S.C. section 1801 et seq.;
(b) petroleum and petroleum products including crude oil and any
fractions thereof;
(c) natural gas, synthetic gas, and any mixtures thereof; and
(d) radon, radioactive substances, asbestos, urea formaldehyde,
polychlorinated biphenyls and electromagnetic field radiation.
3.13 TAXES.
(a) Each of Prime and the Prime Subsidiaries (i) has filed all tax
returns and reports required to be filed by it (after giving effect to any
filing extension properly granted by a Governmental Entity having authority
to do so), and all such returns and reports are accurate and complete in all
material respects, and (ii) has paid (or Prime has paid on its behalf) all
Taxes shown on such returns and reports as required to be paid by it except
where the failure to file such tax returns or reports and failure to pay such
Taxes would not have a Prime Material Adverse Effect. The most recent audited
financial statements contained in the Prime SEC Documents reflect an adequate
reserve for all material Taxes payable by Prime and the Prime Subsidiaries
for all taxable periods and portions thereof through the date of such
financial statements. Since the Prime Financial Statement Date, Prime has
incurred no liability for Taxes under Sections 857(b), 860(c) or 4981 of the
Code, including without limitation any tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and neither Prime nor
any Prime Subsidiary has incurred any material liability for Taxes other than
in the ordinary course of business. No event has occurred, and no condition
or circumstance exists, which presents a material risk that any material tax
described in the preceding sentence will be imposed upon Prime. To the
Knowledge of Prime, no deficiencies
48
for any Taxes have been proposed, asserted or assessed against Prime or any
of the Prime Subsidiaries, and no requests for waivers of the time to assess
any such Taxes are pending.
(b) Prime (i) has operated in such a manner as to qualify as a
REIT within the meaning of Section 856 of the Code for each of its taxable
years ending on or before December 31, 1996, and intends to continue to
operate in such a manner as to qualify as a REIT for the taxable year that
ends on the Closing Date, and (ii) has not taken or omitted to take any
action which would reasonably be expected to result in a challenge to its
status as a REIT, and to Prime's Knowledge, no such challenge is pending or
threatened. Each Prime Subsidiary which is a partnership, joint venture or
limited liability company (x) has been since its formation and continues to
be for federal income tax purposes as a partnership and not as a corporation
or as an association or publicly traded partnership taxable as a corporation
and (y) has not since the later of its formation or the acquisition by Prime
of a direct or indirect interest therein, owned any assets (including,
without limitation, securities) that would cause Prime to violate Section
856(c)(5) of the Code. Each Prime Subsidiary which is a corporation (other
than Prime Retail Services, Inc.) has been since its formation a qualified
REIT subsidiary under Section 856(i) of the Code. Except as set forth in
Schedule 3.13 to the Prime Disclosure Letter neither Prime nor any Prime
Subsidiary holds any asset (x) the disposition of which would be subject to
rules similar to Section 1374 of the Code as a result of a notice under IRS
Notice 88-19 or (y) which is subject to a consent filed pursuant to Section
341(f) of the Code and the regulations thereunder.
3.14 BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, investment
banker, financial advisor or other person, other than Friedman, Billings,
Xxxxxx & Co., Inc., the fees and expenses of which will be paid by Prime and
are described in the engagement letter with Friedman, Billings, Xxxxxx & Co.,
Inc., a true, correct and complete copy of which has previously been given to
Horizon, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of Prime or any Prime
Subsidiary.
3.15 COMPLIANCE WITH LAWS. Prime and its Subsidiaries hold all permits,
licenses, variances, exceptions, orders, registrations and approvals of all
Governmental Entities which are required for the operation of the business of
Prime and its Subsidiaries (the "Prime Permits"), except where the failure to
have any such Prime Permits individually or in the aggregate would not have a
Prime Material Adverse Effect. Since March 22, 1994, neither Prime nor any
of the Prime Subsidiaries has violated or failed to comply with any statute,
law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business, properties or operations
(except any Environmental Law, as to which the representations in Section
3.12 shall apply), except to the extent that such violation or failure would
not, individually or in the aggregate, have a Prime Material Adverse Effect.
3.16 CONTRACTS; DEBT INSTRUMENTS.
(a) To the Knowledge of Prime, except as disclosed in the Prime SEC
Documents or in Schedule 3.16 to the Prime Disclosure Letter, there is no
contract or agreement that purports
49
to limit in any material respect the names or the geographic location in
which Prime and its Subsidiaries conduct or may conduct their business.
Neither Prime nor any Prime Subsidiary has received a written notice that
Prime or any Prime Subsidiary is in violation of or in default under (nor to
the Knowledge of Prime does there exist any condition which upon the passage
of time or the giving of notice or both would cause such a violation of or
default under) any material loan or credit agreement, note, bond, mortgage,
indenture, concession or any other similar type of material contract,
agreement, arrangement or understanding, to which it is a party or by which
it or any of its properties or assets is bound, nor to the Knowledge of Prime
does such a violation or default exist, except to the extent that such
violation or default, individually or in the aggregate, would not have a
Prime Material Adverse Effect.
3.17 OPINION OF FINANCIAL ADVISOR. Prime has received the written
opinion of Friedman, Billings, Xxxxxx & Co., Inc., satisfactory to Prime, to
the effect that proposed Prime/Horizon Merger Consideration and Partnership
Merger Consideration to be paid by Prime and Prime Partnership in connection
with the Mergers is fair, from a financial point of view, to Prime and Prime
Partnership.
3.18 STATE TAKEOVER STATUTES. Prime has taken all action necessary to
exempt transactions between Prime and Horizon and its Affiliates from the
operation of Takeover Statutes.
3.19 INVESTMENT COMPANY ACT OF 1940. Neither Prime nor any of the Prime
Subsidiaries is, or at the Partnership Merger Effective Time will be,
required to be registered under the 0000 Xxx.
3.20 DEFINITION OF KNOWLEDGE OF PRIME. As used in this Agreement, the
phrase "Knowledge of Prime" (or words of similar import) means the actual
knowledge of officers and directors of Prime and Prime Partnership identified
on Schedule 3.20 to the Prime Disclosure Letter.
3.21 VOTE REQUIRED. The affirmative vote of at least (i) 66-2/3% of the
outstanding Prime Series C Preferred Shares and (ii) two-thirds of the
outstanding Prime Common Shares are the only votes of the holders of any
class or series of Prime's capital stock necessary (under applicable law or
otherwise) to approve this Agreement and the transactions contemplated
hereby. The affirmative vote of the holders of at least (i) 50% of the
outstanding Prime Common Units and (ii) 50% of the outstanding Prime Series C
Preferred Units, held by the limited partners of Prime Partnership are the
only votes by the holders of any class or series of partnership interest
therein necessary (under applicable law or otherwise) to approve this
Agreement and the transactions contemplated hereby.
ARTICLE IV
COVENANTS
4.1 CONDUCT OF HORIZON'S, HORIZON PARTNERSHIP'S AND SKY MERGER'S
BUSINESS PENDING MERGERS. During the period from the date of this Agreement
to the Prime/Horizon Merger Effective Time, except as consented to in writing
by Prime or as expressly provided for in this Agreement or the C&C/Xxxxxxx
Agreements (other than as provided in Section 4.1(j)(2)), Horizon, Horizon
50
Partnership and Sky Merger shall, and shall cause (or, in the case of Horizon
Subsidiaries that Horizon, Horizon Partnership or Sky Merger do not control,
shall use reasonable best efforts to cause) each of the Horizon Subsidiaries
to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted;
(b) use commercially reasonable efforts to preserve intact its
business organizations, goodwill and ongoing businesses and keep available
the services of its officers and employees;
(c) confer on a regular basis with one or more representatives of
Prime to report operational matters of materiality and any proposals to
engage in material transactions (except with respect to Acquisition
Proposals, as to which the provisions of Section 4.3 shall apply);
(d) promptly notify Prime of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities or the normal course of its businesses or in
the operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(e) promptly deliver to Prime true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its
methods, principles or practices of accounting in effect at the Horizon
Financial Statement Date, except as may be required by the SEC, applicable
law or GAAP;
(g) duly and timely file all reports, tax returns and other
documents required to be filed with federal, state, local and other
authorities, subject to extensions permitted by law, provided Horizon
notifies Prime that it is availing itself of such extensions and provided
such extensions do not adversely affect Horizon's status as a qualified REIT
under the Code;
(h) not make any Tax election (unless required by law or necessary
to preserve Horizon's status as a REIT or the status of any Horizon
Subsidiary as a partnership for federal income tax purposes, as the case may
be) and not make or rescind any express or deemed election relative to Taxes;
(i) make all capital expenditures, and expenditures relating to
leasing, in accordance with a capital budget of Horizon delivered prior to
the date hereof to Prime (the "Horizon Capital Budget") and will not (A)
acquire, enter into any option to acquire, or exercise an option or other
right or election or enter into any other commitment or contractual
obligation (each, a "Commitment") for the acquisition of any real property or
other transaction involving in excess of $100,000 which is not included in
the Horizon Capital Budget approved by Prime, encumber
51
assets or commence construction of, or enter into any Commitment to develop
or construct other real estate projects, except in the ordinary course of its
retail property business or (B) incur or enter into any Commitment to incur
additional indebtedness (secured or unsecured) except for working capital
under its revolving line(s) of credit and Commitments for indebtedness
described on Schedule 4.1(i) to the Horizon Disclosure Letter;
(j) not (1) amend its Articles of Incorporation, or its Bylaws, or
the articles or certificate of incorporation, bylaws, code of regulations,
partnership agreement, operating agreement or joint venture agreement or
comparable charter or organization document of any Horizon Subsidiary or (2)
amend or otherwise modify or waive any rights under any C&C/Xxxxxxx Agreement
to which it is a party;
(k) not split, combine or reclassify any capital stock,
partnership or other ownership interests and make no change in the number of
shares of capital stock, membership interests or units of limited partnership
interest issued and outstanding, other than pursuant to the redemption of
Horizon OP Units pursuant to the Horizon Partnership Agreement or the
exercise of Horizon Stock Options;
(l) grant no options or other right or commitment relating to its
shares of capital stock, membership interests or units of limited partnership
interest or any security convertible into its shares of capital stock,
membership interests or units of limited partnership interest, or any
security the value of which is measured by shares of capital stock, or any
security subordinated to the claim of its general creditors and, except as
contemplated by this Agreement, not amend or waive any rights under any of
the Horizon Stock Options;
(m) except as provided in Section 5.10 and in connection with the
use of Horizon Common Shares to pay the exercise price or tax withholding in
connection with equity-based employee benefit plans by the participants
therein, not (i) authorize, declare, set aside or pay any dividend or make
any other distribution or payment with respect to any Horizon Common Shares
or Horizon OP Units or (ii) directly or indirectly redeem, purchase or
otherwise acquire any shares of capital stock, membership interests or units
of partnership interest or any option, warrant or right to acquire, or
security convertible into, shares of capital stock, membership interests, or
units of partnership interest of Horizon, except for (A) exchanges of Horizon
Common Shares required under Section 5.4 of the Horizon Articles of
Incorporation in order to preserve the status of Horizon as a REIT under the
Code, and (B) redemptions of Horizon OP Units, whether or not outstanding on
the date of this Agreement, under the Horizon Partnership Agreement in which
Horizon Common Shares are utilized;
(n) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any of the Horizon Properties, except in connection with a
transaction that is made in the ordinary course of business and is the
subject of a binding contract in existence on the date of this Agreement and
disclosed in Schedule 2.20 to the Horizon Disclosure Letter; provided,
however, without the prior written consent of Prime, leases of space in all
Horizon Properties which are to be contributed to Newco LP pursuant to the
Horizon Partnership Contribution may be made in accordance with the
52
leasing plans or parameters which shall be agreed from time to time between
Horizon Partnership and Prime. Notwithstanding any provision of this
Agreement to the contrary, a Horizon Subsidiary shall be permitted to enter
into any lease for any space in any property owned by it if such Horizon
Subsidiary provides written notice to Prime with respect to the terms of a
proposed lease and Prime does not object in writing by notice to such Horizon
Subsidiary to the terms of such lease within one business day after the
receipt of the aforesaid notice from such Horizon Subsidiary.
(o) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any of its personal property or intangible property, except in
connection with a transaction that is permitted by Section 4.1(n) or that is
made in the ordinary course of business and is not material, individually or
in the aggregate;
(p) not make any loans, advances or capital contributions to, or
investments in, any other Person, (whether by the purchase, redemption or
other acquisition of the equity or debt of such Person or otherwise) other
than loans, advances and capital contributions to Horizon Subsidiaries in
existence on the date hereof and advances to employees in the ordinary course
of business consistent with past practice;
(q) not incur, pay, discharge, satisfy or settle any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against in,
or contemplated by, the most recent consolidated financial statements (or the
notes thereto) furnished to Prime or incurred in the ordinary course of
business consistent with past practice;
(r) not guarantee the indebtedness of another Person, enter into
any "keep well" or other agreement to maintain any financial statement
condition of another Person or enter into any arrangement having the economic
effect of any of the foregoing;
(s) not enter into any Commitment with any officer, director or
Affiliate of Horizon or any of the Horizon Subsidiaries or any material
Commitment with any consultant;
(t) except as set forth in Schedule 4.1(t) to the Horizon
Disclosure Letter, not increase any compensation or enter into or amend any
employment agreement described in Schedule 2.17 to the Horizon Disclosure
Letter with any of its officers, directors or employees, other than as
required by any contract or Plan or in accordance with waivers by employees
of benefits under such agreements and other than normal year end bonuses in
keeping consistent with past practice and annual salary increases not
exceeding 5%; provided, however, that for any officer or employee earning an
annual salary in excess of $75,000, Horizon may provide such employee with an
annual salary increase only after consulting with Prime before effecting such
increase.
(u) not adopt any new employee benefit plan, incentive plan,
severance plan, stock option or similar plan or amend any existing plans or
rights, except for changes to severance benefits to provide that an employee
whose position is transferred to a location outside the standard
00
xxxxxxxxxxxx xxxxxxxxxxx xxxx in which such employee is currently employed
shall not forfeit severance benefits by reason of failure to accept such
transfer, and changes which are required by law;
(v) not settle any shareholder derivative, class action claims or
other suit or claims arising out of or in connection with any of the
transactions contemplated by this Agreement;
(w) not change the ownership of any of its Subsidiaries, except
changes which arise as a result of the acquisition of Horizon OP Units in
exchange for Horizon Common Shares pursuant to exercise of the Horizon OP
Unit redemption right under Section 8.6 of the Horizon Partnership Agreement;
(x) not accept a promissory note in payment of the exercise price
payable under any option to purchase Horizon Common Shares;
(y) not enter into or amend or otherwise modify or waive any
rights under any agreement or arrangement for the persons that are
affiliates, or as of the date hereof, all officers, directors or employees,
of Horizon, Horizon Partnership or any Horizon Subsidiary not approved by a
majority of the "independent" members of the Board of Directors of Horizon;
(z) not directly or indirectly or through a subsidiary, merge or
consolidate with, acquire all or substantially all of the assets of, or
acquire the beneficial ownership of a majority of the outstanding capital
stock or other equity interest in any person or entity unless such
transaction has been approved by Prime; and.
(aa) Notwithstanding any provision of this Agreement to the
contrary, including but not limited to the provisions of this Section 4.1,
(i) on or prior to the Closing, Horizon or Horizon Partnership shall be
permitted to make any or all of the payments on Schedule 4.1(aa) to the
Horizon Disclosure Schedule without the consent of Prime and (ii) Horizon and
Horizon Partnership shall be permitted to take any and all actions expressly
set forth in a quarterly operating budget, prepared by Horizon and approved
by Prime in writing prior to the commencement of each quarter.
4.2 CONDUCT OF PRIME'S AND PRIME PARTNERSHIP'S BUSINESS PENDING
MERGERS. During the period from the date of this Agreement to the
Prime/Horizon Merger Effective Time, except as (i) contemplated by this
Agreement including as contemplated by the Contribution Agreement, or (ii)
consented to in writing by Horizon, Prime and Prime Partnership shall, and
shall cause (or, in the case of Prime Subsidiaries that Prime or Prime
Partnership do not control, use reasonable best efforts to cause) each of the
Prime Subsidiaries to:
(a) use commercially reasonable efforts to preserve intact its
business organizations and goodwill and keep available the services of its
officers and employees;
54
(b) confer on a regular basis with one or more representatives of
Horizon to report operational matters of materiality which would have a Prime
Material Adverse Effect;
(c) promptly notify Horizon of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, or of any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated);
(d) promptly deliver to Horizon true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(e) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its
methods, principles or practices of accounting in effect at the Prime
Financial Statement Date, except as may be required by the SEC, applicable
law or GAAP;
(f) duly and timely file all reports, tax returns and other
documents required to be filed with federal, state, local and other
authorities, subject to extensions permitted by law, provided such extensions
do not adversely affect Prime's status as a qualified REIT under the Code;
(g) not make or rescind any express or deemed election relative to
Taxes (unless required by law or necessary to preserve Prime's status as a
REIT or the status of any Prime Subsidiary as a partnership for federal
income tax purposes or as a qualified REIT subsidiary under Section 856(i) of
the Code, as the case may be);
(h) not amend the Prime Articles of Incorporation or the Prime
Bylaws, or the articles or certificate of incorporation, bylaws, code of
regulations, partnership agreement, operating agreement or joint venture
agreement or comparable charter or organization document of any Prime
Subsidiary, including the Prime Partnership Agreement (except to the extent
necessary to reflect the admission of additional limited partners and other
amendments in connection therewith that can be made by Prime without a vote
of limited partners and that will not, individually or in the aggregate,
materially adversely affect the rights or obligations of holders of Prime OP
Units);
(i) except as provided in Sections 1.16, 1.17 and 5.10 hereof and
in connection with the use of Prime Common Shares to pay the exercise price
or tax withholding in connection with equity-based employee benefit plans by
the participants therein, not (i) authorize, declare, set aside or pay any
dividend or make any other distribution or payment with respect to any Prime
Common Shares or Prime Common Units or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of capital stock, membership
interests or units of partnership interest or any option, warrant or right to
acquire, or security convertible into, shares of capital stock, membership
interests, or units of partnership interest of Prime, except for (A)
conversions of Prime Common Shares required under Section 4.9.5 or Section
4.5.7, respectively, of the Prime Articles of Incorporation in order to
preserve the status of Prime as a REIT under the Code, and (B) exchanges
55
of Prime Common Units, whether or not outstanding on the date of this
Agreement, under the Prime Partnership Agreement in which Prime Common Shares
are utilized;
(j) not sell, lease, mortgage, subject to Lien or otherwise
dispose of any of the Prime Properties, except in connection with a
transaction that would not reasonably be expected to have a Prime Material
Adverse Effect;
(k) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise) if it would reasonably be expected to have a Prime Material
Adverse Effect; and
(l) except as contemplated by Section 1.17, not directly or
indirectly through a subsidiary, merge or consolidate with, or acquire all or
substantially all of the assets of, or the beneficial ownership of a majority
of the outstanding capital stock or other equity interests in any person or
entity whose securities are registered under the Exchange Act unless such
transaction has been approved by Horizon.
4.3 NO SOLICITATION. Prior to the Prime/Horizon Merger Effective Time,
Horizon agrees, for itself and in its capacity as general partner of Horizon
Partnership, that:
(a) neither it nor any of the Horizon Subsidiaries shall, directly
or indirectly, whether through a Horizon representative specified in Section
4.3(b) or otherwise, invite, initiate, solicit (including by way of
furnishing non-public information or assistance) or encourage any inquiries,
proposals, discussions or negotiations or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to
its shareholders) that constitutes or may reasonably be expected to lead to,
or otherwise with respect to, (i) a merger, acquisition, consolidation, share
exchange, business combination or similar transaction, (ii) any tender offer
or exchange offer for 10% or more of the outstanding Horizon Common Shares or
the filing of a registration statement under the Securities Act in connection
therewith, (iii) a transaction resulting in the issuance of securities
representing 10% or more of the outstanding equity securities of Horizon,
(iv) the sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 10% or more of the assets or equity securities (including,
without limitation, partnership interests and units) of Horizon or Horizon
Partnership or (v) any public announcements of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing, other than the transactions contemplated by this Agreement (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any discussions or negotiations concerning or provide
any confidential or non-public information or data to, or have any
discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal;
(b) neither it nor any of the Horizon Subsidiaries will authorize
or permit any of its officers, directors, employees, affiliates, agents,
investment bankers, financial advisors, attorneys, accountants, brokers,
finders or other representative of Horizon to engage in any of the activities
described in Section 4.3(a);
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(c) it and the Horizon Subsidiaries will immediately cease and
cause to be terminated any existing activities, discussions or negotiations
with any parties conducted heretofore with respect to any of the foregoing
and will take the necessary steps to inform the individuals or entities
referred to in Section 4.3(b) of the obligations undertaken in this Section
4.3; and
(d) it will notify Prime immediately if Horizon or any of the
Horizon Subsidiaries receives any such inquiries or proposals, or any
requests for such information, or if any such negotiations or discussions are
sought to be initiated or continued with it and provide all relevant details
related thereto;
provided, however, that nothing contained in this Section 4.3 shall prohibit
the Board of Directors of Horizon (including with respect to Horizon's
capacity as general partner of Horizon Partnership) from (i) furnishing
information to or entering into discussions or negotiations with, any person
or entity that makes an unsolicited Acquisition Proposal, if, and only to the
extent that (A) a majority of the Board of Directors of Horizon determines in
good faith that such action is required for the Board of Directors of Horizon
to comply with its duties to shareholders imposed by applicable law and (B)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, Horizon provides written notice to
Prime to the effect that it is furnishing information to, or entering into
discussions with, such person or entity; and (ii) making any disclosure
required by applicable law with regard to an Acquisition Proposal. Nothing in
this Section 4.3 shall (x) permit Horizon to terminate this Agreement (except
as specifically provided in Article 7 hereof), (y) permit Horizon to enter
into an agreement for an Acquisition Proposal during the term of this
Agreement or (z) affect any other obligation of Horizon under this Agreement;
provided, however, that a majority of the Board of Directors of Horizon may
approve and recommend a Superior Acquisition Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of this
Agreement and the Mergers in accordance with Section 5.1(e). Any disclosure
that the Board of Directors of Horizon may be compelled to make with respect
to the receipt of an Acquisition Proposal in order to comply with its duties
to shareholders imposed by applicable law or Rule 14d-9 or 14e-2 of the
Exchange Act will not constitute a violation of this Section 4.3. As used
herein, "Superior Acquisition Proposal" means a bona fide Acquisition
Proposal made by a third party which a majority of the members of the Board
of Directors of Horizon resolves in good faith to be more favorable to
Horizon's shareholders than the Mergers and which the Board of Directors of
Horizon determines is reasonably capable of being consummated.
4.4 AFFILIATES. Prior to the Partnership Merger Effective Time, Horizon
and Prime shall cause to be prepared and delivered to the other a list
(reasonably satisfactory to counsel for Prime and Horizon) identifying all
persons who, at the time of the Horizon, Prime Shareholders Meetings, may be
deemed to be "affiliates" of Horizon or Prime, respectively, as that term is
used under Rule 145 under the Securities Act (the "Affiliates"). Horizon and
Prime each shall use its reasonable best efforts to cause each person who is
identified by it as an Affiliate in such list to deliver to the other on or
prior to the Prime/Horizon Merger Effective Time a written agreement, in the
form to be approved by the parties hereto prior to the Prime/Horizon Merger
Effective Time, that such Affiliate will not sell, pledge, transfer or otherwise
dispose of any Surviving Company Common Shares issued to such Affiliate pursuant
to the Prime/Horizon Merger, except pursuant to an effective
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registration statement under the Securities Act or in compliance with
paragraph (d) of Rule 145 or as otherwise permitted by the Securities Act.
The Surviving Company shall be entitled to place legends as specified in such
written agreements on the certificates representing any Surviving Company
Common Shares to be received pursuant to the terms of this Agreement by such
Affiliates who have executed such agreements and to issue appropriate stop
transfer instructions to the transfer agent for the Surviving Company Common
Shares issued to such Affiliates, consistent with the terms of such
agreements. The Surviving Company shall timely file the reports required to
be filed by it under the Exchange Act and the rules and regulations adopted
by the SEC thereunder, and it will take such further action as any Affiliate
of Horizon or Prime may reasonably request, all to the extent required from
time to time to enable such Affiliate to sell shares of the Surviving Company
received by such Affiliate in the Prime/Horizon Merger without registration
under the Securities Act pursuant to (i) Rule 145(d)(1) under the Securities
Act, as such rule may be amended from to time, or (ii) any successor rule or
regulation hereafter adopted by the SEC.
4.5 OTHER ACTIONS. Each of Horizon, Horizon Partnership and Newco LP,
on the one hand, and Prime and Prime Partnership, on the other hand, shall
not, and shall use commercially reasonable efforts to cause their respective
subsidiaries and joint ventures not to take, any action that would result in
(i) any of the representations and warranties of such party (without giving
effect to any "knowledge" qualification) set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of such representations
and warranties (without giving effect to any "knowledge" qualification) that
are not so qualified becoming untrue in any material respect or (iii) except
as contemplated by Section 4.3, any of the conditions to the Mergers or that
would materially impair the ability of the parties hereto to consummate the
transactions contemplated by the Contribution Agreement set forth in Article
6 not being satisfied.
ARTICLE V
ADDITIONAL COVENANTS
5.1 PREPARATION OF THE REGISTRATION STATEMENT AND THE PROXY STATEMENT;
HORIZON SHAREHOLDERS AND PARTNERS MEETINGS AND PRIME SHAREHOLDERS AND
PARTNERS MEETINGS.
(a) As promptly as practicable after execution of this Agreement,
(i) each of Horizon, Prime and, to the extent required, Prime Partnership,
Horizon Partnership, Sky Merger and Newco LP shall prepare and file with the
SEC (with appropriate requests for confidential treatment, unless the parties
hereto otherwise agree) under the Exchange Act, one or more joint proxy
statements/prospectuses and forms of proxies (such joint proxy
statement(s)/prospectus(es) together with any amendments to supplements
thereto, the "Proxy Statement") relating to the shareholder meetings, and, if
applicable, partners meetings, of each of Horizon, Horizon Partnership, Sky
Merger, Newco LP, Prime and Prime Partnership and the vote of the
shareholders of Horizon, Sky Merger and Prime and, if applicable, Horizon
Partnership, Newco LP, and Prime Partnership, with respect to the Mergers and
the transactions contemplated hereunder and such registration statements,
(collectively and together with any amendments or supplements thereto, the
"Registration Statement"), in which the Proxy Statement above will be
included, as may be required in connection
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with the registration under the Securities Act of the securities to be
distributed in connection with the Mergers or the other transactions
contemplated hereunder. The respective parties will cause the Proxy Statement
and the Registration Statement to comply as to form in all material respects
with the applicable provisions of the Securities Act, the Exchange Act and
the rules and regulations thereunder. Each of Horizon, Horizon Partnership,
Sky Merger, Newco LP, Prime and Prime Partnership shall furnish all
information about itself and its business and operations and all necessary
financial information to the other as the other may reasonably request in
connection with the preparation of the Proxy Statement and the Registration
Statement. Each such party shall use its reasonable best efforts, to have the
Registration Statement declared effective by the SEC as promptly as
practicable (including clearing the Proxy Statement with the SEC). Each of
Horizon, Horizon Partnership, Newco LP and Sky Merger, on the one hand, and
Prime and Prime Partnership, on the other hand, agree promptly to correct any
information provided by it for use in the Proxy Statement and the
Registration Statement if and to the extent that such information shall have
become false or misleading in any material respect, and each of the parties
hereto further agrees to take all steps necessary to amend or supplement the
Proxy Statement and the Registration Statement and to cause the Proxy
Statement and the Registration Statement as so amended or supplemented to be
filed with the SEC (with copies provided to the other parties hereto) and to
be disseminated to their respective shareholders and partners, in each case
as and to the extent required by applicable federal and state securities
laws. Each of Horizon, Horizon Partnership, Sky Merger, Newco LP, Prime and
Prime Partnership agrees that the information provided by it for inclusion in
the Proxy Statement or the Registration Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of shareholders of Horizon, Sky Merger and Prime and at
the time of the respective taking of consents, if any, of partners of Horizon
Partnership, Newco LP, and Prime Partnership, will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each party will
notify the other promptly and will advise and deliver copies (if any) to the
other parties hereto, promptly after it receives notice thereof, of any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC
for additional information (regardless whether such requests relate to Prime
or Prime Partnership, on the one hand, or Horizon, Sky Merger, Horizon
Partnership or Newco LP on the other hand), and each of Prime and Prime
Partnership, on the other hand, and Horizon, Horizon Partnership, Newco LP
and Sky Merger, on the other hand, shall promptly notify the other of (i) the
time when the Registration Statement has become effective, (ii) or any
supplement or amendment thereto has been filed, (iii) the issuance of any
stop order, and (iv) the suspension of the qualification and registration of
the securities issuable in connection with the Mergers and the Distribution.
The Proxy Statement shall include the recommendations of the Board of
Directors of each Prime and Horizon; provided, that the recommendation of the
Board of Directors of Horizon may not be included or may be withdrawn if the
Board of Directors of Horizon has accepted a proposal for Superior
Acquisition Proposal in accordance with the terms of Section 4.3. Each party
shall also take any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of securities
pursuant to the Mergers and the other transactions contemplated hereunder,
and shall furnish all information as may be reasonably requested in
connection with any such action. Each party will use its best efforts to
obtain prior to the effective date of the Registration Statement, all
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necessary state securities or "blue sky" permits or approvals required to
carry out the transactions contemplated by this Agreement. In connection with
the preparation of the Proxy Statement and the Registration Statement,
Horizon shall use reasonable efforts to cause to be delivered to Prime prior
to the mailing of the Proxy Statement, the opinion of Xxxxxxx & Xxxxx, dated
the date of the Proxy Statement, that (i) Horizon was organized and has
operated in conformity with the requirements for qualification as a REIT
within the meaning of the Code in each of its taxable years or other periods
ending after December 31, 1993 and on or before the Closing Date and (ii)
Horizon Partnership, Newco LP, and each other Horizon Subsidiary has been
since formation, and continues to be, as of such date, for federal income tax
purposes, a partnership and not a corporation or an association taxable as a
corporation or publicly traded partnership. In connection with the
preparation of the Proxy Statement and the Registration Statement, Prime
shall use reasonable efforts to cause to be delivered to Horizon prior to the
mailing of the Proxy Statement, the opinion of Winston & Xxxxxx, dated the
date of the Proxy Statement, that (i) Prime was organized and has operated in
conformity with the requirements for qualification as a REIT within the
meaning of the Code in each of its taxable years or other periods ending on
or before the Closing Date and (ii) Prime Partnership, and each other Prime
Subsidiary that is a partnership, joint venture or limited liability company
has been since formation, and continues to be, as of such date, for federal
income tax purposes, a partnership and not a corporation or an association
taxable as a corporation or publicly traded partnership.
(b) Each of Horizon, Horizon Partnership, Sky Merger, Newco LP,
Prime and Prime Partnership shall use its reasonable best efforts to timely
mail the joint proxy statement/prospectus contained in the Registration
Statements to its shareholders. It shall be a condition to the mailing of the
joint proxy statement/prospectus that (i) Prime and Prime Partnership shall
have received a "comfort" letter from Ernst & Young LLP, independent public
accountants for Horizon and Horizon Partnership, of the kind contemplated by
the Statement of Auditing Standards with respect to Letters to Underwriters
promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), dated as of the date on which the Registration Statement
shall become effective and as of the Closing Date, addressed to Prime and
Prime Partnership, in form and substance reasonably satisfactory to Prime and
Prime Partnership, concerning the procedures undertaken by Ernst & Young LLP,
with respect to the financial statements and information of Horizon, Horizon
Partnership and their subsidiaries contained or incorporated by reference in
the Registration Statement and the other matters contemplated by the AICPA
Statement and otherwise customary in scope and substance or letters delivered
by independent public accountants in connection with transactions such as
those contemplated by this Agreement, (ii) Horizon shall have received a
"comfort" letter from Ernst & Young LLP, independent public accountants for
Prime and Prime Partnership, of the kind contemplated by the AICPA Statement,
dated as of the date on which the Registration Statement shall become
effective and as of the Effective Time, addressed to Horizon and Horizon
Partnership, in form and substance reasonably satisfactory to Horizon,
concerning the procedures undertaken by Ernst & Young LLP with respect to the
financial statements and information of Prime, Prime Partnership and their
subsidiaries contained or incorporated by reference in the Registration
Statement and the other matters contemplated by the AICPA Statement and
otherwise customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement, (iii) Prime shall have received reasonable
assurance that the
60
conditions set forth in Section 6.2(f) will be satisfied on or prior to the
Closing Date and (iv) Horizon shall have received reasonable assurance that
the conditions set forth in Section 6.3(f) will be satisfied on or prior to
the Closing Date.
(c) Prime will duly call and as soon as practicable following the
date of this Agreement (but in no event sooner than 20 business days
following the date the Proxy Statement is mailed to the shareholders of
Prime), give notice of, convene and hold a meeting of its shareholders (the
"Prime Shareholders Meeting") for the purpose of obtaining the Prime
Shareholder Approvals. Prime will, through its Board of Directors, recommend
to its shareholders approval of this Agreement, the Horizon/Prime Merger and
the other transactions contemplated by this Agreement.
(d) Horizon will duly call and give notice of and, as soon as
practicable following the date of this Agreement (but in no event sooner than
20 business days following the date the Proxy Statement is mailed to the
shareholders of Horizon), convene and hold a meeting of its shareholders (the
"Horizon Shareholders Meeting") for the purpose of obtaining Horizon
Shareholder Approvals. Horizon will, through its Board of Directors,
recommend to its shareholders approval of this Agreement, the Prime/Horizon
Merger, the Horizon/Subsidiary Merger and the other transactions contemplated
by this Agreement and include such recommendation in the Proxy Statement;
provided, however, that prior to the Horizon Shareholders Meeting, such
recommendation may be withdrawn, modified or amended with respect to a
Superior Acquisition Proposal if a majority of the Board of Directors of
Horizon determines in good faith, based upon the advice of its outside
counsel, that such action is required for the Board of Directors of Horizon
to comply with its duties to its shareholders pursuant to Section 4.3.
(e) Prime and Horizon shall use their best efforts to cause the
Proxy Statements to be mailed to their respective shareholders on the same
day and to convene their respective shareholder meetings on the same day,
which day, subject to the provisions of Sections 5.1(c), 5.1(d) and 5.3,
shall be a day not later than forty-five days after the date the Proxy
Statement is mailed.
(f) If on the date for the Prime Shareholders Meeting and Horizon
Shareholders Meeting established pursuant to Section 5.1(e) of this
Agreement, either Prime or Horizon has not received duly executed proxies for
a sufficient number of votes to approve the respective Mergers (but less than
a majority of the outstanding Horizon Common Shares or Prime Common Shares,
as the case may be, have voted against the respective Mergers), then both
parties shall recommend the adjournment of their respective shareholders
meetings until one or more dates not later than the date ten (10) days after
the originally scheduled date of the shareholders meetings.
(g) Horizon shall use commercially reasonable efforts to obtain
the written consents for approval by the limited partners of Horizon
Partnership to the transactions contemplated hereby to the extent required by
the Horizon Partnership Agreement and any other matters reasonably requested
by Prime which are reasonably determined by Prime to be required to effect
the transactions contemplated by this Agreement (collectively, the "Horizon
Partner Approvals") on or prior to the Horizon Shareholder Meeting
established pursuant to Section 5.1(d). Horizon
61
shall use commercially reasonable efforts to obtain the written consents for
approval by the limited partners of Newco LP to the transactions contemplated
hereby, including the Partnership Merger, to the extent required by the
Newco LP partnership agreement and any other matters reasonably requested by
Prime which are reasonably determined by Prime to be required to effect the
transactions contemplated by this Agreement (collectively, the "Newco Partner
Approvals") on or prior to the Horizon Shareholder Meeting established
pursuant to Section 5.1(d). Horizon hereby agrees to vote in favor of such
matters and to recommend to the limited partners of Horizon Partnership and
Newco LP that they approve such matters. Prime shall use commercially
reasonable efforts to obtain written consents for approval by the limited
partners of Prime Partnership to the transactions contemplated hereby to the
extent required by the Prime Partnership Agreement and any other matters
reasonably requested by Horizon which are reasonably determined by Horizon to
be required to effect the transactions contemplated by this Agreement
(collectively, the "Prime Partner Approvals", and together with the Horizon
Partner Approvals and the Newco Partner Approvals, the "Partner Approvals")
on or prior to the Prime Shareholder Meeting established pursuant to Section
5.1(c). Prime hereby agrees to vote in favor of such matters and to
recommend to the limited partners of Prime Partnership that they approve such
matters.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to the
requirements of confidentiality agreements with third parties, each of the
parties hereto shall, and shall cause each of its Subsidiaries to, afford to
the other parties and to the officers, employees, accountants, counsel,
financial advisors and other representatives of such other parties,
reasonable access during normal business hours prior to the Prime/Horizon
Merger Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of the
parties shall, and shall cause each of its Subsidiaries to, furnish promptly
to the other parties (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Each of the parties shall, and shall cause its
Subsidiaries to, use commercially reasonable efforts to cause its officers,
employees, accountants, counsel, financial advisors and other representatives
and affiliates to, hold any nonpublic information in confidence to the extent
required by, and in accordance with, and will comply with the provisions of
the letter agreement dated as of September 18, 1997 by and among Prime,
Horizon and Xxxxxx Brothers (the "Confidentiality Agreement"), as amended.
5.3 REASONABLE BEST EFFORTS; NOTIFICATION.
(a) Subject to the terms and conditions herein provided, each of
the parties shall: (i) use all reasonable best efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Prime/Horizon Merger Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the
Prime/Horizon Merger Effective Time from, governmental or regulatory
authorities of the United States, the several states and foreign
jurisdictions and any third parties in connection with the execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby including without limitation confirmation of the
transactions under the Contribution Agreement and (B) timely making all such
filings and timely seeking all such consents, approvals, permits and
authorizations; (ii) use
62
all reasonable best efforts (other than the payment of money) to obtain in
writing any consents required from third parties to effectuate the Mergers,
such consents to be in form reasonably satisfactory to each of the parties;
and (iii) use all reasonable best efforts to take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary, proper
or appropriate to consummate and make effective the transactions contemplated
by this Agreement. If at any time after the Prime/Horizon Merger Effective
Time any further action is necessary or desirable to carry out the purpose of
this Agreement, each party shall take all such necessary action.
(b) Horizon and Horizon Partnership shall use all reasonable best
efforts to obtain from Ernst & Young LLP access to all work papers relating
to audits of Horizon and Horizon Partnership performed by Ernst & Young LLP,
and the continued cooperation of Ernst & Young LLP with regard to the
preparation of consolidated financial statements for the Surviving Company.
(c) Horizon and Horizon Partnership shall give prompt notice to
Prime and Prime Partnership, and Prime and Prime Partnership shall give
prompt notice to Horizon and Horizon Partnership, (i) if any representation
or warranty made by it contained in this Agreement that is qualified as to
materiality becomes untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becomes untrue or
inaccurate in any material respect or (ii) of the failure by it to comply
with or satisfy in any material respect any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
5.4 TAX TREATMENT.
(a) Each of Prime and Horizon shall use its reasonable best
efforts before the Prime/Horizon Merger Effective Time to cause each of the
Horizon/Subsidiary Merger and the Prime/Horizon Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code, and to
obtain the opinions of counsel referred to in Sections 6.2(e) and 6.3(e).
(b) Immediately upon the Partnership Merger Effective Time,
Horizon Partnership will be treated as terminating for purposes of Code
Section 708(b)(2)(A). Immediately following the Partnership Merger Effective
Time, the Surviving Partnership will elect to use the "traditional method
with curative allocations" under Treasury Regulations Section 1.704-3(c) for
purposes of making allocations under Section 704(c) of the Code with respect
to the properties of or interests held by the Horizon Partnership immediately
before the Partnership Merger Effective Time. Prime Partnership and Horizon
Partnership shall negotiate in good faith to agree upon the "Section 704(c)
values" of the properties of Horizon Partnership, effective as of the
Partnership Merger Effective Time, in accordance with Treasury Regulations
Section 1.704-3(a)(3). The Surviving Partnership shall not, in connection
with the Prime/Horizon Merger (and any termination of Prime Partnership
pursuant thereto under Code Section 708(b)(1)(B)), adjust the capital
accounts of the Prime Partnership pursuant to section 1.704-1(b)(2)(iv)(f) of
the Treasury Regulations.
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(c) Following the Partnership Merger Effective Time, the Surviving
Partnership shall allocate "excess nonrecourse liabilities" under Treasury
Regulations Section 1.752-3(a)(3) among the partners of the Surviving
Partnership as follows:
(i) First, assuming that the assets of the Surviving
Partnership are sold for their relative fair market values, the Surviving
Partnership shall determine for each of its partners the sum of (i) the
amount Code Section 704(c) gain allocable to such partner (taking into
account the relative Code Section 704(c) method elected by the Surviving
Partnership in respect of each contributed asset under Treasury Regulation
Section 1.704-3, and less the amount already allocated to such partner under
Treasury Regulations Section 1.752-3(a)(2)), plus (ii) the amount, if any, of
remaining income and gain which would be further allocated to such Surviving
Partnership partner under the Surviving Partnership Agreement, after all
income and gain allocable to partners under Code Section 704(c) has been
taken into account;
(ii) Second, the Surviving Partnership shall determine a
percentage (the "Tier Three Percentage") for each of its partners equal to
the fraction of the sum computed for such partner in paragraph (i) above,
over the aggregate amount of such sums for all partners of the Surviving
Partnership; and
(iii) Third, the Surviving Partnership shall allocate the
excess nonrecourse liabilities of the Surviving Partnership to each of its
partners, pro rata, in accordance with each partner's Tier Three Percentage.
(d) In the event that Ernst & Young LLP determines that Prime
Partnership will be treated as terminating for purposes of Code Section
708(b)(1)(B) upon the Prime/Horizon Merger Effective Time, then the Surviving
Partnership may elect to use the "traditional method" under Treasury
Regulations Section 1.704-3(b) for purposes of making allocations under
Section 704(c) of the Code with respect to the properties of or interests in
the Prime Partnership immediately before the Partnership Merger Effective
Time.
(e) For any taxable year of the Surviving Partnership that ends
within the period ending on the seventh anniversary of the Partnership Merger
Effective Time, the Surviving Partnership shall use good faith, commercially
reasonable efforts (i) to avoid or minimize any gain recognized by the
partners of the Surviving Partnership, as a result of the refinancing or
repayment of the Surviving Partnership's liabilities, and (ii) in any case in
which a Horizon Property of the Surviving Partnership is to be disposed of,
to engage in a transaction that defers, to the extent possible, the
recognition of gain by such partners under the Code, including, but not
limited to, structuring such disposition as part of a tax-free exchange under
Code Section 1031.
(f) Prime Partnership and Horizon Partnership agree that the
transactions that are contemplated by the C&C/Xxxxxxx Agreements which occur
upon the Closing shall be treated as taking place immediately after the
Partnership Merger Effective Time.
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5.5 PUBLIC ANNOUNCEMENTS. Each party will consult with each other
party before issuing, and provide each other the opportunity to review and
comment upon, any press release or other written public statements which
address in any manner the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such written public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with
any national securities exchange. The parties agree that the initial press
release to be issued with respect to the transactions contemplated by this
Agreement will be in the form agreed to by the parties concurrent with the
execution of this Agreement.
5.6 LISTING. Prime shall use all reasonable best efforts to cause the
Surviving Company Common Shares and Surviving Company Series B Preferred
Shares to be issued in the Prime/Horizon Merger and the Surviving Company
Common Shares and Surviving Company Series B Preferred Shares reserved for
issuance upon redemption of Prime Common Units and Prime Series B Preferred
Units issued in the Partnership Merger, to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Prime/Horizon
Merger Effective Time.
5.7 TRANSFER AND GAINS TAXES. Each party shall cooperate in the
preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement (together with any related interests, penalties or additions to
tax, "Transfer and Gains Taxes"). From and after the Prime/Horizon Merger
Effective Time, Surviving Company shall pay or cause Prime Partnership, as
appropriate, to pay or cause to be paid, without deduction or withholding
from any amounts payable to the holders of Surviving Company Common Shares or
Surviving Company Series B Preferred Shares or Prime OP Units or Prime Series
B Preferred Units, as applicable, all Transfer and Gains Taxes (which term
shall not in any event be construed to include for these purposes any tax
imposed under the Code or any applicable state or local tax imposed upon net
or gross income).
5.8 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS.
(a) BENEFIT PLANS. After the Prime/Horizon Merger Effective Time,
all employees of Prime who are employed by the Surviving Company shall, at
the option of the Surviving Company, either continue to be eligible to
participate in an "employee benefit plan", as defined in Section 3(3) of
ERISA, of Prime which is, at the option of the Surviving Company, continued
by the Surviving Company, or alternatively shall be eligible to participate
in the same manner as other similarly situated employees of the Surviving
Company who were formerly employees of Horizon in any "employee benefit
plan," as defined in Section 3(3) of ERISA, sponsored or maintained by the
Surviving Company after the Prime/Horizon Merger Effective Time. With respect
to each such employee benefit plan, service with Horizon, any Horizon
Subsidiary, Prime or any Prime Subsidiary (as applicable) and the predecessor
of any of them shall be included for purposes of determining eligibility to
participate, vesting (if applicable) and entitlement to benefits.
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(b) STOCK OPTIONS.
(i) As of the Prime/Horizon Merger Effective Time, each
outstanding Prime Stock Option shall be assumed by Surviving Company and
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Prime Stock Option, the same number
of Surviving Company Common Shares as the holder of such Prime Stock Option
would have been entitled to receive pursuant to the Prime/Horizon Merger had
such holder exercised such Prime Stock Option in full immediately prior to
the Prime/Horizon Merger Effective Time at a price per share equal to the
aggregate exercise price for the shares subject to such Prime Stock Option
divided by the number of full Surviving Company Common Shares deemed to be
purchasable pursuant to such Prime Stock Option.
(ii) As of the Prime/Horizon Merger Effective Time, each Sky
Merger Stock Option outstanding under (a) the Horizon 1993 Stock Option
Plan and (b) the Horizon Long Term Incentive Plan (to the extent permitted
under the terms of such plan and the terms of the Horizon Options outstanding
under such plan) (in each case, as assumed by Sky Merger pursuant to the
Horizon/Subsidiary Merger) shall in each case automatically be canceled and
all rights with respect thereto shall cease to exist (other than the Sky
Merger Stock Options outstanding and held by Xxxxxxx Xxxx). As of the
Prime/Horizon Merger Effective Time, each Sky Merger Stock Option outstanding
under the Horizon 1997 Stock Option Plan or the Horizon Director/Stock Option
Plan and each other outstanding Sky Merger Option not canceled pursuant to
the immediately preceding sentence shall constitute an option to acquire, on
the same terms and conditions as were applicable under such Sky Merger Stock
Option (other than as provided in the proviso to this sentence), that number
of Surviving Company Common Shares equal to the product of (A) 0.9193 times
(B) the number of Sky Merger Common Shares subject to such Horizon Stock
Option at an aggregate exercise price per share equal to the aggregate
exercise price per share set forth in such Sky Merger Stock Option; provided,
however, that (1) each option shall continue to be exercisable until its
expiration date notwithstanding the termination of employment, death or
disability of the optionee, and (2) the number of Surviving Company Common
Shares that may be purchased upon exercise of such Sky Merger Stock Option
shall not include any fractional shares and, upon the first such exercise of
such Sky Merger Stock Option, a cash payment shall be made for any fractional
shares calculated in accordance with and in the manner provided for
calculations as to be paid in lieu of fractional shares as part of the
Prime/Horizon Merger Consideration under Section 1.17(g).
(iii) As soon as practical after the Closing Date, Prime
shall file a registration statement under the Securities Act covering the
shares issuable pursuant to the stock options assumed by the Surviving
Company pursuant to the provisions of Section 5.8(b).
(c) WITHHOLDING. To the extent required by applicable law, Horizon
shall require each employee who exercises a Horizon Stock Option or who
receives Horizon Common Shares or Sky Merger Common Shares pursuant to any
existing commitment to pay to Horizon in cash or Horizon Common Shares or Sky
Merger Common Shares an amount sufficient to satisfy in full Horizon's
obligation to withhold Taxes incurred by reason of such exercise or issuance.
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(d) RETENTION PROGRAM. Prior to the Closing Date, Horizon may
implement a retention program for key employees pursuant to which up to an
aggregate of $990,000 may be paid to such key employees who continue to be
employed through a date certain (to be approved by Prime) or who are
terminated without cause prior to such date certain.
5.9 INDEMNIFICATION.
(a) From and after the Prime/Horizon Merger Effective Time the
Surviving Company shall indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date of this Agreement or who
becomes prior to the Prime/Horizon Merger Effective Time, an officer,
director or employee of Horizon or any Horizon Subsidiary (including, without
limitation, Newco and Newco LP) (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses, liabilities or judgments, or
amounts that are paid in settlement with the approval of the indemnifying
party (which approval shall not be unreasonably withheld) of, or in
connection with, any claim, action, suit, proceeding or investigation to the
extent related to, or to the extent arising in whole or in part directly or
indirectly out of the fact that such person is or was a director, officer or
employee of Horizon or any Horizon Subsidiary (including, without limitation,
Newco), whether pertaining to any matter existing or occurring at or prior to
the Prime/Horizon Merger Effective Time (including, without limitation, any
and all transactions resulting directly or indirectly from the transactions
contemplated hereby or the documents delivered hereunder) and whether
asserted or claimed prior to, or at or after, the consummation of the
transactions contemplated hereby or any document contemplated hereunder
("Indemnified Liabilities"), in each case to the full extent a corporation is
permitted under the MGCL (and the Surviving Company will pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
affirmation and undertaking required by the MGCL arising from the
investigation, defense or settlement of such Indemnification Liabilities).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Prime/Horizon Merger Effective Time), (i) the
Indemnified Parties may retain counsel satisfactory to them with the consent
of the Surviving Company which consent may not be unreasonably withheld, (ii)
the Surviving Company shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (iii) the Surviving Company will use all reasonable efforts to
assist in the defense of any such matter, provided that the Surviving Company
shall not be liable for any settlement of any claim effected without its
written consent, which consent, however, shall not be unreasonably withheld.
Any Indemnified Party wishing to claim indemnification under this Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Surviving Company (but the failure so to
notify shall not relieve the Company or the Surviving Company from any
liability which it may have under this Section 5.9(a) except to the extent
such failure materially prejudices such party), and shall deliver to the
Surviving Company any affirmation and undertaking contemplated by the MGCL.
The Indemnified Parties as a group may retain only one law firm to represent
them with respect to each such matter unless there is, under applicable
standards of professional conduct, a conflict on any significant issue
between the positions of any two or more Indemnified Parties. The provisions
for the indemnification and advancement of expenses set forth
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in this Agreement are not exclusive of any rights an Indemnified Party may
have under any contract, law or otherwise.
(b) The Surviving Company shall obtain and maintain in effect at
the Prime/Horizon Merger Effective Time and continuing until the sixth
anniversary thereof "run-off" directors and officers liability insurance with
a coverage amount and other terms and conditions comparable to Horizon's
current directors and officers liability insurance policy covering the
directors and officers of Horizon with respect to their service as such prior
to the Prime/Horizon Merger Effective Time.
(c) This Section 5.9 is intended for the irrevocable benefit of,
and to grant third party rights to, the Indemnified Parties and their
successors, assigns and heirs and shall be binding on all successors and
assigns of Surviving Company. Each of the Indemnified Parties shall be
entitled to enforce the covenants contained in this Section 5.9 and Surviving
Company acknowledges and agrees that each Indemnified Party would suffer
irreparable harm and that no adequate remedy at law exists for a breach of
such covenants and such Indemnified Party shall be entitled to injunctive
relief and specific performance in the event of any breach of any provision
in this Section.
(d) In the event that the Surviving Company or any of its
respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case
the successors and assigns of such entity shall assume the obligations set
forth in this Section 5.9, which obligations are expressly intended to be for
the irrevocable benefit of, and shall be enforceable by, each director and
officer covered hereby.
(e) At the Closing, the Surviving Company shall deliver to each
Indemnified Party a written acknowledgment of the Surviving Company's
indemnity obligations to such Indemnified Party pursuant to this Agreement.
5.10 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS. From and after the
date of this Agreement, neither Horizon nor Horizon Partnership, on the one
hand, nor Prime nor Prime Partnership, on the other hand, shall declare or
pay any dividend or distribution to its shareholders or partners, as the case
may be, without the prior written consent of Prime or Horizon, respectively;
provided, however, that such written consent shall not be required for the
declaration and payment of (i) (a) a distribution of $0.295 per Prime Common
Share, $0.65625 per Prime Series A Preferred Share, $0.53125 per Prime Series
B Preferred Share, $0.09699 per Prime Series C Preferred Share, $0.295 per
Prime Series C Preferred Unit and $0.295 per Prime Common Unit, each payable
on February 17, 1998 to shareholders/unitholders of record as of February 2,
1998 and (b) a distribution with respect to each Horizon Common Share or
Horizon OP Unit in the first quarter of 1998 in an amount equal to $0.105,
(ii) a quarterly distribution with respect to each Horizon Common Share or
Horizon OP Unit in any quarterly period ending after March 31, 1998 in an
amount equal to the product of (A) 0.9193 times (B) the dividend or
distribution declared in respect of each Prime
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Common Share or Prime OP Unit in such quarterly period, (iii) Prime Regular
Quarterly Distributions, (iv) the Prime Newco Distribution, (v) any
distribution contemplated by the Contribution Agreement and (vi) any
distribution contemplated by Section 1.14(d), Section 1.16 or Section 1.17
hereof; provided, however, that, except for distributions described in the
foregoing clauses (i), (iv) and (v), the record date for each distribution
with respect to the Horizon Common Shares and the Horizon OP Units, on the
one hand, shall be the same date as the record date for the quarterly
distributions for the Prime Common Shares and the Prime Common Units, on the
other hand, as provided to Horizon by notice not less than fifteen (15) days
prior to the record date for any quarterly distribution by Prime or Prime
Partnership.
The foregoing restrictions shall not apply, however, to the extent a
distribution by Horizon or Prime is necessary for Horizon or Prime, as
applicable, to maintain REIT status.
5.11 TRANSFER OF SHARES/INTERESTS IN NON-WHOLLY OWNED SUBSIDIARIES OF
HORIZON; C&C/XXXXXXX AGREEMENTS.
(a) At the Closing and pursuant to the Stock Purchase Agreement,
Xxxxxx Xxxxxxxx shall transfer to Prime Retail Services, Inc. or such person
or persons as Prime Retail Services, Inc. shall designate by written notice
delivered to him prior to the Closing, all of the shares of First HGI, Inc.,
HGI Perryville, Inc., MG Third Party Services Corp., HGI Management Corp. and
Second HGI, Inc. owned by him, constituting all the outstanding shares of
such companies which are not owned by Horizon Partnership, for an aggregate
consideration in an amount equal to the fair market value of such shares, as
determined in accordance with the provisions of the Stock Purchase Agreement.
(b) Prior to Closing Prime shall use commercially reasonably
efforts to acquire from FLOC, L.L.C. all of the outstanding membership
interests (other than such interests held by Horizon Partnership) of Finger
Lakes Outlet Center L.L.C. held by FLOC, L.L.C. on the terms and conditions
set forth on Schedule 5.11 to the Prime Disclosure Letter.
(c) Prior to Closing, Horizon and Horizon Partnership shall use
commercially reasonable efforts to consummate the transactions contemplated
by the C&C/Xxxxxxx Agreements and to enforce the rights of Horizon and
Horizon Partnership thereunder. Horizon shall promptly notify Prime upon
Horizon or Horizon Partnership obtaining Knowledge of any breach of or
default under any terms or provisions of the C&C/Xxxxxxx Agreements or of any
event which could otherwise adversely affect in a material way the rights of
Horizon or Horizon Partnership thereunder.
5.12 NOTICES. Prime and Horizon shall provide such notice to its
shareholders of the Mergers as is required under Maryland and Michigan law.
5.13 RESIGNATIONS. On the Closing Date, Horizon shall cause the
directors and officers of each of the Horizon Subsidiaries to submit their
resignations from such positions, effective as of the Partnership Merger
Effective Time as requested by Prime.
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5.14 THIRD PARTY MANAGEMENT AGREEMENTS. Horizon will not, and will not
permit any of its Subsidiaries to, amend the management agreements pursuant
to which Horizon, directly or indirectly, manages buildings in which Horizon
does not own a 100% interest. Horizon will not, and will not permit any
Horizon Subsidiary to, renew such management agreements except on terms which
permit its cancellation by Horizon or the applicable Horizon Subsidiary on
thirty days' notice or less without any charge, penalty or other cost for
such cancellation.
5.15 CONTRIBUTION AGREEMENT. Horizon shall cause Newco to execute the
transactions contemplated hereby to which Newco is a party provided that
Horizon has obtained all material consents required to be obtained by Horizon
and the Horizon Subsidiaries from third parties in order to perform their
respective obligations under the Contribution Agreement and the other
agreements contemplated hereby to which Newco is a party, except for those
consents set forth on Schedule 5.15 to the Horizon Disclosure Letter.
Horizon shall diligently seek and use commercially reasonable efforts to
obtain such consents prior to the Closing Date. Horizon shall keep Prime
currently apprised of its progress in obtaining such consents. Horizon shall
inform Prime promptly if it appears unlikely that any given consent will be
obtained. Horizon shall cooperate with Prime in taking any action to either
obtain such consents or to put Horizon and the Horizon Subsidiaries in a
position so that such consents are no longer required; provided such action
does not cost Horizon a material amount.
5.16 ACTIONS UPON ISSUANCE OF INJUNCTION OR RESTRAINT. In the event
that the transactions contemplated by this Agreement cannot be consummated by
the parties hereto on the Closing Date due to the failure to satisfy the
condition contained in Section 6.1(d), then the parties hereto shall use
their commercially reasonable efforts to restructure the transactions
contemplated hereby in a manner that would (i) enable the condition contained
in Section 6.1(d) to be satisfied or (ii) provide the same economic and other
material benefits to the parties hereto in a manner satisfactory to all
parties hereto. Notwithstanding the foregoing, the obligations contained in
this Section 5.17 shall not affect, alter or in any way supersede the rights
of the parties hereto under Article VII hereof if such restructuring cannot
be accomplished prior to July 31, 1998.
5.17 DESIGNATED PROPERTIES. The parties hereto acknowledge that Horizon
and Horizon Partnership may explore the sale of the Designated Properties
prior to Closing in accordance with the provisions hereof, including without
limitation Sections 1.18 and 4.1 hereof, and shall permit Prime and Prime
Partnership and their financial and legal advisors to participate in such
sale process; provided, however, that such agreements may provide at
Horizon's election that such agreements are terminable by Horizon if this
Agreement is terminated for any reason.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS. The
respective obligations of each party to effect the Mergers and to consummate the
other transactions
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contemplated by this Agreement to occur on the Closing Date shall be subject
to the fulfillment or written waiver at or prior to the Closing Date of the
following conditions:
(a) SHAREHOLDER AND PARTNER APPROVALS. This Agreement, the
Mergers and all other matters necessary to consummate the other transactions
contemplated to occur on the Closing Date and the transactions contemplated
by this Agreement shall have been approved and adopted by the Shareholder
Approvals and all required Partner Approvals shall have been obtained.
(b) LISTING OF SHARES. The NYSE shall have approved for listing
the Surviving Company Common Shares and Surviving Company Series B Preferred
Shares to be issued in the Prime/Horizon Merger and the Surviving Company
Common Shares reserved for issuance upon exchange of Prime Common Units and
Prime Series B Preferred Units issued in the Partnership Merger, subject to
official notice of issuance.
(c) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings by the SEC seeking a stop order.
(d) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Mergers or any of the other transactions contemplated
hereby shall be in effect.
(e) BLUE SKY LAWS. Prime shall have received all state securities
or "blue sky" permits and other authorizations necessary to issue the Merger
Consideration.
(f) GOVERNMENTAL ENTITY ACTIONS AND CONSENTS. All material
actions by or in respect of or filings with any Governmental Entity required
for the consummation of the transactions contemplated hereby shall have been
obtained or made.
6.2 CONDITIONS TO OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP. The
obligations of Prime and Prime Partnership to effect the Mergers and to
consummate the other transactions contemplated to occur on the Closing Date
are further subject to the following conditions, any one or more of which may
be waived by Prime:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Horizon and Horizon Partnership (without giving effect to any
"materiality" qualification or limitation) set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing
Date, as though made on and as of the Closing Date, except to the extent such
representation or warranty is expressly limited by its terms to another date,
and Prime shall have received a certificate (which certificate may be
qualified by knowledge to the same extent as the representations and
warranties of Horizon and Horizon Partnership contained herein are so
qualified) signed on behalf of Horizon by the chief executive officer or the
chief financial officer of Horizon, in such capacity, to such effect. This
condition shall be deemed satisfied notwithstanding any failure
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of a representation or warranty of Horizon or Horizon Partnership to be true
and correct as of the Closing Date (without giving effect to any materiality
qualification or limitation) if the aggregate amount of Horizon Economic
Losses (as defined below) that would reasonably be expected to arise as a
result of the failures of such representations and warranties to be true and
correct as of the Closing Date does not exceed $50,000,000 (such amount to be
calculated by counting in all cases from the first dollar of such Horizon
Economic Losses). "Horizon Economic Losses" shall mean any and all net
damage, net loss, net liability or expenses suffered by Horizon and the
Horizon Subsidiaries taken as a whole, but shall not include any claims,
damages, loss, expense or other liability resulting from any class action or
shareholders' derivative lawsuits relating to the Mergers against Horizon or
the Horizon Subsidiaries, if any, filed subsequent to the date of this
Agreement or any amounts paid or expenses incurred by Horizon or its
Subsidiaries in obtaining non-governmental third party consents.
(b) PERFORMANCE OF OBLIGATIONS OF HORIZON, SKY MERGER AND HORIZON
PARTNERSHIP. Horizon and Horizon Partnership shall have performed in all
material respects all obligations required to be performed by them under this
Agreement at or prior to the Prime/Horizon Merger Effective Time, and Prime
shall have received a certificate signed on behalf of Horizon by the chief
executive officer or the chief operating officer of Horizon, in such
capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Horizon Material Adverse Change taken as a whole,
that have resulted or would result individually or in the aggregate, in
Horizon Economic Losses of $50,000,000 or more and Prime shall have received
a certificate of the chief executive officer or operating officer of Horizon,
in such capacity, certifying to such effect.
(d) TAX OPINIONS RELATING TO REIT STATUS AND PARTNERSHIP STATUS.
Prime shall have received an opinion of Xxxxxxx & Xxxxx or other counsel to
Horizon reasonably satisfactory to Prime, dated as of the Closing Date, to
the effect that, subject to customary exceptions, assumptions, certificates
and qualifications and based upon customary representations, (x) for each of
its taxable years ending after December 31, 1993, Horizon has operated and
complied with the requirements for qualification as a REIT under the Code,
and (y) each Horizon Subsidiary which has been formed as a partnership, joint
venture or limited liability company is, for federal income tax purposes, a
partnership and not a corporation or association or publicly traded
partnership taxable as a corporation.
(e) TAX OPINION RELATING TO THE MERGERS. Prime shall have
received an opinion dated the Closing Date from Winston & Xxxxxx or other
counsel reasonably satisfactory to Prime, dated as of the Closing Date, to
the effect that, subject to customary exceptions, assumptions, certificates
and qualifications and the opinion of counsel to Horizon described in clause
Section 6.2(d)(i) above, and based upon customary representations, to the
effect that each of the Horizon/Prime Merger and the Horizon/Subsidiary
Merger will qualify as a reorganization under the provisions of Section
368(a) of the Code.
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(f) "COMFORT" LETTER. Prime and Prime Partnership shall have
received a "comfort" letter from Ernst & Young LLP, as described in Section
5.1(b).
(g) SHARES OF NON WHOLLY-OWNED COMPANIES. All of the voting
shares of First HGI, Inc., HGI Perryville, Inc., MG Third Party Services
Corp., HGI Management Corp. and Second HGI, Inc. (other than any such shares
owned by Horizon Partnership) shall have been transferred to Prime Retail
Services, Inc., or its designees or assigns, in accordance with the Stock
Purchase Agreement.
(h) CONTRIBUTION AGREEMENT. Horizon, Horizon Partnership, Sky
Merger, Newco and Newco LP shall have entered into the Contribution Agreement
and all of the conditions to the consummation of the transactions
contemplated thereby shall have been satisfied and each of the transactions
contemplated thereby shall have been completed to the extent required to be
completed thereunder as of such time.
6.3 CONDITIONS TO OBLIGATIONS OF HORIZON AND HORIZON PARTNERSHIP. The
obligations of Horizon and Horizon Partnership to effect the Mergers and to
consummate the other transactions contemplated to occur on the Closing Date
is further subject to the following conditions, any one or more of which may
be waived in writing by Horizon:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Prime and Prime Partnership (without giving effect to any
"materiality" qualification or limitation) set forth in this Agreement shall
be true and correct as of the date of this Agreement and as of the Closing
Date, as though made on and as of the Closing Date, except to the extent the
representation or warranty is expressly limited by its terms to another date,
and Horizon shall have received a certificate (which certificate may be
qualified by knowledge to the same extent as such representations and
warranties of Prime and Prime Partnership contained herein are so qualified)
signed on behalf of Prime by the chief executive officer or the chief
financial officer of such party, in such capacity, to such effect. This
condition shall be deemed satisfied notwithstanding any failure of a
representation or warranty of Prime or Prime Partnership to be true and
correct as of the Closing Date (without giving effect to any materiality
qualification) if the aggregate amount of Prime Economic Losses (as defined
below) that would reasonably be expected to arise as a result of the failures
of such representations and warranties to be true and correct as of the
Closing Date does not exceed $50,000,000 (such amount to be calculated by
counting in all cases from the first dollar of such Prime Economic Losses).
"Prime Economic Losses" shall mean any and all net damage, net loss, net
liability or expenses suffered by Prime and the Prime Subsidiaries taken as a
whole, but shall not include any claims, damages, loss, expense or other
liability resulting from any class action or shareholders' derivative
lawsuits relating to the Mergers against Prime or the Prime Subsidiaries, if
any, filed subsequent to the date of this Agreement or any amounts paid or
expenses incurred by Prime or its Subsidiaries in obtaining non-governmental
third party consents.
(b) PERFORMANCE OF OBLIGATIONS OF PRIME AND PRIME PARTNERSHIP.
Prime and Prime Partnership shall have performed in all material respects all
obligations required to be performed by
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it under this Agreement at or prior to the Prime/Horizon Merger Effective
Time, and Horizon shall have received a certificate of Prime signed on behalf
of Prime by the chief executive officer or the chief financial officer of
Prime, in such capacity, to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
there shall have been no Prime Material Adverse Change taken as a whole, that
have resulted or would result individually or in the aggregate, in Prime
Economic Losses of $50,000,000 or more and Horizon shall have received a
certificate of the chief executive officer or operating officer of Prime, in
such capacity, certifying to such effect.
(d) TAX OPINIONS RELATING TO REIT STATUS AND PARTNERSHIP STATUS.
Horizon shall have received an opinion of Winston & Xxxxxx or other counsel
to Prime reasonably satisfactory to Horizon, dated as of the Closing Date, to
the effect that, subject to customary exceptions, assumptions, certificates
and qualifications and based upon customary representations, (x) for each of
its taxable years since formation, Prime has operated and complied with the
requirements for qualification as a REIT under the Code, and (y) Prime
Partnership is, for federal income tax purposes, a partnership and not a
corporation or association or publicly traded partnership taxable as a
corporation.
(e) TAX OPINION RELATING TO MERGERS. Horizon shall have received
an opinion dated the Closing Date from Xxxxxxx & Xxxxx or other counsel
reasonably satisfactory to Horizon, dated as of the Closing Date, to the
effect that, subject to customary exceptions, assumptions, certificates and
qualifications and the opinion of counsel to Prime described in Section
6.3(i) above, and based upon customary representations, to the effect that
each of the Horizon/Prime Merger and the Horizon/Subsidiary Merger will
qualify as a reorganization under the provisions of Section 368(a) of the
Code.
(f) "COMFORT" LETTER. Horizon and Horizon Partnership shall have
received a "comfort" letter from Ernst & Young LLP, as described in Section
5.1(b).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to
the filing of the Delaware Certificate of Merger with the Delaware Secretary,
whether before or after either of the Shareholder Approvals are obtained:
(a) by mutual written consent duly authorized by the Board of
Directors of Prime and the Board of Directors of Horizon;
(b) by Prime, upon (i) a breach of any representation, warranty,
covenant, obligation or agreement on the part of Horizon or Horizon
Partnership set forth in this Agreement, or (ii) if any representation or
warranty of Horizon or Horizon Partnership shall become untrue, in
74
the case of either (i) or (ii), such that the conditions set forth in
Section 6.2(a) or Section 6.2(b), as the case may be, would be incapable of
being satisfied by July 31, 1998 (or as otherwise extended);
(c) by Horizon, upon (i) a breach of any representation, warranty,
covenant obligation or agreement on the part of Prime or Prime Partnership
set forth in this Agreement, or (ii) if any representation or warranty of
Prime or Prime Partnership shall become untrue, in the case of either (i) or
(ii), such that the conditions set forth in Section 6.3(a) or Section 6.3(b),
as the case may be, would be incapable of being satisfied by July 31, 1998
(or as otherwise extended);
(d) by either Prime or Horizon, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of any of the Mergers shall have become final and
non-appealable;
(e) by either Prime or Horizon, if the Mergers shall not have been
consummated before July 31, 1998; provided, however, that a party may not
terminate pursuant to this clause (e) if the terminating party shall have
breached in any material respect its obligations under this Agreement in such
a manner that shall have proximately contributed to the failure to close;
(f) by either Prime or Horizon (unless Horizon or Horizon
Partnership is in breach of its obligations under Section 5.1) if, upon a
vote at a duly held Horizon Shareholders Meeting or any adjournment thereof,
the Horizon Shareholder Approvals shall not have been obtained as
contemplated by Section 5.1 (excluding Section 5.1(d)) or the Horizon Partner
Approvals or Newco LP Partner Approvals shall not have been obtained;
(g) by either Horizon or Prime (unless Prime or Prime Partnership
is in breach of its obligations under Section 5.1 (excluding Section 5.1(d))
if, upon a vote at a duly held Prime Shareholders Meeting or any adjournment
thereof, the Prime Shareholder Approvals shall not have been obtained as
contemplated by Section 5.1 (excluding Section 5.1(d)) or the Prime Partner
Approvals shall not have been obtained;
(h) by Horizon, upon payment to Prime of the amounts referred to
in Section 7.2, if prior to the Horizon Shareholders Meeting, the Board of
Directors of Horizon shall have withdrawn or modified in any manner adverse
to Prime its approval or recommendation of the Mergers or this Agreement in
connection with, or approved or recommended, a Superior Acquisition Proposal;
and
(i) by Prime, if (A) prior to the Horizon Shareholders Meeting,
the Board of Directors of Horizon shall have withdrawn or modified in any
manner adverse to Prime its approval or recommendation of the Mergers or this
Agreement in connection with, or approved or recommended, any Superior
Acquisition Proposal, (B) Horizon shall have entered into any agreement for
any Acquisition Proposal, or (C) the Board of Directors of Horizon or any
committee thereof shall have resolved to do any of the foregoing.
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7.2 CERTAIN FEES AND EXPENSES. If this Agreement shall be terminated
(i) pursuant to Section 7.1(h) or 7.1(i), then Horizon and Horizon
Partnership thereupon shall pay to Prime Partnership a fee equal to the
Break-Up Fee (as defined below) and Break-Up Expenses (as defined below), and
(ii) pursuant to Section 7.1(b) or 7.1(f), then Horizon and Horizon
Partnership shall pay to Prime Partnership (provided that Horizon was not
entitled to terminate this Agreement pursuant to Section 7.1(c) at the time
of such termination) an amount equal to the Break-Up Expenses (as defined
below). If this Agreement shall be terminated pursuant to Section 7.1(c) or
7.1(g), then Prime and Prime Partnership shall pay Horizon Partnership
(provided that Prime was not entitled to terminate this Agreement pursuant to
Section 7.1(b) at the time of such termination) an amount equal to the
Break-Up Expenses. If this Agreement shall be terminated pursuant to Section
7.1(b), 7.1(d) (if primarily resulting from any action or inaction of Horizon
or any Horizon Subsidiary), 7.1(e) or 7.1(f) and prior to the time of such
termination an Acquisition Proposal has been received by Horizon or any
Horizon Subsidiary, and either prior to the termination of this Agreement or
within twelve (12) months thereafter, Horizon or any Horizon Subsidiary
enters into any written Acquisition Proposal which is subsequently
consummated (whether or not any such Acquisition Proposal is the same
Acquisition Proposal which had been received at the time of the termination
of this Agreement), then Horizon and Horizon Partnership shall pay the
Break-Up Fee and Break-Up Expenses to Prime Partnership. If prior to the
Horizon Shareholders Meeting the Board of Directors of Horizon shall have
withdrawn or modified in any manner adverse to Prime its approval or
recommendation of the Mergers or this Agreement and, within twelve (12)
months after termination of this Agreement, Horizon or Horizon Partnership
enters into any written Acquisition Proposal which is subsequently
consummated (whether or not any Acquisition Proposal had been received prior
to the time of the termination of this Agreement), then Horizon and Horizon
Partnership shall pay the Break-Up Fee to Prime Partnership. The payment of
the Break-Up Fee shall be compensation for the loss suffered by Prime and
Prime Partnership as a result of the failure of the Mergers to be consummated
(including, without limitation, opportunity costs and out-of-pocket costs and
expenses) and to avoid the difficulty of determining damages under the
circumstances. The Break-Up Fee shall be paid by Horizon and Horizon
Partnership to Prime Partnership, or the Break-Up Expenses shall be paid by
Horizon and Horizon Partnership to Prime Partnership or Prime Partnership to
Horizon Partnership (as applicable), in immediately available funds within
fifteen (15) calendar days after the date the event giving rise to the
obligation to make such payment occurred (except as otherwise provided in
Section 7.1(h)). As used in this Agreement, "Break-Up Fee" shall be an amount
equal to the lesser of (i) $20,000,000 (the "Base Amount") and (ii) the sum
of (A) the maximum amount that can be paid to Prime Partnership without
causing Prime to fail to meet the requirements of Sections 856(c)(2) and (3)
of the Code determined as if the payment of such amount did not constitute
income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the
Code ("Qualifying Income"), as determined by independent accountants to
Prime, and (B) in the event Prime receives a letter from outside counsel (the
"Break-Up Fee Tax Opinion") indicating that Prime has received a ruling from
the IRS holding that Prime Partnership's receipt of the Base Amount would
either constitute Qualifying Income or would be excluded from gross income of
Prime within the meaning of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") or that the receipt by Prime Partnership of the remaining
balance of the Base Amount following the receipt of and pursuant to such
ruling would not be deemed constructively received prior thereto, the Base
Amount less the amount payable under clause (A) above. Horizon's and Horizon
Partnership's obligation to
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pay any unpaid portion of the Break-Up Fee shall terminate three years from
the date of this Agreement. In the event that Prime Partnership is not able
to receive the full Base Amount, Horizon and Horizon Partnership shall place
the unpaid amount in escrow and shall not release any portion thereof to
Prime Partnership unless and until Horizon receives either one of the
following: (i) a letter from Prime's independent accountants indicating the
maximum amount that can be paid at that time to Prime Partnership without
causing Prime to fail to meet the REIT Requirements or (ii) a Break-Up Fee
Tax Opinion, in either of which events Horizon and Horizon Partnership shall
pay to Prime Partnership the lesser of the unpaid Base Amount or the maximum
amount stated in the letter referred to in (i) above. The "Break-Up Expenses"
payable to Prime Partnership or Horizon Partnership, as the case may be (the
"Recipient"), shall be an amount equal to the lesser of (i) $4,500,000, (ii)
the Recipient's out-of-pocket expenses incurred in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, all attorneys', accountants' and investment bankers' fees and
expenses) or (iii) the sum of (A) the maximum amount that can be paid to the
Recipient without causing Prime or Horizon, as the case may be, to fail to
meet the requirements of Sections 856(c)(2) and (3) of the Code determined as
if the payment of such amount did not constitute Qualifying Income, as
determined by independent accountants to the Prime or Horizon, as the case
may be, and (B) in the event Prime or Horizon, as the case may be, receives a
Break-Up Fee Tax Opinion indicating that it has received a ruling from the
IRS holding that the Recipient's receipt of the Break-Up Expenses would
either constitute Qualifying Income or would be excluded from gross income of
Prime or Horizon, as the case may be, within the meaning of the REIT
Requirements or that receipt by the Recipient of the remaining balance of the
Break-Up Expenses following the receipt of and pursuant to such ruling would
not be deemed constructively received prior thereto, the Break-Up Expenses
less the amount payable under clause (A) above. The obligation of Prime and
Prime Partnership or Horizon and Horizon Partnership, as applicable
("Payor"), to pay any unpaid portion of the Break-Up Expenses shall terminate
three years from the date of this Agreement. In the event that the Recipient
is not able to receive the full Break-Up Expenses, the Payor shall place the
unpaid amount in escrow and shall not release any portion thereof to the
Recipient unless and until the Payor receives either one of the following:
(i) a letter from the independent accountants of Prime or Horizon, as the
case may be, indicating the maximum amount that can be paid at that time to
the Recipient without causing it to fail to meet the REIT Requirements or
(ii) a Break-Up Expense Tax Opinion, in either of which events the Payor
shall pay to the Recipient the lesser of the unpaid Break-Up Expenses or the
maximum amount stated in the letter referred to in (i) above.
7.3 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Horizon or Prime as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Prime, Prime Partnership, Newco, Newco
LP, Sky Merger, Horizon or Horizon Partnership, other than the last sentence
of Section 5.2, Section 7.2, this Section 7.3 and Article 8, and except to
the extent that such termination results from a material breach by any party
of any of its representations, warranties, covenants or agreements set forth
in this Agreement.
7.4 AMENDMENT. This Agreement may be amended by the parties in writing
by action of the respective Board of Directors of Prime and Horizon at any
time before or after any
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Shareholder Approvals are obtained and prior to the filing of the Delaware
Certificate with the Delaware Secretary; provided, however, that, after the
Shareholder Approvals and Partner Approvals are obtained, no such amendment,
modification or supplement shall be made which by law requires the further
approval of shareholders without obtaining such further approval. The parties
agree to amend this Agreement in the manner provided in the immediately
preceding sentence to the extent required to (a) continue the status of each
of Prime and Horizon (and its successor Horizon Subsidiary) as a REIT, or (b)
preserve each of the Prime/Horizon Merger and the Horizon/Subsidiary Merger
as a tax-free reorganization under Section 368 of the Code.
7.5 EXTENSION; WAIVER. At any time prior to the Partnership Merger
Effective Time, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other party, (b) waive any
inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) subject to the proviso of Section 7.4, waive compliance with
any of the agreements or conditions of the other party contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement confirming the representations and
warranties in this Agreement shall survive the Prime/Horizon Merger Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Prime/Horizon
Merger Effective Time.
8.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be
delivered personally, sent by overnight courier (providing proof of delivery)
to the parties or sent by telecopy (providing confirmation of transmission)
at the following addresses or telecopy numbers (or at such other address or
telecopy number for a party as shall be specified by like notice):
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(a) if to Prime, to:
Prime Retail, Inc.
000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
Xxxxxxx Xxxxxxxxx
C. Xxxx Xxxxxxxxx
Fax No.: (000) 000-0000
with a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Fax No.: (000) 000-0000
(b) if to Horizon, to:
Horizon Group, Inc.
0000 Xxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxxx
Xxxxx X. Xxxxxx
Fax.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Xxx X. Xxxxx
Fax No.: (000) 000-0000
All notices shall be deemed given only when actually received.
8.3 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any
79
way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation."
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party.
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement,
the Confidentiality Agreement and the Stock Purchase Agreement and the other
agreements entered into in connection with the Mergers (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral between the parties with respect to the subject matter of
this Agreement, including without limitation the Original Merger Agreement
and (b) except as provided in Sections 1.8, 1.11, 1.12, 1.13, 1.14, 5.8, 5.9,
and 8.5 ("Third Party Provisions"), are not intended to confer upon any
person other than the parties hereto any rights or remedies.
8.6 GOVERNING LAW. THE PARTNERSHIP MERGER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS
OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF
CONFLICT OF LAWS THEREOF. EXCEPT AS PROVIDED IN THE IMMEDIATELY PRECEDING
SENTENCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT MIGHT
OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated,
in whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
8.8 ENFORCEMENT. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland or in any state court located in Maryland this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself (without making such
submission exclusive) to the personal jurisdiction of any federal court
located in Maryland or any state court located in Maryland in the event any
dispute arises out of this Agreement or any of the transactions contemplated
by this Agreement and (b) agrees that it will not attempt to deny or defeat
such personal jurisdiction by motion or other request for leave from any such
court.
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8.9 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Prime, Prime Partnership, Horizon, Sky Merger,
Horizon Partnership, Newco and Newco LP have caused this Amended and Restated
Agreement and Plan of Merger to be signed by their respective officers (or
general partners) thereunto duly authorized all as of the date first written
above.
PRIME RETAIL, INC.
By: /S/ C. Xxxx Xxxxxxxxx
Name: C. Xxxx Xxxxxxxxx
Title: Senior Vice President -
General Counsel and Secretary
PRIME RETAIL, L.P.
By: Prime Retail, Inc.,
its sole general partner
By: /S/ C. Xxxx Xxxxxxxxx
Name: C. Xxxx Xxxxxxxxx
Title: Senior Vice President -
General Counsel and Secretary
HORIZON GROUP, INC.
By: /S/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
SKY MERGER CORP.
By: /S/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
HORIZON/XXXX OUTLET CENTERS
LIMITED PARTNERSHIP
By: Horizon Group, Inc.,
its sole general partner
By: /S/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
HORIZON GROUP PROPERTIES, INC.
By: /S/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc.,
its sole general partner
By: /S/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx
Title: President
EXHIBIT A
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of ______, 1998 (this "Agreement"), by and
between Horizon Group, Inc., a Michigan corporation ("Horizon"), Sky Merger
Corp., a Maryland corporation ("Sky Merger"), Horizon/Xxxx Outlet Centers
Limited Partnership, a Delaware limited partnership ("Horizon Partnership"),
Horizon Group Properties, Inc., a Maryland corporation ("Horizon Properties"),
and Horizon Group Properties, L.P., a Delaware limited partnership ("Horizon
Properties LP").
RECITALS
A. THE MERGER TRANSACTIONS. Prime Retail, Inc. ("Prime"), Prime
Retail, L.P. ("Prime Partnership") and the parties hereto have entered into
an Amended and Restated Agreement and Plan of Merger, dated as of January __,
1998 (the "Merger Agreement"), providing for, among other things, (i) the
merger of Horizon Partnership with and into Prime Partnership, with Prime
Partnership as the surviving partnership (the "Partnership Merger"), (ii) the
reincorporation of Horizon as a Maryland corporation through the merger of
Horizon with and into Sky Merger, with Sky Merger as the surviving
corporation (the "Horizon/Subsidiary Merger"), and (iii) the merger of Prime
with and into Sky Merger, with Sky Merger as the surviving corporation (the
"Prime/Horizon Merger") (the Partnership Merger, the Horizon/Subsidiary
Merger and the Prime/Horizon Merger being, collectively, the "Mergers").
Pursuant to the foregoing, Sky Merger will become subject to all of the
rights and obligations of Horizon under this Agreement, and Prime Partnership
will become subject to all of the rights and obligations of Horizon
Partnership under this Agreement.
B. THE CONTRIBUTION. Immediately prior to the Partnership Merger,
Horizon expects to cause Initial Horizon Partnership Group (as hereinafter
defined) to contribute the Contributed Assets (as hereinafter defined) to
Horizon Properties LP as a capital contribution, and to cause Horizon
Properties LP to assume the Assumed Liabilities (as hereinafter defined) (the
"Contribution").
C. PURPOSE. The purpose of the Contribution is to facilitate the
Mergers by providing for the transfer to Horizon Properties LP of certain
properties, businesses and operations which Prime and Prime Partnership are
unwilling to acquire pursuant to the Merger Agreement. This Agreement sets
forth or provides for certain agreements among the parties hereto in
connection with such transfer.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings (capitalized terms used but not
defined herein shall have the respective meanings ascribed thereto in the
Merger Agreement):
"Action" shall mean any suit, claim, action, arbitration, inquiry,
proceeding or investigation by or before any court, arbitral tribunal,
administrative agency or commission or other governmental, regulatory or
administrative agency or commission.
"Assumed Liabilities" shall mean all Liabilities of Initial Horizon
Partnership Group, other than the Retained Liabilities, arising from the
ownership or operation of the Contributed Assets and shall include, without
limitation, (i) all obligations to indemnify present and former officers and
directors of Horizon Properties LP Group under certificates or articles of
incorporation, by-laws, partnership agreements, employment agreements,
indemnification agreements or otherwise, for any matter occurring after the
Prime/Horizon Merger Effective Time, (ii) all Liabilities relating to the
loans described on the Schedule of Debt as secured by a Contributed Asset
listed on Schedule 1.1(a), including the Xxxxxx Brothers loans to Third
Horizon to the extent needed to obtain requisite lender consent to the
transfer of the Contributed Assets owned by Third Horizon, and (iii) all
leases (whether as lessor, lessee, sublessee, sublessor or otherwise) and
related contracts, and service contracts, relating to the Contributed Assets
listed on Schedule 1.1(a)
"Contributed Assets" shall mean, collectively, (i) all business, assets,
properties, interests in property and rights of Initial Horizon Partnership
Group solely related to the ownership and operation of the retail outlet
centers listed on Schedule 1.1(a) hereto; (ii) all capital stock, partnership
interests and membership interests of Initial Horizon Partnership Group in
Horizon Partnership, MG Long Island Limited Partnership, MG Patchogue Limited
Partnership, MG Patchogue II Limited Partnership, Third HGI, Inc., Third HGI,
L.L.C. and Third Horizon; (iii) the Retained Proprietary Name Rights (as
hereinafter defined); and (iv) Horizon's administrative offices located at
0000 Xxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxxxxx, including the office equipment and
computer software used therein. Contributed Assets shall not include any
cash or cash equivalents of Initial Horizon Partnership Group.
"Contributed Business" shall mean all business and operations of Initial
Horizon Partnership Group relating solely to the Contributed Assets.
"Employee Benefits Agreement" shall have the meaning assigned thereto in
Section 5.7 hereof.
"Horizon Partnership Group" shall mean, collectively, Horizon, Horizon
Partnership and their Subsidiaries (other than Horizon Properties LP Group)
after giving effect to the Contribution.
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"Horizon Properties LP Group" shall mean, collectively, Horizon
Properties and its Subsidiaries, including Horizon Properties LP, after
giving effect to the Contribution.
"Indemnified Loss" shall mean, with respect to any claim by an
Indemnified Party for indemnification pursuant to Article V hereof, any and
all losses, Liabilities, claims, damages, obligations, payments, costs and
expenses (including, without limitation, the costs and expenses of any and
all actions, demands, assessments, judgments, settlements and compromises
relating thereto and reasonable costs of investigation and attorneys' fees
and expenses in connection therewith) suffered by such Indemnified Party with
respect to such claim.
"Initial Horizon Partnership Group" shall mean, collectively, Horizon
Partnership and its Subsidiaries prior to giving effect to the Contribution.
"Liabilities" shall mean, with respect to any Person, except as
otherwise provided herein, any and all liabilities and obligations of such
Person, whether absolute, accrued, contingent, reflected on a balance sheet
(or in the notes thereto) or otherwise, including, without limitation, those
arising under any law, rule, regulation, Action, order or consent decree of
any governmental entity or any judgment of any court of any kind or any award
of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
"Retained Assets" shall mean all business, assets, properties, interests
in property, and rights of Initial Horizon Partnership Group, except for the
Contributed Assets, and shall include, without limitation:
(a) all real estate and interests in real estate, buildings,
fixtures, leases (whether as lessor, lessee, sublessee, sublessor or
otherwise), rights of way, and easements;
(b) all current and fixed assets, including, but not limited to, all
machinery, equipment, furniture, fixtures and all other personal property;
(c) all contracts, purchase orders, leases, royalty agreements,
instruments, licenses, franchises and other agreements;
(d) all files wherever located, whether in the form of hard copies,
computer tape or otherwise, and all software;
(e) all licenses, authorizations and permits issued by any
governmental agency;
(f) all intangible property rights including, without limitation, all
trademarks, tradenames and copyrights, all capital stock of any Person, and
all partnership or membership interests in any Person;
(g) all trade secrets, customer lists, supplier lists, and all other
rights and documents, and all books and records incident thereto;
A-3
(h) all rights to insurance proceeds arising from any casualty,
security deposits, and deposits with utilities and governmental agencies;
(i) such rights as Horizon Partnership Group has to use their present
telephone numbers;
(j) all cash and cash equivalents;
(k) all membership and other interests in Finger Lakes Outlet
Center, L.L.C.; and
(l) any and all of the business, assets, properties, interests in
property and rights, whether tangible or intangible, relating to the
ownership and operation of each of the retail outlet centers listed on
Schedule 1.1(b) hereto.
"Retained Business" shall mean all business and operations of Initial
Horizon Partnership Group primarily related to the Retained Assets.
"Retained Liabilities" shall mean all Liabilities of the Initial Horizon
Partnership Group other than the Assumed Liabilities and shall include,
without limitation, (i) all obligations to indemnify present and former
officers and directors of Initial Horizon Partnership Group under
certificates or articles of incorporation, by-laws, partnership agreements,
employment agreements, indemnification agreements or otherwise arising for
any matter occurring at or prior to the Prime/Horizon Merger Effective Time
(ii) all Liabilities relating to the loans described on the Schedule of Debt
as secured by a Retained Asset listed on Schedule 1.1(b), and any other
mortgage loans secured by a Retained Asset listed on Schedule 1.1(b) incurred
after the date hereof, but not the loans from Xxxxxx Brothers to Third
Horizon to the extent the same are Assumed Liabilities, and (iii) all leases
(whether as lessor, lessee, sublessee, sublessor or otherwise) and related
contracts, and service contracts, relating to the Retained Assets listed on
Schedule 1.1(b).
"Schedule of Debt" shall mean the Horizon Schedule of Debt attached as
Schedule 1.1(c) hereto.
"Tax Disaffiliation Agreement" shall have the meaning assigned thereto in
Article III hereof.
"Third Horizon" shall mean Third Horizon Group Limited Partnership.
"Time of Contribution" shall mean the time of consummation of the
Contribution.
"Transfer Agent" shall mean the transfer agent for the Horizon Common
Stock.
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ARTICLE II
TAX MATTERS
Prior to the Time of Contribution, Horizon and Horizon Properties shall
enter into an agreement relating to past and future tax sharing and certain
issues associated therewith in substantially the form attached hereto as
Exhibit A (the "Tax Disaffiliation Agreement").
ARTICLE III
CONTRIBUTION AND ASSUMPTION
3.1 CONTRIBUTION OF ASSETS.
(a) Subject to Section 4.1(c) and to the satisfaction or waiver of
the conditions set forth in Article VI of this Agreement, immediately prior
to the Partnership Merger, Horizon shall cause Initial Horizon Partnership
Group to transfer, assign and convey to Horizon Properties LP as a capital
contribution all of its respective right, title and interest in and to the
Contributed Assets. If a property listed on Schedule 1.1(a) has been sold
prior to the Time of Contribution, the proceeds of such sale shall be
contributed in lieu thereof. To the extent 100% ownership of any entity that
owns Contributed Assets is transferred to Horizon Properties LP pursuant to
this Agreement, the Contributed Assets owned by such entity shall be deemed
transferred to Horizon Properties LP.
(b) Notwithstanding Sections 4.1(a), Horizon Partnership Group shall
retain and not contribute to Horizon Properties LP any of its respective right,
title, or interest in and to the Retained Assets.
(c) At the Time of Contribution, Horizon Properties LP shall issue to
Horizon Partnership, in partial consideration for the Contribution, that number
of common units of Horizon Properties LP (the "Horizon Properties LP Common
Units") which, when combined with the number of Horizon Properties LP Common
Units then outstanding, will equal the number of Horizon Properties LP Common
Units to be distributed by Prime Partnership pursuant to the Prime Partnership
Common Distribution.
3.2 ASSUMPTION OF LIABILITIES.
(a) Subject to Section 4.2(b) and effective as of the Time of
Contribution, Horizon Properties LP, in partial consideration for the
Contribution, hereby unconditionally assumes and undertakes to pay, satisfy and
discharge when due in accordance with their terms the Assumed Liabilities.
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(b) Notwithstanding Section 4.2(a), Horizon Partnership Group shall
retain, and Horizon Properties LP shall not assume and shall have no liability
with respect to, the Retained Liabilities.
3.3 TRANSFER AND ASSUMPTION DOCUMENTATION. In furtherance of the
contribution, grant, conveyance, assignment, transfer and delivery of the
Contributed Assets and the assumption of the Assumed Liabilities set forth in
this Article IV, at the Time of Contribution or as promptly as practicable
thereafter (i) Horizon Partnership shall execute and deliver, and cause its
Subsidiaries to execute and deliver, such deeds, bills of sale, stock powers,
certificates of title, assignments of leases and contracts and other
instruments of contribution, grant, conveyance, assignment, transfer and
delivery necessary to evidence such contribution, grant, conveyance,
assignment, transfer and delivery and (ii) Horizon Properties LP shall
execute and deliver such instruments of assumption as and to the extent
necessary to evidence such assumption.
3.4 NONASSIGNABLE CONTRACTS. Anything contained herein to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign
any lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or asset if an assignment or attempted
assignment of the same without the consent of the other party or parties
thereto would constitute a breach thereof or in any way impair the rights
after the Contribution of Horizon Partnership Group or Horizon Properties LP
Group thereunder. Horizon Partnership shall, prior to the Time of
Contribution, use reasonable best efforts (it being understood that such
efforts shall not include any requirement of the Initial Horizon Partnership
Group to expend money or offer or grant any financial accommodation) as
requested by Horizon Properties LP, and Horizon Properties LP shall cooperate
in all reasonable respects with Initial Horizon Partnership Group, to obtain
all consents and waivers and to resolve all impracticalities of assignments
or transfers necessary to convey to Horizon Properties LP the Contributed
Assets. If any such consent is not obtained or if an attempted assignment
would be ineffective or would impair either group's rights under any such
lease, license agreement, contract, agreement, sales order, purchase order,
open bid or other commitment or asset so that Horizon Properties LP would not
receive all such rights, then (x) Horizon Partnership shall use reasonable
best efforts (it being understood that such efforts shall not include any
requirement of Initial Horizon Partnership Group to expend money or offer or
grant any financial accommodation) to provide or cause to be provided to
Horizon Properties LP, to the extent permitted by law, the benefits of any
such lease, license agreement, contract, agreement, sales order, purchase
order, open bid or other commitment or asset.
3.5 USE OF NAMES.
(a) Prior to the Contribution, Horizon Partnership Group and
Horizon Properties LP shall determine which of the names, trademarks, trade
names and other proprietary rights related to the Contributed Assets Horizon
Partners LP shall have the sole and exclusive ownership of and right to use,
as between Horizon Properties LP Group, on the one hand, and Horizon
Partnership Group, on the other hand, following the Time of Contribution (the
"Contributed Proprietary Name Rights"). Following the Time of Contribution,
Horizon Partnership Group shall have the sole and exclusive ownership of and
right to use, as between Horizon Properties LP Group on the one hand, and the
Horizon Partnership Group on the other hand, all names, trade marks, trade
names, service
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marks and other proprietary rights owned or used by Horizon Partnership Group
immediately prior to the Time of Contribution other than the Contributed
Proprietary Name Rights (the "Retained Proprietary Name Rights").
(b) Following the Contribution (i) Horizon Properties and Horizon
Properties LP shall, and shall cause their Subsidiaries and other affiliates
to, take all action necessary to cease using, and change as promptly as
practicable (including by amending any charter documents), any corporate or
other names which are the same as or confusingly similar to any of the
Retained Proprietary Name Rights, and (ii) Horizon Partnership shall, and
shall cause its Subsidiaries and other affiliates to, take all action
necessary to cease using, and change as promptly as practicable (including by
amending any charter documents), any corporate or other names which are the
same as or confusingly similar to any of the Contributed Proprietary Name
Rights. From and after the Closing Date, Horizon Properties and Horizon
Properties LP Group shall cause the Horizon Properties LP Group to cease
holding itself out as having an affiliation with Horizon Partnership Group.
ARTICLE IV
CERTAIN COVENANTS
4.1 INDEMNITY AS BETWEEN HORIZON PROPERTIES LP AND HORIZON PARTNERSHIP
FROM ASSUMED LIABILITIES.
(a) Effective upon the Contribution, Horizon Properties LP agrees
to indemnify and hold Horizon Partnership Group, its affiliates, successors
and assigns and the officers, directors, employees, agents, advisors and
representatives of any of them, harmless from and against any and all
Indemnified Losses arising out of or related to the Assumed Liabilities.
(b) Effective upon the Contribution, Horizon Partnership agrees to
indemnify and hold Horizon Properties LP Group, its affiliates, successors
and assigns and the officers, directors, employees, agents and
representatives of any of them, harmless from and against any and all
Indemnified Losses arising out of or related to the Retained Liabilities.
4.2 PROCEDURE FOR THIRD PARTY INDEMNIFICATION.
(a) If a party entitled to be indemnified hereunder (an
"Indemnified Party") shall receive notice of the assertion by a person who is
not a party to this Agreement of any claim or of the commencement by any such
person of any Action (a "Third Party Claim") with respect to which a party
hereto is obligated to provide indemnification (an "Indemnifying Party"),
such Indemnified Party shall give such Indemnifying Party prompt notice
thereof after becoming aware of such Third Party Claim; provided that the
failure of any Indemnitee to give notice as provided in this Section 5.3
shall not relieve the related Indemnifying Party of its obligations under
this Article V, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice.
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Such notice shall describe the Third Party Claim in reasonable detail, and,
if practicable, shall indicate the estimated amount of the Indemnified Loss
that has been or may be sustained by such Indemnified Party.
(b) An Indemnifying Party may elect to defend, at such
Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any Third Party Claim. If an Indemnifying Party elects to defend a
Third Party Claim, it shall, within 30 days of notice of such Third Party
Claim (or sooner, if the nature of such Third Party Claim so requires),
notify the related Indemnified Party of its intent to do so and acknowledge
its liability therefor, and such Indemnified Party shall cooperate in the
defense of such Third Party Claim. After notice from an Indemnifying Party to
an Indemnified Party of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such Indemnified Party
under this Article V for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof as long as the
Indemnifying Party pursues such defense diligently and in good faith;
provided that if, under applicable standards of professional conduct (as
advised by counsel to the Indemnifying Party), a conflict on any significant
issue between such Indemnified Party and such Indemnifying Party or between
any two or more Indemnified Parties may exist in respect of such claim, then
the Indemnifying Party shall pay the reasonable fees and expenses of one such
additional counsel as may be required to be retained in light of such
conflict. If an Indemnifying Party elects not to defend against a Third
Party Claim, or fails to notify an Indemnified Party of its election as
provided in this Section 5.2 within the time period specified, or fails to
pursue the defense of a Third Party Claim diligently and in good faith, such
Indemnified Party may defend, compromise and settle such Third Party Claim.
Notwithstanding the foregoing, (i) neither an Indemnifying Party nor an
Indemnified Party, as the party controlling the defense of a Third Party
Claim, may compromise or settle any claim or consent to the entry of any
judgment for other than monetary damages without the prior written consent of
the other; provided that (upon reasonable notice thereof) consent to
compromise or settlement or the entry of a judgment shall not be unreasonably
withheld or delayed, and (ii) no Indemnifying Party shall consent to the
entry of any judgment or enter into any compromise or settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party and all other Indemnified Parties, as the
case may be, subject to such Third Party Claim of a full and final release
from all liability in respect of such claim or litigation.
4.3 ADJUSTMENT FOR INSURANCE AND TAXES. The amount which either Horizon
Properties LP or Horizon Partnership is required to pay to, for or on behalf of
the other pursuant to Sections 5.1 and 5.2, shall be adjusted (including,
without limitation, retroactively) (i) by any insurance proceeds actually
recovered by or on behalf of Horizon Properties LP Group, Horizon Partnership
Group or the Indemnified Party, as the case may be, in reduction of the related
Indemnified Loss or Third Party Claim and (ii) reduced by the net difference
between (A) the present value of the amount of any Tax savings resulting from
any tax benefit to Horizon Properties LP Group, Horizon Partnership Group or the
Indemnified Party, as the case may be as a result of the Indemnified Loss or
Third Party Claim, and (B) the present value of the amount of any Tax due with
respect to the receipt of the indemnification payment itself. Amounts required
to be paid, as so adjusted, are hereafter sometimes called an "Indemnified
Payment." If Horizon Properties LP Group, Horizon
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Partnership Group or the Indemnified Party, as the case may be, shall have
received or shall have had paid on its behalf an Indemnified Payment in
respect of an Indemnified Loss or Third Party Claim and shall subsequently
receive insurance proceeds in respect of such Indemnified Loss or Third Party
Claim, or realize any net tax benefit (as computed in clause (ii) above) as a
result of such Indemnified Party or Third Party Claim, then Horizon
Properties LP, Horizon Partnership or the Indemnified Party, as the case may
be, shall pay to Horizon Properties LP, Horizon Partnership or the
Indemnified Party, as the case may be, the amount of such insurance proceeds
or net tax benefit, or if lesser, the amount of the Indemnified Payment.
4.4 RISK OF CONTRIBUTED ASSETS. Each party understands and agrees
that, except as otherwise specifically provided herein, no party nor any of
its Subsidiaries is, in this Agreement or any other agreement or document
representing or warranting to such party in any way as to the assets,
business or Liabilities transferred or assumed as contemplated hereby or as
to any consents or approvals required in connection with the consummation of
the transactions contemplated by this Agreement, it being agreed and
understood that each party shall take or keep all of its assets "as is" and
that it shall bear the economic and legal risk that conveyance of such assets
shall prove to be insufficient or that the title to any assets shall be other
than good and marketable and free from encumbrances. All implied warranties
are hereby expressly disclaimed.
4.5 TRANSFER OF EMPLOYEES. With respect to the personnel employed
on-site at the centers included in the Retained Business and such other
employees of the Contributed Business designated by Horizon Partnership not
later than the Closing Date as employees who will remain with Horizon
Partnership Group (collectively, the "Retained Employees"), except as
otherwise specifically provided in this Agreement, Horizon Partnership Group
shall retain the liabilities and obligations with respect to, and continue to
be responsible for, all liabilities and obligations whatsoever in connection
with, claims made by or on behalf of such persons in respect of salary,
wages, benefits, severance pay, salary continuation, COBRA continuation and
similar obligations relating to the continued employment, or the termination
or alleged termination of such persons' employment with Horizon Partnership
Group by reason of the consummation of the transactions contemplated in this
Agreement or the Merger Agreement or otherwise and neither Horizon Properties
LP nor any member of Horizon Properties LP Group shall assume such liability.
Effective as of the Partnership Merger Effective Time, Horizon Partnership
and Horizon Properties LP shall cooperate to transfer to the employ of
Horizon Properties LP Group, each person employed by Horizon Partnership
Group, other than the Retained Employees (such employees and other persons
who become employees of the Horizon Properties LP Group after the Partnership
Merger Effective Time in accordance with this Section 5.5 shall be
hereinafter referred to as the "Transferred Employees"). With respect to the
Transferred Employees, Horizon Properties LP Group shall assume the
liabilities and obligations with respect to, and continue to be responsible
for all liabilities and obligations whatsoever in connection with, claims
made by or on behalf of such persons in respect of salary, wages, benefits,
severance pay, salary continuation, COBRA continuation and similar
obligations relating to the continued employment, or the termination or
alleged termination of such persons' employment with the Horizon Properties
LP Group by reason of consummation of the transactions contemplated in this
Agreement or the Merger Agreement or otherwise and Horizon Partnership Group
shall have no such liability.
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4.6 CERTAIN EMPLOYEE BENEFITS PLANS. Prior to Partnership Merger
Effective Time, Horizon Properties LP and Horizon Partnership shall enter into
an agreement relating to the parties' responsibilities with respect to certain
employee benefit liabilities and obligations (the "Employee Benefits
Agreement").
4.7 INSURANCE. The parties agree to cooperate with each other with
respect to the processing of any claims which are covered by any insurance
policy in existence prior to the Partnership Merger Effective Time. Without
limiting the generality of the foregoing, Horizon Partnership Group shall have
the right to process and pursue any claim for insurance (including negotiating
with the company issuing the insurance policy) in connection with any liability
of Horizon Partnership Group, regardless of whether the insurance policy under
which such claim is made is transferred pursuant to Section 4.1(a), and Horizon
Properties LP Group shall have the right to process and pursue any claim for
insurance (including negotiating with the company issuing the insurance policy)
in connection with any liability of Horizon Properties LP Group, regardless of
whether the insurance policy under which such claim is made is retained by
Horizon Partnership Group pursuant to Section 4.1(b).
4.8 TRANSFER TAXES. Horizon Properties LP shall pay or cause to be paid
the Transfer Taxes (as defined in the Tax Disaffiliation Agreement) imposed in
connection with or as a result of the Contribution or the Distribution.
ARTICLE V
CONDITIONS
The obligations of the parties to consummate the Contribution and
Distribution shall be subject to the fulfillment or waiver in accordance with
the Merger Agreement of each condition to the closing of the Merger set forth in
Article VI of the Merger Agreement.
ARTICLE VI
ACCESS TO INFORMATION AND SERVICES
6.1 PROVISION OF CORPORATE RECORDS. At the Time of Contribution, Horizon
Partnership shall cause Initial Horizon Partnership Group to deliver, or cause
to be delivered, to Horizon Properties LP Group all corporate books and records
which relate primarily to Horizon Properties LP Group, the Contributed Assets or
the Assumed Liabilities, including, without limitation, all active agreements,
active litigation files and government filings. From and after the Time of
Contribution, all such books, records and copies shall be the property of
Horizon Properties LP Group.
6.2 ACCESS TO INFORMATION. From and after the Time of Contribution (i)
Horizon Partnership shall cause Horizon Partnership Group to afford to Horizon
Properties LP Group and its authorized accountants, counsel and other designated
representatives reasonable access
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(including, without limitation, using reasonable efforts to give access to
persons or firms possessing Information (as defined below)) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Horizon Partnership Group's possession relating to the
Contributed Assets or the Assumed Liabilities, insofar as such access is
reasonably required by Horizon Properties LP Group, and (ii) Horizon
Properties shall cause Horizon Properties LP Group to afford to Horizon
Partnership Group and its authorized accountants, counsel and other
designated representatives reasonable access (including, without limitation,
using reasonable efforts to give access to persons or firms possessing
Information) and duplicating rights during normal business hours to all
Information within Horizon Properties LP Group's possession relating to the
Initial Horizon Partnership Group, the assets of Horizon Partnership Group
(including without limitation, the Contributed Assets or the Assumed
Liabilities), insofar as such access is reasonably required by Horizon
Partnership Group. Information may be requested under this Section 7.2 for,
without limitation, audit, accounting, claims, litigation and tax purposes,
as well as for purposes of fulfilling disclosure and reporting obligations.
6.3 PRODUCTION OF WITNESSES. From and after the Time of Contribution,
each party shall use reasonable efforts to make available to the other party,
upon written request, its officers, directors, employees and agents as
witnesses to the extent that any such person may reasonably be required in
connection with any legal, administrative or other proceedings in which the
requesting party may from time to time be involved.
6.4 RETENTION OF RECORDS. Except as otherwise required by law or
agreed to in writing, Horizon Partnership shall cause Horizon Partnership
Group, and Horizon Properties shall cause Horizon Properties LP Group each to
retain, for a period of at least five years following the Time of
Contribution, all significant Information relating to the Contributed Assets
or the Retained Business. Notwithstanding the foregoing, either Horizon
Partnership Group or Horizon Properties LP Group may destroy or otherwise
dispose of any of such Information at any time, provided that, prior to such
destruction or disposal (a) Horizon Partnership or Horizon Properties LP, as
the case may be, shall cause the Person seeking to destroy or otherwise
dispose of any Information to provide no less than 90 days or more than 120
days' prior written notice to the parties hereto, specifying the Information
proposed to be destroyed or disposed of and (b) if any party shall request in
writing prior to the scheduled date for such destruction or disposal that any
of the Information proposed to be destroyed or disposed of be delivered to
the other party, such Person shall promptly arrange for the delivery of such
of the Information as was requested, at the expense of the requesting party.
6.5 CONFIDENTIALITY. Each party shall hold, and shall cause its officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law or in order to comply with the requirements of a binding
stock exchange listing application or agreement or applicable stock exchange
rules, all non-public Information concerning the other party furnished it by
such other party or its representatives or otherwise in its possession (except
to the extent that such Information can be shown to have been (a) available to
such party on a non-confidential basis prior to its disclosure by the other
party, (b) in the public domain through no fault of such party or (c) later
lawfully acquired
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from other sources by the party to which it was furnished), and each party
shall not release or disclose such Information to any other person, except
its auditors, attorneys, financial advisors, bankers and other consultants
and advisors who have a need to know such Information and who agree to be
bound by the provisions of this Section 7.5.
ARTICLE VII
MISCELLANEOUS AND GENERAL
7.1 MODIFICATION OR AMENDMENT. The parties hereto may modify or amend
this Agreement by written agreement executed and delivered by authorized
officers of the respective parties, provided Prime has consented in writing
to any such modification or amendment. The parties expressly agree that
Prime shall be a third party beneficiary of this Section 8.1.
7.2 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in separate counterparts, each such counterpart
being deemed to be an original instrument, and which counterparts shall
together constitute the same agreement.
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Illinois, without reference to
its conflicts of law principles.
7.4 NOTICES. Any notice, request, instruction or other document to be
given hereunder by any party to the other shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by
facsimile (upon confirmation of receipt) or personally, (ii) on the first
business day following the date of dispatch if delivered by Federal Express
or other reputable next-day courier service or (iii) on the third business
day following the date of mailing if delivered by registered or certified
mail, return receipt requested, postage prepaid. On and after the
Partnership Merger Effective Date, all notices hereunder shall be delivered
as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.
If to Horizon Properties or Horizon Properties LP:
[Horizon Group, Inc.
0000 Xxxxx Xxxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Fax: No.: (000) 000-0000
with a copy to:
Xxxxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
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Attention: Xxxxx X. Xxxxxxxx, Esq.
Fax No.: (000) 000-0000]
If to Horizon, Horizon Partnership or Sky Merger
Prime Retail, Inc.
000 Xxxx Xxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
C. Xxxx Xxxxxxxxx
Fax No.: (000) 000-0000
With a copy to:
Winston & Xxxxxx
00 X. Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
Fax No.: (000) 000-0000
7.5 CAPTIONS. All Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement
and shall not be deemed to limit or otherwise affect any of the provisions
hereof.
7.6 ASSIGNMENT. Nothing contained in this Agreement or the agreements
referred to herein (except as otherwise expressly set forth therein) is
intended to confer on any person or entity other than the parties hereto and
their respective successors and permitted assigns any benefit, rights or
remedies under or by reason of this Agreement and such other agreements,
except that the provisions of [Section 5.1 and 5.2] hereof shall inure to the
benefit of the Persons referred to therein.
7.7 FURTHER ASSURANCES. Subject to the terms and conditions hereof
and, as applicable, of the Merger Agreement, the parties will, and will cause
their respective Subsidiaries and affiliates to, do such additional things as
are necessary or proper to carry out and effectuate the intent of this
Agreement or any part hereof or the transactions contemplated hereby.
7.8 ATTORNEY-CLIENT PRIVILEGE; WORK PRODUCT. Anything herein or in the
Merger Agreement notwithstanding, the transactions contemplated hereby and by
the Merger Agreement shall not be deemed to transfer to or vest in Horizon
Properties LP Group any right to waive, nor shall they be deemed to waive,
any attorney-client privilege between Horizon Partnership Group and its legal
counsel, with respect to legal advice concerning the business or operations
of Horizon Partnership Group including, without limitation, the Retained
Liabilities or the transactions
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contemplated hereby and by the Merger Agreement, in either case, concerning
privileged communications (or work product related thereto) at any time prior
to the Closing Date (as defined in the Merger Agreement). Horizon Properties
and Horizon Partnership each shall assign to Horizon Properties LP, and cause
each member of Horizon Partnership Group to assign to Horizon Properties LP
Group, its rights (if any) to any attorney-client privilege with respect to
legal advice concerning the business or operations of Horizon Properties LP
Group including, without limitation, the Assumed Liabilities or the
transactions contemplated hereby concerning privileged communications (or
work product related thereto) at any time prior the Closing Date. Horizon
Partnership Group and their successors and assigns shall not be entitled to
waive or have access, nor shall they attempt to waive or seek access, to any
privileged communications (or work product related thereto) between Horizon
Properties LP Group and its legal counsel with respect to legal advice
concerning the business or operations of the Horizon Properties LP Group,
including the Assumed Liabilities or the transactions contemplated hereby.
7.9 NO THIRD-PARTY BENEFICIARIES. Except as provided in Section 5.1
and 8.1 hereof, this Agreement, the Tax Disaffiliation Agreement and the
Employee Benefits Agreement, are not intended to confer upon any person other
than the parties hereto and thereto any rights or remedies hereunder or
thereunder.
7.10 CONFLICT WITH TAX DISAFFILIATION AGREEMENT. In the event of any
conflict between this Agreement and the Tax Disaffiliation Agreement, the Tax
Disaffiliation Agreement shall control.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first
hereinabove written.
HORIZON GROUP, INC.
By: __________________________________
Name:
Title:
HORIZON GROUP PROPERTIES, INC.
By: ______________________________
Name:
Title:
HORIZON/XXXX OUTLET CENTERS
LIMITED PARTNERSHIP
By: Horizon Group, Inc., its sole general partner
By: _______________________________________
Name:
Title:
SKY MERGER CORP.
By: ______________________________
Name:
Title:
HORIZON GROUP PROPERTIES, L.P.
By: Horizon Group Properties, Inc., its sole
general partner
By: _________________________________
Name:
Title:
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