EXHIBIT 2.1
-----------
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
among
XXXX-XXXX REALTY CORPORATION,
XXXX-XXXX REALTY, L.P.,
XXXXXXXX PROPERTIES TRUST
and
XXXXXXXX PROPERTIES ACQUISITION PARTNERS, L.P.
Dated as of June 27, 2000
TABLE OF CONTENTS
Page
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ARTICLE 1 THE MERGERS............................................................................................... 3
1.1 THE MERGER................................................................................................ 3
1.2 THE PARTNERSHIP MERGER ................................................................................... 3
1.3 ELECTION BY LIMITED PARTNERS IN XXXXXXXX PARTNERSHIP TO
EXERCISE THE EXCHANGE RIGHT; THE PARTNERSHIP MERGER....................................................... 3
1.4 CLOSING................................................................................................... 4
1.5 EFFECTIVE TIME............................................................................................ 4
1.6 EFFECT OF MERGER ON CHARTER AND BYLAWS.................................................................... 4
1.7 EFFECT OF PARTNERSHIP MERGER ON AGREEMENT OF LIMITED
PARTNERSHIP............................................................................................... 4
1.8 DIRECTORS................................................................................................. 5
1.9 OFFICERS.................................................................................................. 5
1.10 EFFECT ON SHARES.......................................................................................... 5
1.11 EFFECT ON PARTNERSHIP INTERESTS........................................................................... 5
1.12 EXCHANGE RATIOS AND OTHER MERGER CONSIDERATION............................................................ 5
1.13 REGISTRATION RIGHTS AGREEMENTS............................................................................ 7
1.14 PARTNER APPROVAL.......................................................................................... 7
1.15 NO APPRAISAL RIGHTS....................................................................................... 8
1.16 EXCHANGE OF CERTIFICATES; PRE-CLOSING DIVIDENDS,
FRACTIONAL SHARES......................................................................................... 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF XXXXXXXX AND XXXXXXXX
PARTNERSHIP................................................................................................ 11
2.1 ORGANIZATION, STANDING AND POWER OF XXXXXXXX............................................................... 11
2.2 XXXXXXXX SUBSIDIARIES...................................................................................... 11
2.3 CAPITAL STRUCTURE.......................................................................................... 12
2.4 OTHER INTERESTS............................................................................................ 14
2.5 AUTHORITY, NONCONTRAVENTION; CONSENTS...................................................................... 14
2.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES............................................... 16
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS....................................................................... 16
2.8 LITIGATION................................................................................................. 17
2.9 PROPERTIES................................................................................................. 17
2.10 ENVIRONMENTAL MATTERS...................................................................................... 20
2.11 RELATED PARTY TRANSACTIONS................................................................................. 21
2.12 EMPLOYEE BENEFITS.......................................................................................... 21
2.13 EMPLOYEES / EMPLOYEE POLICIES.............................................................................. 23
2.14 TAXES...................................................................................................... 23
2.15 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS............................................................ 25
2.16 BROKER; SCHEDULE OF FEES AND EXPENSES...................................................................... 25
2.17 COMPLIANCE WITH LAWS....................................................................................... 25
i
2.18 CONTRACTS; DEBT INSTRUMENTS................................................................................ 25
2.19 OPINION OF FINANCIAL ADVISOR............................................................................... 27
2.20 STATE TAKEOVER STATUTES.................................................................................... 27
2.21 INVESTMENT COMPANY ACT OF 1940............................................................................. 27
2.22 DEFINITION OF KNOWLEDGE OF XXXXXXXX........................................................................ 27
2.23 XXXXXXXX NOT AN INTERESTED STOCKHOLDER..................................................................... 27
2.24 REQUIRED STOCKHOLDER APPROVALS AND PARTNER APPROVALS....................................................... 27
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF XXXX-XXXX AND XXXX-XXXX PARTNERSHIP....................................... 28
3.1 ORGANIZATION, STANDING AND POWER OF XXXX-XXXX............................................................... 28
3.2 XXXX-XXXX SUBSIDIARIES...................................................................................... 28
3.3 CAPITAL STRUCTURE........................................................................................... 29
3.4 OTHER INTERESTS............................................................................................. 31
3.5 AUTHORITY; NONCONTRAVENTION; CONSENTS....................................................................... 31
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES................................................ 32
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS........................................................................ 33
3.8 LITIGATION.................................................................................................. 34
3.9 PROPERTIES.................................................................................................. 34
3.10 ENVIRONMENTAL MATTERS....................................................................................... 36
3.11 RELATED PARTY TRANSACTIONS.................................................................................. 37
3.12 EMPLOYEE BENEFITS........................................................................................... 37
3.13 EMPLOYEES / EMPLOYEE POLICIES............................................................................... 39
3.14 TAXES....................................................................................................... 40
3.15 NO PAYMENTS TO EMPLOYEES, OFFICERS OR DIRECTORS............................................................. 41
3.16 BROKER; SCHEDULE OF FEES AND EXPENSES....................................................................... 41
3.17 COMPLIANCE WITH LAWS........................................................................................ 41
3.18 CONTRACTS; DEBT INSTRUMENTS................................................................................. 41
3.19 OPINION OF FINANCIAL ADVISOR................................................................................ 43
3.20 STATE TAKEOVER STATUTES..................................................................................... 43
3.21 INVESTMENT COMPANY ACT OF 1940.............................................................................. 43
3.22 DEFINITION OF KNOWLEDGE OF XXXX-XXXX........................................................................ 43
3.23 XXXX-XXXX NOT AN INTERESTED STOCKHOLDER..................................................................... 44
3.24 REQUIRED STOCKHOLDER APPROVALS AND PARTNER APPROVALS........................................................ 44
ARTICLE 4 COVENANTS.................................................................................................... 44
4.1 CONDUCT OF XXXXXXXX AND XXXXXXXX PARTNERSHIP'S BUSINESS PENDING MERGER....................................... 44
BUSINESS PENDING MERGER...................................................................................... 47
4.3 NO SOLICITATION.............................................................................................. 50
4.4 AFFILIATES................................................................................................... 51
ii
4.5 OTHER ACTIONS...................................................................................................... 52
4.6 M-C REIT SUBSIDIARY MERGER......................................................................................... 52
ARTICLE 5 ADDITIONAL COVENANTS............................................................................................... 53
5.1 PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; XXXXXXXX SHAREHOLDERS MEETING,
XXXXXXXX UNITHOLDERS CONSENT SOLICITATION AND XXXX-XXXX SHAREHOLDER MEETING........................................ 53
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY............................................................................. 55
5.3 COMMERCIALLY REASONABLE EFFORTS; NOTIFICATION...................................................................... 55
5.4 TAX MATTERS........................................................................................................ 56
5.5 PUBLIC ANNOUNCEMENTS............................................................................................... 56
5.6 LISTING............................................................................................................ 57
5.7 TRANSFER AND GAINS TAXES........................................................................................... 57
5.8 BENEFIT PLANS AND OTHER EMPLOYEE ARRANGEMENTS...................................................................... 57
5.9 INDEMNIFICATION.................................................................................................... 60
5.10 DECLARATION OF DIVIDENDS AND DISTRIBUTIONS......................................................................... 62
5.11 TRANSFER OF NON-CONTROLLED SUBSIDIARY VOTING SHARES................................................................ 63
5.12 ASSUMPTION OF EXISTING XXXXXXXX TAX PROTECTION AGREEMENTS.......................................................... 63
5.13 REGISTRATION RIGHTS AGREEMENTS..................................................................................... 63
5.14 REDEMPTION OF RIGHTS PLAN.......................................................................................... 63
5.15 SECTION 16(B) MATTERS.............................................................................................. 63
5.16 CERTIFICATE OF DESIGNATION......................................................................................... 64
ARTICLE 6 CONDITIONS......................................................................................................... 64
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGERS........................................................ 64
6.2 CONDITIONS TO OBLIGATIONS OF XXXX-XXXX AND XXXX-XXXX PARTNERSHIP................................................... 65
6.3 CONDITIONS TO OBLIGATIONS OF XXXXXXXX AND XXXXXXXX PARTNERSHIP..................................................... 66
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER.................................................................................. 67
7.1 TERMINATION........................................................................................................ 67
7.2 CERTAIN FEES AND EXPENSES.......................................................................................... 68
7.4 AMENDMENT.......................................................................................................... 70
7.5 EXTENSION; WAIVER.................................................................................................. 71
ARTICLE 8 GENERAL PROVISIONS................................................................................................. 71
8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES...................................................................... 71
8.2 NOTICES............................................................................................................ 71
8.3 INTERPRETATION..................................................................................................... 72
8.4 COUNTERPARTS....................................................................................................... 72
8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES..................................................................... 72
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8.6 GOVERNING LAW...................................................................................................... 72
8.7 ASSIGNMENT......................................................................................................... 73
8.8 ENFORCEMENT........................................................................................................ 73
8.9 SEVERABILITY....................................................................................................... 73
8.10 EXCULPATION........................................................................................................ 73
8.11 JOINT AND SEVERAL OBLIGATIONS...................................................................................... 73
EXHIBITS
EXHIBIT A - CERTIFICATE OF MERGER
EXHIBIT B -- ARTICLES OF MERGER
iv
INDEX OF DEFINED TERMS
AICPA STATEMENT....................................................................................... 5.1(b)
AFFILIATES............................................................................................ 4.4
AGREEMENT............................................................................................. PREAMBLE
ARTICLES OF MERGER.................................................................................... RECITAL D
BASE AMOUNT........................................................................................... 7.2
BREAK-UP EXPENSES..................................................................................... 7.2
BREAK-UP EXPENSE TAX OPINION.......................................................................... 7.2
BREAK-UP FEE.......................................................................................... 7.2
BREAK-UP FEE TAX OPINION.............................................................................. 7.2
CERCLA................................................................................................ 2.10(a)
CERTIFICATE OF MERGER................................................................................. RECITAL C
CERTIFICATE........................................................................................... 1.12(c)(i)
CLOSING............................................................................................... 1.4
CLOSING DATE.......................................................................................... 1.4
CODE.................................................................................................. RECITAL E
COMMITMENT............................................................................................ 4.1(i)
CONTINUING GRANTEES................................................................................... 5.8(h)
DECLARATION OF TRUST.................................................................................. 1.6
DEPARTMENT............................................................................................ 1.5
DRULPA................................................................................................ 1.2
EFFECTIVE TIME........................................................................................ 1.5
ELIGIBLE RESTRICTED SHARE GRANTEES.................................................................... 5.8(g)
ELIGIBLE SHARE GRANTEES............................................................................... 5.8(f)
EMPLOYMENT AGREEMENT.................................................................................. 5.8(h)
ENCUMBRANCES.......................................................................................... 2.9(a)
ENVIRONMENTAL LAW..................................................................................... 2.10(a)
ENVIRONMENTAL PERMITS................................................................................. 2.10(b)(iv)
ERISA................................................................................................. 2.12
EXCHANGE ACT.......................................................................................... 2.5(c)
EXCHANGE AGENT........................................................................................ 1.16(a)
EXCHANGE FUND......................................................................................... 1.16(b)
EXCHANGE RATIO........................................................................................ 1.12(b)(i)
EXECUTIVE OPTIONS..................................................................................... 5.8(f)
EXERCISE.............................................................................................. 1.3(a)
EXERCISE PRICE........................................................................................ 5.8(f)
FAIR MARKET VALUE..................................................................................... 1.16(g)(ii)
FINAL COMPANY DIVIDEND................................................................................ 1.16(d)(i)
FORM S-4.............................................................................................. 5.1(a)
FORMER XXXXXXXX PROPERTIES............................................................................ 2.10(b)(ii)
GAAP.................................................................................................. 2.6
GOVERNMENTAL ENTITY................................................................................... 2.5(c)
HAZARDOUS MATERIALS................................................................................... 2.10(a)
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INDEMNIFIED PARTIES................................................................................... 5.9(a)
INDEMNIFYING PARTIES.................................................................................. 5.9(a)
KNOWLEDGE OF XXXX-XXXX................................................................................ 3.22
KNOWLEDGE OF XXXXXXXX................................................................................. 2.22
HSR ACT............................................................................................... 2.5(c)
LAWS.................................................................................................. 2.5(c)
LIENS................................................................................................. 2.2(b)
XXXX-XXXX............................................................................................. PREAMBLE
XXXX-XXXX BYLAWS...................................................................................... 1.6
XXXX-XXXX CHARTER..................................................................................... 1.6
XXXX-XXXX COMMON SHARE................................................................................ 1.12(b)(i)
XXXX-XXXX COMMON UNIT................................................................................. 1.12(a)(i)
XXXX-XXXX CONTROLLED GROUP MEMBER..................................................................... 3.13(a)
XXXX-XXXX COUNTER PROPOSAL............................................................................ 4.3(c)
XXXX-XXXX DISCLOSURE LETTER........................................................................... ART. 3
XXXX-XXXX EMPLOYEE PLAN............................................................................... 3.12
XXXX-XXXX EMPLOYEES................................................................................... 3.13(a)
XXXX-XXXX FINANCIAL STATEMENT DATE.................................................................... 3.7
XXXX-XXXX MATERIAL ADVERSE CHANGE..................................................................... 3.7
XXXX-XXXX MATERIAL ADVERSE EFFECT..................................................................... 3.1
XXXX-XXXX NON-CONTROLLED SUBSIDIARY................................................................... 3.2(a)
XXXX-XXXX OPTIONS..................................................................................... 3.3(b)
XXXX-XXXX OTHER INTERESTS............................................................................. 3.4
XXXX-XXXX OUTSIDE PROPERTY MANAGEMENT AGREEMENTS...................................................... 3.18(f)
XXXX-XXXX PARTNER APPROVALS........................................................................... 1.14
XXXX-XXXX PARTNERSHIP................................................................................. PREAMBLE
XXXX-XXXX PARTNERSHIP AGREEMENT....................................................................... 1.7
XXXX-XXXX PARTNERSHIP AGREEMENT AMENDMENT............................................................. 1.12(a)(ii)
XXXX-XXXX PREFERRED UNITS............................................................................. 3.3(e)
XXXX-XXXX PROPERTIES.................................................................................. 3.9(a)
XXXX-XXXX RENT ROLL................................................................................... 3.9(e)
XXXX-XXXX RESTRICTED SHARES........................................................................... 5.8(g)
XXXX-XXXX SEC DOCUMENTS............................................................................... 3.6
XXXX-XXXX SERIES A PREFERRED SHARE.................................................................... 1.12(b)(ii)
XXXX-XXXX SERIES D PREFERRED UNIT..................................................................... 1.12(a)(ii)
XXXX-XXXX SERIES E PREFERRED UNIT..................................................................... 1.12(a)(iii)
XXXX-XXXX SHAREHOLDER APPROVALS....................................................................... 3.5(a)
XXXX-XXXX SHAREHOLDERS MEETING........................................................................ 5.1(c)
XXXX-XXXX SPACE LEASE................................................................................. 3.9(e)
XXXX-XXXX SUBSIDIARIES................................................................................ 3.1
XXXX-XXXX TAX PROTECTION AGREEMENT.................................................................... 3.18(j)
XXXX-XXXX UNITS....................................................................................... 3.3(e)
XXXX-XXXX VOTING AGREEMENT............................................................................ RECITAL J
M-C REIT SUBSIDIARY................................................................................... 4.6
M-C REIT SUBSIDIARY COMMON SHARES..................................................................... 4.6
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M-C REIT SUBSIDIARY MERGER............................................................................ 4.6
M-C REIT SUBSIDIARY MERGER DOCUMENTS.................................................................. 4.6
M-C REIT SUBSIDIARY SERIES A PREFERRED SHARES......................................................... 4.6
MERGER................................................................................................ RECITAL A
MERGERS............................................................................................... RECITAL B
MERGER CONSIDERATION.................................................................................. 1.12(b)
MGCL.................................................................................................. 1.1
NEW XXXX-XXXX PREFERRED UNITS......................................................................... 1.12(a)(iii)
NEW XXXX-XXXX UNITS................................................................................... 1.12(a)(iii)
NYSE.................................................................................................. 1.16(g)(ii)
OUTSIDE PROPERTY MANAGEMENT AGREEMENTS................................................................ 2.18(f)
PARTNER APPROVALS..................................................................................... 1.14
PARTNERSHIP MERGER.................................................................................... RECITAL B
PARTNERSHIP MERGER CONSIDERATION...................................................................... 1.12(a)
PAYOR................................................................................................. 7.2
PENSION PLAN.......................................................................................... 2.12
PERSON................................................................................................ 2.2(a)
PREFERRED EXCHANGE RATIO.............................................................................. 1.12(b)(ii)
PROPERTY RESTRICTIONS................................................................................. 2.9(a)
PROPOSED XXXX-XXXX CHARTER AMENDMENT RELATING TO
A CUT-DOWN......................................................................................... 4.2(j)
XXXXXXXX.............................................................................................. PREAMBLE
XXXXXXXX ACQUISITION PROPOSAL......................................................................... 4.3(a)(i)
XXXXXXXX COMMON SHARE................................................................................. 1.12(b)(i)
XXXXXXXX COMMON UNIT.................................................................................. 1.12(a)(i)
XXXXXXXX CONTROLLED GROUP MEMBER...................................................................... 2.13(a)
XXXXXXXX DIRECTOR..................................................................................... 1.8
XXXXXXXX DISCLOSURE LETTER............................................................................ ART. 2
XXXXXXXX EMPLOYEE PLAN................................................................................ 2.12
XXXXXXXX EMPLOYEES.................................................................................... 2.13(a)
XXXXXXXX ERISA AFFILIATE.............................................................................. 2.12
XXXXXXXX FINANCIAL STATEMENT DATE..................................................................... 2.7
XXXXXXXX MATERIAL ADVERSE CHANGE...................................................................... 2.7
XXXXXXXX MATERIAL ADVERSE EFFECT...................................................................... 2.1
XXXXXXXX NON-CONTROLLED SUBSIDIARY.................................................................... RECITAL K
XXXXXXXX OTHER INTERESTS.............................................................................. 2.4
XXXXXXXX PARTNER APPROVALS............................................................................ 1.14
XXXXXXXX PARTNERSHIP.................................................................................. PREAMBLE
XXXXXXXX PARTNERSHIP AGREEMENT........................................................................ 1.7
XXXXXXXX PREFERRED UNIT............................................................................... 1.12(a)(iii)
XXXXXXXX PROPERTIES................................................................................... 2.9(a)
XXXXXXXX RENT ROLL.................................................................................... 2.9(e)
XXXXXXXX RESTRICTED SHARES............................................................................ 5.8(d)
XXXXXXXX SEC DOCUMENTS................................................................................ 2.6
XXXXXXXX SERIES A PREFERRED SHARE..................................................................... 1.12(b)(ii)
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XXXXXXXX SERIES A PURCHASE AGREEMENT.................................................................. 4.1(k)
XXXXXXXX SERIES B PREFERRED UNITS..................................................................... 1.12(a)(ii)
XXXXXXXX SERIES C PREFERRED UNITS..................................................................... 1.12(a)(iii)
XXXXXXXX SHAREHOLDER APPROVALS........................................................................ 2.5(a)
XXXXXXXX SHAREHOLDERS MEETING......................................................................... 5.1(d)
XXXXXXXX SPACE LEASE.................................................................................. 2.9(e)
XXXXXXXX SHARE OPTIONS................................................................................ 2.3(b)
XXXXXXXX SHARE RIGHTS................................................................................. 2.3(b)
XXXXXXXX SUBSIDIARIES................................................................................. 2.2(a)
XXXXXXXX TAX PROTECTION AGREEMENT..................................................................... 2.18(j)
XXXXXXXX UNITS........................................................................................ 1.3
XXXXXXXX VOTING AGREEMENT............................................................................. RECITAL I
PROXY STATEMENT....................................................................................... 5.1(a)
QUALIFYING INCOME..................................................................................... 7.2
RECIPIENT............................................................................................. 7.2
REIT.................................................................................................. RECITAL E
REIT REQUIREMENTS..................................................................................... 7.2
RELEASE............................................................................................... 2.10(a)
RESTRICTED SHARE SCHEDULE............................................................................. 5.8(g)
SEC................................................................................................... 2.5(c)
SECRETARY............................................................................................. 1.5
SECURITIES ACT........................................................................................ 2.3(g)
SHARE OPTION SCHEDULE................................................................................. 5.8(f)
SHAREHOLDER APPROVALS................................................................................. 3.5(a)
STOCK PURCHASE AGREEMENT.............................................................................. RECITAL K
SUBSIDIARY............................................................................................ 2.2(a)
SUPERIOR ACQUISITION PROPOSAL......................................................................... 4.3(d)
SURVIVING CORPORATION................................................................................. 1.1
SURVIVING PARTNERSHIP................................................................................. 1.2
TAKEOVER STATUTE...................................................................................... 2.20
TAXES................................................................................................. 2.14(a)
THIRD PARTY PROVISIONS................................................................................ 8.5
TITLE 3............................................................................................... 1.1
TITLE 8............................................................................................... 1.1
TRANSFER AND GAINS TAXES.............................................................................. 5.7
UNIT CERTIFICATE...................................................................................... 1.12(c)(ii)
WELFARE PLAN.......................................................................................... 2.12
1940 ACT.............................................................................................. 2.21
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 27,
2000, by and among XXXX-XXXX REALTY CORPORATION, a Maryland corporation ("Xxxx-
Xxxx"), XXXX-XXXX REALTY, L.P., a Delaware limited partnership ("Xxxx-Xxxx
Partnership"), XXXXXXXX PROPERTIES TRUST, a Maryland real estate investment
trust ("Xxxxxxxx"), and XXXXXXXX PROPERTIES ACQUISITION PARTNERS, L.P., a
Delaware limited partnership ("Xxxxxxxx Partnership").
R E C I T A L S:
A. The Board of Directors of Xxxx-Xxxx and the Board of Trustees of
Xxxxxxxx have determined that it is advisable and in the best interests of their
respective companies and shareholders, that upon the terms and subject to the
conditions contained herein, Xxxxxxxx shall merge with and into Xxxx-Xxxx, with
Xxxx-Xxxx being the surviving corporation (the "Merger").
X. Xxxx-Xxxx, as the sole general partner of Xxxx-Xxxx Partnership, and
Xxxxxxxx, as the sole general partner (through a wholly-owned direct subsidiary)
of Xxxxxxxx Partnership, have determined that it is advisable and in the best
interests of their respective partnerships and limited partners that upon the
terms and subject to the conditions contained herein, immediately prior to the
Merger, Xxxxxxxx Partnership shall merge with and into Xxxx-Xxxx Partnership (or
a limited liability company or limited partnership owned entirely directly
and/or indirectly, by Xxxx-Xxxx Partnership, as determined by Xxxx-Xxxx and
Xxxx-Xxxx Partnership), with Xxxx-Xxxx Partnership being the surviving
partnership, with the holders of partnership interests in Xxxxxxxx Partnership
receiving in any event units of limited partnership interest in Xxxx-Xxxx
Partnership, as set forth herein (the "Partnership Merger" and, together with
the Merger, the "Mergers"). As an alternative to receiving units of limited
partnership interest in Xxxx-Xxxx Partnership in connection with the Partnership
Merger, limited partners in Xxxxxxxx Partnership (other than Xxxxxxxx) shall
have the right to elect, effective immediately prior to the Partnership Merger,
to exercise their exchange right under the Xxxxxxxx Partnership Agreement (as
defined herein), regardless of whether or not they would otherwise be entitled
to exercise that exchange right under the Xxxxxxxx Partnership Agreement, and
Xxxxxxxx shall issue shares of Xxxxxxxx Common Stock (as defined herein) in
satisfaction of that right, thereby allowing former limited partners in Xxxxxxxx
Partnership (other than Xxxxxxxx) to participate in the Merger as holders of
Xxxxxxxx Common Shares.
C. Upon the terms and subject to the conditions set forth herein,
immediately prior to the Merger, Xxxx-Xxxx Partnership and Xxxxxxxx Partnership
shall execute a Certificate of Merger (the "Certificate of Merger") in
substantially the form attached hereto as Exhibit A and shall file such
Certificate of Merger in accordance with Delaware law to effectuate the
Partnership Merger.
D. Upon the terms and subject to the conditions set forth herein,
immediately following the effectiveness of the Partnership Merger, Xxxx-Xxxx and
Xxxxxxxx shall execute Articles of Merger (the "Articles of Merger") in
substantially the form attached hereto as Exhibit B and shall file such Articles
of Merger in accordance with Maryland law to effectuate the Merger.
E. The parties intend that for federal income tax purposes the Merger
shall qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), that this Agreement shall
constitute a plan of reorganization under Section 368 of the Code,
and that, following the Merger, Xxxx-Xxxx will continue to be subject to
taxation as a real estate investment trust (a "REIT") within the meaning of the
Code.
F For federal income taxes, it is intended that the Partnership Merger,
regardless of form, be treated as a contribution by Xxxxxxxx Partnership of all
of its assets to Xxxx-Xxxx Partnership in exchange for partnership interests in
Xxxx-Xxxx Partnership, as provided for herein, under Section 721 of the Code,
and a distribution of such partnership interests by Xxxxxxxx Partnership to its
partners under Section 731 of the Code.
X. Xxxx-Xxxx and Xxxxxxxx each have received a fairness opinion relating
to the transactions contemplated hereby as more fully described herein.
X. Xxxx-Xxxx, Xxxx-Xxxx Partnership, Xxxxxxxx and Xxxxxxxx Partnership
desire to make certain representations, warranties and agreements in connection
with the Mergers.
I. Contemporaneously with the execution and delivery of this Agreement,
certain holders of Xxxxxxxx Common Shares (as defined in Section 1.12(b)(i) of
this Agreement) have entered into voting agreements with Xxxx-Xxxx and Xxxx-Xxxx
Partnership (each, a "Xxxxxxxx Voting Agreement") pursuant to which, among other
things, each holder has agreed to vote his or its Xxxxxxxx Common Shares in
favor of the Merger, the Partnership Merger, this Agreement and the other
transactions contemplated hereby and any other matter which requires his or its
vote in connection with the transactions contemplated by this Agreement.
J. Contemporaneously with the execution and delivery of this Agreement,
certain holders of Xxxx-Xxxx Common Shares (as defined in Section 1.12(b)(i) of
this Agreement) and certain holders of partnership interests in Xxxx-Xxxx
Partnership have entered into voting agreements with Xxxxxxxx and Xxxxxxxx
Partnership (each, a "Xxxx-Xxxx Voting Agreement") pursuant to which, among
other things, each holder has agreed to vote his or its Xxxx-Xxxx Common Shares
and Xxxx-Xxxx Units (as defined in Section 3.3(e) of this Agreement) in favor of
the Merger, the Partnership Merger, this Agreement and the other transactions
contemplated hereby and any other matter which requires his or its vote in
connection with the transactions contemplated by this Agreement.
K. Contemporaneously with the execution and delivery of this Agreement
and as an inducement to Xxxx-Xxxx and Xxxx-Xxxx Partnership to enter into this
Agreement, Ampulla, LLC, as the owner of 100% of the voting capital stock of
Xxxxxxxx Properties Limited, Inc., a Delaware corporation (the "Xxxxxxxx Non-
controlled Subsidiary"), have entered into a Stock Purchase Agreement, dated as
of the date hereof, relating to the voting capital stock of the Xxxxxxxx Non-
controlled Subsidiary (the "Stock Purchase Agreement"), providing for the sale
of all of the outstanding voting capital stock of the Xxxxxxxx Non-controlled
Subsidiary to certain officers of Xxxx-Xxxx or their assigns.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
2
ARTICLE 1
THE MERGERS
1.1 The Merger. Subject to the completion of the Partnership Merger in
----------
accordance with Section 1.2 hereof, upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the applicable provisions of
Title 3 of the Maryland General Corporation Law (the "MGCL"), as amended ("Title
3"), and Title 8 of the Corporations and Associations Article of the Annotated
Code of Maryland, as amended ("Title 8"), immediately following the
effectiveness of the Partnership Merger, Xxxxxxxx shall be merged with and into
Xxxx-Xxxx, whereupon the separate corporate existence of Xxxxxxxx shall cease
and Xxxx-Xxxx shall continue as the surviving corporation (the "Surviving
Corporation"). The Merger shall have the effects set forth in Section 3-114 of
the MGCL, Section 8-501.1 of Title 8 and this Agreement.
1.2 The Partnership Merger. Immediately prior to the Merger, upon the
----------------------
terms and subject to the conditions of this Agreement, and in accordance with
the applicable provisions of Title 6, Chapter 17 of the Delaware Code Annotated,
as amended (the "DRULPA"), Xxxxxxxx Partnership shall be merged with and into
Xxxx-Xxxx Partnership (or, at Xxxx-Xxxx Partnership's option, a limited
liability company or a limited partnership owned entirely, directly and/or
indirectly, by Xxxx-Xxxx Partnership, as determined by Xxxx-Xxxx and Xxxx-Xxxx
Partnership), whereupon the separate partnership existence of Xxxxxxxx
Partnership shall cease and Xxxx-Xxxx Partnership (or such limited partnership
or limited liability company subsidiary) shall continue as the surviving limited
partnership or limited liability company, as the case may be (the "Surviving
Partnership"), and with the holders of partnership interests in Xxxxxxxx
Partnership receiving in any event units of partnership interest in Xxxx-Xxxx
Partnership, as set forth in Section 1.12(a). The Partnership Merger shall have
the effects set forth in Section 17-211 of the DRULPA. Notwithstanding the
foregoing, certain of Xxxxxxxx Partnership's Subsidiaries may be merged into
Xxxx-Xxxx Partnership or certain of Xxxx-Xxxx Partnership's Subsidiaries as the
parties hereto may mutually agree.
1.3 Election by Limited Partners in Xxxxxxxx Partnership to Exercise
----------------------------------------------------------------
the Exchange Right; The Partnership Merger. Notwithstanding any limitation or
------------------------------------------
restriction contained in the Xxxxxxxx Partnership Agreement with respect to the
right of a Limited Partner (as defined in the Xxxxxxxx Partnership Agreement) to
exercise the Exchange Right (as defined in the Xxxxxxxx Partnership Agreement)
(including, without limitation, any limitation or restriction contained in
Section 8.05 of the Xxxxxxxx Partnership Agreement), every Limited Partner shall
have the right to exercise the Exchange Right by submitting to Xxxxxxxx
Partnership (with a copy to Xxxxxxxx) during the period between the mailing date
of the Proxy Statement (as defined herein) for the Xxxxxxxx Shareholders Meeting
(as defined herein) and 5:00 p.m., Eastern time, on the second business day
prior to the date of the Xxxxxxxx Shareholders Meeting a Notice of Exchange (as
defined in the Xxxxxxxx Partnership Agreement) specifying the number of units of
limited partnership interest of Xxxxxxxx Partnership (the "Xxxxxxxx Units")
which such Limited Partner desires to have exchanged pursuant to Section 8.05 of
the Xxxxxxxx Partnership Agreement (as modified by this Section 1.3(a)), which
Notice of Exchange shall be conditioned upon the closing of the Partnership
Merger; provided, that,
(a) with respect to each Notice of Exchange (a copy of the form of which
shall accompany or form a part of the Form of Election (as defined herein))
properly submitted by a Limited Partner in accordance with this Section 1.3(a)
(an "Exercise"), Xxxxxxxx shall elect in accordance with Section
3
8.05(b) of the Xxxxxxxx Partnership Agreement to purchase the Xxxxxxxx Units
relating to such Exercise by paying the REIT Shares Amount (as defined in the
Xxxxxxxx Partnership Agreement) and not the Cash Amount (as defined in the
Xxxxxxxx Partnership Agreement);
(b) Notwithstanding the provisions of Section 8.05(b) of the Xxxxxxxx
Partnership Agreement, Xxxxxxxx shall not be required to notify the Exchanging
Partner (as defined in the Xxxxxxxx Partnership Agreement) of Xxxxxxxx' election
to purchase the Xxxxxxxx Units as described in the foregoing clause (a);
(c) The Specified Exchange Date (as defined in the Xxxxxxxx Partnership
Agreement) shall be the Closing Date (as defined herein) at a time prior to the
consummation of the Partnership Merger; and
(d) Each Exchanging Partner shall be treated as an owner of the Xxxxxxxx
Common Shares issued pursuant to this Agreement at the Effective Time (as
defined herein) of the Merger.
1.4 Closing. The closing of the Mergers (the "Closing") will take place
-------
at 10:00 a.m., New York City 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 Article 6 (the "Closing Date"), at the offices of
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
unless another date or place is agreed to in writing by the parties.
1.5 Effective Time. As soon as practicable following the satisfaction or
--------------
waiver of the conditions set forth in Article 6, (i) Xxxx-Xxxx Partnership and
Xxxxxxxx Partnership shall execute and file the Certificate of Merger, executed
in accordance with the DRULPA, with the Office of the Secretary of State of the
State of Delaware (the "Secretary") and (ii) Xxxx-Xxxx and Xxxxxxxx shall then
execute and file the Articles of Merger, executed in accordance with the
applicable provisions of Title 3 and Title 8, with the State Department of
Assessments and Taxation of Maryland (the "Department"), and shall make all
other filings and recordings required with respect to the Merger under Title 3
and Title 8 or, with respect to the Partnership Merger, under the DRULPA. The
Mergers shall become effective at such times (each an "Effective Time" and
collectively, the "Effective Times") as Xxxx-Xxxx and Xxxxxxxx shall agree
should be specified in the Articles of Merger and the Certificate of Merger (not
to exceed thirty (30) days after the Articles of Merger are accepted for record
by the Department). Unless otherwise agreed, the parties shall cause the
Effective Times to occur on the Closing Date, with not less than one hour
between the Effective Time of the Partnership Merger and the Effective Time of
the Merger.
1.6 Effect of Merger on Charter and Bylaws. The Articles of Restatement,
--------------------------------------
as amended, of Xxxx-Xxxx (the "Xxxx-Xxxx Charter") and the Bylaws of Xxxx-Xxxx
(the "Xxxx-Xxxx Bylaws"), as in effect immediately prior to the Effective Time,
and, if approved by the Xxxx-Xxxx shareholders, as amended to increase the
authorized preferred stock and to change the name of the Surviving Corporation
(each as set forth in the Articles of Merger), shall continue in full force and
effect after the Merger and, until further amended in accordance with applicable
Maryland law. The Amended and Restated Declaration of Trust of Xxxxxxxx, as
amended (the "Declaration of Trust"), and the Bylaws of Xxxxxxxx, as in effect
immediately prior to the Effective Time of the Merger, shall terminate at the
Effective Time of the Merger.
1.7 Effect of Partnership Merger on Agreement of Limited Partnership. The
----------------------------------------------------------------
Second Amended and Restated Agreement of Limited Partnership, as amended, of
Xxxx-Xxxx Partnership (the
4
"Xxxx-Xxxx Partnership Agreement"), as in effect immediately prior to the
Effective Time and as amended to change the name of the Surviving Partnership
(as set forth in the Certificate of Merger), shall continue in full force and
effect after the Partnership Merger until further amended in accordance with
applicable Delaware law. The Second Amended and Restated Agreement of Limited
Partnership, as amended, of Xxxxxxxx Partnership as in effect immediately prior
to the Effective Time of the Partnership Merger (the "Xxxxxxxx Partnership
Agreement") shall terminate at the Effective Time of the Partnership Merger.
1.8 Directors. At the Effective Time of the Merger, the directors of the
---------
Surviving Corporation shall consist of (a) the directors of Xxxx-Xxxx
immediately prior to the Effective Time of the Merger, who shall continue to
serve for the balance of their unexpired terms or their earlier death,
resignation or removal and (b) one (1) designee of Xxxxxxxx (the "Xxxxxxxx
Director"). Immediately prior to the Effective Time, Xxxx-Xxxx shall take all
action necessary to nominate and cause the designee of Xxxxxxxx to be elected to
the Board of Directors, including, without limitation, increasing the number of
directors as provided in the Xxxx-Xxxx Bylaws and amending its Bylaws. The
Xxxxxxxx Director shall be elected as a Class II director of the Xxxx-Xxxx Board
of Directors, and as such shall have a term expiring at the second annual
meeting of shareholders of Xxxx-Xxxx following the Effective Times. Following
his election as a director hereunder and his election as a director at such
annual meeting, such person shall serve for his designated term, subject to his
earlier death, resignation or removal. Upon the expiration of the Xxxxxxxx
Director's initial term on the Board of Directors of Xxxx-Xxxx, Xxxx-Cali shall
use commercially reasonable efforts to re-nominate the Xxxxxxxx Director and to
cause the Xxxxxxxx Director to be re-elected to serve an additional term as a
Class II director of the Board of Directors.
1.9 Officers. The officers of the Surviving Corporation shall consist of
--------
the officers of Xxxx-Xxxx immediately prior to the Effective Time.
1.10 Effect on Shares. The effect of the Merger on the shares of
----------------
beneficial interest of Xxxxxxxx shall be as provided in the Articles of Merger.
The Merger shall not change the shares of capital stock of Xxxx-Xxxx outstanding
immediately prior to the Merger.
1.11 Effect on Partnership Interests. The effect of the Partnership
-------------------------------
Merger on the partnership interests of Xxxxxxxx Partnership shall be as provided
in the Certificate of Merger. The Partnership Merger shall not change the
partnership interests of Xxxx-Xxxx Partnership outstanding immediately prior to
the Merger.
1.12 Exchange Ratios and Other Merger Consideration.
----------------------------------------------
(a) The merger consideration to be paid to holders of Xxxxxxxx Units in
the Partnership Merger (the "Partnership Merger Consideration") is as follows:
(i) The exchange ratio relating to the Partnership Merger shall be
0.956 OP Unit (as defined in the Xxxx-Xxxx Partnership Agreement) of Xxxx-Xxxx
Partnership (each a "Xxxx-Xxxx Common Unit") for each common unit of limited
partnership interest in Xxxxxxxx Partnership (a "Xxxxxxxx Common Unit")
outstanding immediately prior to the Effective Time of the Partnership Merger.
The holders of the Xxxx-Xxxx Common Units issued in the Partnership Merger
(other than Xxxxxxxx and Subsidiaries (as defined herein) of Xxxxxxxx) shall be
entitled to redeem such Xxxx-Xxxx Common Units following the consummation of the
Partnership Merger pursuant to the terms of the Xxxx-Xxxx
5
Partnership Agreement, and shall be entitled to the same rights and privileges
as the holders of Xxxx-Xxxx Common Units outstanding on the date hereof;
(ii) The exchange ratio relating to the Partnership Merger shall be
one Class D Preferred Unit (as defined in the contemplated amendment to the
Xxxx-Xxxx Partnership Agreement to designate such units (the "Xxxx-Xxxx
Partnership Agreement Amendment")), designated a Class D 8.30% Cumulative
Redeemable Perpetual Preferred Unit, of Xxxx-Xxxx Partnership ("Xxxx-Xxxx Series
D Preferred Units"), for each Series B Preferred Unit (as defined in the
Xxxxxxxx Partnership Agreement), designated an 8.30% Series B Cumulative
Redeemable Perpetual Preferred Unit of Xxxxxxxx Partnership ("Xxxxxxxx Series B
Preferred Unit") outstanding immediately prior to the Effective Time of the
Partnership Merger. The holders of the Xxxx-Xxxx Series D Preferred Units
issued in the Partnership Merger shall be entitled to the same rights and
privileges as the holders of the Xxxxxxxx Series B Preferred Units outstanding
on the date hereof; and
(iii) The exchange ratio relating to the Partnership Merger shall be
one Class E Preferred Unit (as defined in the Xxxx-Xxxx Partnership Agreement
Amendment), designated a Class E 9.45% Cumulative Redeemable Perpetual Preferred
Unit, of Xxxx-Xxxx Partnership ("Xxxx-Xxxx Series E Preferred Units" and,
together with the Xxxx-Xxxx Series D Preferred Units, the "New Xxxx-Xxxx
Preferred Units"), for each Series C Preferred Unit (as defined in the Xxxxxxxx
Partnership Agreement), designated a 9.45% Series C Cumulative Redeemable
Perpetual Preferred Unit of Xxxxxxxx Partnership ("Xxxxxxxx Series C Preferred
Unit" and, together with the Xxxxxxxx Series B Preferred Units, the "Xxxxxxxx
Preferred Units") outstanding immediately prior to the Effective Time of the
Partnership Merger. The holders of the Xxxx-Xxxx Series E Preferred Units
issued in the Partnership Merger shall be entitled to the same rights and
privileges as the holders of the Xxxxxxxx Series C Preferred Units outstanding
on the date hereof. The Xxxx-Xxxx Common Units issued pursuant to the
Partnership Merger, the Xxxx-Xxxx Series D Preferred Units and the Xxxx-Xxxx
Series E Preferred Units are sometimes collectively referred to herein as the
"New Xxxx-Xxxx Units". The Xxxxxxxx Common Units, the Xxxxxxxx Series B
Preferred Units and the Xxxxxxxx Series C Preferred Units comprise the Xxxxxxxx
Units.
(b) The merger consideration to be paid to holders of shares of beneficial
interest of Xxxxxxxx in the Merger (collectively, the "Merger Consideration") is
as follows:
(i) Each common share of beneficial interest, par value $0.01 per
share, of Xxxxxxxx (a "Xxxxxxxx Common Share") issued and outstanding
immediately prior to the Effective Time of the Merger, shall be converted into
the right to receive 0.956 validly issued, fully paid and nonassessable share of
common stock, par value $0.01 per share, of Xxxx-Xxxx (a "Xxxx-Xxxx Common
Share") (the "Exchange Ratio"); and
(ii) Each share of Series A Cumulative Convertible Redeemable
Preferred Shares, liquidation preference $26.50 per share, of Xxxxxxxx
("Xxxxxxxx Series A Preferred Shares") issued and outstanding immediately prior
to the Effective Time of the Merger shall be converted into the right to receive
one (1) validly issued, fully paid and nonassessable share of Series A
Cumulative Convertible Redeemable Preferred Stock, liquidation preference $26.50
per share, of Xxxx-Xxxx (a "Xxxx-Xxxx Series A Preferred Share") (the "Preferred
Exchange Ratio"). The holders of the Xxxx-Xxxx Series A Preferred Shares issued
in the Merger shall be entitled to the same rights and privileges as the holders
of the Xxxxxxxx Series A Preferred Shares outstanding on the date hereof.
6
(iii) If, from the date hereof until the Effective Time, Xxxx-Xxxx
(i) pays a dividend or makes a distribution on the Xxxx-Xxxx Common Shares in
Xxxx-Xxxx Common Shares, (ii) subdivides the outstanding Xxxx-Xxxx Common Shares
into a greater number of Xxxx-Xxxx Common Shares or (iii) combines the
outstanding Xxxx-Xxxx Common Shares into a smaller number of Xxxx-Xxxx Common
Shares, then the Exchange Ratio shall be adjusted to reflect the proportionate
change in the number of outstanding Xxxx-Xxxx Common Shares.
(c) (i) All Xxxxxxxx Common Shares, when so converted as provided in
Section 1.12(b)(i), and all Xxxxxxxx Series A Preferred Shares, when so
converted as provided in Section 1.12(b)(ii), shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate (a "Certificate") theretofore representing any such
shares shall cease to have any rights with respect thereto, except the right to
receive, upon the surrender of such Certificate in accordance with Section
1.16(c), as applicable, (A) any dividends and other distributions in accordance
with Section 1.16(d), (B) certificates representing the Xxxx-Xxxx Common Shares
into which such Xxxxxxxx Common Shares are converted pursuant to Section
1.12(b)(i) (if any), (C) certificates representing the Xxxx-Xxxx Series A
Preferred Shares into which such Xxxxxxxx Series A Preferred Shares are
converted pursuant to Section 1.12(b)(ii) (if any), and (D) any cash, without
interest, in lieu of fractional Xxxx-Xxxx Common Shares to be issued or paid in
consideration for Xxxxxxxx Common Shares upon the surrender of such Certificate
in accordance with Sections 1.16(c) and 1.16(g).
(ii) All Xxxxxxxx Common Units, when so converted as provided in
Section 1.12(a)(i), all Xxxxxxxx Series B Preferred Units, when so converted as
provided in Section 1.12(a)(ii), and all Xxxxxxxx Series C Preferred Units, when
so converted as provided in Section 1.12(a)(iii), shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist, and
each holder of a unit certificate (a "Unit Certificate") theretofore
representing any such units shall cease to have any rights with respect thereto,
except the right to receive, upon the surrender of such Unit Certificate in
accordance with Section 1.16(c) and 1.16(i), as applicable, (A) any
distributions in accordance with Section 1.16(d) and 1.16(i) and (B) unit
certificates representing the New Xxxx-Xxxx Units into which such Xxxxxxxx Units
are converted pursuant to Section 1.12(a).
1.13 Registration Rights Agreements. At the Effective Time, Xxxx-Xxxx
------------------------------
will assume in writing and succeed to all rights and obligations of Xxxxxxxx
pursuant to the Registration Rights Agreements listed on Schedule 2.3 to the
Xxxxxxxx Disclosure Letter (as hereinafter defined).
1.14 Partner Approval. Xxxxxxxx shall seek, and use its commercially
----------------
reasonable efforts to obtain, the approval, if any, of the limited partners of
Xxxxxxxx Partnership to the Partnership Merger and the withdrawal of Xxxxxxxx as
general partner (through a wholly-owned direct subsidiary) to the extent
required by the Xxxxxxxx Partnership Agreement and any other matters reasonably
requested by either party to effectuate the transactions contemplated by this
Agreement (collectively, the "Xxxxxxxx Partner Approvals"). Xxxx-Xxxx shall
seek, and shall use its commercially reasonable efforts to obtain, the approval,
if any, of the partners of Xxxx-Xxxx Partnership to the Partnership Merger to
the extent required by the Xxxx-Xxxx Partnership Agreement and any other matters
reasonably requested by either party to effectuate the transactions contemplated
by this Agreement (collectively, the "Xxxx-Xxxx Partner Approvals," and together
with the Xxxxxxxx Partner Approvals, the "Partner Approvals").
7
1.15 No Appraisal Rights. The holders of Xxxxxxxx Common Shares, Xxxxxxxx
-------------------
Series A Preferred Shares, Xxxxxxxx Units, Xxxx-Xxxx Common Shares and Xxxx-Xxxx
Units are not entitled under applicable law to appraisal rights as a result of
the Mergers.
1.16 Exchange of Certificates; Pre-Closing Dividends; Fractional Shares.
------------------------------------------------------------------
(a) Exchange Agent. Prior to the Effective Time, Xxxx-Xxxx shall appoint
--------------
Equiserve Trust Company, N.A. as the exchange agent, or another bank or trust
company reasonably acceptable to Xxxxxxxx, to act as exchange agent (the
"Exchange Agent") for the exchange of the Merger Consideration upon surrender of
certificates representing issued and outstanding Xxxxxxxx Common Shares,
Xxxxxxxx Series A Preferred Shares, and Xxxxxxxx Units, as applicable.
(b) Xxxx-Xxxx to Provide Merger Consideration. Xxxx-Xxxx shall provide to
-----------------------------------------
the Exchange Agent on or before the Effective Time, for the benefit of the
holders of Xxxxxxxx Common Shares and Xxxxxxxx Series A Preferred Shares, the
Merger Consideration (the "Exchange Fund") issuable in exchange for the issued
and outstanding Xxxxxxxx Common Shares and Xxxxxxxx Series A Preferred Shares
pursuant to Section 1.12 and cash payable in respect of any fractional shares
required pursuant to Section 1.16(g). Xxxxxxxx shall provide to the Exchange
Agent on or before the Effective Time, for the benefit of the holders of
Xxxxxxxx Common Shares, cash payable in respect of any dividends required
pursuant to Section 1.16(d).
(c) Exchange Procedure. As soon as reasonably practicable after the
------------------
Effective Time, Xxxx-Xxxx shall use commercially reasonable efforts to cause the
Exchange Agent to mail to each holder of record of a Certificate or Certificates
which immediately prior to the Effective Time represented outstanding Xxxxxxxx
Common Shares and Xxxxxxxx Series A Preferred Shares whose shares were converted
pursuant to Section 1.12 into the right to receive the Merger Consideration (i)
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 Xxxx-Xxxx may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the 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 Xxxx-Xxxx,
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 Merger
Consideration into which the Xxxxxxxx Common Shares or Xxxxxxxx Series A
Preferred Shares, as applicable, theretofore represented by such Certificate
shall have been converted pursuant to Section 1.12, together with any dividends
or other distributions to which such holder is entitled pursuant to Section
1.16(d), and cash, if any, payable in lieu of fractional shares pursuant to
Section 1.16(g), to be mailed within five business days of receipt thereof, and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Xxxxxxxx Common Shares or Xxxxxxxx Series A Preferred
Shares which is not registered in the transfer records of Xxxxxxxx, payment may
be made to a person other than the person in whose name the Certificate so
surrendered is registered 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 Xxxx-Xxxx that such tax or taxes have been paid
or are not applicable. Until surrendered as contemplated by this Section 1.16,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
8
Consideration, without interest, into which the Xxxxxxxx Common Shares or
Xxxxxxxx Series A Preferred Shares, as applicable, theretofore represented by
such Certificate shall have been converted pursuant to Section 1.12, and any
dividends or other distributions to which such holder is entitled pursuant to
Section 1.16(d). No interest will be paid or will accrue on the Merger
Consideration upon the surrender of any Certificate or on any cash payable
pursuant to Section 1.16(d) or Section 1.16(g).
(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 Xxxxxxxx ending at the Effective
Time of the Merger (and avoid the payment of tax with respect to undistributed
income), Xxxxxxxx shall declare a dividend (the "Final Company Dividend") to
holders of Xxxxxxxx Common Shares and Xxxxxxxx Series A Preferred Shares, the
record date for which shall be the close of business on the last business day
prior to the Effective Time of the Merger, in an amount equal to the minimum
dividend sufficient to permit Xxxxxxxx to satisfy such requirements, and
Xxxxxxxx Partnership shall declare a parallel and equivalent distribution to the
holders of the Xxxxxxxx Units. If Xxxxxxxx determines it necessary to declare
the Final Company Dividend, it shall notify Xxxx-Xxxx at least ten (10) days
prior to the date for the Xxxxxxxx Shareholders Meeting (as defined in Section
5.1), and Xxxx-Xxxx shall declare a dividend per share to holders of Xxxx-Xxxx
Common Shares, the record date for which shall be the close of business on the
last business day prior to the Effective Times, in an amount per Xxxx-Xxxx
Common Share equal to the quotient obtained by dividing (x) the Final Company
Dividend per Xxxxxxxx Common Share paid by Xxxxxxxx by (y) the Exchange Ratio,
and Xxxx-Xxxx Partnership shall declare a parallel and equivalent distribution,
the record date for which shall be the close of business on the last business
day prior to the Effective Times, to the holders of the Xxxx-Xxxx Common Units
and the distributions to the holders of the Xxxx-Xxxx Preferred Units (as
defined in Section 3.3(e)), the record date for which shall be the close of
business on the last business day prior to the Effective Times. The dividends
and distributions payable hereunder shall be payable on the last business day
immediately preceding the Closing Date.
(ii) No dividends or other distributions with respect to Xxxx-Xxxx
Common Shares with a record date after the Effective Times shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of Xxxx-Xxxx
Common Shares represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 1.16(g), in each
case until the surrender of such Certificate in accordance with this Section
1.16. 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 Xxxx-Xxxx Common Shares to which such holder
is entitled pursuant to Section 1.16(g) and (ii) if such Certificate is
exchangeable for one or more whole Xxxx-Xxxx Common Shares, (x) at the time of
such surrender the amount of dividends or other distributions with a record date
after the Effective Times theretofore paid with respect to such whole Xxxx-Xxxx
Common Shares and (y) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Times but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole Xxxx-Xxxx Common Shares.
(e) No Further Ownership Rights in Xxxxxxxx Common Shares and Xxxxxxxx
------------------------------------------------------------------
Series A Preferred Shares. All Merger Consideration paid upon the surrender of
-------------------------
Certificates in accordance with the terms of this Section 1.16 (including any
cash paid pursuant to Section 1.16(g)) shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Xxxxxxxx Common Shares or Xxxxxxxx
Series A
9
Preferred Shares, as applicable, theretofore represented by such Certificates;
provided, however, that Xxxxxxxx shall transfer to the Exchange Agent cash
sufficient to pay any dividends or make any other distributions with a record
date prior to the Effective Times which may have been declared or made by
Xxxxxxxx on such Xxxxxxxx Common Shares or Xxxxxxxx Series A Preferred Shares,
as applicable, in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Effective Times and have
not been paid prior to such surrender, and there shall be no further
registration of transfers on the stock transfer books of Xxxxxxxx of the
Xxxxxxxx Common Shares and Xxxxxxxx Series A Preferred Shares which were
outstanding immediately prior to the Effective Times. If, after the Effective
Times, Certificates are presented to Xxxx-Xxxx for any reason, they shall be
canceled and exchanged as provided in this Section 1.16.
(f) No Liability. None of Xxxxxxxx, Xxxx-Cali or the Exchange Agent shall
------------
be liable to any person in respect of any Merger Consideration or dividends
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 twelve (12)
months after the Effective Time shall be redelivered by the Exchange Agent to
Xxxx-Xxxx, upon demand, and any holders of Certificates who have not theretofore
complied with Section 1.16(c) shall thereafter look only to Xxxx-Xxxx for
delivery of the Merger Consideration and any unpaid dividends, subject to
applicable escheat and other similar laws.
(g) No Fractional Shares.
--------------------
(i) No certificates or scrip representing fractional Xxxx-Xxxx
Common 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 Xxxx-Xxxx.
(ii) No fractional Xxxx-Xxxx Common Shares shall be issued pursuant
to this Agreement. In lieu of the issuance of any fractional Xxxx-Xxxx Common
Shares pursuant to this Agreement, each holder of Xxxxxxxx Common Shares upon
surrender of a Certificate for exchange shall be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying (i) the
average closing price of one Xxxx-Xxxx Common Share on the New York Stock
Exchange (the "NYSE") on the five trading days immediately preceding the Closing
Date (the "Fair Market Value") by (ii) the fractional amount of the Xxxx-Xxxx
Common Shares which such holder would otherwise be entitled to receive under
this Section 1.16.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
-----------------
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by Xxxx-Xxxx
or the Exchange Agent, the posting by such person of a bond in such reasonable
amount as Xxxx-Xxxx or the Exchange Agent may direct (but consistent with the
practices Xxxx-Xxxx applies to its own shareholders) as indemnity against any
claim that may be made against them with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Xxxx-Xxxx Common Shares to which the holders thereof are
entitled pursuant to Section 1.12, any cash payable pursuant to Section 1.16(g)
to which the holders thereof are entitled and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
1.16(d).
10
(i) Applicability to Partnership Merger. All provisions of this Section
-----------------------------------
1.16 shall apply to Xxxxxxxx Partnership, Xxxx-Xxxx Partnership and the Xxxxxxxx
Common Units and the Xxxxxxxx Preferred Units with respect to the Partnership
Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF XXXXXXXX AND XXXXXXXX PARTNERSHIP
Except as set forth in the letter of even date herewith signed by the
Chairman or Chief Executive Officer of Xxxxxxxx and delivered to Xxxx-Xxxx prior
to the execution hereof (the "Xxxxxxxx Disclosure Letter"), Xxxxxxxx and
Xxxxxxxx Partnership represent and warrant to Xxxx-Xxxx and Xxxx-Xxxx
Partnership as follows:
2.1 Organization, Standing and Power of Xxxxxxxx. Xxxxxxxx is a real
--------------------------------------------
estate investment trust duly organized, validly existing and in good standing
under the laws of the state of Maryland. Xxxxxxxx has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted. Xxxxxxxx' Declaration of Trust is in effect,
and no dissolution, revocation or forfeiture proceedings regarding Xxxxxxxx have
been commenced. Xxxxxxxx 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 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 Xxxxxxxx and the Xxxxxxxx
Subsidiaries (as defined below), taken as a whole (a "Xxxxxxxx Material Adverse
Effect"). A Xxxxxxxx Material Adverse Effect shall not include (i) the effects
related to general economic changes, changes in the U.S. financial markets
generally, changes that affect real estate investment trusts generally and
changes that affect office real estate generally or (ii) the effects specified
in Section 2.5(c) with respect to the items listed in part (ii) of Section
2.5(c) to the extent disclosed in Schedule 2.5(c) of the Xxxxxxxx Disclosure
Letter. Xxxxxxxx has delivered to Xxxx-Xxxx complete and correct copies of
Xxxxxxxx' Declaration of Trust and Bylaws, in each case, as amended or
supplemented to the date of this Agreement.
2.2 Xxxxxxxx Subsidiaries.
---------------------
(a) Schedule 2.2(a) to the Xxxxxxxx Disclosure Letter sets forth (A) each
Subsidiary (as defined below) of Xxxxxxxx (the "Xxxxxxxx Subsidiaries") and the
Xxxxxxxx Non-controlled Subsidiary (which Xxxxxxxx Non-controlled Subsidiary
constitutes the only entity in which Xxxxxxxx owns a non-voting equity interest
and has no right to control except as set forth on Schedule 2.4 of the Xxxxxxxx
Disclosure Letter), (B) the ownership interest therein of Xxxxxxxx, (C) if not
directly or indirectly wholly owned by Xxxxxxxx or its Affiliates, the identity
and ownership interest of each of the other owners of such Xxxxxxxx Subsidiary
or Xxxxxxxx Non-controlled Subsidiary, as applicable, (D) each office property
and other commercial property owned or managed by such Xxxxxxxx Subsidiary or
Xxxxxxxx Non-controlled Subsidiary, as applicable, and (E) if such property is
not wholly owned by such Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled
Subsidiary, as applicable, the identity and ownership interest of each of the
other owners of such property. Except as set forth on Schedule 2.2(a) to the
Xxxxxxxx Disclosure Letter, Xxxxxxxx has never owned greater than 10% of the
voting stock of any corporation other than a Qualified REIT Subsidiary (as
defined under Section 856(i)(2) of the Code). As used in this Agreement,
"Subsidiary" of any Person (as defined below) means any corporation,
partnership, limited
11
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 (1) a general partner, managing member or other similar
interest, or (2) (x) 10% or more of the voting power of the voting capital stock
or other equity interests, or (y) 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 2.4 to the Xxxxxxxx Disclosure Letter sets forth a true and complete
list of the equity securities owned by Xxxxxxxx, directly or indirectly, in any
corporation, partnership, limited liability company, joint venture or other
legal entity, excluding Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-controlled
Subsidiary.
(b) Except as set forth in Schedule 2.2(b) to the Xxxxxxxx Disclosure
Letter, (i) all of the outstanding shares of capital stock of each Xxxxxxxx
Subsidiary and Xxxxxxxx Non-controlled 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 Xxxxxxxx or by another
Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled 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 Xxxxxxxx Subsidiary that is a partnership, joint
venture, limited liability company or trust which are owned by Xxxxxxxx, by
another Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled Subsidiary or by Xxxxxxxx
and another Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled Subsidiary are owned
free and clear of all Liens. Each Xxxxxxxx Subsidiary and Xxxxxxxx Non-
controlled 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 Xxxxxxxx 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 Xxxxxxxx Subsidiary and
Xxxxxxxx Non-controlled 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
Xxxxxxxx Material Adverse Effect. Complete and correct copies of the articles
of incorporation, bylaws, organizational documents and partnership, joint
venture and operating agreements of each Xxxxxxxx Subsidiary and Xxxxxxxx Non-
controlled Subsidiary, as amended to the date of this Agreement, have been
previously delivered or made available to Xxxx-Xxxx. No effective amendment has
been made to the Xxxxxxxx Partnership Agreement since May 16, 2000.
2.3 Capital Structure.
-----------------
(a) The authorized shares of beneficial interest of Xxxxxxxx consist of
(i) 20,000,000 preferred shares of beneficial interest, $0.01 par value per
share, 3,773,585 of which are issued and outstanding as Xxxxxxxx Series A
Preferred Shares on the date hereof, and (ii) 100,000,000 Xxxxxxxx Common
Shares, 36,288,480 of which were issued and outstanding as of the date hereof
and 4,098,136 of which were held in treasury.
(b) Set forth in Schedule 2.3(b) to the Xxxxxxxx Disclosure Letter is a
true and complete list of the following: (i) each qualified or nonqualified
option to purchase shares of beneficial interest of
12
Xxxxxxxx granted under the Trustee's Share Incentive Plan, the 1996 Share
Incentive Plan, Employee Share Purchase Plan or any other formal or informal
arrangement (collectively, the "Xxxxxxxx Share Options"); and (ii) all other
warrants or other rights to acquire shares of beneficial interest of Xxxxxxxx,
all stock appreciation rights, restricted stock, deferred compensation accounts,
phantom stock, dividend equivalents, performance units and performance awards
and other awards, which are outstanding on the date of this Agreement ("Xxxxxxxx
Share Rights"). Schedule 2.3(b) to the Xxxxxxxx Disclosure Letter sets forth for
each Xxxxxxxx Share Option and Xxxxxxxx Share Right 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 beneficial interest of
Xxxxxxxx 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 stock appreciation rights. On the date
of this Agreement, no shares of beneficial interest of Xxxxxxxx were outstanding
or reserved for issuance except as set forth in this Section 2.3 or in Schedule
2.3(b) to the Xxxxxxxx Disclosure Letter.
(c) All outstanding shares of beneficial interest of Xxxxxxxx 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 Xxxxxxxx having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Xxxxxxxx may vote.
(d) Except (i) as set forth in this Section 2.3 or in Schedule 2.3(d) to
the Xxxxxxxx Disclosure Letter, (ii) Xxxxxxxx Common Units, which may be
redeemed for cash or, at the option of Xxxxxxxx, Xxxxxxxx Common Shares at a
rate of one Xxxxxxxx Common Share for each Xxxxxxxx Common Unit, and (iii)
Xxxxxxxx Common Shares issuable upon the conversion of Xxxxxxxx Series A
Preferred Shares, 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 Xxxxxxxx or any Xxxxxxxx
Subsidiary or Xxxxxxxx Non-controlled Subsidiary is a party or by which such
entity is bound, obligating Xxxxxxxx or any Xxxxxxxx Subsidiary or Xxxxxxxx Non-
controlled 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 Xxxxxxxx or any Xxxxxxxx Subsidiary or Xxxxxxxx
Non-controlled Subsidiary or obligating Xxxxxxxx or any Xxxxxxxx Subsidiary or
Xxxxxxxx Non-controlled Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking (other than to Xxxxxxxx or a Xxxxxxxx Subsidiary or Xxxxxxxx Non-
controlled Subsidiary).
(e) As of the date of this Agreement, 37,870,247 Xxxxxxxx Common Units,
1,900,000 Xxxxxxxx Series B Preferred Units and 2,000,000 Xxxxxxxx Series C
Preferred Units are validly issued and outstanding, fully paid and nonassessable
and not subject to preemptive rights. Schedule 2.3(e) to the Xxxxxxxx
Disclosure Letter sets forth the name of each holder of Xxxxxxxx Common Units
and Xxxxxxxx Preferred Units and the number of Xxxxxxxx Common Units and
Xxxxxxxx Preferred Units, as applicable, owned by each such holder as of the
date of this Agreement. The Xxxxxxxx Units are subject to no restrictions
except as set forth in the Xxxxxxxx Partnership Agreement. Except as provided
in the Xxxxxxxx Partnership Agreement and the Registration Rights Agreements set
forth on Schedule 2.3(g) of the Xxxxxxxx Disclosure Letter, Xxxxxxxx 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, the issuance or sale of interests in Xxxxxxxx Partnership,
whether issued or unissued, or securities convertible or exchangeable into
interests in Xxxxxxxx Partnership.
13
(f) Other than the dividend of $0.485 per Xxxxxxxx Common Share, Xxxxxxxx
Series A Preferred Share and Xxxxxxxx Common Unit payable on July 14, 2000 to
holders of record on June 30, 2000, and an aggregate amount of dividends of
$3,152,500 payable on or before July 3, 2000 to holders of record of the
Xxxxxxxx Preferred Units, all dividends on Xxxxxxxx Common Shares and Xxxxxxxx
Series A Preferred Shares, and all distributions on Xxxxxxxx Common Units and
Xxxxxxxx Preferred 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 Xxxxxxxx Disclosure Letter is a
list of each Registration Rights Agreement or other agreement between Xxxxxxxx
and/or Xxxxxxxx Partnership, on the one hand, and one or more other parties, on
the other hand, which sets forth the rights of any such other party or parties
to cause the registration of any securities of Xxxxxxxx and/or Xxxxxxxx
Partnership pursuant to the Securities Act of 1933, as amended (the "Securities
Act").
2.4 Other Interests. Except for interests in the Xxxxxxxx Subsidiaries,
---------------
the Xxxxxxxx Non-controlled Subsidiary and certain other entities as set forth
in Schedule 2.4(a) to the Xxxxxxxx Disclosure Letter (the "Xxxxxxxx Other
Interests"), none of Xxxxxxxx, Xxxxxxxx Partnership, any Xxxxxxxx Subsidiary or
the Xxxxxxxx Non-controlled Subsidiary owns directly or indirectly any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business trust, limited liability company or other entity with a fair
market value as of the date of this Agreement greater than $1,000,000 or which
represents 5% or more of the outstanding voting power, capital stock or other
ownership interest of any class in any such corporation, partnership, joint
venture, business trust, limited liability company or other entity (other than
investments in short-term investment securities). With respect to the Xxxxxxxx
Other Interests, Xxxxxxxx or Xxxxxxxx Partnership owns such interests free and
clear of all Liens, except as otherwise indicated on Schedule 2.4(a) to the
Xxxxxxxx Disclosure Letter. None of Xxxxxxxx, Xxxxxxxx Partnership, any
Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled Subsidiary is in material
breach of any provision of any agreement, document or contract which is of a
material nature governing its rights in or to the Xxxxxxxx Other Interests, all
of which agreements, documents and contracts are (a) set forth in Schedule
2.4(b) to the Xxxxxxxx Disclosure Letter or disclosed in the Xxxxxxxx SEC
Documents, (b) unmodified except as described therein and (c) in full force and
effect. To the Knowledge of Xxxxxxxx (as hereinafter defined), the other
parties to any such agreement, document or contract which is of a material
nature are not in breach of any of their respective obligations under such
agreements, documents or contracts other than breaches which, in the aggregate,
would not reasonably be expected to have a Xxxxxxxx Material Adverse Effect.
2.5 Authority; Noncontravention; Consents.
-------------------------------------
(a) Xxxxxxxx has the requisite trust power and authority to enter into
this Agreement and, subject to the requisite shareholder approval of the Merger
and any other related matters (the "Xxxxxxxx Shareholder Approvals"), to
consummate the transactions contemplated by this Agreement to which Xxxxxxxx is
a party. The execution and delivery of this Agreement by Xxxxxxxx and the
consummation by Xxxxxxxx of the transactions contemplated by this Agreement to
which Xxxxxxxx is a party have been duly authorized by all necessary action on
the part of Xxxxxxxx, except for and subject to the Xxxxxxxx Shareholder
Approvals and the Xxxxxxxx Partner Approvals with respect to the consummation of
the Mergers only. This Agreement has been duly executed and delivered by
Xxxxxxxx and, subject to the Xxxxxxxx Shareholder Approvals with respect to the
consummation of the Merger only and assuming this Agreement constitutes the
valid and binding agreement of Xxxx-Xxxx, constitutes a valid and binding
obligation of Xxxxxxxx, enforceable against Xxxxxxxx in accordance with and
subject to its terms, subject to
14
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
(b) Xxxxxxxx Partnership has the requisite partnership power and authority
to enter into this Agreement and, subject to the requisite Xxxxxxxx Partner
Approvals, to consummate the transactions contemplated by this Agreement to
which Xxxxxxxx Partnership is a party. The execution and delivery of this
Agreement by Xxxxxxxx Partnership and the consummation by Xxxxxxxx Partnership
of the transactions contemplated by this Agreement to which Xxxxxxxx Partnership
is a party have been duly authorized by all necessary action on the part of
Xxxxxxxx Partnership, except for and subject to the Xxxxxxxx Shareholder
Approvals and the Xxxxxxxx Partner Approvals. This Agreement has been duly
executed and delivered by Xxxxxxxx Partnership and constitutes a valid and
binding obligation of Xxxxxxxx Partnership, enforceable against Xxxxxxxx
Partnership in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
(c) Except as set forth in Schedule 2.5(c)(1) to the Xxxxxxxx Disclosure
Letter, the execution and delivery of this Agreement by Xxxxxxxx and Xxxxxxxx
Partnership do not, and the consummation of the transactions contemplated by
this Agreement to which Xxxxxxxx or Xxxxxxxx Partnership is a party and
compliance by Xxxxxxxx or Xxxxxxxx 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 material loss of a benefit under, or result in the creation of any Lien upon
any of the properties or assets of Xxxxxxxx or any Xxxxxxxx Subsidiary under,
(i) subject to the Xxxxxxxx Shareholder Approvals with respect to the
consummation of the Merger only, the Declaration of Trust or the Bylaws of
Xxxxxxxx or the comparable charter or organizational documents or partnership,
operating, or similar agreement (as the case may be) of any Xxxxxxxx Subsidiary
or Xxxxxxxx Non-controlled 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 Xxxxxxxx or any Xxxxxxxx
Subsidiary or Xxxxxxxx Non-controlled 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 Xxxxxxxx
or any Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled 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 Xxxxxxxx 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 Xxxxxxxx or any Xxxxxxxx Subsidiary or Xxxxxxxx Non-
controlled Subsidiary in connection with the execution and delivery of this
Agreement by Xxxxxxxx or the consummation by Xxxxxxxx of any of the transactions
contemplated by this Agreement, except for (i) filings with the Securities and
Exchange Commission (the "SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) the acceptance for record of the Articles of
Merger by the Department, (iii) the filing of the Certificate of Merger with the
Secretary, (iv) filings with the NYSE, (v) such filings as may be required in
connection with the payment of any transfer and gains taxes, (vi) such filings
as may be required under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
0000 (xxx "XXX Xxx") and (vii) such other consents, approvals, orders,
authorizations, registrations,
15
declarations and filings (A) as are set forth in Schedule 2.5(c)(2) to the
Xxxxxxxx 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 in
any material respect the consummation of any of the transactions contemplated by
this Agreement or otherwise prevent Xxxxxxxx from performing its obligations
under this Agreement in any material respect or have, individually or in the
aggregate, a Xxxxxxxx Material Adverse Effect.
2.6 SEC Documents; Financial Statements; Undisclosed Liabilities.
------------------------------------------------------------
Xxxxxxxx has filed all required reports, schedules, forms, statements and other
documents with the SEC since January 1, 1998 through the date hereof (the
"Xxxxxxxx SEC Documents"). Schedule 2.6(a) to the Xxxxxxxx Disclosure Letter
contains a complete list of all Xxxxxxxx SEC Documents filed by Xxxxxxxx with
the SEC since January 1, 1998 and on or prior to the date of this Agreement.
All of the Xxxxxxxx SEC Documents (other than preliminary material or material
subsequently amended), 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 Xxxxxxxx SEC Documents. None of the Xxxxxxxx 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 amended, modified or superseded by later Xxxxxxxx SEC Documents filed
and publicly available prior to the date of this Agreement. The consolidated
financial statements of Xxxxxxxx and the Xxxxxxxx Subsidiaries (including
Xxxxxxxx Partnership) included in the Xxxxxxxx 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 all material respects, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position of Xxxxxxxx and the Xxxxxxxx Subsidiaries
(including Xxxxxxxx Partnership) 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 Xxxxxxxx Disclosure
Letter, Xxxxxxxx has no Subsidiaries which are not consolidated for accounting
purposes. Except for liabilities and obligations set forth in the Xxxxxxxx SEC
Documents or in Schedule 2.6(c) to the Xxxxxxxx Disclosure Letter, none of
Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled 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 Xxxxxxxx or in the notes thereto and which, individually or in
the aggregate, would have a Xxxxxxxx Material Adverse Effect.
2.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Xxxxxxxx SEC Documents or in Schedule 2.7 to the Xxxxxxxx Disclosure Letter,
since the date of the most recent audited financial statements included in the
Xxxxxxxx SEC Documents (the "Xxxxxxxx Financial Statement Date"), Xxxxxxxx, the
Xxxxxxxx Subsidiaries (including Xxxxxxxx Partnership) and the Xxxxxxxx Non-
controlled Subsidiary 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, properties, assets, financial condition or results of
operations of Xxxxxxxx
16
and the Xxxxxxxx Subsidiaries (including Xxxxxxxx Partnership) taken as a whole
(a "Xxxxxxxx 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 Xxxxxxxx Material Adverse Change, (b) any authorization,
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any shares of Xxxxxxxx'
beneficial interest, except for (i) regular quarterly distributions not in
excess of $0.485 per Xxxxxxxx Series A Preferred Share, per Xxxxxxxx Common
Share or per Xxxxxxxx Common Unit, respectively, and an aggregate of $3,152,500
to holders of the Xxxxxxxx Preferred Units, in each case with customary record
and payment dates or (ii) any final Xxxxxxxx and corresponding Xxxxxxxx
Partnership distribution contemplated by this Agreement, (c) any split,
combination or reclassification of shares of Xxxxxxxx' beneficial interest 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 beneficial interest of Xxxxxxxx or partnership
interests in Xxxxxxxx Partnership or any issuance of an ownership interest in,
any Xxxxxxxx Subsidiary or Xxxxxxxx Non-controlled Subsidiary, (d) any damage,
destruction or loss, whether or not covered by insurance, that has or would have
a Xxxxxxxx Material Adverse Effect, (e) any change in accounting methods,
principles or practices by Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx
Non-controlled Subsidiary materially affecting its assets, liabilities or
business, except insofar as may have been disclosed in Xxxxxxxx SEC Documents or
required by a change in GAAP, or (f) any amendment of any employment,
consulting, severance, retention or any other agreement between Xxxxxxxx and any
officer or director of Xxxxxxxx.
2.8 Litigation. Except as disclosed in the Xxxxxxxx SEC Documents or in
----------
Schedule 2.8 to the Xxxxxxxx Disclosure Letter, and other than bodily injury and
other tort litigation arising from the ordinary course of operations of Xxxxxxxx
and its Subsidiaries (a) which are substantially covered by insurance or (b) for
which all material costs and liabilities arising therefrom are reimbursable
pursuant to common area maintenance or similar agreements, there is no suit,
action or proceeding pending (in which service of process has been received by
an employee of Xxxxxxxx, a Xxxxxxxx Subsidiary or a Xxxxxxxx Non-controlled
Subsidiary) or, to the Knowledge of Xxxxxxxx (as hereinafter defined),
threatened in writing against or affecting Xxxxxxxx or any Xxxxxxxx Subsidiary
or Xxxxxxxx Non-controlled Subsidiary that, individually or in the aggregate,
could reasonably be expected to (i) have a Xxxxxxxx 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 Xxxxxxxx or any
Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled Subsidiary having, or which,
insofar as reasonably can be foreseen, in the future would have, any such
effect. Notwithstanding the foregoing, (x) Schedule 2.8 to the Xxxxxxxx
Disclosure Letter sets forth each and every material uninsured claim, equal
employment opportunity claim and claim relating to sexual harassment and/or
discrimination pending or, to the Knowledge of Xxxxxxxx, threatened as of the
date hereof, in each case with a brief summary of such claim or threatened claim
and (y) no claim has been made under any directors' and officers' liability
insurance policy maintained at any time by Xxxxxxxx, any of the Xxxxxxxx
Subsidiaries or the Xxxxxxxx Non-controlled Subsidiary.
2.9 Properties.
----------
(a) Except as provided in Schedule 2.2(a) or Schedule 2.9(a) to the
Xxxxxxxx Disclosure Letter, Xxxxxxxx or the Xxxxxxxx Subsidiary or the Xxxxxxxx
Non-controlled Subsidiary set forth on Schedule 2.2(a) to the Xxxxxxxx
Disclosure Letter owns fee simple title to, or holds ground leases for, each of
the real properties identified in Schedule 2.2(a) to the Xxxxxxxx Disclosure
Letter (the "Xxxxxxxx
17
Properties"), which are all of the real estate properties owned by them, in each
case (except as provided below) 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"). Schedule 2.2(a) to the Xxxxxxxx
Disclosure Letter further identifies which of the Xxxxxxxx Properties are owned
in fee simple by Xxxxxxxx or the Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled Subsidiary and which of the Xxxxxxxx Properties are subject to a
ground lease. Except as set forth in Schedule 2.2(a) to the Xxxxxxxx Disclosure
Letter, no other Person has any ownership interest in any of the Xxxxxxxx
Properties, and any such ownership interest so scheduled does not materially
detract from the value of the Xxxxxxxx Subsidiary's or Xxxxxxxx Non-controlled
Subsidiary's (as the case may be) interest in, or materially interfere with the
present use of, any of the Xxxxxxxx Properties subject thereto or affected
thereby. Except as set forth in Schedule 2.9(a) to the Xxxxxxxx Disclosure
Letter, none of the Xxxxxxxx Properties is subject to any restriction on the
sale or other disposition thereof or on the financing or release of financing
thereon. The Xxxxxxxx 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 the Xxxxxxxx Disclosure Letter, (ii) Property
Restrictions imposed or promulgated by law or any governmental or authority with
respect to real property, including zoning regulations, which do not materially
adversely affect the current use of any Xxxxxxxx Property, (iii) Property
Restrictions and Encumbrances disclosed on existing title reports or existing
surveys or subsequently granted by Xxxxxxxx or the Xxxxxxxx Subsidiary or the
Xxxxxxxx Non-controlled Subsidiary, which Property Restrictions and
Encumbrances, in any event, do not materially detract from the value of, or
materially interfere with the present use of, any of the Xxxxxxxx Properties
subject thereto or affected thereby and (iv) liens for real estate taxes not yet
due and payable, mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances and Property Restrictions, if any, which, individually or in the
aggregate, do not materially detract from the value of or materially interfere
with the present use of any of the Xxxxxxxx Property subject thereto or affected
thereby. Schedule 2.9(a) to the Xxxxxxxx Disclosure Letter lists each of the
Xxxxxxxx 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 2.2(a) or Schedule 2.9(b) to the
Xxxxxxxx Disclosure Letter, valid policies of title insurance have been issued
insuring the applicable Xxxxxxxx Subsidiary's or Xxxxxxxx Non-controlled
Subsidiary's (as the case may be) fee simple title or leasehold estate, as the
case may be, to the Xxxxxxxx Properties owned by it in amounts at least equal to
the purchase price therefor paid by such Xxxxxxxx Subsidiary or Xxxxxxxx Non-
controlled Subsidiary at the time of acquisition of such Xxxxxxxx Properties.
To Xxxxxxxx' Knowledge, such policies are, at the date hereof, in full force and
effect. No material claim has been made against any such policy.
(c) Except as provided in Schedule 2.9(c) to the Xxxxxxxx Disclosure
Letter, to the Knowledge of Xxxxxxxx, there does not exist (i) any certificate,
permit or license from any governmental authority having jurisdiction over any
of the Xxxxxxxx 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 Xxxxxxxx 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 Xxxxxxxx Properties that has not been
obtained and is not in full force and effect, other than with respect to such
certificates, permits, licenses, agreements, easement or other rights, the
failure of which to have or maintain would not have a Xxxxxxxx Material Adverse
Effect, (ii) any written notice of any violation of any federal, state or
municipal law, ordinance, order, regulation or requirement materially and
adversely affecting any of the Xxxxxxxx
18
Properties issued by any governmental authority which would have a Xxxxxxxx
Material Adverse Effect or (iii) any structural defect or defects relating to
any Xxxxxxxx Property, Xxxxxxxx Properties whose building systems are not in
working order, any physical damage to any Xxxxxxxx Property for which there is
no insurance in effect covering a substantial portion of the cost of the
restoration, except such structural defects, building systems not in working
order, physical damage, renovation and restoration which, in the aggregate,
would not have a Xxxxxxxx Material Adverse Effect.
(d) None of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled 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 Xxxxxxxx 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 Xxxxxxxx Properties or by the continued maintenance, operation or
use of the parking areas other than such notices which, in the aggregate, would
not have a Xxxxxxxx Material Adverse Effect. Except as set forth in Schedule
2.9(d) or 4.1(i) to the Xxxxxxxx Disclosure Letter, all work required to be
performed, payments required to be made and actions required to be taken, other
than those which would not have a Xxxxxxxx Material Adverse Effect, 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 Xxxxxxxx Properties (e.g., Local Improvement
District, Road Improvement District, Environmental Mitigation) have been
performed, paid or taken, as the case may be, except where the failure to do so
would not, in the aggregate, have a Xxxxxxxx Material Adverse Effect, and
Xxxxxxxx has no Knowledge of any planned or proposed work, payments or actions
that may be required after the date hereof pursuant to such agreements, except
as set forth in development or operating budgets for such Xxxxxxxx Properties
delivered to Xxxx-Xxxx and Xxxx-Xxxx Partnership prior to the date hereof and
except for such work, payments or actions which, in the aggregate, would not
have a Xxxxxxxx Material Adverse Effect.
(e) The rent rolls requested by Xxxx-Xxxx and previously provided by
Xxxxxxxx to Xxxx-Xxxx (the "Xxxxxxxx Rent Roll") lists substantially all
Xxxxxxxx Space Leases (as defined below) in effect as of the respective dates
indicated on such Xxxxxxxx Rent Rolls except for Xxxxxxxx Space Leases for which
the payment of rent has not commenced. "Xxxxxxxx Space Lease" means each lease
or other right of occupancy affecting or relating to a property in which
Xxxxxxxx Partnership (or an entity in which it directly or indirectly has an
interest) is the landlord, either pursuant to the terms of the lease agreement
or as successor to any prior landlord, but excluding any ground lease. Those
copies of Xxxxxxxx Space Leases made available to Xxxx-Xxxx are true, correct
and complete copies of all such Xxxxxxxx Space Leases, including all amendments,
modifications, supplements, renewals, extensions and guarantees related thereto,
as of the date hereof. Except for discrepancies that, either individually or in
the aggregate, would not reasonably be expected to have a Xxxxxxxx Material
Adverse Effect, all information set forth in the Xxxxxxxx Rent Roll is true,
correct and complete as of the date thereof. Except as set forth in a
delinquency report made available to Xxxx-Xxxx, none of Xxxxxxxx or any Xxxxxxxx
Subsidiary or the Xxxxxxxx Non-controlled Subsidiary, on the one hand, nor, to
the Knowledge of Xxxxxxxx or Xxxxxxxx Partnership, any other party, on the other
hand, is in monetary default under any Xxxxxxxx Space Lease, except for such
defaults that would not reasonably be expected to have a Xxxxxxxx Material
Adverse Effect.
19
2.10 Environmental Matters.
---------------------
(a) "Environmental Law" shall mean all applicable Laws relating to the
protection of human health or safety, natural resources or the environment,
including, without limitation, Laws relating to the use, manufacturing,
generation, recycling, reuse, sale, storage, handling, transport, treatment or
disposal of any Hazardous Materials (including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. sections 9601 et seq. ("CERCLA")). "Hazardous Materials"
shall mean substances, wastes or materials listed, regulated or defined under
any Environmental Law, and shall include, without limitation, "hazardous
wastes," "pollutants," "contaminants," "hazardous substances," "hazardous
materials," petroleum or any fraction thereof, asbestos, lead-paint, urea-
formaldehyde, and polychlorinated biphenyls. "Release" shall have the meaning
set forth in Section 101 of CERCLA, without regard to the exclusions set forth
therein.
(b) Except as disclosed in Schedule 2.10(a) to the Xxxxxxxx Disclosure
Letter,
(i) to the Knowledge of Xxxxxxxx, none of Xxxxxxxx, any of the
Xxxxxxxx Subsidiaries or the Xxxxxxxx Non-controlled Subsidiary or any other
Person has caused or permitted the presence of any Hazardous Materials at, on or
under, or migrating from or onto, any of the Xxxxxxxx Properties, such that the
presence of such Hazardous Materials (including the presence of asbestos in any
buildings or improvements at the Xxxxxxxx Properties) would, individually or in
the aggregate, reasonably be expected to have a Xxxxxxxx Material Adverse
Effect;
(ii) to the Knowledge of Xxxxxxxx, during the period of such
ownership, operation or tenancy, except in accordance with the Environmental
Permits (as defined herein) there has been no Release of Hazardous Materials at,
on, under or from or onto (A) the Xxxxxxxx Properties or (B) any real property
previously owned, operated or leased by Xxxxxxxx or the Xxxxxxxx Subsidiaries or
the Xxxxxxxx Non-controlled Subsidiary (the "Former Xxxxxxxx Properties"), and
to the Knowledge of Xxxxxxxx there does not exist any Release of Hazardous
Materials having occurred or presently occurring at, on, under or from or onto
the Xxxxxxxx Properties or the Former Xxxxxxxx Properties, which would,
individually or in the aggregate, reasonably be expected to have a Xxxxxxxx
Material Adverse Effect;
(iii) Xxxxxxxx, the Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-
controlled Subsidiary have complied in all material respects with all
Environmental Laws, and, to the Knowledge of Xxxxxxxx, none of Xxxxxxxx, the
Xxxxxxxx Subsidiaries or the Xxxxxxxx Non-controlled Subsidiary has any
liability under existing Environmental Laws, except to the extent that any such
failure to comply or any such liability, individually or in the aggregate, would
not reasonably be expected to have a Xxxxxxxx Material Adverse Effect; and
(iv) Xxxxxxxx, the Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-
controlled Subsidiary have been duly issued, and currently have and will
maintain through the Closing Date, all permits, licenses, certificates and
approvals required under any Environmental Law (collectively, the "Environmental
Permits") necessary to operate their businesses as currently operated except
where the failure to obtain and maintain such Environmental Permits would not
have a material adverse effect on the Xxxxxxxx Property, Xxxxxxxx the Xxxxxxxx
Subsidiaries and the Xxxxxxxx Non-controlled Subsidiary.
(c) Xxxxxxxx has previously delivered or made available to Xxxx-Xxxx
complete copies of all material information, documents and reports, including,
without limitation, environmental investigations
20
and testing or analysis that are in the possession or control of any of
Xxxxxxxx, the Xxxxxxxx Subsidiaries or the Xxxxxxxx Non-controlled Subsidiary
which are located in its Dallas corporate office and which relate to compliance
with Environmental Laws by any of them or to the past or current environmental
condition of the Xxxxxxxx Properties.
2.11 Related Party Transactions. Except as disclosed in the Xxxxxxxx SEC
--------------------------
Documents, set forth in Schedule 2.11 to the Xxxxxxxx Disclosure Letter is a
list of all material arrangements, agreements and contracts entered into by
Xxxxxxxx, any of the Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-controlled
Subsidiary with (a) any investment banker or financial advisor that would impose
obligations on the Surviving Corporation after Closing or (b) any person who is
an officer, director or Affiliate (as defined below) of Xxxxxxxx, any of the
Xxxxxxxx Subsidiaries or the Xxxxxxxx Non-controlled Subsidiary, any relative of
any of the foregoing or any entity of which any of the foregoing is an
Affiliate. Except as disclosed in the Xxxxxxxx SEC Documents, copies of all of
the foregoing have previously been delivered or made available to Xxxx-Xxxx. 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.
2.12 Employee Benefits. As used herein, the term " Xxxxxxxx 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 ("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"), and any welfare plan ("Welfare
Plan") as defined in Section 3(1) of ERISA, whether any of the foregoing is
funded, insured or self-funded, written or oral, (i) sponsored or maintained by
Xxxxxxxx or any entity which is a member of a "controlled group of corporations"
with, under "common control" with, or a member of an "affiliated service group"
with Xxxxxxxx as such terms are defined in Section 414 of the Code (each,
including Xxxxxxxx, a "Xxxxxxxx ERISA Affiliate"), including any Xxxxxxxx
Subsidiary or the Xxxxxxxx Non-controlled Subsidiary (if any is a Xxxxxxxx ERISA
Affiliate) and covering any Xxxxxxxx ERISA Affiliate's active or former
employees (or their beneficiaries), (ii) to which any Xxxxxxxx ERISA Affiliate
is a party or by which any Xxxxxxxx ERISA Affiliate (or any of the rights,
properties or assets thereof) is bound or (iii) with respect to which any
current Xxxxxxxx ERISA Affiliate may otherwise have any material liability
(whether or not such Xxxxxxxx ERISA Affiliate still maintains such Xxxxxxxx
Employee Plan). Each Xxxxxxxx Employee Plan is listed on Schedule 2.12 to the
Xxxxxxxx Disclosure Letter. With respect to the Xxxxxxxx Employee Plans:
(a) Except as disclosed in Schedule 2.12(a) to the Xxxxxxxx Disclosure
Letter, no Xxxxxxxx ERISA Affiliate has any continuing liability under any
Welfare Plan or other Xxxxxxxx Employee 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. Except as set forth on Schedule 2.12(a), none of the
Xxxxxxxx Employee Plans that are welfare benefit plans are self insured or
multiple employer welfare arrangements as defined in Section 3(40) of ERISA, and
except as set forth on Schedule 2.12(a), there are no reserves, assets surpluses
or prepaid premiums with respect to such welfare benefit plans. No event or
condition exists with respect to any Xxxxxxxx Employee Plan that could subject
any Xxxxxxxx ERISA Affiliate to any material Tax under Section 4980B of the Code
or any predecessor provision of such section of the Code, 4980D of the Code or
any liability under similar state laws.
21
(b) Except as disclosed in Schedule 2.12(b) to the Xxxxxxxx Disclosure
Letter, each Xxxxxxxx Employee Plan complies in all material respects with the
applicable requirements of ERISA and any other applicable law governing such
Xxxxxxxx Employee Plan, and, to the Knowledge of Xxxxxxxx, each Xxxxxxxx
Employee Plan has at all times been properly administered in all material
respects 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. 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 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 or has
pending an application for such a letter and, to the Knowledge of Xxxxxxxx, no
event has occurred which would jeopardize the qualified status of any such plan
or the tax exempt status of any such trust under Section 401(a) and Section
501(a) of the Code, respectively. Except as described in Schedule 2.12(b) to
the Xxxxxxxx Disclosure Letter, no lawsuits, claims (other than routine claims
for benefits) or complaints to, or by, any person or governmental entity have
been filed, are pending, or, to the Knowledge of Xxxxxxxx, are threatened with
respect to any Xxxxxxxx Employee Plan and, to the Knowledge of Xxxxxxxx, 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, with respect to
each Xxxxxxxx Employee Plan:
(i) all contributions and payments with respect to Xxxxxxxx Employee
Plans that are required to be made by a Xxxxxxxx ERISA Affiliate 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
(ii) with respect to each such Xxxxxxxx Employee Plan, to the extent
applicable, Xxxxxxxx has delivered to or has made available to Xxxx-Xxxx
true and complete copies of (A) plan documents, summary plan descriptions
and 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 contracts or other funding agreements
that implement each such Xxxxxxxx Employee Plan.
(c) Except as disclosed in Schedule 2.12(c) to the Xxxxxxxx Disclosure
Letter, with respect to each Xxxxxxxx Employee Plan (i) 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 (ii) there has not occurred any breach of fiduciary
duty under Title I of ERISA, which in either case could subject Xxxxxxxx or any
Xxxxxxxx ERISA Affiliate to material liability.
(d) No Xxxxxxxx ERISA Affiliate has maintained or been obligated to
contribute to any Pension Plan subject to Code Section 412 or Title IV of ERISA.
No Pension Plan subject to Code Section 412 or Title IV of ERISA has been
terminated. No Xxxxxxxx Employee Plan is a "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(3) of ERISA.
22
(e) With respect to each Xxxxxxxx Employee Plan maintained by any
Xxxxxxxx ERISA Affiliate, 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.
(f) Each Pension Plan that is not qualified under Code section 401(a) or
403(a) is exempt from Part 2, 3, and 4 of Title I of ERISA as an unfunded
benefit plan that is maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) ERISA. Except as disclosed
on Schedule 2.12(f) to the Xxxxxxxx Disclosure Schedule, no assets of Xxxxxxxx
are allocated to or held in a "rabbi trust" or similar funding vehicle.
2.13 Employees / Employee Policies.
-----------------------------
(a) The employee handbooks of Xxxxxxxx, the Xxxxxxxx Subsidiaries and the
Xxxxxxxx Non-controlled Subsidiary currently in effect are attached as Schedule
2.13 to the Xxxxxxxx Disclosure Letter and fairly and accurately summarize all
material employee policies, vacation policies and payroll policies. Schedule
2.13(a) to the Xxxxxxxx Disclosure Letter sets forth a list, true and correct in
all material respects, of the names of all current employees of Xxxxxxxx, any
Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled Subsidiary (each a "Xxxxxxxx
Controlled Group Member") (including employees who are also directors or
officers of any Xxxxxxxx Controlled Group Member) (the "Xxxxxxxx Employees") all
of whom are located in the United States and with respect to each such Employee,
such person's job title, the location of employment of such Xxxxxxxx Employee,
such Xxxxxxxx Employee's date of employment, and the current salary and bonus
paid in 1999. Except as disclosed on Schedule 2.13(a) to the Xxxxxxxx
Disclosure Letter and except for travel advances which have been granted in the
ordinary course of business, there are no outstanding loans from any Xxxxxxxx
Controlled Group Member to any Xxxxxxxx Employee, former employee, consultant or
any related party. Except as disclosed on Schedule 2.13(a) to the Xxxxxxxx
Disclosure Letter, the Xxxxxxxx Controlled Group Members do not have any
employment or other compensation agreements with any Xxxxxxxx Employees or
former employees. To Xxxxxxxx' Knowledge, Xxxxxxxx is not in breach of any
material terms of any such employment agreements of any of the Xxxxxxxx
Employees.
(b) Except as disclosed on Schedule 2.13(b) to the Xxxxxxxx Disclosure
Letter, there are no material controversies, strikes, slowdowns, lockouts, work
stoppages, picketing, grievances, unfair labor practice charges, investigations,
charges, complaints, disputes or other proceedings pending or threatened between
any Xxxxxxxx Controlled Group Member and any of the Xxxxxxxx Employees or former
employees.
2.14 Taxes.
-----
(a) Each of Xxxxxxxx, the Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-
controlled Subsidiary (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, (B) has paid (or Xxxxxxxx
has paid on its behalf) all Taxes (as defined herein) shown on such returns and
reports as required to be paid by it, and (C) has complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections
23
1441, 1442, 1445, 3121, and 3402 of the Code or similar provisions under any
foreign laws) and has, within the time period prescribed by law, withheld and
paid over to the proper governmental entities all amounts required to be so
withheld and paid over under applicable laws and regulations, except, with
respect to all of the foregoing, where the failure to file such tax returns and
reports or failure to pay such Taxes or failure to comply with such withholding
requirements would not reasonably be expected to have a Xxxxxxxx Material
Adverse Effect. The most recent audited financial statements contained in the
Xxxxxxxx SEC Documents reflect an adequate reserve for all material Taxes
payable by Xxxxxxxx, the Xxxxxxxx Subsidiaries and the Xxxxxxxx Non-controlled
Subsidiary for all taxable periods and portions thereof through the date of such
financial statements. Since the Xxxxxxxx Financial Statement Date, Xxxxxxxx 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 none of Xxxxxxxx, any Xxxxxxxx
Subsidiary or the Xxxxxxxx Non-controlled 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 sentences will be imposed
upon Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary. None of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled Subsidiary is the subject of any audit, examination, or other
proceeding in respect of federal income Taxes, and to the Knowledge of Xxxxxxxx,
no audit, examination or other proceeding in respect of federal income Taxes
involving any of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled Subsidiary is being considered by any Tax authority. To the Knowledge
of Xxxxxxxx, no deficiencies for any Taxes have been proposed, asserted or
assessed against Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled Subsidiary, and no requests for waivers of the time to assess any
such Taxes are pending. As used in this Agreement, "Taxes" shall include all
taxes, charges, fees, levies and other assessments, including, without
limitation, income, gross receipts, excise, property, sales, withholding
(including, without limitation, dividend withholding and withholding required
pursuant to Sections 1445 and 1446 of the Code), social security, occupation,
use, service, license, payroll, franchise, transfer and recording taxes, fees
and charges, including estimated taxes, imposed by the United States or any
taxing authority (domestic or foreign), whether computed on a separate,
consolidated, unitary, combined or any other basis, and any interest, fines,
penalties or additional amounts attributable to, or imposed upon, or with
respect to any such taxes, charges, fees, levies or other assessments.
(b) Xxxxxxxx (i) since its formation and through December 31, 1999, has
been subject to taxation as a REIT within the meaning of Section 856 of the Code
and has satisfied all requirements to qualify as a REIT for such years, (ii) has
operated since January 1, 2000, to the date of this representation, and intends
to continue to operate, in such a manner as to qualify as a REIT for the taxable
year ending December 31, 2000 and, if later, for the taxable year of Xxxxxxxx
ending on 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 no such challenge is pending or, to the Knowledge of Xxxxxxxx,
threatened. Each Xxxxxxxx Subsidiary which is a partnership, joint venture or
limited liability company (1) has been treated since its formation and continues
to be treated for federal income tax purposes as a partnership and not as a
corporation or an association taxable as a corporation and (2) has not since the
later of its formation or the acquisition by Xxxxxxxx of a direct or indirect
interest therein, owned any assets (including, without limitation, securities)
that would cause Xxxxxxxx to violate Section 856(c)(5) of the Code. Each
Xxxxxxxx Subsidiary which is a corporation (other than Xxxxxxxx Services
Company) has been since its formation a qualified REIT subsidiary under Section
856(i) of the Code. Xxxxxxxx Partnership is not a publicly traded partnership
within the meaning of Section 7704 of the Code. Neither Xxxxxxxx nor any
Xxxxxxxx Subsidiary holds any asset (x) the disposition of which would be
24
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19 or Temporary Treasury Regulation sec. 1.337(d)-5T or (y)
which is subject to a consent filed pursuant to Section 341(f) of the Code and
the regulations thereunder.
2.15 No Payments to Employees, Officers or Directors. Except as described
-----------------------------------------------
in Schedule 2.15 to the Xxxxxxxx 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 Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary. Except as described in Schedule 2.15 to the Xxxxxxxx Disclosure
Letter, there is no agreement or arrangement with any employee, officer or other
service provider under which Xxxxxxxx, any Xxxxxxxx Subsidiary or Xxxxxxxx Non-
controlled Subsidiary has agreed to pay any tax that might be owed under Section
4999 of the Code with respect to payments to such individuals.
2.16 Broker; Schedule of Fees and Expenses. No broker, investment banker,
-------------------------------------
financial advisor or other person, other than Lazard Freres & Co. LLC, the fees
and expenses of which are described in the engagement letter between Lazard
Freres & Co. LLC and Xxxxxxxx, a true, correct and complete copy of which has
previously been given to Xxxx-Xxxx, 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
Xxxxxxxx or any Xxxxxxxx Subsidiary.
2.17 Compliance with Laws. None of Xxxxxxxx, any Xxxxxxxx Subsidiary or
--------------------
the Xxxxxxxx Non-controlled Subsidiary 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
to the extent that such violation or failure would not reasonably be expected to
have a Xxxxxxxx Material Adverse Effect.
2.18 Contracts; Debt Instruments.
---------------------------
(a) Except for any violation or default caused by the transactions
contemplated by this Agreement, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the
Xxxxxxxx Non-controlled Subsidiary is in violation of or in default under (nor
to the Knowledge of Xxxxxxxx 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, lease, permit, concession, franchise, license or any other 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
Xxxxxxxx does such a violation or default exist, except to the extent that such
violation or default, individually or in the aggregate, would not reasonably be
expected to have a Xxxxxxxx Material Adverse Effect.
(b) Except for any of the following expressly identified in Xxxxxxxx SEC
Documents, Schedule 2.18(b) to the Xxxxxxxx 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 of
Xxxxxxxx, any Xxxxxxxx Subsidiary and the Xxxxxxxx Non-controlled Subsidiary,
other than Indebtedness payable to Xxxxxxxx, a Xxxxxxxx Subsidiary or a Xxxxxxxx
Non-controlled Subsidiary, is outstanding or may be incurred.
25
(c) Except for any of the following identified in the Xxxxxxxx SEC
Documents, to the extent not set forth in response to the requirements of
Section 2.18(b), Schedule 2.18(c) to the Xxxxxxxx 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 Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary is a party or an obligor with respect thereto.
(d) Except as set forth in Schedule 2.18(d) of the Xxxxxxxx Disclosure
Letter, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary 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 Xxxxxxxx Properties.
(e) Except as described in Schedule 2.18(e) to the Xxxxxxxx Disclosure
Letter, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary is a party to any agreement relating to the management of any
Xxxxxxxx Property by any Person other than Xxxxxxxx, a Xxxxxxxx Subsidiary or a
Xxxxxxxx Non-controlled Subsidiary.
(f) Schedule 2.18(f) to the Xxxxxxxx Disclosure Letter, which is correct
in all material respects as of the date hereof, lists all agreements currently
in effect entered into by Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-
controlled Subsidiary pursuant to which Xxxxxxxx, any Xxxxxxxx Subsidiary or the
Xxxxxxxx Non-controlled Subsidiary manages or provides services with respect to
any real properties other than Xxxxxxxx Properties (the "Outside Property
Management Agreements").
(g) Xxxxxxxx has delivered to Xxxx-Xxxx prior to the date of this
Agreement true and complete copies of the pro formas which include the
development costs relating to ongoing development projects and the investment
package, including development cost pro formas, relating to the committed
development projects of Xxxxxxxx or Xxxxxxxx Partnership.
(h) Schedule 2.18(h) to the Xxxxxxxx Disclosure Letter lists all
agreements currently in effect entered into by Xxxxxxxx, any Xxxxxxxx Subsidiary
or the Xxxxxxxx Non-controlled Subsidiary providing for the sale of any Xxxxxxxx
Properties or the purchase of, by Xxxxxxxx, any Xxxxxxxx Subsidiary or the
Xxxxxxxx Non-controlled Subsidiary, on the one hand, or the other party thereto,
on the other hand, any real estate.
(i) Except as set forth in Schedule 2.18(i) to the Xxxxxxxx Disclosure
Letter, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary has any continuing contractual liability, which alone or in the
aggregate is greater than $5,000,000, to pay any additional purchase price for
any of the Xxxxxxxx Properties.
(j) Except as set forth on Schedule 2.18(j) to the Xxxxxxxx Disclosure
Letter, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary has entered into or is subject, directly or indirectly, to any
Xxxxxxxx Tax Protection Agreements. As used herein, a "Xxxxxxxx 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 Xxxxxxxx Partnership or any other Xxxxxxxx
Subsidiary that is treated as a partnership for federal income tax purposes, and
that (i) prohibits or
26
restricts in any manner the disposition of any assets of Xxxxxxxx, any Xxxxxxxx
Subsidiary or the Xxxxxxxx Non-controlled Subsidiary, (ii) requires that
Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled Subsidiary
maintain, or put in place, or replace, indebtedness, whether or not secured by
one or more of the Xxxxxxxx Properties, or (iii) requires that Xxxxxxxx, any
Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled 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 Xxxxxxxx, any Xxxxxxxx Subsidiary or the
Xxxxxxxx Non-controlled Subsidiary, (B) that specifies or relates to a method of
taking into account book-tax disparities under Section 704(c) of the Code with
respect to one or more assets of Xxxxxxxx or a Xxxxxxxx Subsidiary, or (C) that
requires a particular method for allocating one or more liabilities of Xxxxxxxx
or any Xxxxxxxx Subsidiary under Section 752 of the Code. None of Xxxxxxxx, any
Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled Subsidiary is in violation of
or in default under any Xxxxxxxx Tax Protection Agreement.
(k) Except as set forth in Schedule 2.18(k) to the Xxxxxxxx Disclosure
Letter, none of Xxxxxxxx, any Xxxxxxxx Subsidiary or the Xxxxxxxx Non-controlled
Subsidiary is a party to any standstill, lock-up or voting agreement not entered
into in the ordinary course of business.
2.19 Opinion of Financial Advisor. Xxxxxxxx has received the written
----------------------------
opinion of Lazard Freres & Co. LLC, Xxxxxxxx' financial advisor, to the effect
that the Exchange Ratio is fair , from a financial point of view, to the holders
of Xxxxxxxx Common Shares.
2.20 State Takeover Statutes. Xxxxxxxx has taken all action necessary to
-----------------------
exempt the transactions contemplated by this Agreement between Xxxx-Xxxx and
Xxxxxxxx and its Affiliates from the operation of any "business combination,"
"fair price," "moratorium," "control share acquisition" or any other anti-
takeover statute or similar statute enacted under the laws of the State of
Maryland and the State of Delaware or federal laws of the United States or
similar statute or regulation (a "Takeover Statute").
2.21 Investment Company Act of 1940. None of Xxxxxxxx, any Xxxxxxxx
------------------------------
Subsidiary or the Xxxxxxxx Non-controlled Subsidiary is, or at the Effective
Time will be, required to be registered under the Investment Company Act of
1940, as amended (the "1940 Act").
2.22 Definition of Knowledge of Xxxxxxxx. As used in this Agreement, the
-----------------------------------
phrase "Knowledge of Xxxxxxxx" (or words of similar import) means the actual
knowledge of those individuals identified in Schedule 2.22 to the Xxxxxxxx
Disclosure Letter, without a duty of inquiry or investigation of any kind.
2.23 Xxxxxxxx Not An Interested Stockholder. Neither Xxxxxxxx nor
--------------------------------------
Xxxxxxxx Partnership is an "interested stockholder" or an "affiliate of an
interested stockholder" of Xxxx-Xxxx within the meaning of Section 3-601 of the
MGCL.
2.24 Required Stockholder Approvals and Partner Approvals. The
----------------------------------------------------
affirmative vote of the holders of not less than a majority of all votes
entitled to be cast by holders of the Xxxxxxxx Common Shares are the only votes
of the holders of any class or series of shares of beneficial interest of
Xxxxxxxx necessary or required under this Agreement or under applicable law to
approve the Mergers and this Agreement. The approval of Xxxxxxxx, as general
partner of Xxxxxxxx Partnership, is the only vote of the holders of any class or
series of Xxxxxxxx Partnership's partnership interests necessary or required
under this Agreement or under applicable law to approve the Merger, the
withdrawal of Xxxxxxxx (through its
27
wholly-owned subsidiary) as general partner and the Partnership Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF XXXX-XXXX AND XXXX-XXXX PARTNERSHIP
Except as set forth in the letter of even date herewith signed by the Chief
Executive Officer of Xxxx-Xxxx and delivered to Xxxxxxxx prior to the execution
hereof (the "Xxxx-Xxxx Disclosure Letter"), Xxxx-Xxxx and Xxxx-Xxxx Partnership
represent and warrant to Xxxxxxxx and Xxxxxxxx Partnership as follows:
3.1 Organization, Standing and Power of Xxxx-Xxxx. Xxxx-Xxxx is a
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state 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. Xxxx-Xxxx'x Articles of Incorporation are in effect and no
dissolution, revocation or forfeiture proceedings regarding Xxxx-Xxxx have been
commenced. Xxxx-Xxxx 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 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 Xxxx-Xxxx and the Subsidiaries
of Xxxx-Xxxx (collectively, the "Xxxx-Xxxx Subsidiaries"), taken as a whole (a
"Xxxx-Xxxx Material Adverse Effect"). A Xxxx-Xxxx Material Adverse Effect shall
not include (i) the effects related to general economic changes, changes in the
U.S. financial markets generally, changes that affect real estate investment
trusts generally and changes that affect office real estate generally or (ii)
the effects specified in Section 2.5(c) with respect to the items listed in part
(ii) of Section 2.5(c) to the extent disclosed in Schedule 2.5(c) of the
Xxxxxxxx Disclosure Letter.. Xxxx-Xxxx has delivered to Xxxxxxxx complete and
correct copies of the Xxxx-Xxxx Charter (as the same is proposed to be modified
to increase the authorized preferred stock and the Proposed Xxxx-Xxxx Charter
Amendment Relating to a Cut-Down (as defined herein)) and the Xxxx-Xxxx Bylaws,
in each case as amended or supplemented to the date of this Agreement.
3.2 Xxxx-Xxxx Subsidiaries.
----------------------
(a) Schedule 3.2(a) to the Xxxx-Xxxx Disclosure Letter sets forth (i) each
Xxxx-Xxxx Subsidiary and each entity in which Xxxx-Xxxx holds non-voting equity
securities (but no voting securities) (collectively, the "Xxxx-Xxxx Non-
controlled Subsidiary"), (ii) the ownership interest therein of Xxxx-Xxxx, (iii)
if not directly or indirectly wholly owned by Xxxx-Xxxx, the identity and
ownership interest of each of the other owners of such Xxxx-Xxxx Subsidiary or
Xxxx-Xxxx Non-controlled Subsidiary, as applicable, (iv) each office property
and other commercial property owned or managed by such Xxxx-Xxxx Subsidiary or
Xxxx-Xxxx Non-controlled Subsidiary, as applicable, and (v) if such property is
not wholly owned by such Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled
Subsidiary, as applicable, the identity and ownership interest of each of the
other owners of such property. Except as set forth on Schedule 3.2(a) to the
Xxxx-Xxxx Disclosure Letter, Xxxx-Xxxx has never owned greater than 10% of the
voting stock of any corporation other than a Qualified REIT Subsidiary (as
defined under Section 856(i)(2) of the Code). Schedule 3.4(a) to the Xxxx-Xxxx
Disclosure Letter sets forth a true and complete list of the equity securities
owned by Xxxx-Xxxx, directly or indirectly, in any corporation, partnership,
limited liability company, joint venture or other legal entity, excluding Xxxx-
Xxxx
28
Subsidiaries and the Xxxx-Xxxx Non-controlled Subsidiary.
(b) Except as set forth in Schedule 3.2(b) to the Xxxx-Xxxx Disclosure
Letter, (i) all of the outstanding shares of capital stock of each Xxxx-Xxxx
Subsidiary and each Xxxx-Xxxx Non-controlled 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 Xxxx-Xxxx or by
another Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled Subsidiary and (C)
owned free and clear of all Liens and (ii) all equity interests in each Xxxx-
Xxxx Subsidiary that is a partnership, joint venture, limited liability company
or trust which are owned by Xxxx-Xxxx, by another Xxxx-Xxxx Subsidiary or Xxxx-
Xxxx Non-controlled Subsidiary or by Xxxx-Xxxx and another Xxxx-Xxxx Subsidiary
or Xxxx-Xxxx Non-controlled Subsidiary are owned free and clear of all Liens.
Each Xxxx-Xxxx Subsidiary and Xxxx-Xxxx Non-controlled 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 Xxxx-Xxxx 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 Xxxx-Xxxx
Subsidiary and Xxxx-Xxxx Non-controlled 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 Xxxx-Xxxx Material Adverse Effect. Complete and correct copies of
the articles of incorporation, bylaws, organizational documents and partnership,
joint venture and operating agreements of each Xxxx-Xxxx Subsidiary and Xxxx-
Xxxx Non-controlled Subsidiary, as amended to the date of this Agreement, have
been previously delivered or made available to Xxxxxxxx. No effective amendment
has been made to the Xxxx-Xxxx Partnership Agreement since July 6, 1999.
3.3 Capital Structure.
-----------------
(a) The authorized shares of stock of Xxxx-Xxxx consist of (i) 190,000,000
Xxxx-Xxxx Common Shares, 58,782,408 of which are issued and outstanding as of
the date hereof and 8,075,720 of which are reserved for issuance upon the
redemption of Xxxx-Xxxx Common Units, and (ii) 5,000,000 shares of preferred
stock, $.01 par value per share, none of which are issued or outstanding as of
the date hereof.
(b) Set forth in Schedule 3.3(b) to the Xxxx-Xxxx Disclosure Letter is a
true and complete list of the following: (i) each qualified or nonqualified
option to purchase shares of Xxxx-Xxxx'x stock granted under the Xxxx-Xxxx
Employee Stock Option Plan and Xxxx-Xxxx Director Stock Option Plan or any other
formal or informal arrangement (collectively, the "Xxxx-Xxxx Options"); and (ii)
all other warrants or other rights to acquire shares of Xxxx-Xxxx'x stock, all
stock appreciation rights, restricted stock, deferred compensation accounts,
phantom stock, dividend equivalents, performance units and performance awards
and other awards which are outstanding on the date of this Agreement. Schedule
3.3(b) to the Xxxx-Xxxx Disclosure Letter sets forth for each Xxxx-Xxxx Option
the name of the grantee, the date of the grant, the status of the option as
qualified or nonqualified under Section 422 of the Code, the number and type of
Xxxx-Xxxx 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
29
such shares subject to stock appreciation rights. On the date of this Agreement
no shares of stock of Xxxx-Xxxx were outstanding or reserved for issuance except
as set forth in this Section 3.3 or in Schedule 3.3(b) to the Xxxx-Xxxx
Disclosure Letter.
(c) All outstanding shares of stock of Xxxx-Xxxx 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 Xxxx-
Xxxx having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
Xxxx-Xxxx may vote.
(d) Except (i) as set forth in this Section 3.3 or in Schedule 3.3(d) to
the Xxxx-Xxxx Disclosure Letter and (ii) Xxxx-Xxxx Common Units, which may be
redeemed for cash, or at the option of Xxxx-Xxxx, Xxxx-Cali Common Shares at a
rate of one (1) Xxxx-Xxxx Common Share for each Xxxx-Xxxx Common Unit, 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 Xxxx-Xxxx or any Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled
Subsidiary is a party or by which such entity is bound, obligating Xxxx-Xxxx or
any Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled 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 Xxxx-Xxxx or
any Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled Subsidiary or obligating
Xxxx-Xxxx or any Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled Subsidiary to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking (other than to Xxxx-
Xxxx or a Xxxx-Xxxx Subsidiary or Xxxx-Xxxx Non-controlled Subsidiary).
(e) As of the date hereof, 8,075,720 Xxxx-Xxxx Common Units, no Xxxx-Xxxx
Series A Preferred Units and 223,124 Xxxx-Xxxx Series B Preferred Units (each as
defined in the Xxxx-Xxxx Partnership Agreement, and together, the "Xxxx-Xxxx
Preferred Units"; and the Xxxx-Xxxx Preferred Units collectively with the Xxxx-
Xxxx Common Units, the "Xxxx-Xxxx Units") are validly issued and outstanding,
fully paid and nonassessable and not subject to preemptive rights. Schedule
3.3(e) to the Xxxx-Xxxx Disclosure Letter sets forth the name of each holder of
Xxxx-Xxxx Units, and the number of Xxxx-Xxxx Units owned by each such holder as
of the date of this Agreement. The Xxxx-Xxxx Units are subject to no
restrictions except as set forth in the Xxxx-Xxxx Partnership Agreement. Except
as provided in the Xxxx-Xxxx Partnership Agreement and the Registration Rights
Agreements set forth on Schedule 3.3(g) of the Xxxx-Xxxx Disclosure Letter,
Xxxx-Xxxx 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, the issuance or sale of interests
in Xxxx-Xxxx Partnership, whether issued or unissued, or securities convertible
or exchangeable into interests in Xxxx-Xxxx Partnership.
(f) All dividends on Xxxx-Xxxx Common Shares and all distributions on
Xxxx-Xxxx Units which have been declared prior to the date of this Agreement
have been paid in full.
(g) Set forth on Schedule 3.3(g) to the Xxxx-Xxxx Disclosure Letter is a
list of each Registration Rights Agreement or other agreement between Xxxx-Xxxx
and/or Xxxx-Xxxx Partnership, on the one hand, and one or more other parties, on
the other hand, which sets forth the rights of any such other party or parties
to cause the registration of any securities of Xxxx-Xxxx and/or Xxxx-Xxxx
Partnership pursuant to the Securities Act.
30
(h) The Xxxx-Xxxx Common Shares and the Xxxx-Xxxx Series A Preferred
Shares to be issued by Xxxx-Xxxx, the Xxxx-Xxxx Common Units, the Xxxx-Xxxx
Series D and the Xxxx-Xxxx Series E Preferred Units to be issued by Xxxx-Xxxx
Partnership pursuant to this Agreement have been duly authorized for issuance,
and upon issuance will be duly and validly issued, fully paid and nonassessable.
3.4 Other Interests. Except for interests in the Xxxx-Xxxx Subsidiaries,
---------------
the Xxxx-Xxxx Non-controlled Subsidiary, and certain other entities as set forth
in Schedule 3.4(a) to the Xxxx-Xxxx Disclosure Letter (the "Xxxx-Xxxx Other
Interests"), none of Xxxx-Xxxx, Xxxx-Cali Partnership, any Xxxx-Xxxx Subsidiary
or the Xxxx-Xxxx Non-controlled Subsidiary owns directly or indirectly any
interest or investment (whether equity or debt) in any corporation, partnership,
joint venture, business trust, limited liability company or other entity with a
fair market value as of the date of this Agreement greater than $1,000,000 or
which represents 5% or more of the outstanding voting power, capital stock or
other ownership interest of any class in any such corporation, partnership,
joint venture, business trust, limited liability company or other entity (other
than investments in short-term investment securities). With respect to the
Xxxx-Xxxx Other Interests, Xxxx-Xxxx or Xxxx-Xxxx Partnership owns such
interests free and clear of all Liens, except as otherwise indicated on Schedule
3.4(a) to the Xxxx-Xxxx Disclosure Letter. None of Xxxx-Xxxx, Xxxx-Cali
Partnership, any Xxxx-Xxxx Subsidiary or the Xxxx-Xxxx Non-controlled Subsidiary
is in material breach of any provision of any agreement, document or contract
which is of a material nature governing its rights in or to the Xxxx-Xxxx Other
Interests, all of which agreements, documents and contracts are (a) set forth in
Schedule 3.4(b) to the Xxxx-Xxxx Disclosure Letter or disclosed in the Xxxx-Xxxx
SEC Documents (as defined below), (b) unmodified except as described therein and
(c) in full force and effect. To the Knowledge of Xxxx-Xxxx (as hereinafter
defined), the other parties to any such agreement, document or contract which is
of a material nature are not in breach of any of their respective obligations
under such agreements, documents or contracts other than breaches which, in the
aggregate, would not reasonably be expected to have a Xxxx-Xxxx Material Adverse
Effect.
3.5 Authority; Noncontravention; Consents.
-------------------------------------
(a) Xxxx-Xxxx has the requisite corporate power and authority to enter
into this Agreement and, subject to the requisite shareholder approval of the
Merger and any other related matters (the "Xxxx-Xxxx Shareholder Approvals" and,
together with the Xxxxxxxx Shareholder Approvals, the "Shareholder Approvals"),
to consummate the transactions contemplated by this Agreement to which Xxxx-Xxxx
is a party. The execution and delivery of this Agreement by Xxxx-Xxxx and the
consummation by Xxxx-Xxxx of the transactions contemplated by this Agreement to
which Xxxx-Xxxx is a party have been duly authorized by all necessary action on
the part of Xxxx-Xxxx, except for and subject to the Xxxx-Xxxx Shareholder
Approvals and the Xxxx-Xxxx Partner Approvals with respect to the consummation
of the Mergers only. This Agreement has been duly executed and delivered by
Xxxx-Xxxx, subject to the Xxxx-Xxxx Shareholder Approvals with respect to the
consummation of the Merger only and assuming this Agreement constitutes the
valid and binding agreement of Xxxxxxxx, constitutes a valid and binding
obligation of Xxxx-Xxxx, enforceable against Mack-Cali in accordance with and
subject to its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
and general principles of equity.
(b) Mack-Cali Partnership has the requisite partnership power and authority
to enter into this Agreement and, subject to the requisite Mack-Cali Partner
Approvals, to consummate the transactions contemplated by this Agreement to
which Mack-Cali Partnership is a party. The execution and delivery
31
of this Agreement by Mack-Cali Partnership and the consummation by Mack-Cali
Partnership of the transactions contemplated by this Agreement to which Mack-
Cali Partnership is a party have been duly authorized by all necessary action on
the part of Mack-Cali Partnership, except for and subject to the Mack-Cali
Shareholder Approvals and Mack-Cali Partner Approval. This Agreement has been
duly executed and delivered by Mack-Cali Partnership and constitutes a valid and
binding obligation of Mack-Cali Partnership, enforceable against Mack-Cali
Partnership in accordance with and subject to its terms, subject to applicable
bankruptcy, insolvency, reorganization, 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 Mack-Cali Disclosure
Letter, the execution and delivery of this Agreement by Mack-Cali and Mack-Cali
Partnership do not, and the consummation of the transactions contemplated by
this Agreement to which Mack-Cali or Mack-Cali Partnership is a party and
compliance by Mack-Cali or Mack-Cali 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 material loss of a benefit under, or result in the creation of any Lien upon
any of the properties or assets of Mack-Cali or any Mack-Cali Subsidiary under,
(i) subject to the Mack-Cali Shareholder Approvals with respect to the
consummation of the Merger only, the Mack-Cali Charter or the Mack-Cali Bylaws
or the comparable charter or organizational documents or partnership, operating,
or similar agreement (as the case may be) of any Mack-Cali Subsidiary or Mack-
Cali Non-controlled 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 Mack-Cali or any Mack-
Cali Subsidiary or Mack-Cali Non-controlled 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 Mack-Cali
or any Mack-Cali Subsidiary or Mack-Cali Non-controlled 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 Mack-Cali 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 Mack-Cali or any Mack-Cali Subsidiary or Mack-Cali Non-controlled
Subsidiary in connection with the execution and delivery of this Agreement by
Mack-Cali or the consummation by Mack-Cali of any of the transactions
contemplated by this Agreement, except for (i) filings with the SEC under the
Exchange Act, (ii) the acceptance for record of the Articles of Merger by the
Department, (iii) the filing of the Certificate of Merger with the Secretary,
(iv) filings with the NYSE, (v) such filings as may be required in connection
with the payment of any transfer and gains taxes, (vi) such filings as may be
required under the HSR Act and (vii) such filings as may be required in
connection with the payment of any transfer and gains taxes and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings (A) as are set forth in Schedule 3.5(c)(2) to the Mack-Cali 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 in any material respect the
consummation of any of the transactions contemplated by this Agreement or
otherwise prevent Mack-Cali from performing its obligations under this Agreement
in any material respect or have, individually or in the aggregate, a Mack-Cali
Material Adverse Effect.
3.6 SEC Documents; Financial Statements; Undisclosed Liabilities. Mack-
------------------------------------------------------------
Cali has filed all
32
required reports, schedules, forms, statements and other documents with the SEC
since January 1, 1998, through the date hereof (the "Mack-Cali SEC Documents").
Schedule 3.6(a) to the Mack-Cali Disclosure Letter contains a complete list of
all Mack-Cali SEC Documents filed by Mack-Cali with the SEC since January 1,
1998, and on or prior to the date of this Agreement. All of the Mack-Cali SEC
Documents (other than preliminary material or material subsequently amended), 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 Mack-
Cali SEC Documents. None of the Mack-Cali 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 amended, modified
or superseded by later Mack-Cali SEC Documents filed and publicly available
prior to the date of this Agreement. The consolidated financial statements of
Mack-Cali and the Mack-Cali Subsidiaries (including Mack-Cali Partnership)
included in the Mack-Cali 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 all material respects, in accordance with the applicable
requirements of GAAP and the applicable rules and regulations of the SEC, the
consolidated financial position of Mack-Cali and the Mack-Cali Subsidiaries
(including Mack-Cali Partnership) 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 3.6(b) to the Mack-Cali Disclosure
Letter, Mack-Cali has no Subsidiaries which are not consolidated for accounting
purposes. Except for liabilities and obligations set forth in the Mack-Cali SEC
Documents or in Schedule 3.6(c) to the Mack-Cali Disclosure Letter, none of
Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-controlled 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 Mack-Cali or in the notes thereto and which, individually or in
the aggregate, would have a Mack-Cali Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Mack-Cali SEC Documents or in Schedule 3.7 to the Mack-Cali Disclosure Letter,
since the date of the most recent audited financial statements included in the
Mack-Cali SEC Documents (the "Mack-Cali Financial Statement Date"), Mack-Cali,
the Mack-Cali Subsidiaries (including Mack-Cali Partnership) and the Mack-Cali
Non-controlled Subsidiary 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, properties, assets, financial condition or
results of operations of Mack-Cali and the Mack-Cali Subsidiaries (including
Mack-Cali Partnership) taken as a whole (a "Mack-Cali 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 Mack-Cali Material Adverse Change,
(b) any authorization, declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
Mack-Cali's shares of stock, except for regular quarterly distributions not in
excess of $0.58 per Mack-Cali Common Share or Mack-Cali Common Unit, or $16.875
per Mack-Cali Series A Preferred Unit or $16.875 per Mack-Cali Series B
Preferred Unit, subject to rounding adjustments as necessary and with customary
record and payment dates, (c) any split, combination or reclassification of any
of Mack-Cali's shares of stock or any issuance
33
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 Mack-Cali or partnership interests in Mack-Cali
Partnership or any issuance of an ownership interest in, any Mack-Cali
Subsidiary or Mack-Cali Non-controlled Subsidiary, (d) any damage, destruction
or loss, whether or not covered by insurance, that has or would have a Mack-Cali
Material Adverse Effect, (e) any change in accounting methods, principles or
practices by Mack-Cali, any Mack-Cali Subsidiary or Mack-Cali Non-controlled
Subsidiary materially affecting its assets, liabilities or business, except
insofar as may have been disclosed in the Mack-Cali SEC Documents or required by
a change in GAAP or (f) any amendment of any employment, consulting, severance,
retention or any other agreement between Mack-Cali and any officer or director
of Mack-Cali.
3.8 Litigation. Except as disclosed in the Mack-Cali SEC Documents or in
----------
Schedule 3.8 to the Mack-Cali Disclosure Letter, and other than bodily injury
and other tort litigation arising from the ordinary course of operations of
Mack-Cali and its Subsidiaries (a) which are substantially covered by insurance
or (b) for which all material costs and liabilities arising therefrom are
reimbursable pursuant to common area maintenance or similar agreements, there is
no suit, action or proceeding pending (in which service of process has been
received by an employee of Mack-Cali, a Mack-Cali Subsidiary or Mack-Cali Non-
controlled Subsidiary) or, to the Knowledge of Mack-Cali (as hereinafter
defined), threatened in writing against or affecting Mack-Cali, a Mack-Cali
Subsidiary or Mack-Cali Non-controlled Subsidiary that, individually or in the
aggregate, could reasonably be expected to (i) have a Mack-Cali 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 Governmental Entity or arbitrator outstanding against Mack-Cali, a Mack-
Cali Subsidiary or Mack-Cali Non-controlled Subsidiary having, or which, insofar
as reasonably can be foreseen, in the future would have, any such effect.
Notwithstanding the foregoing, (x) Schedule 3.8 to the Mack-Cali Disclosure
Letter sets forth each and every material uninsured claim, equal employment
opportunity claim and claim relating to sexual harassment and/or discrimination
pending or, to the Knowledge of Mack-Cali, threatened as of the date hereof, in
each case with a brief summary of such claim or threatened claim and (y) no
claim has been made under any directors' and officers' liability insurance
policy maintained at any time by Mack-Cali, any of the Mack-Cali Subsidiaries or
the Mack-Cali Non-controlled Subsidiary.
3.9 Properties.
----------
(a) Except as provided in Schedule 3.2 or Schedule 3.9(a) to the Mack-Cali
Disclosure Letter, Mack-Cali or the Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary set forth on Schedule 3.2 to the Mack-Cali Disclosure
Letter owns fee simple title to, or holds ground leases for, each of the real
properties identified in Schedule 3.2 to the Mack-Cali Disclosure Letter (the
"Mack-Cali Properties"), which are all of the real estate properties owned by
them, in each case (except as provided below) free and clear of Encumbrances.
Schedule 3.2 to the Mack-Cali Disclosure Letter further identifies which of the
Mack-Cali Properties are owned in fee simple by Mack-Cali or the Mack-Cali
Subsidiary or the Mack-Cali Non-controlled Subsidiary and which of the Mack-Cali
Properties are subject to a ground lease. Except as set forth in Schedule 3.2 to
the Mack-Cali Disclosure Letter, no other Person has any ownership interest in
any of the Mack-Cali Properties, and any such ownership interest so scheduled
does not materially detract from the value of the Mack-Cali Subsidiary's or
Mack-Cali Non-controlled Subsidiary's (as the case may be) interest in, or
materially interfere with the present use of, any of the Mack-Cali Properties
subject thereto or affected thereby. Except as set forth in Schedule 3.9(a) to
the Mack-Cali Disclosure Letter, none of the Mack-Cali Properties is subject to
any
34
restriction on the sale or other disposition thereof or on the financing or
release of financing thereon. The Mack-Cali Properties are not subject to any
Property Restrictions or Encumbrances, except for (i) Property Restrictions and
Encumbrances set forth in the Mack-Cali Disclosure Letter, (ii) Property
Restrictions imposed or promulgated by law or any governmental or authority with
respect to real property, including zoning regulations, which do not materially
adversely affect the current use of any Mack-Cali Property, (iii) Property
Restrictions and Encumbrances disclosed on existing title reports or existing
surveys or subsequently granted by Mack-Cali or the Mack-Cali Subsidiary or the
Mack-Cali Non-controlled Subsidiary, which Property Restrictions and
Encumbrances, in any event, do not materially detract from the value of, or
materially interfere with the present use of, any of the Mack-Cali Properties
subject thereto or affected thereby and (iv) liens for real estate taxes not yet
due and payable, mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances and Property Restrictions, if any, which, individually or in the
aggregate, do not materially detract from the value of or materially interfere
with the present use of any of the Mack-Cali Property subject thereto or
affected thereby. Schedule 3.9(a) to the Mack-Cali Disclosure Letter lists each
of the Mack-Cali 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 3.2 or Schedule 3.9(b) to the Mack-Cali
Disclosure Letter, valid policies of title insurance have been issued insuring
the applicable Mack-Cali Subsidiary's or Mack-Cali Non-controlled Subsidiary's
(as the case may be) fee simple title or leasehold estate, as the case may be,
to the Mack-Cali Properties owned by it in amounts at least equal to the
purchase price therefor paid by such Mack-Cali Subsidiary or Mack-Cali Non-
controlled Subsidiary at the time of acquisition of such Mack-Cali Properties.
To Mack-Cali's Knowledge, such policies are, at the date hereof, in full force
and effect. No material claim has been made against any such policy.
(c) Except as provided in Schedule 3.9(c) to the Mack-Cali Disclosure
Letter, to the Knowledge of Mack-Cali, there does not exist (i) any certificate,
permit or license from any governmental authority having jurisdiction over any
of the Mack-Cali 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 Mack-Cali 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 Mack-Cali Properties that has not been
obtained and is not in full force and effect, other than with respect to such
certificates, permits, licenses, agreements, easement or other rights, the
failure of which to have or maintain would not have a Mack-Cali Material Adverse
Effect, (ii) any written notice of any violation of any federal, state or
municipal law, ordinance, order, regulation or requirement materially and
adversely affecting any of the Mack-Cali Properties issued by any governmental
authority which would have a Mack-Cali Material Adverse Effect or (iii) any
structural defect or defects relating to any Mack-Cali Property, Mack-Cali
Properties whose building systems are not in working order, any physical damage
to any Mack-Cali Property for which there is no insurance in effect covering a
substantial portion of the cost of the restoration, except such structural
defects, building systems not in working order, physical damage, renovation and
restoration which, in the aggregate, would not have a Mack-Cali Material Adverse
Effect.
(d) None of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled 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 Mack-Cali Properties or (ii) any zoning, building or
similar law, code, ordinance, order or regulation is or will be violated by the
35
continued maintenance, operation or use of any buildings or other improvements
on any of the Mack-Cali Properties or by the continued maintenance, operation or
use of the parking areas, other than such notices which, in the aggregate, would
not have a Mack-Cali Material Adverse Effect. Except as set forth in Schedule
3.9(d) to the Mack-Cali Disclosure Letter, all work required to be performed,
payments required to be made and actions required to be taken, other than those
which would not have a Mack-Cali Material Adverse Effect, 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 similar
action relating to any Mack-Cali Properties (e.g., Local Improvement District,
Road Improvement District, Environmental Mitigation), have been performed, paid
or taken, as the case may be, except where the failure to do so would not, in
the aggregate, have a Mack-Cali Material Adverse Effect, and Mack-Cali has no
Knowledge of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as set forth
in development or operating budgets for such Mack-Cali Properties delivered to
Prentiss and Prentiss Partnership prior to the date hereof and except for such
work, payments or actions which, in the aggregate, would not have a Mack-Cali
Material Adverse Effect.
(e) The rent rolls requested by Prentiss and previously provided by Mack-
Cali to Prentiss (the "Mack-Cali Rent Roll") lists substantially all Mack-Cali
Space Leases (as defined below) in effect as of the respective dates indicated
on such Mack-Cali Rent Rolls except for Mack-Cali Space Leases for which payment
of rent has not commenced. "Mack-Cali Space Lease" means each lease or other
right of occupancy affecting or relating to a property in which Mack-Cali
Partnership (or an entity in which it directly or indirectly has an interest) is
the landlord, either pursuant to the terms of the lease agreement or as
successor to any prior landlord, but excluding any ground lease. Those copies of
Mack-Cali Space Leases made available to Prentiss are true, correct and complete
copies of all Mack-Cali Space Leases, including all amendments, modifications,
supplements, renewals, extensions and guarantees related thereto, as of the date
hereof. Except for discrepancies that, either individually or in the aggregate,
would not reasonably be expected to have a Mack-Cali Material Adverse Effect,
all information set forth in the Mack-Cali Rent Roll is true, correct, and
complete as of the date thereof. Except as set forth in a delinquency report
made available to Mack-Cali, none of Mack-Cali, or any Mack-Cali Subsidiary or
Mack-Cali Non-controlled Subsidiary, on the one hand, nor, to the Knowledge of
Mack-Cali or Mack-Cali Partnership, any other party, on the other hand, is in
monetary default under any Mack-Cali Space Lease, except for such defaults that
would not reasonably be expected to have a Mack-Cali Material Adverse Effect.
3.10 Environmental Matters.
----------------------
(a) Except as disclosed in Schedule 3.10(a) to the Mack-Cali Disclosure
Letter,
(i) to the Knowledge of Mack-Cali, none of Mack-Cali, any of the
Mack-Cali Subsidiaries or the Mack-Cali Non-controlled Subsidiary or any other
Person has caused or permitted the presence of any Hazardous Materials at, on or
under, or migrating from or onto, any of the Mack-Cali Properties, such that the
presence of such Hazardous Materials (including the presence of asbestos in any
buildings or improvements at the Mack-Cali Properties) would, individually or in
the aggregate, reasonably be expected to have a Mack-Cali Material Adverse
Effect;
(ii) to the Knowledge of Mack-Cali, during the period of such
ownership, operation or tenancy, except in accordance with the Environmental
Permits there has been no Release of Hazardous
36
Materials at, on, under or from or onto (A) the Mack-Cali Properties or (B) any
real property previously owned, operated or leased by Mack-Cali or the Mack-Cali
Subsidiaries or the Mack-Cali Non-controlled Subsidiary (the "Former Mack-Cali
Properties"), and to the Knowledge of Mack-Cali there does not exist any Release
of Hazardous Materials having occurred or presently occurring at, on, under or
from or onto the Mack-Cali Properties or the Former Mack-Cali Properties, which
would, individually or in the aggregate, reasonably be expected to have a Mack-
Cali Material Adverse Effect;
(iii) Mack-Cali, the Mack-Cali Subsidiaries and the Mack-Cali Non-
controlled Subsidiary have complied in all material respects with all
Environmental Laws, and, to the Knowledge of Mack-Cali, none of Mack-Cali, the
Mack-Cali Subsidiaries or the Mack-Cali Non-controlled Subsidiary has any
liability under existing Environmental Laws, except to the extent that any such
failure to comply or any such liability, individually or in the aggregate, would
not reasonably be expected to have a Mack-Cali Material Adverse Effect; and
(iv) Mack-Cali, the Mack-Cali Subsidiaries and the Mack-Cali Non-
controlled Subsidiary have been duly issued, and currently have and will
maintain through the Closing Date, all Environmental Permits necessary to
operate their businesses as currently operated, except where the failure to
obtain and maintain such Environmental Permits would not have a material adverse
effect on any Mack-Cali Property, Mack-Cali, the Mack-Cali Subsidiaries and the
Mack-Cali Non-controlled Subsidiary.
(c) Mack-Cali has previously delivered or made available to Prentiss
complete copies of all material information, documents and reports, including,
without limitation, environmental investigations and testing or analysis that
are in the possession or control of any of Mack-Cali, the Mack-Cali Subsidiaries
or the Mack-Cali Non-controlled Subsidiary which are located in its Cranford,
New Jersey office and which relate to compliance with Environmental Laws by any
of them or to the past or current environmental condition of the Mack-Cali
Properties.
3.11 Related Party Transactions. Except as disclosed in the Mack-Cali SEC
--------------------------
Documents, set forth in Schedule 3.11 to the Mack-Cali Disclosure Letter is a
list of all material arrangements, agreements and contracts entered into by
Mack-Cali, any of the Mack-Cali Subsidiaries and the Mack-Cali Non-controlled
Subsidiary with (a) any investment banker or financial advisor that would impose
obligations on the Surviving Corporation after Closing or (b) any person who is
an officer, director or Affiliate of Mack-Cali, any of the Mack-Cali
Subsidiaries or the Mack-Cali Non-controlled Subsidiary, any relative of any of
the foregoing or any entity of which any of the foregoing is an Affiliate.
Except as disclosed in the Mack-Cali SEC Documents, copies of all of the
foregoing have previously been delivered or made available to Prentiss.
3.12 Employee Benefits. As used herein, the term "Mack-Cali 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 ERISA, and any Welfare Plan as
defined in Section 3(1) of ERISA, whether any of the foregoing is funded,
insured or self-funded, written or oral, (i) sponsored or maintained by Mack-
Cali or any entity which is a member of a "controlled group of corporations"
with, under "common control" with, or a member of an "affiliated service group"
with Mack-Cali as such terms are defined in Section 414 of the
37
Code (each, including Mack-Cali, a "Mack-Cali ERISA Affiliate"), including any
Mack-Cali Subsidiary or the Mack-Cali Non-controlled Subsidiary (if any is a
Mack-Cali ERISA Affiliate) and covering any Mack-Cali ERISA Affiliate's active
or former employees (or their beneficiaries), (ii) to which any Mack-Cali ERISA
Affiliate is a party or by which any Mack-Cali ERISA Affiliate (or any of the
rights, properties or assets thereof) is bound or (iii) with respect to which
any current Mack-Cali ERISA Affiliate may otherwise have any material liability
(whether or not such Mack-Cali ERISA Affiliate still maintains such Employee
Plan). Each Mack-Cali Employee Plan is listed on Schedule 3.12 to the Mack-Cali
Disclosure Letter. With respect to the Mack-Cali Employee Plans:
(a) Except as disclosed in Schedule 3.12(a) to the Mack-Cali Disclosure
Letter, no Mack-Cali ERISA Affiliate has any continuing liability under any
Welfare Plan or other Mack-Cali Employee 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. Except as set forth on Schedule 3.12(a), none of the Mack-
Cali Employee Plans that are welfare benefit plans are self insured or multiple
employer welfare arrangements as defined in Section 3(40) of ERISA, and except
as set forth on Schedule 3.12(a), there are no reserves, assets surpluses or
prepaid premiums with respect to such welfare benefit plans. No event or
condition exists with respect to any Mack-Cali Employee Plan that could subject
any Mack-Cali ERISA Affiliate to any material Tax under Section 4980B of the
Code or any predecessor provision of such section of the Code, 4980D of the Code
or any liability under similar state laws.
(b) Except as disclosed in Schedule 3.12(b) to the Mack-Cali Disclosure
Letter, each Mack-Cali Employee Plan complies in all material respects with the
applicable requirements of ERISA and any other applicable law governing such
Mack-Cali Employee Plan, and, to the Knowledge of Mack-Cali, each Mack-Cali
Employee Plan has at all times been properly administered in all material
respects 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. 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 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 or has
pending an application for such a letter and, to the Knowledge of Mack-Cali, no
event has occurred which would jeopardize the qualified status of any such plan
or the tax exempt status of any such trust under Section 401(a) and Section
501(a) of the Code, respectively. Except as described in Schedule 3.12(b) to
the Mack-Cali Disclosure Letter, no lawsuits, claims (other than routine claims
for benefits) or complaints to, or by, any person or governmental entity have
been filed, are pending, or, to the Knowledge of Mack-Cali, are threatened with
respect to any Mack-Cali Employee Plan and, to the Knowledge of Mack-Cali, 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, with respect to
each Mack-Cali Employee Plan:
(i) all contributions and payments with respect to Mack-Cali Employee
Plans that are required to be made by a Mack-Cali ERISA Affiliate 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
38
the appropriate plan document, actuarial report, collective bargaining
agreements or insurance contracts or arrangements or as otherwise required
by ERISA or the Code; and
(ii) with respect to each such Mack-Cali Employee Plan, to the extent
applicable, Mack-Cali has delivered to or has made available to Prentiss
true and complete copies of (A) plan documents, summary plan descriptions
and 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 contracts or other funding agreements
that implement each such Mack-Cali Employee Plan.
(c) Except as disclosed in Schedule 3.12(c) to the Mack-Cali Disclosure
Letter, with respect to each Mack-Cali Employee Plan (i) 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 (ii) there has not occurred any breach of fiduciary
duty under Title I of ERISA, which in either case could subject Mack-Cali or any
Mack-Cali ERISA Affiliate to material liability.
(d) No Mack-Cali ERISA Affiliate has maintained or been obligated to
contribute to any Pension Plan subject to Code Section 412 or Title IV of ERISA.
No Pension Plan subject to Code Section 412 or Title IV of ERISA has been
terminated. No Mack-Cali Employee Plan is a "multiemployer plan" within the
meaning of Section 3(37) or 4001(a)(3) of ERISA.
(e) With respect to each Mack-Cali Employee Plan maintained by any Mack-
Cali ERISA Affiliate, 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.
(f) Each Pension Plan that is not qualified under Code section 401(a) or
403(a) is exempt from Part 2, 3, and 4 of Title I of ERISA as an unfunded
benefit plan that is maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) ERISA. Except as set forth
on Schedule 3.12(f) to the Mack-Cali Disclosure Letter, no assets of Mack-Cali
are allocated to of held in a "rabbi trust" or similar funding vehicle.
3.13 Employees / Employee Policies.
-----------------------------
(a) The employee handbooks of Mack-Cali, the Mack-Cali Subsidiaries and
the Mack-Cali Non-controlled Subsidiary currently in effect are attached as
Schedule 3.13 to the Mack-Cali Disclosure Letter and fairly and accurately
summarize all material employee policies, vacation policies and payroll
policies. Schedule 3.13(a) sets forth a list, true and correct in all material
respects, of the names of all current employees of Mack-Cali, any Mack-Cali
Subsidiary or the Mack-Cali Non-controlled Subsidiary (each a "Mack-Cali
Controlled Group Member") (including employees who are also directors or
officers of any Mack-Cali Controlled Group Member) (the "Mack-Cali Employees")
all of whom are located in the United States and with respect to each such
Employee, such person's job title, the location of employment of such Mack-Cali
Employee, such Mack-Cali Employee's date of employment, and the current salary
and bonus paid in 1999. Except for travel advances which have been granted in
the
39
ordinary course of business, there are no outstanding loans from any Mack-Cali
Controlled Group Member to any Mack-Cali Employee, former employee, consultant
or any related party. Except as set forth on Schedule 3.13(a), the Mack-Cali
Controlled Group Members do not have any employment or other compensation
agreements with any Mack-Cali Employees or former employees. To Mack-Cali's
Knowledge, Mack-Cali is not in breach of any material terms of any such
employment agreements of any of the Mack-Cali Employees.
(b) Except as set forth on Schedule 3.13(b), there are no material
controversies, strikes, slowdowns, lockouts, work stoppages, picketing,
grievances, unfair labor practice charges, investigations, charges, complaints,
disputes or other proceedings pending or threatened between any Mack-Cali
Controlled Group Member and any of the Mack-Cali Employees or former employees.
3.14 Taxes.
-----
(a) Each of Mack-Cali, the Mack-Cali Subsidiaries and the Mack-Cali Non-
controlled Subsidiary (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, (B) has paid (or Mack-Cali
has paid on its behalf) all Taxes shown on such returns and reports as required
to be paid by it, and (C) has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442, 1445, 3121, and 3402 of the Code or similar provisions
under any foreign laws) and has, within the time period prescribed by law,
withheld and paid over to the proper governmental entities all amounts required
to be so withheld and paid over under applicable laws and regulations, except,
with respect to all of the foregoing, where the failure to file such tax returns
and reports or failure to pay such Taxes or failure to comply with such
withholding requirements would not reasonably be expected to have a Mack-Cali
Material Adverse Effect. The most recent audited financial statements contained
in the Mack-Cali SEC Documents reflect an adequate reserve for all material
Taxes payable by Mack-Cali, the Mack-Cali Subsidiaries and the Mack-Cali Non-
controlled Subsidiary for all taxable periods and portions thereof through the
date of such financial statements. Since the Mack-Cali Financial Statement
Date, Mack-Cali 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 none of
Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-controlled 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
sentences will be imposed upon Mack-Cali, any Mack-Cali Subsidiary or the Mack-
Cali Non-controlled Subsidiary. None of Mack-Cali, any Mack-Cali Subsidiary or
the Mack-Cali Non-controlled Subsidiary is the subject of any audit,
examination, or other proceeding in respect of federal income Taxes, and to the
Knowledge of Mack-Cali, no audit, examination or other proceeding in respect of
federal income Taxes involving any of Mack-Cali, any Mack-Cali Subsidiary or the
Mack-Cali Non-controlled Subsidiary is being considered by any Tax authority.
To the Knowledge of Mack-Cali, no deficiencies for any Taxes have been proposed,
asserted or assessed against Mack-Cali, any Mack-Cali Subsidiary or the Mack-
Cali Non-controlled Subsidiary, and no requests for waivers of the time to
assess any such Taxes are pending.
(b) Mack-Cali (i) since its formation and through December 31, 1999 has
been subject to taxation as a REIT within the meaning of Section 856 of the Code
and has satisfied all requirements
40
to qualify as a REIT for such years, (ii) has operated since January 1, 2000, to
the date of this representation, and intends to continue to operate, in such a
manner as to qualify as a REIT for the taxable year ending December 31, 2000
and, if later, for the taxable year of Mack-Cali ending on 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 no such challenge
is pending or, to the Knowledge of Mack-Cali, threatened. Each Mack-Cali
Subsidiary which is a partnership, joint venture or limited liability company
(1) has been treated since its formation and continues to be treated for federal
income tax purposes as a partnership and not as a corporation or an association
taxable as a corporation and (2) has not since the later of its formation or the
acquisition by Mack-Cali of a direct or indirect interest therein, owned any
assets (including, without limitation, securities) that would cause Mack-Cali to
violate Section 856(c)(5) of the Code. Each Mack-Cali Subsidiary which is a
corporation (other than Mack-Cali Services Inc.) has been since its formation a
qualified REIT subsidiary under Section 856(i) of the Code. Mack-Cali
Partnership is not a publicly traded partnership within the meaning of Section
7704 of the Code. Neither Mack-Cali nor any Mack-Cali 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 an election under IRS Notice 88-19 or Temporary
Treasury Regulation sec. 1.337(d)-5T or (y) which is subject to a consent filed
pursuant to Section 341(f) of the Code and the regulations thereunder.
3.15 No Payments to Employees, Officers or Directors. Except as described
-----------------------------------------------
in Schedule 3.15 to the Mack-Cali 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 Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-controlled
Subsidiary. Except as described in Schedule 3.15 to the Mack-Cali Disclosure
Letter, there is no agreement or arrangement with any employee, officer or other
service provider under which Mack-Cali, any Mack-Cali Subsidiary or Mack-Cali
Non-controlled Subsidiary has agreed to pay any tax that might be owed under
Section 4999 of the Code with respect to payments to such individuals.
3.16 Broker; Schedule of Fees and Expenses. No broker, investment banker,
-------------------------------------
financial advisor or other person, other than Prudential Securities
Incorporated, the fees and expenses of which are described in the engagement
letter between Prudential Securities Incorporated and Mack-Cali, a true, correct
and complete copy of which has previously been given to Prentiss, 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 Mack-Cali or any Mack-Cali Subsidiary.
3.17 Compliance with Laws. None of Mack-Cali, any Mack-Cali Subsidiary or
--------------------
the Mack-Cali Non-controlled Subsidiary 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
to the extent that such violation or failure would not reasonably be expected to
have a Mack-Cali Material Adverse Effect.
3.18 Contracts; Debt Instruments.
---------------------------
(a) Except for any violation or default caused by the transactions
contemplated by this
41
Agreement, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary is in violation of or in default under (nor to the
Knowledge of Mack-Cali 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,
lease, permit, concession, franchise, license or any other 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 Mack-Cali
does such a violation or default exist, except to the extent that such violation
or default, individually or in the aggregate, would not reasonably be expected
to have a Mack-Cali Material Adverse Effect.
(b) Except for any of the following expressly identified in Mack-Cali SEC
Documents, Schedule 3.18(b) to the Mack-Cali 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 of Mack-
Cali, any Mack-Cali Subsidiary and the Mack-Cali Non-controlled Subsidiary,
other than Indebtedness payable to Mack-Cali, a Mack-Cali Subsidiary or a Mack-
Cali Non-controlled Subsidiary, is outstanding or may be incurred.
(c) Except for any of the following identified in the Mack-Cali SEC
Documents, to the extent not set forth in response to the requirements of
Section 3.18(b), Schedule 3.18(c) to the Mack-Cali 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 Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-controlled
Subsidiary is a party or an obligor with respect thereto.
(d) Except as set forth in Schedule 3.18(d) of the Mack-Cali Disclosure
Letter, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary 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 Mack-Cali Properties.
(e) Except as described in Schedule 3.18(e) to the Mack-Cali Disclosure
Letter, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary is a party to any agreement relating to the management of
any Mack-Cali Property by any Person other than Mack-Cali, a Mack-Cali
Subsidiary or a Mack-Cali Non-controlled Subsidiary.
(f) Schedule 3.18(f) to the Mack-Cali Disclosure Letter, which is correct
in all material respects as of the date hereof, lists all agreements currently
in effect entered into by Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali
Non-controlled Subsidiary pursuant to which Mack-Cali, any Mack-Cali Subsidiary
or the Mack-Cali Non-controlled Subsidiary manages or provides services with
respect to any real properties other than Mack-Cali Properties (the "Mack-Cali
Outside Property Management Agreements").
(g) Mack-Cali has delivered to Prentiss prior to the date of this
Agreement a true and complete copy of the development budget relating to ongoing
and/or committed development projects of Mack-Cali or Mack-Cali Partnership.
(h) Schedule 3.18(h) to the Mack-Cali Disclosure Letter lists all
agreements currently in effect entered into by Mack-Cali, any Mack-Cali
Subsidiary or the Mack-Cali Non-controlled Subsidiary
42
providing for the sale of any Mack-Cali Properties or the purchase of, by Mack-
Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-controlled Subsidiary, on
the one hand, or the other party thereto, on the other hand, any real estate.
(i) Except as set forth in Schedule 3.18(i) to the Mack-Cali Disclosure
Letter, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary has any continuing contractual liability, which alone or
in the aggregate is greater than $5,000,000, to pay any additional purchase
price for any of the Mack-Cali Properties.
(j) Except as set forth on Schedule 3.18(j) to the Mack-Cali Disclosure
Letter, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary has entered into or is subject, directly or indirectly, to
any Mack-Cali Tax Protection Agreements. As used herein, a "Mack-Cali 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 Mack-Cali Partnership or any other
Mack-Cali Subsidiary that is treated as a partnership for federal income tax
purposes, and that (i) prohibits or restricts in any manner the disposition of
any assets of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary, (ii) requires that Mack-Cali, any Mack-Cali Subsidiary or
the Mack-Cali Non-controlled Subsidiary maintain, or put in place, or replace,
indebtedness, whether or not secured by one or more of the Mack-Cali Properties,
or (iii) requires that Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled 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 Mack-Cali,
any Mack-Cali Subsidiary or the Mack-Cali Non-controlled Subsidiary, (B) that
specifies or relates to a method of taking into account book-tax disparities
under Section 704(c) of the Code with respect to one or more assets of Mack-Cali
or a Mack-Cali Subsidiary, or (C) that requires a particular method for
allocating one or more liabilities of Mack-Cali or any Mack-Cali Subsidiary
under Section 752 of the Code. None of Mack-Cali, any Mack-Cali Subsidiary or
the Mack-Cali Non-controlled Subsidiary is in violation of or in default under
any Mack-Cali Tax Protection Agreement.
(k) Except as set forth in Schedule 3.18(k) to the Mack-Cali Disclosure
Letter, none of Mack-Cali, any Mack-Cali Subsidiary or the Mack-Cali Non-
controlled Subsidiary is a party to any standstill, lock-up or voting agreement
not entered into in the ordinary course of business.
3.19 Opinion of Financial Advisor. Mack-Cali has received the written
----------------------------
opinion of Prudential Securities Incorporated, Mack-Cali's financial advisor, to
the effect that the Exchange Ratio is fair, from a financial point of view, to
Mack-Cali and Mack-Cali Operating Partnership.
3.20 State Takeover Statutes. Mack-Cali has taken all action necessary to
-----------------------
exempt the transactions contemplated by this Agreement between Mack-Cali and
Prentiss and its Affiliates from the operation of any Takeover Statute.
3.21 Investment Company Act of 1940. None of Mack-Cali, any Mack-Cali
------------------------------
Subsidiary or the Mack-Cali Non-controlled Subsidiary is, or at the Effective
Time will be, required to be registered under the 1940 Act.
3.22 Definition of Knowledge of Mack-Cali. As used in this Agreement, the
------------------------------------
phrase
43
"Knowledge of Mack-Cali" (or words of similar import) means the actual knowledge
of those individuals identified in Schedule 3.22 to the Mack-Cali Disclosure
Letter, without a duty of inquiry or investigation of any kind.
3.23 Mack-Cali Not An Interested Stockholder. Neither Mack-Cali nor Mack-
---------------------------------------
Cali Partnership is an "interested stockholder" or an "affiliate of an
interested stockholder" of Prentiss within the meaning of Section 3-601 of the
MGCL.
3.24 Required Stockholder Approvals and Partner Approvals. The
----------------------------------------------------
affirmative vote of the holders of not less than a majority of all votes
entitled to be cast by holders of the Mack-Cali Common Shares, and the
affirmative vote of the partners of Mack-Cali Partnership holding at least 85%
of the outstanding Mack-Cali Partnership interests, assuming conversion of all
Mack-Cali Preferred Units into Common Units (including Partnership interests
held by Mack-Cali) are the only votes of the holders of any class or series of
Mack-Cali stock necessary or required under this Agreement or under applicable
law to approve the Mergers and this Agreement.
ARTICLE 4
COVENANTS
4.1 Conduct of Prentiss' and Prentiss Partnership's Business Pending
----------------------------------------------------------------
Merger. During the period from the date of this Agreement to the earlier of the
------
Effective Times or the termination of this Agreement, except as consented to in
writing by Mack-Cali or as expressly provided for in this Agreement, Prentiss
and Prentiss Partnership shall, and shall cause (or, in the case of the Prentiss
Subsidiaries and the Prentiss Non-controlled Subsidiary that Prentiss or
Prentiss Partnership do not control, shall use commercially reasonable efforts
to cause) each of the Prentiss Subsidiaries and Prentiss Non-controlled
Subsidiary to:
(a) conduct its business only in the usual, regular and ordinary course
and in substantially the same manner as heretofore conducted;
(b) preserve intact its business organizations and goodwill and use
commercially reasonable efforts to keep available the services of its officers
and employees;
(c) confer on a regular basis with one or more representatives of Mack-
Cali to report operational matters of materiality which would reasonably be
expected to have a Prentiss Material Adverse Effect and, subject to Section 4.3,
any proposals to engage in material transactions;
(d) promptly notify Mack-Cali of any emergency or other 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 governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), except for such emergencies,
changes or complaints, investigations or hearings which would not have a
Prentiss Material Adverse Effect;
(e) promptly deliver to Mack-Cali true and correct copies of any report,
statement or schedule filed with the SEC subsequent to the date of this
Agreement;
44
(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 Prentiss 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 Prentiss notifies Mack-Cali that it is
availing itself of such extensions and provided such extensions do not adversely
affect Prentiss' status as a qualified REIT under the Code;
(h) not make or rescind any express or deemed election relative to Taxes
(unless required by law or necessary to preserve Prentiss' status as a REIT or
the status of any Prentiss 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);
(i) except for those Prentiss Properties set forth on Schedule 4.1(i) to
the Prentiss Disclosure Letter, without the written approval of Mack-Cali, 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, encumber assets or commence construction of, or enter into any
Commitment to develop or construct other real estate projects, except for (i)
leases of office property space not in excess of 50,000 square feet individually
and (ii) leases of industrial space not in excess of 100,000 square feet
individually, (B) incur or enter into any Commitment to incur additional
indebtedness (secured or unsecured) (except for unsecured indebtedness that is
prepayable without restriction or penalty) or (C) modify, amend or terminate, or
enter into any Commitment to modify, amend or terminate, any indebtedness
(secured or unsecured) in existence as of the date hereof;
(j) not amend its Declaration of Trust 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 Prentiss Subsidiary or Prentiss Non-controlled
Subsidiary, including the Prentiss 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 Prentiss 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 Prentiss
Units);
(k) make no change in the number of shares of beneficial interest or units
of limited partnership interest issued and outstanding, other than pursuant to
(i) the exercise of options disclosed in Schedule 2.3 to the Prentiss Disclosure
Letter, (ii) the conversion of the Prentiss Series A Preferred Shares, (iii) the
redemption of Prentiss Units pursuant to the Prentiss Partnership Agreement or
the redemption of the Prentiss Series A Preferred Shares pursuant to the Series
A Preferred Securities Purchase Agreement dated as of December 2, 1997, among
Security Capital Growth Incorporated, Prentiss and Prentiss Partnership (the
"Prentiss Series A Purchase Agreement"), in each case for cash or, at Prentiss'
option, Prentiss Common Shares or (iv) the issuance of Prentiss Restricted
Shares pursuant to Section 5.8(g) below
(1) except as contemplated by Section 5.8(f) hereof, grant no options or
other right or commitment relating to its shares of beneficial interest or units
of limited partnership interest or any security convertible into its shares of
beneficial interest or units of limited partnership interest, or any
45
security the value of which is measured by shares of beneficial interest or any
security subordinated to the claim of its general creditors and not amend or
waive any rights under any of the Prentiss Share Options or Prentiss Share
Rights;
(m) except as provided in Sections 1.16, 2.3(f) and 5.10 hereof and in
connection with the use of Prentiss 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 Prentiss Common
Shares, Prentiss Series A Preferred Shares or Prentiss 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 beneficial interest,
membership interests, or units of partnership interest of Prentiss, except for
(A) redemptions of Prentiss Common Shares required under the Declaration of
Trust of Prentiss and repurchases of Prentiss Series A Preferred Shares pursuant
to the Prentiss Series A Purchase Agreement or in order to preserve the status
of Prentiss as a REIT under the Code and (B) exchanges of Prentiss Units,
whether or not outstanding on the date of this Agreement, under the Prentiss
Partnership Agreement in which Prentiss Common Shares are utilized;
(n) except for those Prentiss Properties set forth on Schedule 4.1(i) to
the Prentiss Disclosure Letter, not sell, ground lease, mortgage, subject to
Lien or otherwise dispose of any of the Prentiss Properties;
(o) subject to Section 4.3, 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
shares of beneficial interest or other equity interests in any person or entity
whose securities are registered under the Exchange Act unless such transaction
has been approved by Mack-Cali;
(p) not sell, lease, mortgage, subject to Lien or otherwise dispose of any
of its personal property or intangible property, except in the ordinary course
of business and which is not material, individually or in the aggregate;
(q) except as set forth on Schedule 4.1(q) to the Prentiss Disclosure
Letter, not make any loans, advances or capital contributions to, or investments
in, any other Person, other than loans, advances and capital contributions to
Prentiss Subsidiaries or the Prentiss Non-controlled Subsidiary in existence on
the date hereof;
(r) not pay, discharge or satisfy 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 Mack-Cali
or incurred in the ordinary course of business consistent with past practice;
(s) not guarantee the indebtedness of another Person (other than Prentiss
Subsidiaries) , 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;
46
(t) not enter into any Commitment with any officer, director or Affiliate
of Prentiss or any of the Prentiss Subsidiaries or the Prentiss Non-controlled
Subsidiary or any material Commitment with any consultant;
(u) not increase any compensation of any of its officers, directors or
employees earning more than $100,000 per annum or enter into or amend any
employment agreement described in Schedule 2.13 to the Prentiss Disclosure
Letter, other than consistent with established payroll practices or as required
by any contract or Prentiss Employee Plan;
(v) not adopt any new employee benefit plan or amend any existing plans or
rights, except for changes which are required by law and changes which are not
more favorable to participants than provisions presently in effect;
(w) not settle any shareholder derivative or class action claims arising
out of or in connection with any of the transactions contemplated by this
Agreement;
(x) not change the ownership of any of its Subsidiaries or the Prentiss
Non-controlled Subsidiary, except changes which arise as a result of the
acquisition of Prentiss Units in exchange for Prentiss Common Shares pursuant to
exercise of the Prentiss Common Unit exchange right under the Prentiss
Partnership Agreement;
(y) not accept a promissory note in payment of the exercise price payable
under any option to purchase Prentiss Common Shares except pursuant to the terms
of benefit plans in effect as of the date hereof;
(z) not enter into any Prentiss Tax Protection Agreement;
(aa) not amend any of its tax returns or change its organizational
structure in any manner that would impact its current or future tax posture or
affect its status as a REIT, provided, however, that nothing in this Agreement
shall prohibit Prentiss, Prentiss Partnership, the Prentiss Subsidiaries or the
Prentiss Non-controlled Subsidiaries from changing its organizational structure
in any manner to maintain its status as a REIT, so long as any such changes are
agreed to by both Prentiss and Mack-Cali;
(bb) not file any tax returns or other related documents in connection with
the 1999 taxable year of each of Prentiss, Prentiss Partnership and the Prentiss
Non-controlled Subsidiary prior to consulting with Mack-Cali;
(cc) not settle or compromise any material federal, state, local or foreign
tax liability; and
(dd) not authorize, recommend, propose or announce an intention to do
any of the foregoing prohibited actions, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing prohibited actions.
4.2 Conduct of Mack-Cali's and Mack-Cali Partnership's Business Pending
-------------------------------------------------------------------
Merger. During the period from the date of this Agreement to the earlier of the
------
Effective Times or the termination of this Agreement, except as consented to in
writing by Prentiss or as expressly provided for in this Agreement,
47
Mack-Cali and Mack-Cali Partnership shall, and shall cause (or, in the case of
the Mack-Cali Subsidiaries and the Mack-Cali Non-controlled Subsidiary that
Mack-Cali or Mack-Cali Partnership do not control, shall use commercially
reasonable efforts to cause) each of the Mack-Cali Subsidiaries and Mack-Cali
Non-controlled Subsidiary to:
(a) conduct its business only in the usual, regular and ordinary course
and in substantially the same manner as heretofore conducted;
(b) preserve intact its business organizations and goodwill and use
commercially reasonable efforts to keep available the services of its officers
and employees;
(c) confer on a regular basis with one or more representatives of Prentiss
to report operational matters of materiality which would reasonably be expected
to have a Mack-Cali Material Adverse Effect;
(d) promptly notify Prentiss of any 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);
(e) promptly deliver to Prentiss 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 Mack-Cali 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 Mack-Cali notifies Prentiss that it is
availing itself of such extensions and provided such extensions do not adversely
affect Mack-Cali's status as a qualified REIT under the Code;
(h) not make or rescind any express or deemed election relative to Taxes
(unless required by law or necessary to preserve Mack-Cali's status as a REIT or
the status of any Mack-Cali 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);
(i) except for those Mack-Cali Properties set forth on Schedule 4.2(i) to
the Mack-Cali Disclosure Letter, without the written approval of Prentiss, not
(A) acquire, enter into any Commitment for the acquisition of any real property
or other transaction, encumber assets or commence construction of, or enter into
any Commitment to develop or construct other real estate projects, except for
(i) leases of office property space not in excess of 50,000 square feet
individually and (ii) leases of industrial space not in excess of 100,000 square
feet individually, (B) incur or enter into any Commitment to incur additional
indebtedness (secured or unsecured) (except for unsecured indebtedness that is
prepayable without restriction or penalty) or (C) modify, amend or terminate, or
enter into any Commitment to modify, amend or terminate, any indebtedness
(secured or unsecured) in existence as of the date hereof;
48
(j) not amend the Mack-Cali Charter or the Mack-Cali 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 Mack-Cali Subsidiary or the
Mack-Cali Non-controlled Subsidiary, including the Mack-Cali Partnership
Agreement (except for an amendment to increase the authorized preferred stock
(as set forth in the Articles of Merger), the Proposed Mack-Cali Charter
Amendment Relating to a Cut-Down and to the extent necessary to reflect the
admission of additional limited partners and other amendments in connection
therewith that can be made by Mack-Cali 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 Mack-Cali Common Units). As used herein,
"Proposed Mack-Cali Charter Amendment Relating to a Cut-Down" means the proposed
amendment to decrease the affirmative vote required to approve an extraordinary
action from two-thirds to a majority of the outstanding Mack-Cali Common Shares,
which has been approved by the Board of Directors of Mack-Cali and is proposed
to be submitted to a vote of the shareholders of Mack-Cali;
(k) except as provided in Sections 1.16 and 5.10 hereof and in connection
with the use of Mack-Cali 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 Mack-Cali Common
Shares, Mack-Cali Common Units or Mack-Cali Preferred 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 Mack-Cali, except for
(A) redemptions of Mack-Cali Common Shares required under Article VI of the
Mack-Cali Charter in order to preserve the status of Mack-Cali as a REIT under
the Code, and (B) redemptions of Mack-Cali Common Units, whether or not
outstanding on the date of this Agreement, under the Mack-Cali Partnership
Agreement in which Mack-Cali Common Shares are utilized;
(l) except for those Mack-Cali Properties set forth on Schedule 4.2(i) to
the Mack-Cali Disclosure Letter, not sell, ground lease, mortgage, subject to
Lien or otherwise dispose of any of the Mack-Cali Properties;
(m) subject to Section 4.3, not (i) enter into or agree to effect any
merger, acquisition, consolidation, reorganization or other business combination
with any third party in which Mack-Cali is not the surviving party thereto or
(ii) enter into or agree to effect any merger, acquisition, exchange offer or
other business combination with a third party in which Mack-Cali is the
surviving party that would result in the issuance of equity securities
representing in excess of 10% of the outstanding Mack-Cali Common Shares on the
date any such business combination is entered into or agreed to unless, in
either such case, such business combination is approved by Prentiss; and
(n) not amend any of its tax returns or change its organizational
structure in any manner that would impact its current or future tax posture or
affect its status as a REIT.
(o) not authorize, recommend, propose or announce an intention to do any
of the foregoing prohibited actions, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing prohibited actions.
49
4.3 No Solicitation.
---------------
(a) Prior to the termination of this Agreement in accordance with the
terms hereof, Prentiss agrees, for itself and in its capacity as sole general
partner of Prentiss Partnership, that:
(i) none of it, any Prentiss Subsidiary or the Prentiss Non-
controlled Subsidiary shall invite, initiate, solicit or encourage, directly or
indirectly, 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) with respect to a merger, acquisition,
tender offer, exchange offer, transaction resulting in the issuance of
securities representing 25% or more of the outstanding equity securities of
Prentiss, consolidation, share exchange, recapitalization, liquidation,
dissolution, business combination, sale, lease, exchange, mortgage, pledge,
transfer or other disposition of 25% or more of the assets or 25% or more of the
equity securities (including, without limitation, partnership interests and
units) of Prentiss or Prentiss Partnership, other than the Mergers (any such
proposal or offer being hereinafter referred to as a "Prentiss Acquisition
Proposal"), or engage in any discussions or negotiations with or provide any
confidential or non-public information or data to, any person relating to, or
that may reasonably be expected to lead to, a Prentiss Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement a Prentiss
Acquisition Proposal;
(ii) none of it, Prentiss Partnership, any of the Prentiss
Subsidiaries or the Prentiss Non-controlled Subsidiary will permit any of its
officers, directors, employees, affiliates, agents, investment bankers,
financial advisors, attorneys, accountants, brokers, finders, consultants or
other agents or representatives of Prentiss to engage in any of the activities
described in Section 4.3(a);
(iii) it, Prentiss Partnership and the Prentiss Subsidiaries and the
Prentiss Non-controlled Subsidiary 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
(iv) it will notify Mack-Cali immediately (but in any event within 24
hours) if Prentiss, Prentiss Partnership, any of the Prentiss Subsidiaries, the
Prentiss Non-controlled Subsidiary or any individual or entity referred to in
Section 4.3(a)(ii), 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 include in such notice the identity of
the Person making such inquiry, proposal or request, the material terms of such
inquiry, proposal or request and, if in writing, shall promptly deliver to Mack-
Cali a copy of such inquiry, proposal or request along with all other related
documentation and correspondence;
(b) Notwithstanding Section 4.3(a), the Board of Trustees of Prentiss
(including with respect to Prentiss' capacity, through a direct wholly-owned
subsidiary, as the sole general partner of Prentiss Partnership) shall not be
prohibited from furnishing information to or entering into discussions or
negotiations with, any person or entity that makes an unsolicited bona fide
written Prentiss Acquisition Proposal, if, and only to the extent that (i) a
majority of the Board of Trustees of Prentiss determines in good faith, after
consultation with its outside counsel, that such action is required for the
Board of Trustees of Prentiss to comply with its duties to stockholders imposed
by applicable law, (ii) prior to
50
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Prentiss provides written notice to Mack-Cali to
the effect that it is furnishing information to, or entering into discussions
with such person or entity and (iii) Prentiss enters into a confidentiality
agreement with such Person on terms in the aggregate not more favorable to such
Person than the terms of the Confidentiality Agreement.
(c) Notwithstanding anything to the contrary set forth in Section 4.3(a)
or 4.3(b), in the event that a Prentiss Acquisition Proposal constitutes a
Superior Acquisition Proposal (as defined herein), nothing contained in this
Section 4.3 shall prohibit the Board of Trustees of Prentiss from withdrawing,
modifying, amending or qualifying its recommendation of this Agreement and the
Merger as required under Section 5.1(d) hereof and recommending such Superior
Acquisition Proposal to its shareholders: (i) if but only if, Prentiss: (A)
complies fully with this Section 4.3 and (B) provides Mack-Cali with at least
three (3) business days' prior written notice of its intent to withdraw, modify,
amend or qualify its recommendation of this Merger Agreement and the Merger,
(ii) if, in the event that during such three (3) business days Mack-Cali makes a
counter proposal to such Superior Acquisition Proposal (any such counter
proposal being referred to in this Agreement as the "Mack-Cali Counter
Proposal"), Prentiss' Board of Trustees in good faith, taking into account the
advice of its outside financial advisors of nationally recognized reputation,
determines that the Mack-Cali Counter Proposal is not at least as favorable to
Prentiss' shareholders as the Superior Acquisition Proposal, from a financial
point of view, and (iii) Prentiss shall have terminated this Agreement in
accordance with Section 7.1(h).
(d) For all purposes of this Agreement, "Superior Acquisition Proposal"
means a bona fide written proposal made by a third party to acquire, directly or
indirectly, Prentiss and/or Prentiss Partnership pursuant to a tender or
exchange offer, merger, share exchange, consolidation or sale of all or
substantially all of the assets of Prentiss, Prentiss Partnership, and the
Prentiss Subsidiaries or otherwise (i) on terms which a majority of the Board of
Trustees of Prentiss determines in good faith, taking into account the advice of
Prentiss' financial advisors of nationally recognized reputation, are superior,
from a financial point of view, to Prentiss' shareholders to those provided for
in the Merger, (ii) for which financing, to the extent required, is then fully
committed and capable of being obtained and (iii) which the Board of Trustees of
Prentiss determines in good faith is reasonably capable of being consummated.
(e) Any disclosure that the Board of Trustees of Prentiss may be compelled
to make with respect to the receipt of a Prentiss 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.
(f) Nothing in this Section 4.3 shall (i) permit Prentiss to terminate
this Agreement (except as expressly provided in Article 7) or (ii) affect any
other obligations of Prentiss under this Agreement.
4.4 Affiliates. Prior to the Effective Time of the Merger, Prentiss shall
----------
cause to be prepared and delivered to Mack-Cali a list (reasonably satisfactory
to counsel for Mack-Cali) identifying all persons who, at the time of the
Prentiss and Mack-Cali Shareholders Meetings, may be deemed to be "affiliates"
of Prentiss as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "Affiliates"). Prentiss shall use its commercially
reasonable efforts to cause each person who is identified as an Affiliate in
such list to deliver to Mack-Cali on or prior to the Effective Time a written
agreement, in the form previously approved by the parties hereto, that such
Affiliate will not sell, pledge,
51
transfer or otherwise dispose of any Mack-Cali Common Shares and New Mack-Cali
Units issued to such Affiliate pursuant to the Mergers, except pursuant to an
effective registration statement under the Securities Act or in compliance with
paragraph (d) of Rule 145 or as otherwise permitted by the Securities Act. Mack-
Cali shall be entitled to place legends as specified in such written agreements
on the certificates representing any Mack-Cali Common Shares or New Mack-Cali
Units 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 Mack-Cali Common Shares or New Mack-
Cali Units issued to such Affiliates, consistent with the terms of such
agreements. The Surviving Corporation 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
Prentiss or Mack-Cali may reasonably request, all to the extent required from
time to time to enable such Affiliate to sell shares of common stock of the
Surviving Corporation received by such Affiliate in the 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 Prentiss and Prentiss Partnership on the one
-------------
hand, and Mack-Cali and Mack-Cali Partnership on the other hand, shall not take,
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 set forth in this
Agreement that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties 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 Merger set forth in Article 6 not being satisfied.
4.6 M-C REIT Subsidiary Merger. Anything in Section 4.2(h), Section
--------------------------
4.2(j) or elsewhere in this Agreement to the contrary notwithstanding, but
subject to the requirements that the transactions contemplated in this Section
4.6 shall not be a condition to the Mergers and shall not materially alter the
transactions contemplated by this Agreement, Mack-Cali may, prior to the
Effective Time of the Partnership Merger: (i) form a Maryland real estate
investment trust under Title 8 having a declaration of trust and bylaws as will
be mutually agreed upon by the parties hereto, as a wholly owned Subsidiary of
Mack-Cali (the "M-C REIT Subsidiary"); and (ii) effect a merger (the "M-C REIT
Subsidiary Merger") of Mack-Cali with and into the M-C REIT Subsidiary, with the
M-C REIT Subsidiary being the surviving entity, substantially upon the terms and
conditions set forth in an agreement and plan of merger and articles of merger
that will be mutually agreed upon by the parties hereto (collectively the "M-C
REIT Subsidiary Merger Documents"). Any such M-C REIT Subsidiary Merger shall
have the effects set forth in Section 3-114 of the MGCL, Section 8-501.1 of
Title 8 and the M-C REIT Subsidiary Merger Documents, and upon consummation of
the M-C REIT Subsidiary Merger, the M-C REIT Subsidiary will, among other
things, be liable for all of the debts and obligations of Mack-Cali including,
without limitation, the obligations of Mack-Cali under this Agreement. If the M-
C REIT Subsidiary Merger is consummated prior to the Effective Time of the
Partnership Merger, then the Merger shall consist of the merger of Prentiss with
and into the M-C REIT Subsidiary with the M-C REIT Subsidiary being the
surviving entity, and the Merger Consideration, to the extent that it consists
of Mack-Cali Common Shares or Mack-Cali Series A Preferred Shares, will instead
consist of a like number of common shares of beneficial interest of the M-C REIT
Subsidiary ("M-C REIT Subsidiary Common Shares") and a like number of Series A
preferred shares of beneficial interest of the M-C REIT Subsidiary ("M-C REIT
Subsidiary Series A Preferred Shares"), respectively.
52
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of Form S-4 and the Proxy Statement; Prentiss Shareholders
----------------------------------------------------------------------
Meeting, Prentiss Unitholders Consent Solicitation and Mack-Cali Shareholders
-----------------------------------------------------------------------------
Meeting.
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(a) As promptly as practicable after execution of this Agreement, (i) each
of Prentiss and Mack-Cali shall prepare and file with the SEC under the Exchange
Act, (x) 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
of each of Prentiss and Mack-Cali, the vote of the shareholders of Prentiss and
Mack-Cali with respect to the Merger, and the consent, if any, of partners of
Prentiss Partnership and Mack-Cali Partnership in connection with any required
Partner Approvals and (ii) in connection with the clearance by the SEC of the
Proxy Statement, Mack-Cali and Prentiss, if applicable, shall prepare and file
with the SEC under the Securities Act one or more registration statements on
Form S-4 (such registration statement, together with any amendments or
supplements thereto, the "Form S-4"), in which the Proxy Statement will be
included, as one or more prospectuses in connection with the registration under
the Securities Act of the Mack-Cali Common Shares (including the Mack-Cali
Common Shares underlying the Mack-Cali Series A Preferred Shares and the Mack-
Cali Common Units) to be distributed to the holders of Prentiss Common Shares,
Prentiss Series A Preferred Shares and Prentiss Common Units, as appropriate, in
the Mergers. The respective parties will cause the Proxy Statement and the Form
S-4 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 Prentiss, Prentiss Partnership, Mack-Cali and Mack-Cali
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 Form S-4. Mack-Cali and Prentiss, if applicable, shall use its commercially
reasonable efforts, and Prentiss will cooperate with it, to have the Form S-4
declared effective by the SEC as promptly as practicable (including clearing the
Proxy Statement with the SEC). Each of Prentiss and Prentiss Partnership, on the
one hand, and Mack-Cali and Mack-Cali Partnership, on the other hand, agree
promptly to correct any information provided by it for use in the Proxy
Statement and the Form S-4 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 Form S-4 and to cause the Proxy Statement and the Form
S-4 as so amended or supplemented to be filed with the SEC 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
Prentiss, Prentiss Partnership, Mack-Cali and Mack-Cali Partnership agrees that
the information provided by it for inclusion in the Proxy Statement or the Form
S-4 and each amendment or supplement thereto, at the time of mailing thereof and
at the time of the respective meetings of shareholders of Prentiss and Mack-
Cali, and at the time of the taking of consents, if any, of partners of Prentiss
Partnership and Mack-Cali 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. Mack-Cali will advise and deliver copies
(if any) to Prentiss, promptly after it receives notice thereof, of any request
by the SEC for amendment of the Proxy Statement or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional information
(regardless whether such requests relate to Mack-Cali or Mack-Cali Partnership,
on the one hand, and Prentiss or Prentiss
53
Partnership, on the other hand), and Mack-Cali shall promptly notify Prentiss
and Prentiss shall promptly notify Mack-Cali, if applicable, of (i) the time
when the Form S-4 has become effective, (ii) the filing of any supplement or
amendment thereto, (iii) the issuance of any stop order, and (iv) the suspension
of the qualification and registration of the Mack-Cali Common Shares and Mack-
Cali Common Units issuable in connection with the Mergers.
(b) Each of Prentiss, Prentiss Partnership, Mack-Cali and Mack-Cali
Partnership shall use its commercially reasonable efforts to timely mail the
joint proxy statement/prospectus contained in the Form S-4 to its shareholders
and partners (if partner consent is required). It shall be a condition to the
mailing of the joint proxy statement/prospectus that (i) Mack-Cali and Mack-Cali
Partnership shall have received a "comfort" letter from PricewaterhouseCoopers
LLP, independent public accountants for Prentiss and Prentiss 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
Form S-4 shall become effective and as of the Effective Time, addressed to Mack-
Cali and Mack-Cali Partnership, in form and substance reasonably satisfactory to
Mack-Cali and Mack-Cali Partnership, concerning the procedures undertaken by
PricewaterhouseCoopers LLP with respect to the financial statements and
information of Prentiss, Prentiss Partnership and their subsidiaries and the
Prentiss Non-controlled Subsidiary contained in the Form S-4 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 and (ii) Prentiss
shall have received a "comfort" letter from PricewaterhouseCoopers LLP,
independent public accountants for Mack-Cali and Mack-Cali Partnership, of the
kind contemplated by the AICPA Statement, dated as of the date on which the Form
S-4 shall become effective and as of the Effective Time, addressed to Prentiss
and Prentiss Partnership, in form and substance reasonably satisfactory to
Prentiss, concerning the procedures undertaken by PricewaterhouseCoopers LLP
with respect to the financial statements and information of Mack-Cali, Mack-Cali
Partnership and their subsidiaries contained in the Form S-4 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.
(c) Mack-Cali will duly call, 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
Mack-Cali), convene and hold a meeting of its shareholders (the "Mack-Cali
Shareholders Meeting") for the purpose of obtaining the Mack-Cali Shareholder
Approvals. Mack-Cali will, through its Board of Directors, recommend to its
shareholders approval of this Agreement, the Merger, and the transactions
contemplated by this Agreement and include such recommendation in the Proxy
Statement.
(d) Prentiss will duly call, 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
Prentiss), convene and hold a meeting of its shareholders (the "Prentiss
Shareholders Meeting") for the purpose of obtaining the Prentiss Shareholder
Approvals. Prentiss will, through its Board of Trustees, recommend to its
shareholders approval of this Agreement, the Merger and the transactions
contemplated by this Agreement and include such recommendation in the Proxy
Statement; provided, however, that prior to the Prentiss Shareholders Meeting,
such recommendation may be withdrawn, modified or amended if and only to the
extent permitted by Section 4.3(c) hereof.
54
(e) Mack-Cali and Prentiss shall use their commercially reasonable efforts
to convene their respective shareholder meetings on the same day, which day,
subject to the provisions of Sections 5.1(c) and 5.1(d), shall be a day not
later than 45 days after the date the Proxy Statement is mailed.
(f) If on the date for the Mack-Cali Shareholders Meeting and Prentiss
Shareholders Meeting established pursuant to Section 5.1(e) of this Agreement,
either Mack-Cali or Prentiss has not received a sufficient number of votes to
approve the Merger, then both parties shall recommend the adjournment of their
respective shareholders meetings until one or more dates not later than the date
which is ten (10) business days after the originally scheduled date of the
shareholders meetings.
(g) Prentiss shall request written consents for approval, if any is
required, by the limited partners of Prentiss Partnership of each of the matters
described in the definition of Prentiss Partner Approvals. Prentiss hereby
agrees to vote in favor of or consent to, as applicable, the Partnership Merger,
to the extent approval thereof is required by the Prentiss Partnership Agreement
and to recommend to the limited partners of Prentiss Partnership that they
approve such matters, to the extent required. Mack-Cali will request written
consents for approval, if any is required, by the limited partners of Mack-Cali
Partnership of each of the matters described in the definition of Mack-Cali
Partner Approvals. Mack-Cali hereby agrees to vote, if any is required, in favor
of or consent to, as applicable, such matters and to recommend to the limited
partners of Mack-Cali Partnership that they approve such matters, to the extent
required.
5.2 Access to Information; Confidentiality. Subject to the requirements
--------------------------------------
of confidentiality agreements with third parties, each of the parties shall, and
shall cause each of its Subsidiaries (and, in the case of Prentiss, the Prentiss
Non-controlled Subsidiary) 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
Effective Time to 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 (and, in the case of Prentiss, the Prentiss
Non-controlled Subsidiary) 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 relevant information concerning its business, properties
and personnel as such other party may reasonably request. Each of the parties
shall, and shall cause its Subsidiaries (and, in the case of Prentiss, the
Prentiss Non-controlled Subsidiary) to, cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to, hold any nonpublic information in confidence.
5.3 Commercially Reasonable Efforts; Notification.
----------------------------------------------
(a) Subject to the terms and conditions herein provided, each of the
parties shall: (i) use commercially reasonable efforts to cooperate with one
another in (A) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the 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 and (B) timely making all such filings and timely seeking
all such consents, approvals, permits and authorizations; (ii) use commercially
reasonable efforts (other than the payment
55
of money which is not contractually required to be paid) 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 commercially reasonable 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 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) Prentiss and Prentiss Partnership shall use all commercially
reasonable efforts to obtain from PricewaterhouseCoopers LLP, access to all work
papers relating to audits of Prentiss and Prentiss Partnership performed by
PricewaterhouseCoopers LLP, and the continued cooperation of
PricewaterhouseCoopers LLP, with regard to the preparation of consolidated
financial statements for the Surviving Corporation.
(c) Prentiss and Prentiss Partnership shall give prompt notice to Mack-
Cali and Mack-Cali Partnership, and Mack-Cali and Mack-Cali Partnership shall
give prompt notice to Prentiss and Prentiss 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 Matters. Each of Mack-Cali and Prentiss shall use its commercially
-----------
reasonable efforts before and after the Effective Time to cause the Merger, and
the related M-C REIT Subsidiary Merger as described in Section 4.6 (if
applicable), 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). If, based upon the advice of counsel, Mack-Cali and Prentiss
determine that the Partnership Merger could reasonably be expected to create a
risk that the Merger would not qualify as a reorganization under the provisions
of Section 368(a) of the Code, Mack-Cali and Prentiss undertake to use
commercially reasonable efforts to negotiate and structure an alternative means
to effect the Merger, for Mack-Cali to acquire the interest in Prentiss
Partnership owned by Prentiss, and for the holders of Prentiss Units to receive
Mack-Cali Common Units (or the economic and tax equivalent thereof) in exchange
for their Prentiss Units. Mack-Cali Partnership will 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 Prentiss Partnership as of the Effective Time (with no curative
allocations of gross income with respect to depreciation to offset the effects
of the "ceiling rule" but with a curative allocation of gain upon disposition of
such properties to offset the effect of the "ceiling rule"). Mack-Cali
Partnership and Prentiss Partnership shall negotiate in good faith to agree upon
the "Section 704(c) values" of the properties of Prentiss Partnership, effective
as of the Closing Date. For purposes of allocating "excess nonrecourse
liabilities" of Mack-Cali Partnership pursuant to Treasury Regulations Section
1.752-3(a)(3) following the Closing Date, Mack-Cali Partnership shall use a
methodology to be agreed upon between Mack-Cali Partnership and Prentiss
Partnership.
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
56
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 mutually agreed to by the parties prior to
the execution of this Agreement.
5.6 Listing. Mack-Cali shall use all commercially reasonable efforts to
-------
cause the Mack-Cali Common Shares to be issued in the Merger and upon conversion
of the Mack-Cali Series A Preferred Shares and the Mack-Cali Common Shares
reserved for issuance upon redemption of Mack-Cali Common Units issued in the
Partnership Merger, to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the 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 Effective Time, Mack-Cali shall pay or cause Mack-
Cali Partnership, as appropriate, to pay or cause to be paid, without deduction
or withholding from any amounts payable to the holders of Mack-Cali Common
Shares and Mack-Cali Series A Preferred Shares, or New Mack-Cali 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).
5.8 Benefit Plans and Other Employee Arrangements.
---------------------------------------------
(a) Benefit Plans. After the Effective Time, all employees of Prentiss who
-------------
are employed by the Surviving Corporation or its Affiliates shall be entitled to
receive benefits that are no less favorable, in the aggregate, than benefits
provided to similarly situated employees of the Surviving Corporation, with
respect to each employee benefit plan, arrangement or policy sponsored or
maintained by the Surviving Corporation after the Effective Time. With respect
to each such employee benefit plan, service with Prentiss or any Prentiss
Subsidiary (as applicable) and the predecessor of any of them shall be included
for purposes of determining eligibility to participate, vesting and entitlement
to benefits, including receiving credit under any Mack-Cali Employee Plans or
other plans maintained by the Surviving Corporation after the Effective Times
for any deductibles and out-of-pocket expenses incurred to the Effective Times.
Notwithstanding the foregoing, Mack-Cali shall specifically assume Prentiss'
obligations under the change of control arrangements and Prentiss employee
severance policies listed or described on Schedule 2.15 of the Prentiss
Disclosure Letter and honor all obligations arising thereunder.
(b) Stock Option and Restricted Stock Plans. As of the Effective Time, the
---------------------------------------
stock option plans and the restricted stock plan of Prentiss shall be
discontinued.
(c) Prentiss Share Options. As of the Effective Time, each outstanding
----------------------
Prentiss Share Option shall, by virtue of this Agreement and without further
action of Prentiss, Mack-Cali or the holder of such Prentiss Share Option,
whether or not then vested or exercisable, become immediately vested and
exercisable and be assumed by Mack-Cali, and be deemed to constitute an option
to acquire on
57
substantially the same terms and conditions as were applicable under such
Prentiss Share Option (except that each such Prentiss Share Option shall remain
exercisable until the expiration of its term and will not terminate as a result
of termination of employment or for any other reason), the same number of Mack-
Cali Common Shares as the holder of such Prentiss Share Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Prentiss Share Option in full immediately prior to the Effective Time at an
exercise price per share equal to the aggregate exercise price for the Prentiss
Common Shares subject to such Prentiss Share Option divided by the number of
full Mack-Cali Common Shares deemed to be purchasable pursuant to such Prentiss
Share Option; provided, however, that the number of Mack-Cali Common Shares that
may be purchased upon exercise of such Prentiss Share Option shall not include
any fractional share; further provided, that such fractional share shall be
deemed exercised on the Effective Time and as soon as practicable thereafter a
cash payment shall be made for such fractional share in an amount equal to the
value of such fractional share calculated in accordance with and in the manner
provided for calculations as to be paid in lieu of fractional shares as part of
the Merger Consideration under Section 1.10 less the exercise of such fractional
share. Prior to, or simultaneously with, the Effective Time, Mack-Cali shall use
its commercially reasonable efforts to cause to become effective under the
Securities Act, a Registration Statement on Form S-8 in compliance with the
rules and regulations promulgated under the Securities Act covering that number
of Mack-Cali Common Shares that would become issuable upon the exercise of all
outstanding Prentiss Share Options. Mack-Cali shall take all action necessary to
reserve for issuance a sufficient number of Mack-Cali Common Shares for delivery
upon exercise of all outstanding Prentiss Shares Options assumed in accordance
with this Section 5.8(c). Notwithstanding the above, the vesting of the Prentiss
Share Option granted to Mr. Michael V. Prentiss and Thomas F. August pursuant to
paragraph 5.8(g) below shall not vest at the Effective Time.
(d) Restricted Stock. As of the Effective Time, all unvested shares of
----------------
restricted stock of Prentiss ("Prentiss Restricted Shares") (i.e. the Prentiss
Restricted Shares set forth in Schedule 5.8(d) of the Prentiss Disclosure
Letter, plus the Prentiss Restricted Shares granted pursuant to paragraph
5.8(g) hereof) shall, by virtue of this Agreement and without further action of
Prentiss, Mack-Cali or the holder of such Prentiss Restricted Shares, become
immediately vested in full and be exchanged for the same number of Mack-Cali
Common Shares as the holder of such Prentiss Restricted Shares would have been
entitled to receive pursuant to the Merger had such Prentiss Restricted Shares
vested in full immediately prior to the Effective Time; provided, however, that
the number of Mack-Cali Common Shares into which such Prentiss Restricted Shares
were converted shall not include any fractional share and, as soon as
practicable following the Effective Time, a cash payment shall be made for such
fractional share calculated in accordance with and in the manner provided for
calculations as to be paid in lieu of fractional shares as part of the Merger
Consideration under Section 1.10. Prior to, or simultaneously with, the
Effective Time, Mack-Cali shall use its commercially reasonable efforts to cause
to become effective under the Securities Act, a Registration Statement on Form
S-8 in compliance with the rules and regulations promulgated under the
Securities Act covering that number of Mack-Cali Restricted Common Shares issued
in exchange for the outstanding Prentiss Restricted Shares.
(e) Withholding. To the extent required by applicable law, Prentiss shall
-----------
require each employee who exercises a Prentiss Share Option or who receives
Prentiss Common Shares pursuant to any existing commitment to pay to Prentiss in
cash or Prentiss Common Shares an amount sufficient to satisfy in full Prentiss'
obligation to withhold Taxes incurred by reason of such exercise or issuance.
58
(f) Mack-Cali Options. Within thirty (30) days prior to the Closing Date,
-----------------
Prentiss shall deliver to Mack-Cali a schedule (the "Share Option Schedule")
setting forth the number of Prentiss Share Options proposed to be issued to
named Prentiss Employees excluding Mr. Michael V. Prentiss and Thomas F. August
("Eligible Share Grantees"); provided that the aggregate amount of such Prentiss
Share Options set forth in such schedule shall not exceed 300,000. Immediately
prior to the Effective Time, Prentiss may issue to those Eligible Share Grantees
who are not Continuing Grantees (as defined below) the number of Prentiss Share
Options proposed to be issued to such Eligible Share Grantee in the Share Option
Schedule pursuant a Prentiss long term incentive plan with a per share exercise
price not less than the closing price of Prentiss Common Shares on the day
immediately preceding the date of grant. In addition, at any time prior to the
Closing Date, Prentiss may issue to each of Mr. Michael V. Prentiss and Thomas
F. August 150,000 Prentiss Share Options pursuant to a Prentiss long term
incentive plan (the "Executive Options"); provided, that each of Mr. Michael V.
Prentiss and Thomas F. August shall agree his Executive Options shall,
notwithstanding any provision of the Prentiss long term incentive plan pursuant
to which they were granted to the contrary, not vest on the Closing Date but
shall instead vest in equal installments on the first, second and third
anniversaries of the Closing Date. The Executive Options shall be issued at a
per share exercise price equal to $26.4375. Any Prentiss Share Option issued
pursuant to this paragraph 5.8(f) shall be subject to paragraph 5.8(c). In
addition, promptly following the Effective Time, Mack-Cali shall issue pursuant
to a Mack-Cali long term incentive plan Mack-Cali Options with an exercise price
equal to the average closing price of the Mack-Cali Common Shares on the NYSE
for the five (5) trading days immediately preceding the Effective Time (the
"Exercise Price") and vesting in three equal installments on the first, second
and third anniversaries of the Effective Time to each Eligible Share Grantee who
is a Continuing Grantee the same number of Mack-Cali Common Shares as proposed
to be issued to such individual in the Share Option Schedule.
(g) Delayed Restricted Stock Grants. Within thirty (30) days prior to the
-------------------------------
Closing Date, Prentiss shall deliver to Mack-Cali a schedule (the "Restricted
Share Schedule") setting forth the number of Prentiss Restricted Shares proposed
to be issued to named Prentiss Employees excluding Mr. Michael V. Prentiss and
Thomas A. August ("Eligible Restricted Share Grantees"); provided that the
aggregate amount of such Prentiss Restricted Shares set forth in such schedule
shall not exceed 100,000. Immediately prior to the Closing Date, Prentiss may
issue to those Eligible Restricted Share Grantees who are not Continuing
Grantees pursuant to a Prentiss long term incentive plan the number of Prentiss
Restricted Shares proposed to be issued to such Eligible Restricted Share
Grantee in the Restricted Share Schedule. Any Prentiss Restricted Shares issued
pursuant to this paragraph 5.8(g) shall be subject to paragraph 5.8 (d). In
addition, promptly following the Effective Time, Mack-Cali shall issue pursuant
to a Mack-Cali long term incentive plan restricted shares of Mack-Cali ("Mack-
Cali Restricted Shares") vesting in equal installments on the third anniversary
of the Effective Time to each Eligible Restricted Share Grantee who is a
Continuing Grantee in an amount equal to the same number of Mack-Cali Common
Shares as proposed to be issued to such Continuing Grantee in the Restricted
Share Schedule.
(h) Employment of Prentiss Employees. At least fifteen (15) days prior to
--------------------------------
the Closing Date, Mack-Cali shall provide Prentiss with a list of those Eligible
Share Grantees and Eligible Restricted Share Grantees who will continue to be
employed by the Surviving Corporation or its Affiliates as of and after the
Effective Time (the "Continuing Grantees"). On and after the Effective Times,
each Continuing Grantee shall initially hold the same title and position such
Continuing Grantee held while employed by Prentiss or its Affiliates.
Immediately after the Effective Times, all Prentiss Employees who continue to be
employed by the Surviving Corporation or its Affiliates, excluding those
Prentiss
59
Employees who have employment agreements as set forth on Schedule 2.13(a) to the
Disclosure Letter, shall be employees "at-will," without guaranteed employment
for any specified period of time. An employment agreement shall simultaneously
herewith be entered into by and between Mack-Cali and Mr. Michael V. Prentiss
(the "Employment Agreement"). The Employment Agreement will provide for a five
(5) year term. It shall provide those benefits listed on Schedule 5.8(h) of
the Prentiss Disclosure Letter which would have been provided to Michael V.
Prentiss had he terminated his employment under the amended and restated
employment agreement dated as of May 10, 2000 between Mr. Michael V. Prentiss
and Prentiss (the "obligation for benefits provided under the Old Agreement").
The obligation for benefits provided under the Old Agreement shall be reflected
as an accrued liability in the Prentiss balance sheet and shall on the Closing
Date be assumed by Mack-Cali. Any obligations to make any payments to employees
as a result of the execution of this Agreement or the consummation of the
Mergers shall be either paid by Prentiss and reflected accordingly in their
Financial Statements or to the extent such payments are not paid by Prentiss and
are to be assumed and paid by Mack-Cali, such payments shall be reflected as an
accrued liability in the Prentiss balance sheet and shall on the Closing Date be
assumed by Mack-Cali.
5.9 Indemnification.
---------------
(a) From and after the Effective Time, Mack-Cali and Mack-Cali Partnership
(collectively, the "Indemnifying Parties") shall provide exculpation and
indemnification, to the maximum extent permitted by applicable law, for each
person who is now or has been at anytime prior to the date hereof or who becomes
prior to the Effective Time, an officer, trustee or director of Prentiss or any
Prentiss Subsidiary (the "Indemnified Parties") which is the same as the
exculpation and indemnification provided to the Indemnified Parties by Prentiss
and the Prentiss Subsidiaries immediately prior to the Effective Time in its
declaration of trust, charter, Bylaws or in its partnership, operating or
similar agreement, as in effect on the date hereof; provided, however, that such
exculpation and indemnification covers actions on or prior to the Effective
Time, including, without limitation, all transactions contemplated by this
Agreement.
(b) In addition to the rights provided in Section 5.9(a) above, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including without
limitation, any action by or on behalf of any or all security holders of
Prentiss or Mack-Cali, or any Prentiss Subsidiary or Mack-Cali Subsidiary, or by
or in the right of Prentiss or Mack-Cali, or any Prentiss Subsidiary or Mack-
Cali Subsidiary, or any claim, action, suit, proceeding or investigation in
which any Indemnified Party is, or is threatened to be, made a party based in
whole or in part on, or arising in whole or in part out of, or pertaining to (i)
the fact that he is or was an officer, employee, trustee or director of Prentiss
or any of the Prentiss Subsidiaries or any action or omission by such person in
his capacity as a director or trustee, or (ii) this Agreement or the
transactions contemplated by this Agreement, whether in any case asserted or
arising before or after the Effective Time, Mack-Cali, Prentiss and the
Indemnified Parties, hereby shall use their commercially reasonable efforts to
cooperate in the defense of such claim, action, suit, proceeding or
investigation. The Indemnified Parties shall have the right to select counsel,
subject to the consent of the Indemnifying Parties (which consent shall not be
unreasonably withheld or delayed). After the Effective Time, the Indemnifying
Parties shall jointly and severally indemnify and hold harmless, as and to the
full extent permitted by applicable law, each Indemnified Party against any
losses, claims, damages, liabilities, expenses (including reasonable attorneys'
fees and expenses), costs, judgments, fines and amounts paid in settlement in
accordance herewith in connection with any such threatened or actual claim,
action, suit, proceeding or investigation in each case to the maximum extent to
which a corporation is permitted
60
under the MGCL. In addition, after the Effective Time, in the event of any such
threatened or actual claim, action, suit, proceeding or investigation, the
Indemnifying Parties shall promptly pay and advance reasonable expenses and
costs incurred by each Indemnified Person as they become due and payable in
advance of the final disposition of the claim, action, suit, proceeding or
investigation to the fullest extent and in the manner permitted by law.
Notwithstanding the foregoing, the Indemnifying Parties shall not be obligated
to advance any expenses or costs prior to receipt of an undertaking by or on
behalf of the Indemnified Party to repay any expenses advanced if it shall
ultimately be determined that the Indemnified Party is not entitled to be
indemnified against such expense. Notwithstanding anything to the contrary set
forth in this Agreement, the Indemnifying Parties (i) shall not be liable for
any settlement effected without their prior written consent (which consent shall
not be unreasonably withheld), and (ii) shall not have any obligation hereunder
to any Indemnified Party to the extent that a court of competent jurisdiction
shall determine in a final and non-appealable order that such indemnification is
prohibited by applicable law. In the event of a final and non-appealable
determination by a court that any payment of expenses is prohibited by
applicable law, the Indemnified Person shall promptly refund to the Indemnifying
Parties the amount of all such expenses theretofore advanced pursuant hereto.
Any Indemnified Party wishing to claim indemnification under this Section 5.9,
upon learning of any such claim, action, suit, proceeding or investigation,
shall promptly notify the Indemnifying Parties of such claim and the relevant
facts and circumstances with respect thereto; provided, however, that the
failure to provide such notice shall not affect the obligations of the
Indemnifying Parties hereunder except to the extent such failure to notify
materially prejudices the Indemnifying Parties ability to defend such claim,
action, suit, proceeding or investigation; and provided, further, however, that
no Indemnified Party shall be obligated to provide any notification pursuant to
this Section 5.9(b) prior to the Effective Time.
If any action is brought against any of the Indemnified Parties and such
Indemnified Parties notify the Indemnifying Parties of its commencement, the
Indemnifying Parties will assume the defense of such action, to the extent
permitted by applicable law, and will pay the costs and expenses of the defense;
provided however that the Indemnifying Parties will be entitled to participate
in and, to the extent that they elect by delivering written notice to such
Indemnified Parties promptly after receiving notice of the commencement of the
action from the Indemnified Parties, to assume the defense of the action and
after such notice, the Indemnifying Parties will not be liable to the
Indemnified Parties for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
Indemnified Parties in connection with the defense. The Indemnifying Parties
shall not settle any such action without the consent of the Indemnified Parties,
which consent shall not be unreasonably withheld or delayed, it being agreed
that it shall not be deemed unreasonable to withhold consent if the settlement
includes any admission of wrongdoing or payment of any money by or on the part
of the Indemnifying Parties or any decree or restriction in the Indemnified
Parties or their officers, directors or trustees; provided, further, that no
Indemnifying Party, in the defense of any such action shall, except with the
consent of the Indemnified Parties, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Parties of a release of
all liability with respect to such action. The Indemnified Parties shall have
the right to employ their own counsel in any such action, but the fees, expenses
and other charges of such counsel will be at the expense of such Indemnified
Parties unless (i) the employment of counsel by the Indemnified Parties has been
authorized in writing by the Indemnifying Parties, (ii) the Indemnified Parties
have reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to the Indemnifying Parties, (iii) a conflict or potential conflict
exists (based on advice of
61
counsel) between the Indemnifying Parties and the Indemnified Parties (in which
case the Indemnifying Parties shall not have the right to direct the defense of
such action on behalf of the Indemnified Parties) or (iv) the Indemnifying
Parties have not in fact employed counsel to assume the defense of such action
within a reasonable time after receiving notice thereof in each of which cases
the reasonable fees, disbursements and other charges of counsel will be at the
expense of the Indemnifying Parties.
(d) At or prior to the Effective Time, Mack-Cali shall purchase
directors' and officers' liability insurance "tail" policy coverage for
Prentiss' trustees and officers for a period of six years, and shall use
commercially reasonable efforts to obtain policies which will provide the
trustees and officers with coverage on substantially similar terms as (but which
shall be no less favorable than those) currently provided by Prentiss to such
trustees and officers for claims based on activity prior to the Effective Time,
provided, however, that Mack-Cali shall have no obligation to pay aggregate
premiums for such coverage in excess of $500,000.
(e) 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 Mack-
Cali. Each of the Indemnified Parties shall be entitled to enforce the covenants
contained in this Section 5.9 and Mack-Cali 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.
(f) In the event that the Surviving Corporation 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, trustee and officer
covered hereby.
5.10 Declaration of Dividends and Distributions. Subject to Section
------------------------------------------
1.16(d) hereof, from and after the date of this Agreement, neither Prentiss nor
Mack-Cali shall make any dividend or distribution to its shareholders without
the prior written consent of the other party; provided, however, the written
consent of the other party shall not be required for the authorization and
payment of quarterly distributions with respect to the Prentiss Common Shares,
Prentiss Series A Preferred Shares or Mack-Cali Common Shares for the dividend
for the second quarter of 2000, and for each quarterly dividend thereafter in an
amount up to the dividend per share paid by it for the first quarter of 2000;
provided, however, the record date for each distribution with respect to the
Prentiss Common Shares and Prentiss Series A Preferred Shares shall be the same
date as the record date for the quarterly distribution for the Mack-Cali Common
Shares as agreed by the parties from time to time. Subject to Section 1.16(d)
hereof, from and after the date of this Agreement, Prentiss Partnership shall
not make any distribution to the holders of Prentiss Common Units except a
distribution per Prentiss Common Unit in the same amount as a dividend per
Prentiss Common Share permitted pursuant to this Section 5.10, with the same
record and payment dates as such dividend on the Prentiss Common Shares, and
shall not make any distribution to the holders of Prentiss Series B Preferred
Units or Prentiss Series C Preferred Units except a distribution per such
Prentiss Preferred Unit as called for by their respective Certificates of
Designation. From and after the date of this Agreement, Mack-Cali Partnership
shall not make any
62
distribution to the holders of Mack-Cali Common Units except a distribution per
Mack-Cali Common Unit in the same amount as a dividend per Mack-Cali Common
Share permitted pursuant to this Section 5.10, with the same record and payment
dates as such dividend on the Mack-Cali Common Shares, and shall not make any
distribution to the holders of Mack-Cali Series A Preferred Units or Mack-Cali
Series B Preferred Units except a distribution per such Mack-Cali Preferred Unit
as called for by their respective Certificates of Designation.
The foregoing restrictions shall not apply, however, to the extent a
distribution by Prentiss or Mack-Cali is necessary for Prentiss or Mack-Cali, as
applicable, to maintain REIT status.
5.11 Transfer of Non-Controlled Subsidiary Voting Shares. At the Closing
---------------------------------------------------
and pursuant to the Stock Purchase Agreement, each of the holders of voting
capital stock of the Prentiss Non-controlled Subsidiary (other than Prentiss
Partnership, to the extent it owns any such voting capital stock) shall transfer
to the individual or individuals designated by Mack-Cali Services, Inc., by
written notice delivered to them prior to the Closing, all of the shares of each
such Prentiss Non-controlled Subsidiary owned by them, constituting all the
outstanding shares of such companies which are not owned by Prentiss
Partnership, for an aggregate consideration in an amount equal to the purchase
price set forth in the Stock Purchase Agreement. Mack-Cali shall use
commercially reasonable efforts to cause the individual or individuals
designated by Mack-Cali Services, Inc. as party or parties to the Stock Purchase
Agreement to perform his or their obligations thereunder.
5.12 Assumption of Existing Prentiss Tax Protection Agreements. Mack-Cali
---------------------------------------------------------
and Mack-Cali Partnership shall assume the obligations of Prentiss, Prentiss
Partnership or the applicable Prentiss Subsidiary, as the case may be, under the
Prentiss Tax Protection Agreements described in Schedule 2.18(j) to the Prentiss
Disclosure Letter. Mack-Cali and Mack-Cali Partnership shall be obligated to
(i) provide the beneficiaries of the Prentiss Tax Protection Agreements
identical lock-out rights as such beneficiaries were entitled under the Prentiss
Tax Protection Agreements and (ii) make available to the beneficiaries of the
Prentiss Tax Protection Agreements guarantees or indemnities of the bottom
portion (i.e. the least risky portion) of Mack-Cali or Mack-Cali Partnership
debt pari passu with other partners of Mack-Cali Partnership who are entitled to
such guarantees or indemnities.
5.13 Registration Rights Agreements. At the Closing, Prentiss shall assign
------------------------------
and Mack-Cali shall assume by appropriate instrument the Registration Rights
Agreements described on Schedule 5.13 to the Prentiss Disclosure Letter.
5.14 Redemption of Rights Plan. On the business day immediately preceding
-------------------------
the Closing Date, Prentiss shall redeem all of the then outstanding rights to
purchase Series B Junior Participating Preferred Shares of Prentiss granted in
connection with the Rights Agreement between Prentiss and First Chicago Trust
Company of New York, dated as of February 6, 1998, pursuant to the terms
thereof.
5.15 Section 16(b) Matters. Each of Prentiss and Mack-Cali shall use its
---------------------
commercially reasonable efforts and take such actions as may be necessary or
appropriate, including, without limitation, having its Board of Trustees and
Board of Directors, respectively, approve and adopt appropriate resolutions, to
cause the issuance of securities in the Mergers to Affiliates of Prentiss who
will become Affiliates of Mack-Cali immediately subsequent to the Mergers to be
exempt from the provisions of Section 16(b) of the Exchange Act.
63
5.16 Certificate of Designation. Prior to the Effective Time, Mack-Cali
--------------------------
shall adopt certificates of designations establishing the Series D Cumulative
Redeemable Perpetual Preferred Shares and the Series E Cumulative Redeemable
Perpetual Preferred Shares which shall have the same terms and provisions as
those of Prentiss' Series B Cumulative Redeemable Perpetual Preferred Shares of
Beneficial Interest and Series C Cumulative Redeemable Perpetual Preferred
Shares of Beneficial Interest, respectively.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Mergers. The
-----------------------------------------------------------
obligations of each party to effect the Mergers and to consummate the other
transactions contemplated by this Agreement to occur on the Closing Date shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Shareholder and Partner Approvals. The Shareholder Approvals and all
---------------------------------
required Partner Approvals shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
-------
the Mergers and the transactions contemplated by the Stock Purchase Agreement
under the HSR Act, if applicable to the Mergers and the transactions
contemplated by the Stock Purchase Agreement, shall have expired or been
terminated.
(c) Listing of Shares. The NYSE shall have approved for listing the Mack-
-----------------
Cali Common Shares to be issued in the Merger and the Mack-Cali Common Shares
reserved for issuance upon redemption of Mack-Cali Units issued in the
Partnership Merger or upon conversion of the Mack-Cali Series A Preferred
Shares, subject to official notice of issuance.
(d) Form S-4. The Form S-4 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.
(e) 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.
(f) Blue Sky Laws. Mack-Cali and Mack-Cali Partnership shall have received
-------------
all state securities or "blue sky" permits and other authorizations necessary to
issue the Mack-Cali Common Shares, Mack-Cali Series A Preferred Shares and Mack-
Cali Units issuable in the Mergers.
(g) Consents. All consents, approvals and waivers (including, without
--------
limitation, waivers of rights of first refusal) from third parties necessary in
connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained, other than such consents, approvals and
waivers from third parties, which, if not obtained, would not result,
individually or in the aggregate, in a Mack-Cali Material Adverse Effect or a
Prentiss Material Adverse Effect.
64
6.2 Conditions to Obligations of Mack-Cali and Mack-Cali Partnership. The
----------------------------------------------------------------
obligations of Mack-Cali and Mack-Cali Partnership to effect the Mergers and to
consummate the other transactions contemplated by this Agreement to occur on the
Closing Date are further subject to the following conditions, any one or more of
which may be waived by Mack-Cali:
(a) Representations and Warranties. The representations and warranties of
------------------------------
Prentiss and Prentiss Partnership set forth in this Agreement, to the extent
qualified with respect to materiality, shall be true and correct in all
respects, and to the extent not so qualified shall be true and correct in all
material respects, in each case 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 Mack-Cali shall have received a certificate (which certificate may be
qualified by Knowledge to the same extent as the representations and warranties
of Prentiss and Prentiss Partnership contained herein are so qualified) signed
on behalf of Prentiss by the Chairman, Chief Executive Officer or the Chief
Financial Officer of Prentiss, in such capacity, to such effect. The schedules
included in the Prentiss Disclosure Letter may be revised between the date
hereof and the Closing, provided that the additions or deletions thereon do not,
individually or in the aggregate, constitute a Prentiss Material Adverse Effect;
and as such, shall be deemed to have modified such representations and
warranties and shall not be deemed to constitute a breach of such representation
or warranty.
(b) Performance of Obligations of Prentiss and Prentiss Partnership.
---------------------------------------------------------------
Prentiss and Prentiss Partnership shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Effective Time, and Mack-Cali shall have received a certificate
signed on behalf of Prentiss by the Chairman, Chief Executive Officer or the
Chief Financial Officer of Prentiss, in such capacity, to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there shall
-----------------------
have been no Prentiss Material Adverse Change and Mack-Cali shall have received
a certificate of the Chairman, Chief Executive Officer or the Chief Financial
Officer of Prentiss, in such capacity, certifying to such effect.
(d) Tax Opinions Relating to REIT Status and Partnership Status. Mack-Cali
-----------------------------------------------------------
shall have received (i) an opinion of Akin, Gump, Strauss, Hauer & Feld L.L.P.,
dated as of the Closing Date, to the effect that, (x) commencing with its
taxable year ended December 31, 1996, (1) Prentiss was organized and has
operated in conformity with the requirements for qualification as a REIT under
the Code, (2) Prentiss Partnership has been during and since December 31, 1996,
and continues to be, treated for federal income tax purposes as a partnership
and not as a corporation or association taxable as a corporation (with customary
exceptions, assumptions and qualifications and based upon customary
representations), and is not a publicly traded partnership within the meaning of
Section 7704 of the Code, and (3) each Prentiss Subsidiary which is a
corporation has been since its formation a qualified REIT subsidiary under
Section 856(i) of the Code, and (y) all employees of Prentiss that purchased
shares of capital stock in Urban Media Communications Corporation are the owners
of such shares of stock for federal income tax purposes and (ii) an opinion of
Pryor Cashman Sherman & Flynn LLP or other counsel to Mack-Cali reasonably
satisfactory to Prentiss, dated as of the Closing Date, to the effect that,
commencing with its taxable year ending December 31, 1994, Mack-Cali was
organized and has operated in conformity with the requirements for qualification
as a REIT under the Code and that, after giving effect to the Merger, Mack-
Cali's proposed method of operation will enable it to continue to meet
65
the requirements for qualification and taxation as a REIT under the Code (with
customary exceptions, assumptions and qualifications and based upon customary
representations and based upon and subject to the opinion of counsel to Prentiss
described in clause (i) above).
(e) Tax Opinion Relating to the Merger. Mack-Cali shall have received an
----------------------------------
opinion dated the Closing Date from Pryor Cashman Sherman & Flynn LLP, based
upon customary certificates and letters, which letters and certificates are to
be in a form to be agreed upon by the parties and dated the Closing Date, to the
effect that the Merger (and any M-C REIT Subsidiary Merger as described in
Section 4.6 hereof, if appropriate) will individually and collectively qualify
as a reorganization under the provisions of Section 368(a) of the Code.
(f) "Comfort" Letter. Mack-Cali and Mack-Cali Partnership shall have
----------------
received a "comfort" letter from PricewaterhouseCoopers LLP, as described in
Section 5.1(b).
6.3 Conditions to Obligations of Prentiss and Prentiss Partnership. The
--------------------------------------------------------------
obligations of Prentiss and Prentiss Partnership to effect the Mergers and to
consummate the other transactions contemplated by this Agreement to occur on the
Closing Date is further subject to the following conditions, any one or more of
which may be waived by Prentiss:
(a) Representations and Warranties. The representations and warranties of
------------------------------
Mack-Cali and Mack-Cali Partnership set forth in this Agreement to the extent
qualified with respect to materiality, shall be true and correct in all
respects, and to the extent not so qualified shall be true and correct in all
material respects, in each case 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 Prentiss shall have received a certificate (which certificate may be
qualified by Knowledge to the same extent as such representations and warranties
of Mack-Cali and Mack-Cali Partnership contained herein are so qualified) signed
on behalf of Mack-Cali by the Chief Executive Officer of such party, in such
capacity, to such effect. The schedules produced in connection with the
representations and warranties of Mack-Cali and Mack-Cali Partnership may be
revised between the date hereof and the Closing, provided that the additions or
deletions thereon do not, individually or in the aggregate, constitute a Mack-
Cali Material Adverse Effect; and as such, shall be deemed to have modified such
representations and warranties and shall not be deemed to constitute a breach of
such representation or warranty.
(b) Performance of Obligations of Mack-Cali and Mack-Cali Partnership.
-----------------------------------------------------------------
Mack-Cali and Mack-Cali Partnership shall have performed in all material
respects all obligations required to be performed by them under this Agreement
at or prior to the Effective Time, and Prentiss shall have received a
certificate of Mack-Cali signed on behalf of Mack-Cali by the Chief Executive
Officer of Mack-Cali, in such capacity, to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there shall
-----------------------
have been no Mack-Cali Material Adverse Change and Prentiss shall have received
a certificate of the Chief Executive Officer of Mack-Cali, in such capacity,
certifying to such effect.
(d) Tax Opinions Relating to REIT Status and Partnership Status. Prentiss
-----------------------------------------------------------
shall have received an opinion of Pryor Cashman Sherman & Flynn LLP, dated as of
the Closing Date, to the effect that, commencing with its taxable year ended
December 31, 1994, (i) Mack-Cali was organized and has
66
operated in conformity with the requirements for qualification as a REIT under
the Code and (ii) Mack-Cali Partnership has been during and since 1994, and
continues to be, treated for federal income tax purposes as a partnership and
not as a corporation or association taxable as a corporation (with customary
exceptions, assumptions and qualifications and based upon customary
representations), and is not a publicly traded partnership within the meaning of
Section 7704 of the Code, and (iii) each Mack-Cali Subsidiary which is a
corporation has been since its formation a qualified REIT subsidiary under
Section 856(i) of the Code.
(e) Tax Opinion Relating to Merger. Prentiss shall have received an
------------------------------
opinion dated the Closing Date from Akin, Gump, Strauss, Hauer & Feld L.L.P.
based upon customary certificates and letters, which letters and certificates
are to be in a form to be agreed upon by the parties and dated the Closing Date,
to the effect that the Merger (and any M-C REIT Subsidiary Merger as described
in Section 4.6 hereof, if appropriate) will individually and collectively
qualify as a reorganization under the provisions of Section 368(a) of the Code.
(f) "Comfort" Letter. Prentiss and Prentiss Partnership shall have
----------------
received a "comfort" letter from PricewaterhouseCoopers LLP, as described in
Section 5.1(b).
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time of the Partnership Merger, whether such action occurs before or
after either of the Shareholder Approvals or the Partner Approvals are obtained:
(a) by mutual written consent duly authorized by the Board of Directors of
Mack-Cali and the Board of Trustees of Prentiss;
(b) by Mack-Cali, upon a breach of any representation, warranty, covenant,
obligation or agreement on the part of Prentiss or Prentiss Partnership set
forth in this Agreement, or if any representation or warranty of Prentiss or
Prentiss Partnership shall become untrue, in either case 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 February 28, 2001 (or as otherwise
extended);
(c) by Prentiss, upon a breach of any representation, warranty, covenant,
obligation or agreement on the part of Mack-Cali or Mack-Cali Partnership set
forth in this Agreement, or if any representation or warranty of Mack-Cali or
Mack-Cali Partnership shall become untrue, in either case 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 February 28, 2001 (or as otherwise
extended);
(d) by either Mack-Cali or Prentiss, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of either of the Mergers shall have become final and non-
appealable;
(e) by either Mack-Cali or Prentiss, if the Mergers shall not have been
consummated before February 28, 2001; provided, however, that a party may not
terminate pursuant to this clause (e) if the
67
terminating party shall have breached in any material respect its obligations
under this Agreement in any manner that shall have caused either of the Mergers
not to have been consummated by such date;
(f) by either Mack-Cali or Prentiss (unless Prentiss or Prentiss
Partnership is in breach of its obligations under Section 5.1) if, upon a vote
at a duly held Prentiss Shareholders Meeting or any adjournment thereof, the
Prentiss Shareholder Approvals shall not have been obtained as contemplated by
Section 5.1 or if the Prentiss Partner Approvals shall not have been obtained as
contemplated by Section 5.1;
(g) by either Prentiss or Mack-Cali (unless Mack-Cali or Mack-Cali
Partnership is in breach of its obligations under Section 5.1) if, upon a vote
at a duly held Mack-Cali Shareholders Meeting or any adjournment thereof, the
Mack-Cali Shareholder Approvals shall not have been obtained as contemplated by
Section 5.1 or if the Mack-Cali Partner Approvals shall not have been obtained
as contemplated by Section 5.1;
(h) by Prentiss, (i) if the Board of Trustees of Prentiss shall have
withdrawn, modified, amended or qualified in any manner adverse to Mack-Cali its
approval or recommendation of either of the Mergers or this Agreement in
connection with, or approved or recommended, a Superior Acquisition Proposal or
(ii) in order to enter into a binding written agreement with respect to a
Superior Acquisition Proposal; provided that, in each case, Prentiss shall have
complied with the terms of Section 4.3 and, prior to terminating pursuant to
this Section 7.1(h), has paid to Mack-Cali the Break-Up Fee (as hereinafter
defined) to the extent required by Section 7.2 hereof; and
(i) by Mack-Cali, if (i) the Board of Trustees of Prentiss shall have
failed to recommend or has withdrawn, modified, amended or qualified, or
proposed publicly not to recommend or to withdraw, modify, amend or qualify, in
any manner adverse to Mack-Cali its approval or recommendation of either of the
Mergers or this Agreement or approved or recommended any Superior Acquisition
Proposal, (ii) following the announcement or receipt of a Prentiss Acquisition
Proposal, Prentiss shall have failed to call the Prentiss Shareholders Meeting
in accordance with Section 5.1(a) or failed to prepare and mail to its
stockholders the Proxy Statement in accordance with Section 5.1(a) or 5.1(b), or
(iii) the Board of Trustees of Prentiss or any committee thereof shall have
resolved to do any of the foregoing.
7.2 Certain Fees and Expenses. If this Agreement shall be terminated (i)
-------------------------
pursuant to Section 7.1(b), 7.1(h) or 7.1(i), then Prentiss and Prentiss
Partnership thereupon shall pay to Mack-Cali Partnership a fee equal to the
Break-Up Fee (as defined below), and (ii) pursuant to Section 7.1(f), then
Prentiss and Prentiss Partnership shall pay to Mack-Cali Partnership (provided
that Prentiss was not then 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 Mack-Cali and Mack-Cali Partnership shall pay
Prentiss Partnership (provided that Mack-Cali was not then entitled to terminate
this Agreement pursuant to Section 7.1(b) at the time of such termination) an
amount equal to the Break-Up Fee. If this Agreement shall be terminated
pursuant to Section 7.1(d) (if primarily resulting from any action or inaction
of Prentiss, Prentiss Partnership or any Prentiss Subsidiary or the Prentiss
Non-controlled Subsidiary), 7.1(e) or 7.1(f) and prior to the time of such
termination a Prentiss Acquisition Proposal has been received by Prentiss or any
Prentiss Subsidiary, and either prior to the termination of this Agreement or
within twelve (12) months thereafter, Prentiss or any Prentiss Subsidiary enters
into any written Prentiss Acquisition Proposal which is subsequently consummated
(whether or not any such Prentiss Acquisition
68
Proposal is the same Prentiss Acquisition Proposal which had been received at
the time of the termination of this Agreement), then Prentiss and Prentiss
Partnership shall pay the Break-Up Fee to Mack-Cali Partnership.
The payment of the Break-Up Fee shall be compensation for the loss suffered
by Mack-Cali and Mack-Cali Partnership or Prentiss or Prentiss Partnership (as
applicable) 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 Prentiss and Prentiss
Partnership to Mack-Cali Partnership or Mack-Cali and Mack-Cali Partnership to
Prentiss Partnership (as applicable), or the Break-Up Expenses shall be paid by
Prentiss and Prentiss Partnership to Mack-Cali Partnership or Mack-Cali and
Mack-Cali Partnership to Prentiss Partnership (as applicable), in immediately
available funds within two (2) business 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) or 7.1(i)). Prentiss acknowledges that the agreements
contained in this Section 7.2 are integral parts of this Agreement; accordingly,
if Prentiss and Prentiss Partnership fail to promptly pay the Break-Up Fee or
Break-Up Expenses due pursuant to this Section 7.2 and, in order to obtain
payment, Mack-Cali commences a suit which results in a judgment against Prentiss
or Prentiss Partnership for any amounts owed pursuant to this Section 7.2,
Prentiss and Prentiss Partnership shall pay to Mack-Cali its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount owed at the rate on six-month U.S. Treasury
obligations in effect on the date such payment was required to be made plus 300
basis points.
As used in this Agreement, "Break-Up Fee" shall be an amount equal to the
lesser of (i) $30,000,000 less Break-Up Expenses paid or payable under this
Section 7.2 (the "Base Amount") and (ii) the sum of (A) the maximum amount that
can be paid to Mack-Cali Partnership or Prentiss Partnership (as applicable)
without causing Mack-Cali or Prentiss (as applicable) 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 Mack-Cali, and (B) in the event Mack-
Cali or Prentiss (as applicable) receives a letter from outside counsel (the
"Break-Up Fee Tax Opinion") indicating that Mack-Cali or Prentiss (as
applicable) has received a ruling from the IRS holding that Mack-Cali
Partnership's or Prentiss Partnership's (as applicable) receipt of the Base
Amount would either constitute Qualifying Income or would be excluded from gross
income of Mack-Cali or Prentiss (as applicable) within the meaning of Sections
856(c)(2) and (3) of the Code (the "REIT Requirements") or that the receipt by
Mack-Cali Partnership or Prentiss Partnership (as applicable) 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 paid under clause (A) above. Prentiss' and Prentiss Partnership's or
Mack-Cali or Mack-Cali Partnership's (as applicable) obligation to pay any
unpaid portion of the Break-Up Fee shall terminate three years from the date of
this Agreement. In the event that Mack-Cali Partnership or Prentiss Partnership
(as applicable) is not able to receive the full Base Amount, Prentiss and
Prentiss Partnership or Mack-Cali and Mack-Cali Partnership (as applicable)
shall place the unpaid amount in escrow and shall not release any portion
thereof to Mack-Cali Partnership or Prentiss Partnership (as applicable) unless
and until Mack-Cali or Prentiss (as applicable) receives either one of the
following: (i) a letter from Mack-Cali's or Prentiss'(as applicable) independent
accountants indicating the maximum amount that can be paid at that time to Mack-
Cali Partnership or Prentiss Partnership (as applicable) without causing Mack-
Cali or Prentiss (as applicable) to fail to meet the REIT Requirements or (ii) a
Break-Up Fee Tax Opinion, in either of
69
which events Prentiss and Prentiss Partnership shall pay to Mack-Cali
Partnership or Mack-Cali and Mack-Cali Partnership shall pay to Prentiss
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 Mack-Cali Partnership or Prentiss
Partnership, as the case may be (the "Recipient"), shall be an amount equal to
the lesser of (i) $5,000,000, (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 Mack-Cali or Prentiss,
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 Mack-Cali or
Prentiss, as the case may be, and (B) in the event Mack-Cali or Prentiss, as the
case may be, receives a letter from outside counsel (a "Break-Up Expense 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 Mack-Cali or Prentiss, 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 paid under clause
(A) above. The obligation of Mack-Cali and Mack-Cali Partnership or Prentiss and
Prentiss 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
Mack-Cali or Prentiss, 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 Prentiss or Mack-Cali 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 Mack-Cali, Mack-Cali Partnership, Prentiss or Prentiss 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 willful
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 Board of Directors of Mack-Cali and the Board of Trustees of
Prentiss at any time before or after any Shareholder Approvals or Partner
Approvals are obtained and prior to the filing of the Articles of Merger with
the Department; 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 party as a REIT or (b) preserve the Merger as
a tax-free reorganization under Section 368 of the Code.
70
7.5 Extension; Waiver. At any time prior to the 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 8
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 Effective Time. This Section 8.1 shall not limit any
covenant or agreement of the parties which by its terms contemplates performance
after the Effective Time, including, without limitation, Sections 1.8, 5.8, 5.9
and 5.12.
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):
(a) if to Mack-Cali or Mack-Cali Partnership, to:
Mack-Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attention: Mitchell E. Hersh
Chief Executive Officer
and
Roger W. Thomas
Executive Vice President, General Counsel
and Secretary
Fax No.: (908) 272-6755
with a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick, Esq.
Fax No.: (212) 326-0806
71
(b) if to Prentiss or Prentiss Partnership, to:
Prentiss Properties Trust
3890 W. Northwest Highway, Suite 400
Dallas, Texas 75220
Attention: Thomas F. August
President and Chief Executive Officer
Fax No.: (214) 350-2408
and
J. Kevan Dilbeck
Senior Vice President and General Counsel
Fax No.: (214) 350-2409
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, Texas 75201
Attention: Michael E. Dillard, P.C.
Fax No.: (214) 969-4343
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 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
----------------------------------------------
Prentiss Disclosure Letter, the Mack-Cali Disclosure Letter, the Voting
Agreements 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 and (b) except as provided in Sections 1.8,
5.8, 5.9 and 5.12 ("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
72
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.
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.
8.10 Exculpation. This Agreement shall not impose any personal liability
-----------
on any shareholder, director, trustee, officer, employee or agent of Mack-Cali
or Prentiss, and all Persons shall look solely to the property of Mack-Cali for
the payment of any claim hereunder or for the performance of this Agreement.
8.11 Joint and Several Obligations. In each case where both Prentiss and
-----------------------------
Prentiss Partnership, on the one hand, or Mack-Cali and Mack-Cali Partnership,
on the other hand, are obligated to perform the same obligation hereunder, such
obligation shall be joint and several.
73
IN WITNESS WHEREOF, Mack-Cali, Mack-Cali Partnership, Prentiss and Prentiss
Partnership have caused this Agreement to be signed by their respective officers
(or general partners) thereunto duly authorized all as of the date first written
above.
MACK-CALI REALTY CORPORATION
By: /s/ MITCHELL E. HERSH
----------------------------------
Name: Mitchell E. Hersh
--------------------------------
Title: Chief Executive Officer
-------------------------------
MACK-CALI REALTY, L.P.
By: Mack-Cali Realty Corporation
its managing general partner
By: /s/ MITCHELL E. HERSH
----------------------------------
Name: Mitchell E. Hersh
--------------------------------
Title: Chief Executive Officer
-------------------------------
PRENTISS PROPERTIES TRUST
By: /s/ THOMAS F. AUGUST
----------------------------------
Name: Thomas F. August
--------------------------------
Title: President and Chief Executive
-------------------------------
Officer
-------------------------------
PRENTISS PROPERTIES ACQUISITION PARTNERS,
L.P.
By: Prentiss Properties I, Inc.,
its sole general partner
By: /s/ MICHAEL V. PRENTISS
----------------------------------
Name: Michael V. Prentiss
--------------------------------
Title: Chairman of the Board
-------------------------------
74
EXHIBIT A
CERTIFICATE OF MERGER
of
PRENTISS PROPERTIES ACQUISITION PARTNERS, L.P.
into
MACK-CALI REALTY, L.P.
The undersigned limited partnership, organized and existing under and by
virtue of the Delaware Revised Uniform Limited Partnership Act, does hereby
certify:
FIRST: That the name and jurisdiction of formation of each of the
constituent limited partnerships which is to merge is as follows:
Name State of Formation
---- ------------------
Mack-Cali Realty, L.P. Delaware
Prentiss Properties Acquisition Partners, L.P. Delaware
SECOND: That an Agreement and Plan of Merger dated as of June 27, 2000
(the "Merger Agreement") by and among Mack-Cali Realty Corporation, a Maryland
corporation ("Mack-Cali"), Mack-Cali Realty, L.P. ("Mack-Cali Partnership"),
Prentiss Properties Trust, a Maryland corporation ("Prentiss"), and Prentiss
Properties Acquisition Partners, L.P. ("Prentiss Properties") has been approved
and executed by each of the constituent limited partnerships in accordance with
the requirements of Section 17-211(b) of the Delaware Revised Uniform Limited
Partnership Act.
THIRD: That the name of the surviving limited partnership is Mack-Cali
Realty, L.P. (the "Surviving Limited Partnership").
FOURTH: That Paragraph FIRST of the Certificate of Amendment of
Certificate of Limited Partnership of the Surviving Limited Partnership will be
amended to read as follows:
"1. The name of the limited partnership is Mack National Office
Properties, L.P."
FIFTH: That the effective time of the merger is upon the filing of this
Certificate of Merger with the Secretary of State of the State of Delaware,
which effective time is prior to the effective time of the merger of Prentiss
into Mack-Cali pursuant to the Merger Agreement.
SIXTH: That the executed Merger Agreement is on file at a place of
business of the Surviving Limited Partnership. The address of such place of
business is 11 Commerce Drive, Cranford, New Jersey, 07016.
A-1
SEVENTH: That a copy of the Merger Agreement will be furnished by the
Surviving Limited Partnership, on request and without cost, to any partner of
the constituent limited partnerships.
EIGHTH: The manner and basis of converting or exchanging issued and
outstanding partnership interests of Prentiss Partnership into different
partnership interests in the Surviving Limited Partnership is as follows:
(a) Conversion of Prentiss Common Units. Upon the Effective Time, each
issued and outstanding unit of limited partnership interest in
Prentiss Partnership ("Prentiss Common Unit") shall be converted into
the right to receive from Mack-Cali Partnership 0.956 fully paid and
nonassessable units of limited partnership interest of Mack-Cali
Partnership ("Mack-Cali Common Units"). As of the Effective Time, all
Prentiss Common Units shall no longer be outstanding and shall
automatically be canceled and retired and all rights with respect
thereto shall cease to exist, and each holder of a certificate
representing any Prentiss Common Units shall cease to have any rights
with respect thereto, except the right to receive, upon surrender of
such certificate in accordance with the applicable provisions of the
Merger Agreement, certificates representing the Mack-Cali Common Units
required to be delivered under this paragraph (a) and any
distributions with a record date prior to the Effective Time which may
have been declared or made by Prentiss Partnership on such Prentiss
Common Units which remain unpaid at the Effective Time and any
distributions with a record date on or after the Effective Time which
may have been declared or made by Mack-Cali Partnership on Mack-Cali
Common Units with a payment date on or prior to the date of delivery
of certificates under this paragraph (a).
(b) Conversion of Prentiss Preferred Units. Upon the Effective Time, (i)
each issued and outstanding Series B preferred unit of limited
partnership interest of Prentiss Partnership ("Prentiss Series B
Preferred Units") shall be converted into the right to receive from
Mack-Cali Partnership one Series D preferred unit of limited
partnership interest of Mack-Cali Partnership ("Mack-Cali Series D
Preferred Units") and (ii) each issued and outstanding Series C
preferred unit of limited partnership interest of Prentiss Partnership
("Prentiss Series C Preferred Units" and, together with the Prentiss
Series B Preferred Units, the "Prentiss Preferred Units") shall be
converted into the right to receive from Mack-Cali Partnership one
Series E preferred unit of limited partnership interest of Mack-Cali
Partnership ("Mack-Cali Series E Preferred Units" and, together with
the Mack-Cali Series B Preferred Units the "New Mack-Cali Preferred
Units"). As of the Effective Time, all Prentiss Preferred Units shall
no longer be outstanding and shall automatically be canceled and
retired and all rights with respect thereto shall cease to exist, and
each holder of a certificate representing any Prentiss Preferred Unit
shall cease to have any rights with respect thereto, except the right
to receive, upon surrender of such certificate in accordance with the
applicable provisions of the Merger Agreement, certificates
representing the New Mack-Cali Preferred Units required to be
delivered under this paragraph (b) and any dividends or other
distributions with a record date prior to the Effective Time which may
have been declared or made by Prentiss Partnership on such Prentiss
Preferred Units which remain unpaid at the Effective Time and any
distributions with a record date on or after the Effective Time which
may have been declared or made by Mack-Cali Partnership on the New
Mack-Cali Preferred Units with
A-2
a payment date on or prior to the date of delivery of certificates
under this paragraph (b).
(c) No fractional units of Mack-Cali Partnership shall be issued in
connection with the Merger. In lieu of the issuance of any fractional
shares of fractional units, each holder of fractional units, upon
surrender of a certificate in accordance with the applicable provision
in the Merger Agreement for exchange shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by
multiplying (i) the average closing price of one share of Common Stock
on the New York Stock Exchange on the five trading days immediately
preceding the Closing Date (as defined in the Merger Agreement) by
(ii) the fractional amount of the unit which such holder would
otherwise be entitled to receive under this Article EIGHTH (such cash
payments, together with the Mack-Cali Common Units and New Mack-Cali
Preferred Units to be issued pursuant to this Article EIGHTH,
hereinafter sometimes collectively referred to as, the "Merger
Consideration").
(d) As soon as reasonably practicable after the Effective Time, Mack-Cali
shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates: (i) a letter of transmittal (which shall
specify that delivery shall be effective, 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 such a form and have such
provisions as Mack-Cali may reasonably specify); and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the
instructions thereto, 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 Merger Consideration
into which the Mack-Cali Common Units or New Mack-Cali Preferred
Units, as applicable, theretofore evidenced by such Certificate shall
have been converted into the right to receive pursuant to Article
EIGHTH, together with any dividends or other distributions to which
such holder is entitled to receive pursuant to Section 1.16(d) of the
Merger Agreement, to be mailed within five business days of receipt
thereof, and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of any such
Prentiss Common Units or Prentiss Preferred Units which is not
registered in the transfer records of Prentiss, payment may be made to
a person or entity other than the person or entity in whose name the
Certificate so surrendered is registered if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the
person or entity requesting such payment either shall pay any transfer
or other taxes required by reason of such payment being made to a
person or entity other than the registered holder of such Certificate
or establish to the satisfaction of Mack-Cali that such taxes have
been paid or are not applicable. Until surrendered as contemplated by
this Article EIGHTH, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration, without interest, into which
the Mack-Cali Common Units or New Mack-Cali Preferred Units, as
applicable, theretofore evidenced by such Certificate shall have been
converted into the right to receive pursuant to Article EIGHTH, and
any dividends or other distributions to which such holder is entitled
to receive pursuant to Section 1.16(d) of the Agreement. No interest
will be paid or will accrue on the Merger Consideration upon the
surrender of any
A-3
Certificate or any cash payable pursuant to Section 1.16(d) of the
Agreement.
(e) No Merger Consideration, or dividends or other distributions with
respect to Mack-Cali Common Units or New Mack-Cali Preferred Units
with a record date after the Effective Time, shall be paid to the
holder of any unsurrendered Certificate with respect to Prentiss
Common Units or Prentiss Preferred Units represented thereby, in each
case until after the surrender of such certificate in accordance with
this Article EIGHTH and Section 1.16 of the Merger Agreement.
(f) All Merger Consideration paid upon the surrender of Certificates in
accordance with the terms of this Article EIGHTH shall be deemed to
have been paid in full satisfaction of all rights pertaining to
Prentiss Common Units or Prentiss Preferred Units, as applicable,
theretofore represented by such Certificates; provided, however, that
Prentiss shall transfer to the Exchange Agent cash sufficient to pay
any dividends or make any other distributions with a record date prior
to the Effective Time which may have been declared or made by Prentiss
on the Prentiss Common Units or Prentiss Preferred Units, as
applicable, in accordance with the terms of the Merger Agreement or
prior to the date of the Merger Agreement and which remain unpaid at
the Effective Time and have not been paid prior to such surrender, and
there shall be no further registration of transfers on the share
transfer books of Prentiss of the Prentiss Common Units or Prentiss
Preferred Units which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are
presented to Mack-Cali for any reason, they shall be canceled and
exchanged in accordance with this Article EIGHTH and Section 1.16 of
the Merger Agreement.
(g) None of Prentiss, Mack-Cali or the Exchange Agent shall be liable to
any person or entity in respect of any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property,
escheat or similar law. Any portion of the Merger Consideration
delivered to the Paying Agent pursuant to this Article EIGHTH that
remains unclaimed for twelve months after the Effective Time shall be
redelivered by the Exchange Agent to Mack-Cali, upon demand and any
holders of Certificates who have not theretofore complied with this
Article EIGHTH shall thereafter look only to Mack-Cali for delivery of
the Merger Consideration and any unpaid dividends, subject to
applicable escheat and other similar laws.
(h) Mack-Cali Units: Upon the Effective Time, each Mack-Cali Common Unit,
Mack-Cali Series A Preferred Unit and Mack-Cali Series B Preferred
Unit (each as defined in the Merger Agreement) outstanding immediately
prior to the Effective Time shall remain outstanding.
A-4
IN WITNESS WHEREOF, Mack-Cali Realty Corporation, the General Partner of
Mack-Cali Realty, L.P., has caused this Certificate of Merger to be signed by a
duly authorized officer, this ________ day of ______________ 2000.
MACK-CALI REALTY, L.P.
By: Mack-Cali Realty Corporation,
Its sole General Partner
By:________________________________
Name:______________________________
Title:_____________________________
A-5
EXHIBIT B
ARTICLES OF MERGER
of
PRENTISS PROPERTIES TRUST,
a Maryland real estate investment trust,
with and into
MACK-CALI REALTY CORPORATION,
a Maryland corporation
MACK-CALI REALTY CORPORATION, a Maryland corporation ("Mack-Cali"),
and PRENTISS PROPERTIES TRUST, a Maryland real estate investment trust
("Prentiss"), do hereby certify to the State Department of Assessments and
Taxation (the "Department") as follows:
FIRST: Mack-Cali and Prentiss agree to merge in the manner hereinafter
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set forth (the "Merger").
SECOND: Mack-Cali is the entity to survive the Merger.
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THIRD: Both Mack-Cali and Prentiss are formed under the laws of the
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State of Maryland.
FOURTH: The principal office of Mack-Cali in the State of Maryland is
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located in Baltimore City and the principal office of Prentiss in the State of
Maryland is located in Baltimore City.
FIFTH: Prentiss owns no interest in land in the State of Maryland.
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SIXTH: The charter (the "Charter") of Mack-Cali will be amended in
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the Merger as follows and the Charter, as amended, shall continue in full force
and effect until duly further amended in accordance with its terms and
applicable law:
(a) By deleting from the Charter in its entirety Article I and
inserting in lieu thereof the following new Article I:
ARTICLE I
1.17 NAME
The name of the corporation (the "Corporation") is:
Mack National Office Properties Corp.
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(b) By deleting from the Charter in its entirety existing
Section 1 of Article IV and inserting in lieu thereof the following new Section
1 of Article IV:
Section 1. Authorized Shares. The total number of shares of
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stock which the Corporation has authority to issue is 215,000,000
shares, of which 190,000,000 shares are shares of Common Stock, $.01
par value per share ("Common Stock"), and 25,000,000 shares are shares
of Preferred Stock, $.01 par value per share ("Preferred Stock"). The
aggregate par value of all authorized shares of stock having par value
is $2,150,000.
SEVENTH: The total number of shares of all classes of beneficial
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interest which Prentiss has authority to issue is 120,000,000 shares, $.01 par
value per share, consisting of (i) 100,000,000 common shares of beneficial
interest (the "Common Shares"), and (ii) 20,000,000 preferred shares of
beneficial interest, of which 1,000,000 shares have been classified as Junior
Participating Cumulative Preferred Shares of Beneficial Interest, Series B,
3,773,585 shares have been classified as Series A Cumulative Convertible
Redeemable Preferred Shares of Beneficial Interest (the "Series A Shares"),
1,900,000 shares have been classified as Series B Cumulative Redeemable
Perpetual Preferred Shares and 2,000,000 shares have been classified as Series C
Cumulative Redeemable Perpetual Preferred Shares of Beneficial Interest. The
aggregate par value of all shares of all classes having a par value is
$1,200,000.
EIGHTH: The total number of shares of all classes of stock which
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Mack-Cali has authority to issue immediately before the Merger is 195,000,000
shares of stock, par value $.01 per share, consisting of: (i) 190,000,000 shares
of common stock, and (ii) 5,000,000 shares of preferred stock, of which 200,000
shares have been classified as Series A Junior Participating Preferred Stock and
3,773,585 shares have been classified as Series A Cumulative Convertible
Redeemable Preferred Stock. The aggregate par value of all shares of all
classes having a par value is $1,950,000.
The total number of shares of all classes of stock which Mack-Cali has
authority to issue immediately after the Merger is 215,000,000 shares of stock,
par value $.01 per share, consisting of: (i) 190,000,000 shares of common stock
(the "Common Stock"), and (ii) 25,000,000 shares of preferred stock, of which
200,000 shares have been classified as Series A Junior Participating Preferred
Stock (the "Junior Stock") and 3,773,585 shares have been classified as Series A
Cumulative Convertible Redeemable Preferred Stock (the "Series A Stock"). The
aggregate par value of all shares of all classes having a par value is
$2,400,000.
NINTH: Upon the Effective Time (as defined below), Prentiss shall be
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merged into Mack-Cali and, thereupon, Mack-Cali shall possess any and all
purposes and powers of Prentiss and all leases, licenses, property, rights,
privileges, and powers of whatever nature and description of Prentiss shall be
transferred to, vested in, and devolved upon Mack-Cali, without further act or
deed, subject to all of the debts and obligations of Prentiss. Except as
otherwise provided in these Articles of Merger, consummation of the Merger at
the Effective Time shall have the effects set forth in Section 3-114 of the
Maryland General Corporation Law (the "MGCL") and Section 8.501.1 of the
Maryland REIT Law (the "MRL").
TENTH: The manner and basis of converting or exchanging the issued
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shares of beneficial interest of Prentiss, and the manner of dealing with any
issued stock of Mack-Cali, at the
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Effective Time, shall be as follows:
(a) Each Common Share of Prentiss which is issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive 0.956 of a share of Common Stock of Mack-Cali, without the necessity of
any action on the part of the holder thereof, pursuant to the terms and
conditions set forth in the Agreement and Plan of Merger dated
[________________] between Prentiss, Prentiss Properties Acquisition Partners,
L.P., a Delaware limited partnership, Mack-Cali Realty, L.P., a Delaware limited
partnership, and Mack-Cali (the "Agreement").
(b) Each Series A Share of Prentiss which is issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive one share of Series A Stock of Mack-Cali, without the necessity of any
action on the part of the holder thereof, pursuant to the terms and conditions
set forth in the Agreement.
(c) Each outstanding option, warrant or other right to purchase or
acquire Common Shares or Series A Shares of Prentiss shall, at the Effective
Time, be converted, exchanged or otherwise treated in the manner provided in the
Agreement.
(d) No fractional shares of Common Stock of Mack-Cali shall be issued
in connection with the Merger. In lieu of the issuance of any fractional shares
of Common Stock, each holder of Common Shares, upon surrender of a Certificate
for exchange pursuant to Article ELEVENTH, shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying (i)
the average closing price of one share of Common Stock on the New York Stock
Exchange on the five trading days immediately preceding the Closing Date (as
defined in the Agreement) by (ii) the fractional amount of the share of Common
Stock which such holder would otherwise be entitled to receive under this
Article TENTH (such cash payments, together with the shares of Common Stock and
Series A Stock to be issued pursuant to this Article TENTH, hereinafter
sometimes collectively referred to as, the "Merger Consideration").
(e) All Common Shares and all Series A Shares, when so converted as
provided in this Article TENTH, shall no longer be issued and outstanding and
shall automatically be canceled and retired and cease to exist, and each holder
of a certificate (a "Certificate") theretofore evidencing any such shares shall
cease to have rights with respect thereto, except the right to receive, upon
surrender of such Certificate in accordance with Article ELEVENTH, as
applicable, (A) any dividends and other distributions in accordance with Section
1.16(d) of the Agreement, (B) certificates representing the shares of Common
Stock into which such Common Shares are converted into the right to receive
pursuant to this Article TENTH, if any, (C) certificates representing the shares
of Series A Stock into which the Series A Shares are converted into the right to
receive pursuant to this Article TENTH, if any, and (D) any cash, without
interest, in lieu of fractional shares of Common Stock to be paid in
consideration for Common Shares upon the surrender of such Certificate in
accordance with the provisions of Article ELEVENTH.
ELEVENTH: (a) Mack-Cali shall provide to Equiserve Trust Company,
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N.A., or another bank or trust company reasonably acceptable to Prentiss (the
"Exchange Agent"), for the benefit of the holders of the issued and outstanding
Common Shares and Class A Preferred Shares of Prentiss to be converted at the
Effective Time pursuant to Article TENTH, the Merger Consideration issuable in
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exchange for the issued and outstanding Common Shares and Preferred Shares
pursuant to Article TENTH.
(b) As soon as reasonably practicable after the Effective Time, Mack-
Cali shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates: (i) a letter of transmittal (which shall specify
that delivery shall be effective, 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 such form and have such provisions as Mack-Cali may reasonably
specify); and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, 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 Merger Consideration into which the Common Shares or Series A
Preferred Shares, as applicable, theretofore evidenced by such Certificate shall
have been converted into the right to receive pursuant to Article TENTH,
together with any dividends or other distributions to which such holder is
entitled to receive pursuant to Section 1.16(d) of the Agreement, to be mailed
within five business days of receipt thereof, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of any
such Common Shares or Series A Shares of Prentiss which is not registered in the
transfer records of Prentiss, payment may be made to a person or entity other
than the person or entity in whose name the Certificate so surrendered is
registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person or entity requesting such payment either
shall pay any transfer or other taxes required by reason of such payment being
made to a person or entity other than the registered holder of such Certificate
or establish to the satisfaction of Mack-Cali that such taxes have been paid or
are not applicable. Until surrendered as contemplated by this Article ELEVENTH,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the Merger
Consideration, without interest, into which the Common Shares or Series A
Shares, as applicable, theretofore evidenced by such Certificate shall have been
converted into the right to receive pursuant to Article TENTH, and any dividends
or other distributions to which such holder is entitled to receive pursuant to
Section 1.16(d) of the Agreement. No interest will be paid or will accrue on
the Merger Consideration upon the surrender of any Certificate or any cash
payable pursuant to Section 1.16(d) of the Agreement.
(c) No Merger Consideration, or dividends or other distributions with
respect to shares of Common Stock with a record date after the Effective Time,
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Common Stock represented thereby, in each case until after the
surrender of such certificate in accordance with this Article ELEVENTH and
Section 1.16 of the Agreement.
(d) All Merger Consideration paid upon the surrender of Certificates
in accordance with the terms of this Article ELEVENTH shall be deemed to have
been paid in full satisfaction of all rights pertaining to Common Shares or
Series A Shares of Prentiss, as applicable, theretofore represented by such
Certificates; provided, however, that Prentiss shall transfer to the Exchange
Agent cash sufficient to pay any dividends or make any other distributions with
a record date prior to the Effective Time which may have been declared or made
by Prentiss on its Common Shares or its Series A Shares, as applicable, in
accordance with the terms of the Agreement or prior to the date of the Agreement
and which remain unpaid at the Effective Time and have not been paid prior to
such surrender, and there shall be no further registration of transfers on the
share transfer books of Prentiss of
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its Common Shares or Series A Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
Mack-Cali for any reason, they shall be canceled and exchanged in accordance
with this Article ELEVENTH and Section 1.16 of the Agreement.
(e) None of Prentiss, Mack-Cali or the Exchange Agent shall be liable
to any person or entity in respect of any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law. Any portion of the Merger Consideration delivered to the Paying
Agent pursuant to this Article ELEVENTH that remains unclaimed for twelve months
after the Effective Time shall be redelivered by the Exchange Agent to Mack-
Cali, upon demand and any holders of Certificates who have not theretofore
complied with this Article ELEVENTH shall thereafter look only to Mack-Cali for
delivery of the Merger Consideration and any unpaid dividends, subject to
applicable escheat and other similar laws.
TWELFTH: The Merger was duly advised, authorized and approved by Prentiss
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in the manner and by the vote required by the MRL, the Declaration of Trust of
Prentiss, as amended, and the Bylaws of Prentiss, as follows:
a) At a meeting duly called and held, the Board of Trustees of
Prentiss adopted a resolution declaring the Merger advisable and directing that
the Merger be submitted for consideration by the shareholders of Prentiss
entitled to vote thereon.
b) At a meeting duly called and held, the Merger was approved by the
shareholders of Prentiss by at least the affirmative vote of a majority of all
votes entitled to be cast on the matter.
THIRTEENTH: The Merger was duly advised, authorized and approved by
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Mack-Cali, in the manner and by the vote required by the MGCL, the Charter and
Bylaws of Mack-Cali, as follows:
a) At a meeting duly called and held, the Board of Directors of
Mack-Cali adopted a resolution declaring the Merger advisable and directing that
the Merger be submitted for consideration by the stockholders of Mack-Cali
entitled to vote thereon.
b) At a meeting duly called and held, the Merger was approved by the
stockholders of Mack-Cali by at least the affirmative vote of
[_____________________] of all votes entitled to be cast on the matter.
FOURTEENTH: These Articles of Merger shall become effective upon
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acceptance for record by the Department (the "Effective Time").
FIFTEENTH: Each undersigned [_________________] acknowledges these
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Articles of Merger to be the act of the respective entity on whose behalf he has
signed, and further, as to all matters or facts required to be verified under
oath, each [_________________] acknowledges that to the best of his knowledge,
information and belief, these matters and facts relating to the entity on whose
behalf he has signed are true in all material respects and that this statement
is made under the penalties for perjury.
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IN WITNESS WHEREOF, these Articles of Merger have been duly executed
by the parties hereto this _____ day of ______, 2000.
ATTEST: MACK-CALI REALTY CORPORATION
By: __________________ By:___________________(SEAL)
Name: Name:
Title: Title:
ATTEST: PRENTISS PROPERTIES TRUST
By: __________________ By:___________________(SEAL)
Name: Name:
Title: Title:
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