Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JUNE 15, 2000
AMONG
MISSION ORCHARD STATUTORY TRUST,
PGP ACQUISITION, INC.
AND
PACIFIC GATEWAY PROPERTIES, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER..................................................... 1
SECTION 1.1. THE MERGER........................................... 1
SECTION 1.2. EFFECTIVE TIME....................................... 1
SECTION 1.3. CLOSING OF THE MERGER................................ 1
SECTION 1.4. EFFECTS OF THE MERGER................................ 2
SECTION 1.5. ARTICLES OF INCORPORATION AND BYLAWS................. 2
SECTION 1.6. DIRECTORS............................................ 2
SECTION 1.7. OFFICERS............................................. 2
SECTION 1.8. CONVERSION OF SHARES................................. 2
SECTION 1.9. PAYMENT OF MERGER CONSIDERATION...................... 3
SECTION 1.10. TREATMENT OF STOCK OPTIONS........................... 5
SECTION 1.11. AGGREGATE MERGER CONSIDERATION AND ADJUSTMENTS....... 6
ARTICLE 2 CONDITIONS TO CONSUMMATION OF MERGER........................... 8
SECTION 2.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS............... 8
SECTION 2.2. CONDITIONS TO PARENT AND ACQUISITION'S OBLIGATIONS... 8
SECTION 2.3. CONDITIONS TO THE COMPANY'S OBLIGATIONS.............. 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 10
SECTION 3.1. ORGANIZATION AND GOOD STANDING OF THE COMPANY........ 10
SECTION 3.2. AUTHORITY............................................ 11
SECTION 3.3. NO CONFLICTS......................................... 11
SECTION 3.4. CONSENTS AND APPROVALS............................... 12
SECTION 3.5. CAPITAL STOCK OF THE COMPANY......................... 12
SECTION 3.6. SUBSIDIARIES; EQUITY INTERESTS....................... 13
SECTION 3.7. FINANCIAL STATEMENTS................................. 13
SECTION 3.8. ASSETS OTHER THAN REAL PROPERTIES.................... 13
SECTION 3.9. REAL PROPERTIES...................................... 14
SECTION 3.10. INTELLECTUAL PROPERTY................................ 16
SECTION 3.11. CONTRACTS............................................ 16
SECTION 3.12. LITIGATION; DECREES.................................. 18
SECTION 3.13. EMPLOYEE AND RELATED MATTERS; ERISA.................. 19
SECTION 3.14. ABSENCE OF CHANGES OR EVENTS......................... 20
SECTION 3.15. COMPLIANCE WITH APPLICABLE LAWS...................... 20
SECTION 3.16. TAXES................................................ 21
SECTION 3.17. EMPLOYEE AND LABOR RELATIONS......................... 22
SECTION 3.18. INSURANCE POLICIES................................... 22
SECTION 3.19. SEC FILINGS.......................................... 22
SECTION 3.20. OPINION OF FINANCIAL ADVISOR......................... 23
SECTION 3.21. INFORMATION STATEMENT................................ 23
SECTION 3.22. BROKERS AND FINANCIAL ADVISORS....................... 23
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SECTION 3.23. RECOMMENDATION OF BOARD OF DIRECTORS: VOTE REQUIRED... 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION....... 24
SECTION 4.1. ORGANIZATION AND GOOD STANDING........................ 24
SECTION 4.2. AUTHORITY............................................. 24
SECTION 4.3. NO BREACH............................................. 24
SECTION 4.4. CONSENTS AND APPROVALS................................ 24
SECTION 4.5. FUNDING............................................... 25
SECTION 4.6. LITIGATION; DECREES................................... 25
SECTION 4.7. BROKERS............................................... 25
SECTION 4.8. INFORMATION STATEMENT................................. 25
ARTICLE 5 COVENANTS OF THE COMPANY....................................... 25
SECTION 5.1. ACCESS................................................ 25
SECTION 5.2. ORDINARY CONDUCT...................................... 26
SECTION 5.3. PREPARATION OF INFORMATION STATEMENT; STOCKHOLDERS'
MEETING............................................... 28
SECTION 5.4. INSURANCE............................................. 29
SECTION 5.5. ESTOPPEL CERTIFICATES................................. 29
SECTION 5.6. CONSTRUCTION AND MAINTENANCE WORK..................... 29
SECTION 5.7. NO SOLICITATION OF TRANSACTIONS....................... 29
SECTION 5.8. EMPLOYEE MATTERS...................................... 30
ARTICLE 6 COVENANTS OF PARENT AND ACQUISITION............................ 30
SECTION 6.1. CONFIDENTIALITY....................................... 30
SECTION 6.2. NO ADDITIONAL REPRESENTATIONS......................... 31
SECTION 6.3. INDEMNITY, INSURANCE.................................. 31
ARTICLE 7 MUTUAL COVENANTS............................................... 31
SECTION 7.1. PUBLICITY............................................. 31
SECTION 7.2. ANTITRUST NOTIFICATION................................ 32
SECTION 7.3. REASONABLE EFFORTS; ADDITIONAL AGREEMENTS............. 32
SECTION 7.4. NOTIFICATION OF CERTAIN MATTERS....................... 32
SECTION 7.5. BENEFIT PLANS; COBRA.................................. 32
ARTICLE 8 TERMINATION; AMENDMENT; WAIVER................................. 33
SECTION 8.1. TERMINATION........................................... 33
SECTION 8.2. CONFIDENTIAL INFORMATION.............................. 34
SECTION 8.3. EFFECTS OF TERMINATION................................ 34
SECTION 8.4. LIQUIDATED DAMAGES.................................... 35
ARTICLE 9 MISCELLANEOUS.................................................. 35
SECTION 9.1. EXPENSES.............................................. 35
SECTION 9.2. ATTORNEYS' FEES....................................... 35
SECTION 9.3. ASSIGNMENT............................................ 36
SECTION 9.4. NO THIRD-PARTY BENEFICIARIES.......................... 36
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SECTION 9.5. NOTICES............................................... 36
SECTION 9.6. REPRESENTATIONS AND WARRANTIES NOT TO SURVIVE......... 37
SECTION 9.7. COUNTERPARTS.......................................... 37
SECTION 9.8. ENTIRE AGREEMENT...................................... 37
SECTION 9.9. SEVERABILITY.......................................... 37
SECTION 9.10. AMENDMENT............................................. 38
SECTION 9.11. EXTENSION; WAIVER..................................... 38
SECTION 9.12. EXCLUSIVE JURISDICTION OF CALIFORNIA COURTS........... 38
SECTION 9.13. INTERPRETATION OF THIS AGREEMENT...................... 38
SECTION 9.14. TRUSTEE EXCULPATION................................... 39
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TABLE OF SCHEDULES AND EXHIBITS
2.2(f) Title Exceptions
3.1 Company Foreign Jurisdictions
3.3 Company Conflicts
3.4 Company Consents
3.5(b) Company Stock Options
3.6(a) Subsidiaries
3.6(b) Other Equity Interests
3.8 Certain Liens
3.9(a)(1) Real Properties
3.9(a)(2) Leases and Rent Roll
3.9(a)(3) Service Contracts
3.9(b) Leased Properties
3.9(c) Brokerage Agreements
3.9(g) Property-Related Litigation
3.10 Intellectual Property
3.11(a) Employment Agreements, etc.
3.11(b) Collective Bargaining Agreements
3.11(c) Non-Competition Agreements
3.11(d) Agreements with Officers, Directors or Employees
3.11(e) Subleases of Leased Properties
3.11(f) Personal Properties Leases
3.11(g) Supply and Service Agreements
3.11(h) Indebtedness
3.11(i) Guarantees
3.11(j) Partnerships, Limited Liability Companies and Joint Ventures
3.11(k) Other Agreements
3.11(l) Acquisition and Disposition Agreements
3.11(m) Other Agreements
3.12 Litigation; Decrees
3.13(a) Plans
3.13(b) Compliance with ERISA and Code
3.13(c) Multiemployer Plans
3.13(e) Employee Welfare Benefit Plans
3.14 Changes or Events
3.16(a) Tax Returns and Taxes
3.16(b) Tax Claims
3.17 Employee and Labor Relations
3.18 Company Insurance Policies
5.6 Construction and Maintenance Work
Exhibit A Balance Sheet and Calculation of Aggregate Merger Consideration
Exhibit B Form of Estoppel Certificate
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TABLE OF DEFINED TERMS
CROSS REFERENCE
TERM IN AGREEMENT PAGE
Accountants, Section ___........................................................
Acquisition, Preamble..........................................................1
Aggregate Merger Consideration, Section 1.8(a)(i)..............................2
Aggregate Option Exercise Price Section 1.10(a)...............................6
Aggregate Paid Exercise Price Section 1.10(a).................................6
Agreement, Preamble............................................................1
Applicable Laws, Section 3.15(a)..............................................21
Articles of Merger, Section 1.2................................................1
Certificates Section 1.9(b)....................................................4
Closing Date, Section 1.3......................................................2
Closing, Section 1.3...........................................................2
Code, Section 3.13(b).........................................................19
Common Merger Consideration, Section 1.8(a)(ii)................................3
Common Share, Section 1.8(a)(i)................................................3
Common Stockholder, Section 1.8(a)(ii).........................................3
Company Balance Sheet, Section 3.7(a).........................................13
Company Board Section 3.23....................................................24
Company Material Adverse Effect Section 3.1...................................11
Company SEC Reports, Section 3.19.............................................23
Company Stock Option Section 1.10(a)..........................................6
Company, Preamble..............................................................1
Confidentiality Agreement, Section 5.1........................................26
Contracts, Section 3.11.......................................................17
DGCL, Section 1.1..............................................................1
Effective Time, Section 1.2....................................................1
Enforceability Exceptions, Section 3.2........................................11
ERISA Affiliate, Section 3.13(a)..............................................19
ERISA, Section 3.14(a)........................................................19
Exchange Act, Section 3.4(c)..................................................12
Final Aggregate Merger Consideration, Section 1.11(b)..........................6
GAAP, Section 1.11(a)..........................................................6
Governmental Entity, Section 3.3..............................................11
Information Statement Section 3.21............................................23
Knowledge, Section 9.13(b)....................................................39
Merger Fund Section 1.9(a).....................................................4
Merger, Section 1.1............................................................1
MGCL, Section 1.1..............................................................1
Optionholders, Section 3.5(b).................................................12
Parent Material Adverse Effect, Section 4.1...................................24
Parent, Preamble...............................................................1
Payment Agent Section 1.9(a)...................................................4
Permits, Section 3.15(c)......................................................21
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CROSS REFERENCE
TERM IN AGREEMENT PAGE
Permitted Liens, Section 3.8..................................................14
Plans, Section 3.13(a)........................................................19
Preferred Stockholder Section 1.8(a)(iii).....................................3
Recommendation Section 3.23...................................................24
SEC, Section 3.4(c)...........................................................12
Securities Act, Section 3.6(a)................................................13
Series 1 Convertible Preferred Share Section 1.8(a)(i).........................3
Series 1 Merger Consideration, Section 1.8(a)(iii).............................3
Shares, Section 1.8(a)(iii)....................................................3
Stockholders' Meeting, Section 5.3............................................28
Stockholders, Section 1.8(a)(iii)..............................................3
Subsidiary, Section 3.6(a)....................................................13
Surviving Company, Section 1.1.................................................1
Tax or Taxes, Section 3.16(c)(i)..............................................22
Tax Return, Section 3.16(c)(ii)...............................................22
True Up Balance Sheet, Section 1.11(b).........................................6
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of June 15,
2000 is among PACIFIC GATEWAY PROPERTIES, INC., a Maryland corporation (the
"Company"), MISSION ORCHARD STATUTORY TRUST, a Connecticut statutory trust
("PARENT") and PGP ACQUISITION, INC., a Maryland corporation and a wholly owned
subsidiary of Parent ("ACQUISITION").
WHEREAS the Board of Directors of the Company has (i) determined that the
Merger (as defined below) is fair and in the best interests of the Stockholders
(as defined below), (ii) approved the Merger in accordance with and on the terms
and conditions set forth in this Agreement, and (iii) determined to recommend to
the Stockholders the approval of this Agreement and the Merger.
WHEREAS the Board of Directors of Acquisition has (i) determined that the
Merger (as defined below) is fair and in the best interests of Acquisition's
stockholders, and (ii) approved the Merger in accordance with and on the terms
and conditions set forth in this Agreement.
WHEREAS the beneficiary of Parent has approved the Merger in accordance
with and on the terms and conditions set forth in this Agreement.
NOW THEREFORE in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby, the Company, Parent and Acquisition hereby agree as
follows:
ARTICLE 1
THE MERGER
SECTION 1.1. THE MERGER. At the Effective Time (as defined below) and
upon the terms and subject to the conditions of this Agreement and in accordance
with the Maryland General Corporation Law (the "MGCL"), Acquisition shall be
merged with and into the Company (the "MERGER"). Following the Merger, the
Company shall continue as the surviving corporation (the "SURVIVING COMPANY")
and the separate corporate existence of Acquisition shall cease.
SECTION 1.2. EFFECTIVE TIME. Subject to the terms and conditions set
forth in this Agreement, on or before the Closing Date articles of merger or
other appropriate documents (the "ARTICLES OF MERGER") shall be duly executed
and acknowledged by the Company and delivered to the State Department of
Assessments and Taxation for filing pursuant to the MGCL. The Merger shall
become effective at such time as a properly executed copy of the Articles of
Merger is duly filed with State Department of Assessments and Taxation in
accordance with the MGCL, or such later time as the Company and Acquisition may
agree upon and set forth in the Articles of Merger (the time the Merger becomes
effective being referred to herein as the "EFFECTIVE TIME").
SECTION 1.3. CLOSING OF THE MERGER. The closing of the Merger (the
"CLOSING") will take place at a time and on a date (the "CLOSING DATE") to be
specified by the parties,
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which shall be no later than the second business day following the satisfaction
or waiver of the conditions set forth in Section 2.1 at the offices of Shearman
& Sterling, 000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, unless
another time, date or place is agreed to in writing by the parties hereto.
SECTION 1.4. EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in the MGCL. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time the Surviving Company shall succeed to all the
rights and property of Acquisition and the Company and shall be subject to all
the debts and liabilities of Acquisition and the Company.
SECTION 1.5. ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation of the Company in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Company as they may be amended
immediately prior to the Effective Time at the request of the Parent. The bylaws
of the Company in effect at the Effective Time shall be the bylaws of the
Surviving Company until amended in accordance with applicable law.
SECTION 1.6. DIRECTORS. The directors of Acquisition at the Effective
Time shall be the initial directors of the Surviving Company, each to hold
office in accordance with the Articles of Incorporation and bylaws of the
Surviving Company until such director's successor is duly elected or appointed
and qualified.
SECTION 1.7. OFFICERS. The officers of Acquisition at the Effective Time
shall be the initial officers of the Surviving Company, each to hold office in
accordance with the Articles of Incorporation and bylaws of the Surviving
Company until such officer's successor is duly elected or appointed and
qualified.
SECTION 1.8. CONVERSION OF SHARES.
(a) Merger Consideration.
(i) AGGREGATE MERGER CONSIDERATION. The aggregate merger
consideration shall be $55,048,389 to be adjusted as necessary in accordance
with the provisions of Section 1.11 (the "Aggregate Merger Consideration") and
to be paid in accordance with the provisions of Section 1.9. The per share
merger consideration (the "Per Share Merger Consideration") shall be an amount
equal to $12.60, to be adjusted as necessary in accordance with the provisions
of Section 1.11 (such adjustments to be determined in a manner consistent with
the calculations and information set forth on Exhibit A), which amount is equal
to:
(A) the sum of the Aggregate Merger Consideration
PLUS $765,970 (which is the Aggregate Option Exercise Price (defined in Section
1.10(a) below))
DIVIDED BY
(B) the sum of (x) the number of outstanding
shares of common stock, par value $1.00 per share (each a "COMMON SHARE")(which
number of Common Shares is 3,933,536 as of the date of this Agreement), PLUS (y)
the number of outstanding shares of Series 1 Convertible Preferred Stock, par
value $1.00 per share
2
(each a "SERIES 1 CONVERTIBLE PREFERRED SHARE")(which number of Series 1
Convertible Preferred Shares is 300,000 as of the date of this Agreement), PLUS
(z) the number of Common Shares for which all of the Company Stock Options
(defined in Section 1.10(a) below) are exercisable (which number is 196,175 as
of the date of this Agreement).
(ii) CONVERSION OF COMMON SHARES. At the Effective Time, each
issued and outstanding Common Share immediately prior to the Effective Time
(other than Common Shares held in the Company's treasury) shall, by virtue of
the Merger and without any action on the part of Acquisition, the Company or any
holder of Common Shares (a "COMMON STOCKHOLDER") thereof, be cancelled and
converted into and shall become the right to receive the Per Share Merger
Consideration in cash, without interest (the "COMMON MERGER CONSIDERATION").
(iii) CONVERSION OF SERIES 1 CONVERTIBLE PREFERRED SHARES. At the
Effective Time, each Series 1 Convertible Preferred Share issued and outstanding
immediately prior to the Effective Time (other than Series 1 Convertible
Preferred Shares held in the Company's treasury) shall, by virtue of the Merger
and without any action on the part of Acquisition, the Company or any holder of
Series 1 Convertible Preferred Shares (a "PREFERRED STOCKHOLDER"), be cancelled
and converted into and shall become the right to receive the Per Share Merger
Consideration in cash, without interest (the "SERIES 1 MERGER CONSIDERATION").
The Common Shares together with the Series 1 Convertible Preferred Shares,
hereinafter are referred to as the "SHARES". The Common Stockholders and the
Preferred Stockholders, hereinafter referred to as the "STOCKHOLDERS".
(iv) ADJUSTMENTS FOR STOCK CHANGES. Notwithstanding the
foregoing if, between the date of this Agreement and the Effective Time, the
outstanding Common Shares or the Series 1 Convertible Preferred Shares shall
have been changed into a different number of shares or a different class by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares then the Common Merger Consideration or
the Series 1 Merger Consideration, as the case may be, shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(b) CONVERSION OF STOCK OF ACQUISITION. At the Effective Time, each
outstanding share of the common stock, $0.01 par value per share, of Acquisition
shall be converted into one share of common stock, $0.01 par value per share, of
the Surviving Company.
(c) CANCELLATION OF TREASURY SHARES. At the Effective Time, each Share
held in the treasury of the Company shall, by virtue of the Merger and without
any action on the part of Acquisition, the Company or the holder thereof, be
canceled, retired and cease to exist and no Merger Consideration shall be
delivered with respect thereto.
SECTION 1.9. PAYMENT OF MERGER CONSIDERATION.
(a) As of the Effective Time, Acquisition shall deposit with such
agent or agents as may be appointed by Parent and Acquisition (the "Payment
Agent") for the benefit of the holders of Shares in cash an aggregate of
$56,048,389 (which includes a
3
$1.0 million reserve for the adjustments to the Aggregate Merger Consideration
to be made pursuant to Section 1.11) (such cash is hereinafter referred to as
the "Merger Fund").
(b) On a date (the "True Up Payment Date") that shall be within three
(3) business days after the calculations required by Section 1.11 become final
as provided in Section 1.11, Parent shall deposit in cash in the Merger Fund
with the Payment Agent for the benefit of the holders of Shares any additional
amounts necessary to pay the Aggregate Merger Consideration as adjusted pursuant
to Section 1.11.
(c) As soon as reasonably practicable after the Effective Time, the
Payment Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") whose shares were converted into the
right to receive the Common Merger Consideration or the Series 1 Merger
Consideration, as the case may be, pursuant to Section 1.8: (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 Payment Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify) and (ii)
instructions on how to surrender the Certificates in exchange for the Common
Merger Consideration or the Series 1 Merger Consideration, as applicable.
(d) As soon as practicable after the Effective Time, payment of $12.60
per Common Share and $12.60 per Series 1 Convertible Preferred Share (the
"Initial Payment") shall be made to Stockholders, subject, in the case of
Stockholders whose Shares are represented by Certificates, to the requirements
of Section 1.9(f) with respect to the surrender of Certificates. As soon as
practicable after the True Up Payment Date, final payment shall be made to the
Stockholders in an additional amount to be calculated by making the adjustments
set forth in Section 1.11, subject, in the case of Stockholders whose Shares are
represented by Certificates, to the requirements of Section 1.9(f) with respect
to the surrender of Certificates.
(e) As soon as practicable after the Effective Time, payment shall be
made to holders of Company Stock Options in an amount (the "Initial Option
Amount") equal to $12.60 per Common Share for which such Company Stock Options
are exercisable LESS the applicable exercise price as set forth on Schedule
3.5(b). As soon as practicable after the True Up Payment Date, final payment
shall be made to holders of Company Stock Options in an additional amount to be
calculated pursuant to Section 1.10(a)(taking into account the adjustments set
forth in Section 1.11).
(f) Notwithstanding anything herein to the contrary, no payments of
Common Merger Consideration or Series 1 Merger Consideration shall be made to
any holder whose Shares are represented by Certificates until such holder has
surrendered to the Payment Agent a Certificate for cancellation, together with
the requisite letter of transmittal duly executed as described herein. Upon
surrender of such Certificate and delivery of the letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor a
check representing the Common Merger Consideration and/or the Series 1 Merger
Consideration which such holder has the right to receive pursuant to the
provisions of this Article 1 and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Shares which is not
4
registered in the transfer records of the Company, payment of the Common Merger
Consideration or the Series 1 Merger Consideration may be made to a transferee
if the Certificate representing such Shares is presented to the Payment Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.9, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Common Merger Consideration and/or the Series 1
Merger Consideration as contemplated by this Section 1.9. No interest shall be
paid or shall accrue in respect of such cash payments.
(g) In the event that any Certificate shall have been lost, stolen or
destroyed, the Payment Agent shall issue in exchange therefor, upon the making
of an affidavit of that fact by the holder thereof, such Common Merger
Consideration and/or the Series 1 Merger Consideration as may be required
pursuant to this Agreement; PROVIDED, HOWEVER, that Parent or the Payment Agent
may, in its discretion, require the delivery of a suitable bond or indemnity.
(h) All Common Merger Consideration or the Series 1 Merger
Consideration paid in accordance with the terms hereof shall be deemed to have
been paid in full satisfaction of all rights pertaining to such Shares, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Company of the Shares which were outstanding immediately prior
to the Effective Time. If after the Effective Time Certificates are presented to
the Surviving Company for any reason they shall be canceled and exchanged as
provided in this Article 1.
(i) Any portion of the Merger Fund which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent upon demand and any stockholders of the Company who have not
theretofore complied with this Article 2 shall thereafter look only to Parent
for payment of their claim for the Common Merger Consideration or the Series 1
Merger Consideration.
(j) Neither Acquisition nor the Company shall be liable to any holder
of Shares for cash from the Merger Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(k) All Common Merger Consideration or the Series 1 Merger
Consideration paid upon the surrender of certificates representing the
outstanding Shares in accordance with the terms hereof shall be deemed, to the
fullest extent permitted by Applicable Law, to have been delivered in full
satisfaction of all rights pertaining to such Shares, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Company of the Shares which were outstanding immediately
prior to the Effective Time.
SECTION 1.10 TREATMENT OF STOCK OPTIONS.
(a) CONVERSION OF STOCK OPTIONS. Each vested and unvested option to
purchase Common Shares (each a "Company Stock Option") that has been granted and
is outstanding immediately prior to the Effective Time shall be cancelled and
extinguished and at the Effective Time shall become the right to receive an
amount, without interest, and
5
subject to applicable withholding taxes, in cash equal to the remainder that
results when the aggregate exercise price of such option is subtracted from the
product of (i) the number of Common Shares for which such option is exercisable
multiplied by (ii) the Per Share Merger Consideration. The sum of the exercise
prices for all outstanding Company Stock Options, less the sum of all exercise
prices actually paid in respect of Company Stock Options to the Company between
the date hereof and the Closing Date (the "Aggregate Paid Exercise Prices") is
the "Aggregate Option Exercise Price."
(b) AMENDMENTS TO THE COMPANY STOCK OPTIONS. At or before the
Effective Time, the Company shall cause to be effected any necessary amendments
to the terms of Company Stock Options to give effect to the foregoing provisions
of this Section 1.10.
SECTION 1.11 AGGREGATE MERGER CONSIDERATION AND ADJUSTMENTS.
(a) TRUE UP BALANCE SHEET AND ADJUSTMENTS.
(i) As promptly as possible, but no later than
forty-five (45) calendar days after the Closing Date, the Surviving Company
shall prepare a consolidated balance sheet of the Company, dated as of the
Closing Date (the "True Up Balance Sheet"), which shall be prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP") and in accordance with accounting policies and practices consistent
with those used in the preparation of the Company's audited financial
statements. On completion of the True Up Balance Sheet, the Surviving Company
(with the assistance of the Transition Personnel) shall calculate the Aggregate
Merger Consideration as adjusted to reflect (i) Balance Sheet adjustments as set
forth in Section 1.11(c), (ii) the adjustments relating to property damage in
Section 1.11(b), and (iii) Transaction Expense Adjustments (hereinafter defined
in Section 1.11(d)). The adjustments to the Aggregate Merger Consideration set
forth in this Section 1.11 shall be calculated in a manner consistent with the
calculations set forth on Exhibit A. Promptly following completion of such
calculations, the Surviving Company shall provide to Parent the True Up Balance
Sheet and such Aggregate Merger Consideration calculations. If within five (5)
business days following delivery of the True Up Balance Sheet and such
calculations to Parent, Parent has not given the Surviving Company and Xxxxxxx
Xxxxxx notice of any objection, then such Aggregate Merger Consideration
calculation shall be deemed to be final on the fifth business day following
delivery. If Parent gives notice of objection, then Parent and Surviving Company
(with the assistance of the Transition Personnel) shall have five (5) business
days within which to resolve the objection to their mutual satisfaction. If no
resolution is reached by the parties within such five-day period, the issues in
dispute will be submitted to Xxxxxx Xxxxxxxx LLP, certified public accountants
(the "Accountants"), for resolution. The determination of the Accountants, as
set forth in a notice delivered to the Surviving Company, will be binding on
both parties. The Aggregate Merger Consideration calculation as adjusted
pursuant to this Section 1.11 in accordance with the Accountants' determination
shall be deemed final on the day following delivery of the Accountants' notice
as provided in the immediately preceding sentence.
(ii) For purposes of preparing the True Up Balance Sheet,
the Surviving Company shall engage, as independent contractors, for such period
following the Closing Date as is reasonably necessary, the Company's current
Chief Executive Officer,
6
the current Vice President of Finance, two Controllers, one member of the
accounting staff and an administrative assistant (collectively, the "Transition
Personnel"). Each of the Transition Personnel shall be compensated as an
independent contractor for such period commensurately with such person's
compensation from the Company at the Closing Date, taking salary, bonus and
benefits into account. The Company's current Chief Executive Officer will be
responsible for reconciling as necessary the True Up Balance Sheet.
(b) PROPERTY DAMAGE ADJUSTMENTS.
(i) In the event that, before the Effective Time, all or
any portion of the Properties is damaged or destroyed by casualty that is
covered by insurance such that the cost to repair such damage or destruction (as
reasonably estimated by the Company and Parent) (A) would not exceed $3,000,000
or (B) would exceed $3,000,000 and Parent does not elect to terminate this
Agreement pursuant to Section 8.1(f), the Company shall assign to Parent any
right to insurance proceeds by reason of such casualty, the Aggregate Merger
Consideration shall be decreased by the amount of any deductible to the
insurance applicable to such casualty.
(ii) In the event that, before the Effective Time, all or
any portion of the Properties is damaged or destroyed by casualty that is not
covered by insurance such that the cost to repair (A) would not exceed
$2,000,000 or (B) would exceed $2,000,000 and Parent does not elect to terminate
this Agreement pursuant to Section 8.1(f), the Company shall assign to Parent
any right to insurance proceeds by reason of such casualty, the Aggregate Merger
Consideration shall be decreased by an amount equal to the lesser of (X) the
cost to repair such damage, or (Y) $2,000,000.
(c) BALANCE SHEET ADJUSTMENTS.
(i) The Aggregate Merger Consideration shall be adjusted
as follows to reflect changes in the amounts of certain assets and liabilities
of the Company through the Closing Date. For purposes of these calculations, the
"Assumed Balance Sheet Amount" is -$49,518,278 (such negative amount
representing the sum of the "Company Assets" MINUS the "Company Liabilities",
such "Company Assets" and "Company Liabilities" to be determined in a manner
consistent with the calculations and information set forth on EXHIBIT A).
(ii) To the extent that the sum of the Company Assets
MINUS the Company Liabilities (such sum, the "Actual Amount") calculated based
on the True Up Balance Sheet is less than the Assumed Balance Sheet Amount, the
Aggregate Merger Consideration shall be decreased by such difference.
(iii) To the extent that the Actual Amount
calculated based on the True Up Balance Sheet is greater than the Assumed
Balance Sheet Amount, the Aggregate Merger Consideration shall be increased
by such difference.
(d) TRANSACTION EXPENSE ADJUSTMENTS. The Aggregate Merger
Consideration shall be further adjusted as follows in connection with directors'
and officers' insurance premiums (such adjustment, the "Transaction Expense
Adjustments"):
7
to the extent that the actual cost of the insurance policies purchased in
accordance with Section 6.3(b) is (x) greater than $100,000, the Aggregate
Merger Consideration will be decreased by the amount by which such actual cost
exceeds $100,000, or (y) less than $100,000, the Aggregate Merger Consideration
will be increased by the amount by which $100,000 exceeds such actual cost.
ARTICLE 2
CONDITIONS TO CONSUMMATION OF MERGER
SECTION 2.1. CONDITIONS TO ALL PARTIES' OBLIGATIONS. The respective
obligations of the parties hereto to consummate the Merger shall be subject to
the satisfaction (or waiver by each party) as of the Effective Time of the
following conditions:
(a) GOVERNMENTAL APPROVALS. Any notice or approvals to or of
any federal, state or foreign governmental authority with respect to the Merger
shall have been either filed, in the case of notices, or received, in the case
of approvals.
(b) NO ORDER. No federal, state or foreign governmental,
administrative or regulatory authority or other agency or commission or court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which remains in effect, and which has the
effect of making the transactions contemplated hereby illegal or otherwise
prohibiting consummation of the transactions contemplated by this Agreement.
(c) STOCKHOLDER APPROVAL. This Agreement and the terms of the
Merger shall have been approved by the holders of two-thirds of the Shares, in
accordance with the applicable provisions of the MGCL and the Articles of
Incorporation and bylaws of the Company.
SECTION 2.2. CONDITIONS TO PARENT AND ACQUISITION'S OBLIGATIONS. The
obligations of Parent and Acquisition to consummate the Merger are subject to
the satisfaction (or waiver by each of Parent and Acquisition) as of the
Effective Time of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company made in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and,
except as specifically contemplated by this Agreement, as of the Effective Time,
as though made as of the Effective Time (except to the extent such
representations specifically relate to an earlier date, in which case such
representations shall be true and correct in all material respects as of such
earlier date), and the Company shall have performed or complied with, or shall
have caused to be performed or complied with, in all material respects all
obligations and covenants required by this Agreement to be performed or complied
with by the Company by the Effective Time; and Parent and Acquisition shall have
received from the Company a certificate dated as of the Effective Time and
signed by an authorized officer of the Company confirming the foregoing.
8
(b) CERTIFICATES OF GOOD STANDING. Parent and Acquisition shall
have received from the Company (i) certificates as to the Company and each of
the Subsidiaries, issued by the appropriate governmental authority of the
respective jurisdictions of incorporation of each of the Company and each of the
Subsidiaries (ii) certificates as to the Company issued by the appropriate
governmental authority of each of the jurisdictions in which the Company is
qualified to do business as a foreign corporation as set forth on SCHEDULE 3.1,
and (iii) certificates as to each of the Subsidiaries issued by the appropriate
governmental authority of each jurisdiction in which such Subsidiary is
qualified to do business as a foreign corporation as set forth on SCHEDULE
3.6(a), in each case evidencing its good standing in such jurisdiction or state
as of a date not more than ten days prior to the Effective Time.
(c) RESOLUTIONS. Parent and Acquisition shall have received
from the Company (i) certified copies of resolutions duly adopted by the Board
of Directors of the Company authorizing the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
and (ii) certified copies of resolutions of the Stockholders or a certificate of
the Secretary of the Company certifying as to the affirmative vote of two-thirds
of the votes that the Stockholders of the outstanding shares are entitled to
cast approving this Agreement and the terms of the Merger, and all such
resolutions shall not have been revoked and shall remain in full force and
effect.
(d) THIRD-PARTY CONSENTS. The Company shall have obtained from
CapMark Services its consent and agreement to the assignment of the CapMark
Loans to, and assumption of the CapMark Loans by, Parent's designee in
connection with any sale by Parent of certain assets of the Company, including
the assets of the Company which secure the CapMark Loans. The Company shall have
obtained in writing any third-party consents necessary in connection with a sale
by Parent of certain assets of the Company and the assignment of all material
service contracts, equipment leases or other agreements affecting such assets.
The Company shall have obtained in writing any material third-party consents
required under any of the Contracts that are indicated with an asterisk on
SCHEDULE 3.4. For purposes hereof, "CapMark Loans" means, collectively, (i) the
loan (the "South Bay Loan") in the original principal amount of $9,450,000
between CapMark Services, successor to AMRESCO Capital Corporation (together
with any successor obligee with respect to the South Bay Loan or the Tucson
Loan, "CapMark") and PGP Southbay Office Tower, Inc., encumbering the South Bay
Property (as defined in Schedule 3.9(a)(1) and (ii) the loan (the "Tucson Loan")
in the original principal amount of $3,850,000 between CapMark and PGP North
Tucson Business Center, Inc., encumbering the Tucson Property (as defined in
Schedule 3.9(a)(1)).
(e) TENANT ESTOPPELS. The Company shall have obtained and
delivered to Parent or its designee at least two (2) business days prior to
Closing tenant estoppel certificates (each an "Estoppel Certificate") addressed
to Parent or its designee, in form and substance attached hereto as Exhibit B,
or otherwise including substantially all of the information provided for in each
tenant's lease or leases from (i) tenants under Leases occupying at least
seventy percent (70%) of the rentable square feet of the Properties, (ii) each
tenant whose Lease or Leases covers at least 10,000 rentable square feet of the
Properties, and (iii) each tenant (other than up to two tenants) whose Lease or
Leases covers at least 5,000 but less than 10,000 rentable square feet of the
Properties.
9
(f) TITLE MATTERS. There shall be no liens or encumbrances on
the assets of the Company and its Subsidiaries other than liens for property
taxes for the then current fiscal year not yet payable and the title exceptions
shown on SCHEDULE 2.2(f) (collectively, "PERMITTED EXCEPTIONS"). The Company
shall have obtained pay-off letters from the holders of all long-term
indebtedness secured by the assets of the Company or its Subsidiaries (other
than the CapMark Loans and equipment leases), which provide for the payment in
full of such indebtedness at the Closing and, upon the payment in full of such
indebtedness, the release of all liens and encumbrances affecting the assets of
the Company and its Subsidiaries, other than Permitted Exceptions.
SECTION 2.3. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations of
the Company to consummate the Merger are subject to the satisfaction (or waiver
by the Company) as of the Effective Time of the following conditions:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of each of Parent and Acquisition made in this
Agreement shall be true and correct in all material respects as of the date of
this Agreement and as of the Effective Time, as though made as of the Effective
Time (except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct as of
such earlier date), and each of Parent and Acquisition shall have performed or
complied in all material respects with all obligations and covenants required by
this Agreement to be performed or complied with by Parent, Acquisition or any
affiliate of Parent by the Effective Time; and the Company shall have received
from each of Parent and Acquisition a certificate dated as of the Effective Time
and signed by an authorized trustee or officer of each of Parent and Acquisition
confirming the foregoing.
(b) CERTIFICATE OF GOOD STANDING. The Company shall have
received a certificate as to Acquisition issued by the appropriate governmental
authority of the jurisdiction of incorporation of Acquisition, evidencing its
good standing in such jurisdiction as of a date not more than ten days prior to
the Effective Time.
(c) RESOLUTIONS. The Company shall have received from (i)
Parent satisfactory evidence of authority for the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, (ii) Acquisition certified copies of resolutions duly
adopted by the Board of Directors of Acquisition authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and (iii) Parent certified copies of
resolutions acting in its capacity as the sole stockholder of Acquisition
approving this Agreement and the consummation of the transactions contemplated
hereby, and all such resolutions shall not have been revoked and shall remain in
full force and effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition as
follows:
SECTION 3.1. ORGANIZATION AND GOOD STANDING OF THE COMPANY. The Company
is a corporation duly organized and validly existing under the laws of the State
of Maryland.
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Each of the Subsidiaries is a corporation duly organized and validly existing
under the laws of the State of California. Each of the Company and its
Subsidiaries has all requisite corporate power and authority and, to the
Knowledge of the Company, possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to carry on its
business as presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which would not be reasonably likely to
have a material adverse effect on the business operations, financial condition
or results of operations of the Company and its subsidiaries taken as a whole
(collectively, a "COMPANY MATERIAL ADVERSE EFFECT"). Each of the Company and its
Subsidiaries is duly qualified and in good standing to do business in the
jurisdictions set forth on SCHEDULE 3.1, which jurisdictions constitute all
jurisdictions in which the nature of its business or the ownership, leasing or
holding of its properties makes such qualification necessary, except such
jurisdictions where the failure be so qualified or in good standing would not be
reasonably likely to have a Company Material Adverse Effect.
SECTION 3.2. AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and, on receipt of the consents
and approvals described in Section 3.4, to consummate the transactions
contemplated hereby. All necessary corporate action required to have been taken
by or on behalf of the Company by Applicable Law or its charter documents has
been taken to authorize (a) the approval, execution and delivery on behalf of
the Company of this Agreement and (b) subject to receipt of the consents and
approvals described in Section 3.4, the performance by the Company of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes a valid and binding agreement of
the Company, enforceable against it in accordance with its terms, except (i) as
the same may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors' rights,
including the effect of statutory or other laws regarding fraudulent conveyances
and preferential transfers and (ii) for the limitations imposed by general
principles of equity (the foregoing exceptions set forth in clauses (i) and (ii)
being referred to as the "ENFORCEABILITY EXCEPTIONS").
SECTION 3.3. NO CONFLICTS.
(a) The execution and delivery of this Agreement by the Company
do not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the Articles of Incorporation or By-laws of the Company
or any Subsidiary, (ii) conflict with or violate any law, rule, regulation,
order, judgment or decree of any federal, state, local or foreign court,
governmental or regulatory body, agency or authority (a "GOVERNMENTAL ENTITY")
applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iii) except as set forth
in SCHEDULE 3.3, result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or cancellation
of; or result in the creation of a lien or other encumbrance on any property or
asset of the Company or any Subsidiary pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except where, in the case of (ii) and (iii), such
conflict, violation, breach or default would not have a Company Material Adverse
Effect.
11
(b) Except as set forth in Schedule 3.3, no note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation of the Company or any of its Subsidiaries, by its
terms prohibits the Company or any of its Subsidiaries from incurring
indebtedness or granting liens on any assets of the Company or any of its
Subsidiaries.
SECTION 3.4. CONSENTS AND APPROVALS. Except for (a) the approval of the
Stockholders as contemplated by Section 5.4, (b) filings with the Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), and (c) the filing and recordation of the
Articles of Merger as required by the MGCL neither the execution and delivery of
this Agreement by the Company nor the consummation of the transactions to which
the Company is a party contemplated hereby will require any consent, approval,
authorization or permit of, or filing with or notification to, any federal,
state or foreign governmental or regulatory authority or any other person,
except (i) as set forth on SCHEDULE 3.4 or (ii) where the failure to obtain such
consent, approval, authorization or permit, or to make such filing or
notification, (x) would not prevent or materially delay the Company from
performing its obligations under this Agreement and (y) would not be reasonably
likely to have a Company Material Adverse Effect.
SECTION 3.5. CAPITAL STOCK OF THE COMPANY.
(a) AUTHORIZED AND OUTSTANDING CAPITAL STOCK. The authorized
capital stock of the Company consists of Twelve Million (12,000,000) shares of
stock, of which (i) Two Million (2,000,000) shares have been initially
classified as Preferred Stock, of which Three Hundred Thousand (300,000) shares
have been classified as Series 1 Convertible Preferred Stock, par value $1.00
per share, of which 300,000 shares are outstanding; (ii) Ten Million
(10,000,000) shares have been initially classified as common stock, par value
$1.00 per share, of which 4,052,090 are outstanding, and 118,554 of which were
outstanding and are held as treasury stock by the Company.
(b) THE COMPANY STOCK OPTIONS. SCHEDULE 3.5(b) sets forth the
name of each person holding the Company Stock Options (the "OPTIONHOLDERS"), the
number of Shares with respect to which such Company Stock Options may be
exercised and the exercise price per share of such Company Stock Options.
(c) NO OTHER EQUITY RIGHTS. Except for the Shares, there are no
shares of capital stock or other equity securities of the Company outstanding.
The Shares have not been issued in violation of, and none of the Shares is
subject to, any preemptive or subscription rights. Other than as set forth on
SCHEDULE 3.5(b) with respect to Company Stock Options, there are no outstanding
or authorized warrants, options, "phantom" stock rights, agreements, convertible
or exchangeable securities or other commitments (other than this Agreement)
pursuant to which the Company or any Subsidiary is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of the Company or any Subsidiary. The Shares are not subject to any
voting trust agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the Shares.
12
SECTION 3.6. SUBSIDIARIES; EQUITY INTERESTS.
(a) SUBSIDIARIES. SCHEDULE 3.6(a) sets forth a true and
complete list of all persons of which the Company owns a majority of the equity
interests (each a "Subsidiary"), listing for each such Subsidiary its name, its
jurisdiction of incorporation, its authorized capital stock, partnership capital
or equivalent, the number and type of its issued and outstanding shares of
capital stock, partnership interests or similar ownership interests, the
percentage of such shares of capital stock, partnership interests or similar
ownership interests owned by the Company and the current ownership of any such
shares, partnership interests or similar ownership interests not owned by the
Company. All of the issued and outstanding shares of each of the Subsidiaries
are validly issued, fully paid and nonassessable. The shares of each of the
Subsidiaries have not been issued in violation of, and none of such shares is
subject to, any preemptive or subscription rights. There are no outstanding or
authorized warrants, options, "phantom" stock rights, agreements, convertible or
exchangeable securities or other commitments pursuant to which any Subsidiary is
or may become obligated to issue, sell, purchase, return or redeem any shares of
capital stock or other securities of such Subsidiary. The shares of each of the
Subsidiaries are not subject to any voting trust agreement or other contract,
agreement, arrangement, commitment or understanding, including any such
agreement, arrangement, commitment or understanding restricting or otherwise
relating to the voting, dividend rights or disposition of such shares. No
Subsidiary is required to file any form, report or other document under the
Securities Act of 1933, as amended (the "Securities Act") or Exchange Act.
(b) OTHER EQUITY INTERESTS. Except as set forth on SCHEDULE
3.6(b), other than the Subsidiaries, there are no corporations, partnerships,
joint ventures, associations or other similar entities in which the Company
owns, of record or beneficially, any direct or indirect equity or other similar
interest or any right (contingent or otherwise) to acquire the same.
SECTION 3.7. FINANCIAL STATEMENTS. The financial statements set forth in
the Company's Form 10-K for the fiscal year ended December 31, 1999, which
consist of the audited consolidated balance sheets of the Company and the notes
thereto as of December 31, 1998 and 1999 (the December 31, 1999 balance sheet
being referred to herein as the "COMPANY BALANCE SHEET"), and the audited
consolidated statements of income, stockholders' equity and cash flows and the
notes thereto for the years ended December 31, 1997, 1998 and 1999, audited by
Xxxxxx Xxxxxxxx LLP, whose report thereon is included therewith, were prepared
in accordance with GAAP, and present fairly, in all material respects, the
Company's consolidated financial position and the results of its consolidated
operations, stockholders' equity and consolidated cash flows as of the date
thereof and for the period covered thereby.
SECTION 3.8. ASSETS OTHER THAN REAL PROPERTIES. The Company has good
title to all material assets, except as otherwise specified below in this
Section 3.8, reflected on the Company Balance Sheet or thereafter acquired,
except those sold or otherwise disposed of since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practice, free and
clear of all mortgages, liens, security interests or other encumbrances of any
nature whatsoever, except (a) such as are disclosed on SCHEDULE 3.8 and (b)
Permitted Liens. For purposes of this Agreement,
13
"PERMITTED LIENS" shall mean (i) mechanics', carriers', workmen's,
warehousemen's, repairmen's or other like liens arising in the ordinary course
of business, (ii) liens arising under original purchase price conditional sale
contracts and equipment leases with third parties entered into in the ordinary
course, (iii) liens for Taxes and other governmental obligations and (iv) other
imperfections of title, restrictions or encumbrances, if any, which liens,
imperfections of title, restrictions or other encumbrances do not materially
impair the continued use in the business of the respective owner thereof, and
operation of the specific assets to which they relate.
This Section 3.8 does not relate to real property or interests in real
property, which are the subject of Section 3.9, or to intellectual property,
which is the subject of Section 3.10.
SECTION 3.9. REAL PROPERTIES.
(a) The Company and/or its Subsidiaries own the real property
listed on SCHEDULE 3.9(a)(1), which is the only real property owned by the
Company or its Subsidiaries. The Company represents and warrants that, to the
Company's Knowledge, the leases, together with all amendments, modifications,
extensions thereto and guaranties thereof (collectively, the "LEASES") which are
the Leases for the tenants described on the rent roll (the "Rent Roll")(which is
attached as SCHEDULE 3.9(a)(2)) and the service contracts, equipment leases and
other personal property financings, or other agreements relating to the
operation, repair or maintenance of the Properties (collectively, the "SERVICE
CONTRACTS") listed on SCHEDULE 3.9(a)(3) hereto are all of the leases, contracts
or agreements affecting the Properties and that the copies of the Leases and
Service Contracts heretofore made available to Parent constitute full, true and
correct copies of the Leases and Service Contracts. The Company further
represents and warrants that, to the Company's Knowledge, such Service Contracts
constitute all of the agreements (exclusive of the Leases) which would be
binding upon the Surviving Corporation or the Properties following the Closing
Date. The Company shall cause to be terminated prior to the Closing (i) all
Service Contracts listed on SCHEDULE 3.9(a)(3) and marked rejected and (ii) all
Brokerage Agreements, equipment leases, contracts or other agreements in
connection with the Property that are not listed on SCHEDULE 3.9(a)(3) or
entered into by the Company after the date of this Agreement without the prior
written consent of Parent.
(b) All Leases have been duly executed by the Company or its
Subsidiaries, as applicable, and, to the Company's Knowledge, except as set
forth on SCHEDULE 3.9(b), (A) all Leases are in full force and effect according
to the terms set forth therein and (B) there is no default under any Lease nor
circumstances which with the giving of notice or the passage of time would
constitute a default under any Lease (including any bankruptcy of any tenant);
and except as has been set forth on SCHEDULE 3.9(b), the Company has not made
any oral agreement with any tenant of the Properties and has not granted any
concession, abatement or adjustment to any tenant except as expressly set forth
in the Lease with such tenant.
(c) The brokerage agreements listed on SCHEDULE 3.9(c) are the
only brokerage agreements in connection with the Properties.
14
(d) All leasing or brokerage fees or commissions presently
owing on the date of execution of this Agreement with respect to any of the
Leases have been or shall be paid in full by the Company prior to the Closing.
(e) To the Company's Knowledge, the information set forth in
the Rent Roll is true, correct and complete.
(f) There are no material service contracts, equipment leases
or other agreements affecting the Properties except the Service Contracts.
(g) Except as set forth on SCHEDULE 3.9(g), neither the Company
nor any Subsidiary has been served as a party to, or otherwise notified of, any
litigation or other proceeding that arises out of the ownership of the
Properties or that might detrimentally affect the use, operation or development
of the Properties for its intended purpose or the value of the Properties or
adversely affect the ability of the Company to perform its obligations under
this Agreement, nor, to the Company's Knowledge, without inquiry, has any such
litigation been threatened with respect to the Properties.
(h) During the period of the Company's direct or indirect
ownership of the Properties, and, to the Company's Knowledge, during the period
of the Company or its Subsidiaries' ownership or occupation of any formerly
owned properties neither the Company nor any of its Subsidiaries, has engaged in
any operations or activities upon, or any use or occupancy of the Properties, or
any portion thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal of any Hazardous Materials (whether legal or illegal,
accidental or intentional) on, under, in or about the Properties, or transported
any Hazardous Materials to, from or across the Properties, except in all cases
in material compliance with all applicable governmental or other environmental
laws, statutes, ordinances, orders or other requirements (collectively,
"ENVIRONMENTAL LAWS") and only in the course of legitimate business operations
at the Properties (which does not include any business primarily or
substantially devoted to the handling, manufacture, treatment, storage, use,
generation, release, discharge, refining, dumping or disposal of Hazardous
Materials). Neither the Company nor its Subsidiaries has received any written
notice, demand, letter, claim, request for information or other written
communication alleging that the Company or any of its Subsidiaries is or has
been in violation of, or has any liability or potential liability under, any
Environmental Law or any governmental permit, license or other authorization
thereunder. Except as set forth in the Reports and Documents and except for the
use of cleaning supplies and other substances in the ordinary course of business
in a manner that complies in all material respects with Environmental Laws, to
the Company's knowledge, there are no Hazardous Materials on the Properties. To
the knowledge of the Company, none of the properties currently or formerly owned
or occupied by the Company is listed or proposed for listing on the "National
Priorities List" or the Comprehensive Environmental Response, Compensation and
Liability Information System pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 as amended, or any analogous
state list. Neither the execution of this Agreement nor the consummation of the
transactions contemplated herein will require any investigation or remediation
of Hazardous Materials, or any notice to or consent of any governmental
authority or third party, pursuant to any applicable Environmental Law or any
governmental permit, license or other authorization thereunder. The term
"HAZARDOUS
15
MATERIALS" as used in this Agreement shall mean and refer to (i) any hazardous
or toxic wastes, materials or substances, or chemicals, and other pollutants or
contaminants, which are or become regulated by applicable local, state, regional
and/or federal orders, ordinances, statutes, rules, regulations (as interpreted
by judicial and administrative decisions) and laws; (ii) asbestos,
asbestos-containing materials or urea formaldehyde; (iii) polychlorinated
biphenyls; (iv) flammables, explosive, corrosive or radioactive materials; (v)
medical waste and biochemicals; and (vi) gasoline, diesel, petroleum or
petroleum by-products. The term "REPORTS AND DOCUMENTS" as used in this
Agreement shall mean all environmental reports pertaining to or concerning the
Properties to the extent the same were made available to Parent prior to the
date of this Agreement.
(i) To the Company's Knowledge, there is no default, nor any
circumstance which with the giving of notice or the passage of time would
constitute a default, under the CapMark Loan Documents. The term "CapMark Loan
Documents" as used in this Agreement shall mean and refer to the documents
evidencing and securing the CapMark Loans.
(j) To the Company's Knowledge, there are no material
violations of any law, rule, regulation, judgment or decree applicable to the
Company or the Properties which would materially affect the value of the
Properties for their intended use.
(k) The representations and warranties contained in this
Section 3.9 shall be deemed to be remade of the Closing Date.
SECTION 3.10. INTELLECTUAL PROPERTY. SCHEDULE 3.10 sets forth a complete
and correct list of (i) all items which either the Company or a Subsidiary
claims as a trademark, trade name or registered copyright, and all trade name
registrations or applications, copyright registrations or applications for
copyright registration, (ii) each license or licensing agreement for any of the
foregoing to which either the Company or a Subsidiary is a party or by which
either is bound and (iii) the jurisdictions in which each such trademark, trade
name, copyright, application and registration has been issued, filed or made
(including the official number or other identifier of such issuance,
registration or application). To the Knowledge of the Company, neither the
Company nor any Subsidiary infringes upon or unlawfully or wrongfully uses, in
either such case in any material respect, any intellectual property owned or
claimed by another person. The Company or a Subsidiary either owns the entire
right, title and interest in, to and under, or has a valid license to use, any
and all intellectual property which is material to the conduct of the business
of the Company in the manner that the business of the Company is currently being
conducted.
SECTION 3.11. CONTRACTS. SCHEDULES 3.11(a) through 3.11(m) set forth a
true and complete list of each of the following types of contracts to which the
Company or any Subsidiary is a party (together with the leases related to the
Leased Properties, "CONTRACTS"):
(a) EMPLOYMENT, INDEPENDENT CONTRACTOR AND CONSULTING
AGREEMENTS. (i) Any employment agreement, employment contract or any agreement
or contract providing for the payment of any severance compensation to any
Company Person (as defined below) or for the provision, vesting and/or
acceleration of any employee benefits
16
following a change of ownership or control of the Company or its Subsidiaries
and (ii) any independent contractor or consulting agreement that has an
aggregate liability after the Closing in excess of $10,000 and is not terminable
by notice of less than 60 calendar days for a cost of less than $10,000;
(b) COLLECTIVE BARGAINING AGREEMENTS. Any employee collective
bargaining agreement or other contract with any labor union;
(c) NON-COMPETITION AGREEMENTS. Any covenant or agreement that
restricts the ability of the Company or any Subsidiary or any management
employee of the Company or any Subsidiary to compete in any line of business in
any place in the world;
(d) AGREEMENTS WITH OFFICERS, DIRECTORS OR EMPLOYEES. Any
agreement or contract with any officer, director or employee of the Company or
any Subsidiary (other than employment agreements covered by paragraph (a)
above);
(e) SUBLEASES OF LEASED PROPERTIES. Any sublease or similar
agreement under which the Company or any Subsidiary is a sublessor of, or makes
available for use by any third party, all or any portion of any real property
leased by the Company or any Subsidiary;
(f) PERSONAL PROPERTIES LEASES. Any lease or similar agreement
under which (i) the Company or any Subsidiary is lessee of, or holds or uses,
any machinery, equipment, vehicle or other tangible personal property owned by a
third party or (ii) the Company or any Subsidiary is a lessor or sublessor of,
or makes available for use by any third party, any tangible personal property
owned or leased by the Company or any Subsidiary, in any such case which has an
aggregate liability after the Closing in excess of $10,000 and is not terminable
by notice of less than 60 calendar days for a cost of less than $10,000;
(g) SUPPLY AND SERVICE AGREEMENTS. (i) Any continuing agreement
or contract for the future purchase by the Company or any Subsidiary of
materials, supplies or equipment or (ii) any advertising agreement or
arrangement, in any such case which has an aggregate liability after the Closing
in excess of $10,000 and is not terminable by notice of less than 60 calendar
days for a cost of less than $10,000;
(h) INDEBTEDNESS. Any agreement or contract under which the
Company or any Subsidiary has borrowed or loaned any money or issued any note,
bond, indenture or other evidence of indebtedness or directly or indirectly
guaranteed indebtedness, liabilities or obligations of others (other than
endorsements for the purpose of collection in the ordinary course of business),
or any other note, bond, indenture or other evidence of indebtedness;
(i) GUARANTEES. Any agreement or contract under which any other
person has directly or indirectly guaranteed indebtedness, liabilities or
obligations of the Company or any Subsidiary (other than endorsements for the
purpose of collection in the ordinary course of business) or any agreement for
indemnification;
17
(j) PARTNERSHIPS, LIMITED LIABILITY COMPANIES AND JOINT
VENTURES. Any partnership agreement, limited liability company agreement or
other joint venture agreement to which the Company or any Subsidiary is a party;
(k) CONTRACTS PROVIDING FOR POWER OF ATTORNEY. All material
contracts or arrangements that result in any person or entity holding a power of
attorney from the Company or any Subsidiary that relates to the Company, any
Subsidiary or their respective businesses;
(l) ACQUISITION AND DISPOSITION AGREEMENTS. All agreements
pursuant to which the Company or any Subsidiary, in the last five years, has
acquired, or agreed to acquire, or disposed or agreed to dispose of, all or a
substantial portion of the assets of or equity interests in any corporation,
partnership or other entity or any Subsidiary, division or business thereof,
except for such agreements that have been filed by the Company as exhibits or
otherwise with the Securities and Exchange Commission; and
(m) OTHER AGREEMENTS. Any other agreement, contract, lease,
license (including exclusive Intellectual Properties licenses), commitment or
instrument to which the Company or any Subsidiary is a party or by or to which
the assets or business of the Company or any Subsidiary is bound or subject,
which in any case has an aggregate liability after the Closing in excess of
$10,000, and is not terminable by notice of less than 60 calendar days for a
cost of less than $10,000.
Set forth on SCHEDULE 3.11 is a list of the material contracts of the Company
and its Subsidiary, as the case may be ("Material Contracts"). With respect to
each such Material Contract, the Company or its Subsidiary, as the case may be,
has performed all material obligations required to be performed by it to date
under the Contracts to which it is a party and it is not in breach or default in
any material respect thereunder and, to the Knowledge of the Company (as defined
below), no other party to any of the Contracts is in breach or default in any
material respect thereunder.
SECTION 3.12. LITIGATION; DECREES. SCHEDULE 3.12 sets forth a list, as of
the date of this Agreement, of all pending and, to the Knowledge of the Company,
threatened lawsuits or claims with respect to which the Company has contacted in
writing the defendant or has been contacted in writing by the claimant or by
counsel for the claimant by or against the Company or any of its Subsidiaries or
any of the properties, assets, operations or businesses of the Company or any of
its Subsidiaries and which (a) involve a claim by or against the Company or any
of its Subsidiaries of more than $10,000, (b) seek any injunctive relief or (c)
relate to the transactions contemplated by this Agreement. To the Knowledge of
the Company, except as disclosed on SCHEDULE 3.12, the Company is not in default
under any judgment, order or decree of any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, applicable to the Company or any of its Subsidiaries or any of the
properties, assets, operations or businesses of the Company or any of its
Subsidiaries, except where such default would not be reasonably likely to have a
Company Material Adverse Effect.
18
SECTION 3.13. EMPLOYEE AND RELATED MATTERS; ERISA.
(a) PLANS. SCHEDULE 3.13(a) sets forth each employee pension,
retirement, profit sharing, stock bonus, stock option, stock purchase,
incentive, deferred compensation, hospitalization, medical, dental, vision, life
insurance, accidental death and dismemberment insurance, business travel
insurance, cafeteria and flexible spending, sick pay, disability, severance,
golden parachute or other plan, fund, program, policy, contract or arrangement
(including any contracts or agreements with certain employees of the Company
that relate to the transactions contemplated by this Agreement) providing
employee benefits that is maintained or contributed to by the Company in which
any the Company Persons have participated or under which any the Company Persons
have accrued and remain entitled to any benefits (the "PLANS"). The Company has
delivered to Parent and Acquisition true, complete and correct copies of (i)
each Plan (or, in the case of any unwritten Plans, descriptions thereof), (ii)
the most recent annual report on Form 5500 filed with the IRS with respect to
each Plan (if any such report was required), (iii) the most recent summary plan
description for each Plan for which such a summary plan description is required,
(iv) each trust agreement and group annuity contract relating to any Plan, and
(v) the most recent actuarial report or valuation relating to a Plan subject to
Title IV of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Neither the Company nor any corporation or trade or business (whether
or not incorporated) which would be treated as a member of the controlled group
including the Company under Section 4001(a)(14) of ERISA (as defined below) (an
"ERISA AFFILIATE") would be liable for any amount pursuant to Section 4062, 4063
or 4064 of ERISA, if any Plan which is subject to Title IV of ERISA were to
terminate.
(b) COMPLIANCE WITH ERISA AND THE CODE. None of the Company or
any of the Plans or any trust created thereunder, or any trustee or
administrator thereof, has engaged in a transaction in connection with which the
Company would be subject to either a material liability or civil penalty
assessed pursuant to Sections 409, 502(i) or 502(1) of ERISA or a material Tax
imposed pursuant to Section 4971, 4972, 4974, 4975, 4976 or 4980B of the
Internal Revenue Code of 1986, as amended (the "Code"). Except as described on
SCHEDULE 3.13(b), each of the Plans has been operated and administered in all
material respects in accordance with Applicable Laws, including ERISA, and the
Code and, to the Knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any ERISA Affiliate could
be subject to any material liability under the terms of such Plans, ERISA, the
Code or any other applicable law. Each Plan intended to be a qualified plan
under Code Section 401 has received a favorable determination letter to that
effect (a copy of which has been delivered to Parent and Acquisition) and
nothing has occurred since the issuance of such letter that would adversely
affect the Tax qualification of any such Plan. There are no pending or, to the
Knowledge of the Company, threatened claims by or on behalf of any of the Plans,
by any employee or beneficiary covered under any such Plan, or otherwise
involving any such Plan (other than ordinary course claims for benefits).
(c) MULTIEMPLOYER PLAN LIABILITIES. Except as disclosed on
SCHEDULE 3.13(c), none of the Company or any ERISA Affiliate is, or has been
within the last six years, obligated to contribute, on behalf of any current or
former employee of the Company, to a multiemployer plan (as defined in Section
3(37) of ERISA) and no such
19
ERISA Affiliate is liable or reasonably expected to be liable for any withdrawal
liability under Section 4201 of ERISA.
(d) FUNDING; LIENS. With respect to each Plan which is subject
to Title IV of ERISA, (i) the present value of accrued benefits under such Plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to such
Plan, did not, as of its latest valuation date, exceed the then current value of
the assets of such Plan allocable to such accrued benefits, (ii) no "reportable
event" (within the meaning of Section 4043 of ERISA) has occurred with respect
to any Plan for which the 30-day notice requirement has not been waived and
(iii) no condition exists that would subject the Company or any ERISA Affiliate
to any material fine under Section 4071 of ERISA.
(e) EMPLOYEE WELFARE BENEFIT PLANS. No Plan provides benefits,
including, without limitation, death or medical benefits (whether or not
insured), with respect to current or former employees of the Company or any
Subsidiary beyond their retirement or other termination of service, other than
(i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension benefit plan" (as such term is defined in
Section 3(2) of ERISA), (iii) deferred compensation benefits accrued as
liabilities on the books of the Company or any Subsidiary or (iv) benefits the
full cost of which is borne by the current or former employee or his
beneficiary. With respect to any Plan that is an employee welfare benefit plan,
except as disclosed on SCHEDULE 3.13(e), (i) no such Plan is unfunded or funded
through a welfare benefits fund, as such term is defined in Section 419(e) of
the Code and (ii) to the Knowledge of the Company, each such Plan that is a
group health plan, as such term is defined in Section 5000(b)(1) of the Code,
complies with the applicable requirements of Section 4980B(f) of the Code.
(f) LABOR DISPUTE. To the Knowledge of the Company, as of the
date of this Agreement, there is no labor dispute, strike or work stoppage
against the Company or any Subsidiary pending or threatened in writing which may
materially interfere with the respective business activities of the Company or
any Subsidiary. As of the date of this Agreement, to the Knowledge of the
Company, none of the Company, any Subsidiary, or their respective
representatives or employees has committed any material unfair labor practices
in connection with the operation of the respective businesses of the Company or
any Subsidiary, and there is no material charge or complaint against the Company
or any Subsidiary by the National Labor Relations Board or any comparable state
agency pending or threatened in writing.
SECTION 3.14. ABSENCE OF CHANGES OR EVENTS. Except as set forth on
SCHEDULE 3.14, since December 31, 1999, there has not been a Company Material
Adverse Effect, other than changes relating to the economy in general or the
real estate industry in general and, in each case, not disproportionately
affecting the Company. Except as disclosed on SCHEDULE 3.14 or as contemplated
by this Agreement, since December 31, 1999, the business of the Company has been
conducted in the ordinary course consistent with past practice.
SECTION 3.15. COMPLIANCE WITH APPLICABLE LAWS. Except as previously
disclosed by the Company to Parent in writing, to the Knowledge of the Company:
20
(a) GENERAL. The Company is in compliance in all material
respects with all applicable statutes, laws, ordinances, rules, orders and
regulations of any governmental authority or instrumentality, domestic or
foreign ("APPLICABLE LAWS"), except for any such violations that would not
reasonably be likely to have a Company Material Adverse Effect. This Section
3.15 does not relate to matters with respect to Taxes or any other taxes. This
Section 3.15(a) does not relate to environmental matters, which are the subject
of Sections 3.15(c) and 3.15(d).
(b) LOBBYING REGULATORY MATTERS. The Company is in compliance
in all material respects with all substantive, registration and reporting
requirements of the Lobbying Disclosure Act of 1995, as amended, the Foreign
Agent Registration Act of 1938, as amended, the Federal Election Campaign Act,
federal bribery laws and rules regarding the making of gifts to members of the
United States House of Representatives, members of the United States Senate and
members of the executive branch of the federal government of the United States.
(c) PERMITS. Each of the Company and its Subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any governmental agency or authority necessary for each of the Company or its
Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Permits"), except where the failure
to have, or the suspension or cancellation of any of the Permits would not be
reasonably likely to have a Company Material Adverse Effect. As of the date
hereof, no suspension or cancellation of any of the Permits is pending or, to
the Knowledge of the Company, threatened, except where the failure to have, or
the suspension or cancellation of any of the Permits would not be reasonably
likely to have a Company Material Adverse Effect.
SECTION 3.16. TAXES.
(a) TAX RETURNS AND TAXES. Except as set forth on SCHEDULE
3.16(a), the Company has filed or caused to be filed in a timely manner (within
any applicable extension periods) with the appropriate Tax authorities all Tax
Returns they are required to have filed and have paid or provided for all Taxes
they are required to have paid, except where the failure to have filed such a
Tax Return or paid or provided for such Taxes would not have a Company Material
Adverse Effect. There are no material Tax liens or assessments against the
Company or any property or assets of the Company, other than liens for Taxes
that are not due and payable or which may thereafter be paid without penalty. No
deficiencies for any Taxes have been asserted or assessed by applicable
governmental tax authorities against the Company that are not adequately
reserved for.
(b) TAX CLAIMS. Except as set forth on SCHEDULE 3.16(b), no
material claim for assessment or collection of Taxes is presently being asserted
against the Company and the Company is not a party to any pending action,
proceeding, or investigation by any governmental taxing authority nor does the
Company have Knowledge of any such threatened action, proceeding or
investigation.
(c) DEFINITIONS. For purposes of this Agreement:
21
(i) "TAX" (including "TAXES") means all federal, state,
local, foreign and other netincome, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, withholding, payroll,
employment, excise, stamp, premium, property or other taxes of any kind
whatsoever, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto; and
(ii) "TAX RETURN" means any return, report, statement or
information statement required to be filed with respect to Taxes.
SECTION 3.17. EMPLOYEE AND LABOR RELATIONS. Except as set forth on
SCHEDULE 3.17, (a) there is no labor strike, dispute, or work stoppage or
lockout pending or, to the Knowledge of the Company, threatened against or
affecting the Company; (b) to the Knowledge of the Company, no union organizing
campaign is in progress with respect to the employees of the Company; (c) there
is no unfair labor practice charge or complaint against the Company pending or,
to the Knowledge of the Company, threatened before the National Labor Relations
Board, (d) there is no pending or, to the Knowledge of the Company, threatened
grievance that would be reasonably likely to have a Company Material Adverse
Effect and (e) no charges with respect to or relating to the Company are pending
before the Equal Employment Opportunity Commission or any state agency
responsible for the prevention of unlawful employment practices as to which
there is a reasonable likelihood of adverse determination, other than those
which, if so determined, would not be reasonably likely to have a Company
Material Adverse Effect.
SECTION 3.18. INSURANCE POLICIES.
(a) SCHEDULE 3.18 sets forth a true and complete list of all
material insurance policies providing coverage at any time within the past three
years with respect to the Company and the Subsidiaries. The Company has
heretofore provided Parent or Acquisition with a true and correct copy of each
insurance policy listed on Schedule 3.18.
(b) At no time subsequent to January 1, 1997, has the Company
or any Subsidiary (i) been denied any insurance or indemnity bond coverage which
it has requested, or (ii) received notice from any of its insurance carriers
that any insurance premiums will be subject to increase in an amount materially
disproportionate to the amount of the increases with respect thereto (or with
respect to similar insurance) in prior years or that any insurance coverage
currently provided to the Company will not be available in the future
substantially on the same terms as are now in effect.
SECTION 3.19. SEC FILINGS. The Company has filed all required forms,
reports and documents ("COMPANY SEC REPORTS") with the SEC since December 31,
1997, each of which (other than preliminary material) has complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act, each as in effect on the dates such forms, reports and documents
were filed. None of such Company SEC Reports, including any financial statements
or schedules included or incorporated by reference therein, contained when filed
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein in light of the circumstances under which they
were made not misleading. The audited consolidated financial statements of the
Company included in the Company SEC Reports were prepared in accordance with
22
GAAP and present fairly the consolidated financial position of the Company and
its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in consolidated financial position for the
periods then ended. The Company has heretofore furnished to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company as part of any Company SEC Reports.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Prudential Securities, Inc. to the effect that, as of the date
hereof, the Merger Consideration to be received by the holders of the Shares
pursuant to the Merger is fair to such holders from a financial point of view,
which opinion has not been withdrawn.
SECTION 3.21. INFORMATION STATEMENT. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in the
information statement ("INFORMATION STATEMENT") relating to the meeting of the
Company's stockholders to be held in connection with the Merger will, at the
date the Information Statement is first mailed to stockholders of the Company
and at the time of the meeting of stockholders of the Company to be held, if
necessary, in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Information
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder. None of the
information supplied by the Company in writing for inclusion in the Information
Statement (except for information about Parent or Acquisition furnished by
Parent or Acquisition, as the case may be, to the Company) will, at the date the
Information Statement is first mailed to stockholders of the Company, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 3.22. BROKERS AND FINANCIAL ADVISORS. Other than Prudential
Securities Incorporated, no broker, financial advisor, finder or investment
banker is entitled to any brokerage finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company or its Subsidiaries.
SECTION 3.23. RECOMMENDATION OF BOARD OF DIRECTORS: VOTE REQUIRED. To the
Knowledge of the Company, is there no state takeover statute applicable to the
Merger. The Board of Directors of the Company (the "COMPANY BOARD") has
determined to recommend to the Company's stockholders (the "RECOMMENDATION")
that they vote to approve this Agreement and the Merger. The affirmative vote of
a two-thirds of the votes that the holders of the then-outstanding Shares are
entitled to cast with respect to the approval of this Agreement and the Merger
is the only vote of the holders of any class or series of the capital stock of
the Company necessary to approve this Agreement and the Merger.
23
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. Parent is a statutory trust duly formed and validly
existing under the laws of the state of its formation. Parent has all requisite
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to carry on its
business as presently conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which would not have a material adverse
effect on the ability of Parent to perform its obligations under this Agreement,
including its obligation to pay the Merger Consideration (a "PARENT MATERIAL
ADVERSE EFFECT").
SECTION 4.2. AUTHORITY. Each of Parent and Acquisition has all requisite
power and authority to execute and deliver this Agreement and to consummate the
transactions to which each of Parent and Acquisition is a party contemplated
hereby. All necessary action required to have been taken by or on behalf of each
of Parent and Acquisition by Applicable Law or its trust agreement or charter
documents, as the case may be, has been taken to authorize (a) the approval,
execution and delivery on behalf of each of Parent and Acquisition of this
Agreement and (b) the performance by each of Parent and Acquisition of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby. This Agreement constitutes a valid and binding agreement of
each of Parent and Acquisition, enforceable against each of them in accordance
with its terms, except as the same may be limited by the Enforceability
Exceptions.
SECTION 4.3. NO BREACH. The execution and delivery of this Agreement by
each of Parent and Acquisition do not, and the consummation of the transactions
to which each of Parent and Acquisition is a party contemplated hereby will not,
(a) violate or conflict with the organizational documents of Parent or
Acquisition or (b) constitute a material breach or default or give rise to any
lien, third-party right of termination, cancellation, material modification or
acceleration under any material agreement, understanding or undertaking to which
Parent is a party or by which it is bound, or violate or conflict with any
Applicable Law.
SECTION 4.4. CONSENTS AND APPROVALS. Except for (a) filings, permits,
authorizations, consents, and approvals as may be required under applicable
requirements of the Securities Act, the Exchange Act, state securities or blue
sky laws or the HSR Act and (b) the filing and recordation of the Articles of
Merger as required by the MGCL, neither the execution and delivery of this
Agreement by either of Parent or Acquisition nor the consummation of the
transactions to which either Parent or Acquisition is a party contemplated
hereby will require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, except where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification would not have a Parent Material Adverse
Effect.
24
SECTION 4.5. FUNDING. Parent and/or Acquisition have obtained and
furnished to the Company certain financing commitments in connection with the
transactions contemplated hereby which commitments are in full force and effect.
The financing commitments referred to above will be sufficient to make payment
in full of the Merger Consideration with respect to the Shares at the Closing,
and to pay all expenses and fees payable by Parent and/or Acquisition associated
with this Agreement and the transactions contemplated hereby. As of the Closing,
Parent and Acquisition shall have taken all measures necessary to ensure that
Acquisition or Parent will have sufficient cash on hand to pay the Merger
Consideration.
SECTION 4.6. LITIGATION; DECREES. Neither Parent nor any of its
subsidiaries is in default under any judgment, order or decree of any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, applicable to Parent or any of its
subsidiaries or any of the properties, assets, operations or businesses of
Parent or any of its subsidiaries, except where such default would not have a
Parent Material Adverse Effect.
SECTION 4.7. BROKERS. No broker, finder or investment banker is entitled
to any brokerage finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Acquisition.
SECTION 4.8. INFORMATION STATEMENT. None of the information supplied or
to be supplied by Parent or Acquisition to the Company for inclusion or
incorporation by reference in the Information Statement will, at the date the
Information Statement is first mailed to stockholders of the Company and at the
time of the meeting of stockholders of the Company to be held, if necessary, in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. None of the information about Parent or
Acquisition furnished by Parent or Acquisition, as the case may be, to the
Company will, at the date the Information Statement is first mailed to
stockholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
ARTICLE 5
COVENANTS OF THE COMPANY
SECTION 5.1. ACCESS. Prior to the Closing, the Company, its Subsidiaries
and their respective officers, directors, employees, advisors, representatives
and authorized agents will provide Parent and Acquisition and to any potential
purchaser from Parent of certain assets of the Company, and, in each case, their
representatives, employees, counsel, accountants, financing sources and advisors
following reasonable prior notification and in a manner which does not
unreasonably interfere with the conduct of the business of the Company or any of
the Company's officers, directors, employees, advisors, representatives or
authorized agents, access to the personnel, properties, books and records of the
Company, in order that they may have the opportunity to make such
25
investigations as they may desire of the affairs of the Company, its
Subsidiaries and of the Properties, PROVIDED, HOWEVER, that all information and
documentation made available pursuant to the terms of this Section 5.1 shall be
subject to the terms of the Confidentiality Agreement between an affiliate of
Parent and the Company dated as of November 2, 1999 (the "CONFIDENTIALITY
AGREEMENT"). Without limiting the foregoing, Parent or its designee may,
following reasonable prior notification of the Company, communicate with any
tenant, lender, servicer or other person or entity related to the ownership or
operation of any of the Properties.
SECTION 5.2. ORDINARY CONDUCT. Except as contemplated by this Agreement,
from the date of this Agreement to the Closing, the Company will conduct its
business in the ordinary course and operate and maintain its properties, in
substantially the same manner as presently conducted as if the Company were not
to enter into the Merger, and will make commercially reasonable efforts,
substantially consistent with past practices, to preserve its relationships with
tenants, customers, suppliers and others with whom the Company deals. Except as
expressly set forth in this Agreement, the Company will not do any of the
following, without the prior written consent of Parent, which consent shall not
be unreasonably withheld or delayed:
(a) CHARTER AND BYLAWS. Amend its Articles of Incorporation or
bylaws, except to the extent required to comply with its obligations hereunder,
required by law or required by rules and regulations of the American Stock
Exchange;
(b) DIVIDENDS. Except for the dividend declared by the Board of
Directors of the Company at its Board meeting on June 13, 2000, which will be
paid on or about July 10, 2000, declare or pay any cash or non-cash dividend or
make any other cash or non-cash distributions to the Stockholders whether or not
upon or in respect of any shares of its capital stock;
(c) CAPITAL STOCK. Redeem or otherwise acquire any shares of
its or its Subsidiaries' capital stock or sell, issue or encumber any capital
stock of the Company or any of its Subsidiaries or any option, warrant or right
relating thereto or any securities convertible into or exchangeable for any
shares of capital stock, except for the issuance of shares of capital stock
pursuant to the exercise of outstanding options;
(d) EMPLOYEE MATTERS. Adopt or amend in any material respect
any Plan or collective bargaining agreement, except as required by Applicable
Law;
(e) COMPENSATION. (i) Grant to any executive officer or
employee any increase in compensation or benefits or any rights to receive
severance payments or other benefits upon a termination of employment or a
change of ownership or control of the employer, except (A) as may be required
under existing agreements, (B) in the ordinary course of business consistent
with past practice or (C) pursuant to agreements substantially similar to those
described on SCHEDULE 3.11(a) with any employees of the Company hired after the
date of this Agreement or (ii) terminate any executive officer or employee other
than in the ordinary course of business, consistent with past practice;
26
(f) INDEBTEDNESS. Except for the borrowings described on
SCHEDULE 3.11(h), incur or assume any liabilities, obligations or indebtedness
for borrowed money or guarantee any such liabilities, obligations or
indebtedness;
(g) ENCUMBRANCES. Permit, allow or suffer any of its Properties
or other assets to be subjected to any mortgage, pledge, lien, encumbrance,
restriction or charge of any kind, other than those excepted from the
representations set forth in Sections 3.8 and 3.9;
(h) CANCELLATION OF INDEBTEDNESS. Cancel any indebtedness owing
to the Company, or waive any claims or rights, other than cancellations or
waivers that cover any indebtedness, claims or rights that, individually, have a
value of less than $75,000;
(i) ACCOUNTING POLICIES. Make any change in any method of
accounting or accounting practice, policy or procedure other than those required
by GAAP;
(j) REORGANIZATIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing the stock of, or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets (other than inventory);
(k) TAXES. Except with respect to the Company's election to be
qualified as a "real estate investment trust", effective January 1, 1999, in
accordance with applicable provisions of the Code, make any material tax
election or settle or compromise any material tax liability;
(l) LITIGATION. Commence or settle any material litigation,
claim, suit, action or proceeding;
(m) LEASING, SERVICE CONTRACTS, ETC. Enter into, amend, extend
or terminate any individual Lease, service contract or other agreement relating
to the ownership, operation, repair or maintenance of the buildings located on
the Properties, or any other material agreement or contract relating to any of
the Properties or accept rentals under any Lease more than thirty (30) days in
advance or take any action which adversely affects title to any of the
Properties;
(n) CONTRACTS. Enter into, amend, extend or terminate any
Material Contract;
(o) ASSET DISPOSITIONS. Sell, lease or otherwise dispose of, or
agree to sell, lease or otherwise dispose of, any of its assets, except in the
ordinary course of business and except for sales, leases or dispositions of
assets that, individually, have a value of less than $75,000;
(p) OPERATION OF PROPERTIES. Act with respect to the Properties
other than in accordance with the Company's preexisting practices as if the
transactions contemplated by this Agreement were not to occur (PROVIDED that the
Company shall not be obligated to undertake any capital expenditure in excess of
$25,000 per building except
27
for capital expenditures that the Company is obligated to undertake under other
provisions of this Agreement); or
(q) AGREEMENTS. Agree, whether in writing or otherwise, to do
any of the foregoing.
Parent's consent under this Section 5.2 shall be deemed to have
been given with respect to proposed actions relating to any individual Lease
under Section 5.2(m) if Parent fails to notify the Company in writing of
Parent's disapproval and the reasons therefore within four (4) business days
after receipt of the Company's request for such consent.
SECTION 5.3. PREPARATION OF INFORMATION STATEMENT, STOCKHOLDERS' MEETING.
(a) The Company, acting through the Company Board, shall:
(i) as soon as practicable, but in no event later than
110 days following the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its stockholders (the "STOCKHOLDERS'
MEETING"), for the purpose of considering and taking action upon this
Agreement and the Merger; and use its commercially reasonable efforts,
consistent with applicable law, to obtain approval of this Agreement and
the Merger;
(ii) within 25 business days following the execution of
this Agreement, with all reasonable and necessary assistance from Parent
and Acquisition, file the Information Statement with the SEC under the
Exchange Act (which Information Statement shall include a statement
regarding the recommendation of the Company Board that the stockholders
approve this Agreement and the Merger), and shall use commercially
reasonable efforts to have the Information Statement cleared by the SEC
as promptly as practicable;
(iii) use commercially reasonable efforts to cause the
Information Statement to be mailed to Stockholders at the earliest
practicable date.
(b) Parent, Acquisition and the Company shall cooperate with
each other in the preparation of the Information Statement, and the Company
shall promptly notify Parent of the receipt of any comments of the SEC with
respect to the Information Statement and of any requests by the SEC for any
amendment thereof or supplement thereto or for additional information and shall
promptly provide to Parent copies of all correspondence between the Company or
any representative of the Company and the SEC. The Company shall give Parent and
its counsel the opportunity to review and make comments on the Information
Statement prior to its being filed with the SEC and shall give Parent and its
counsel the opportunity to review all amendments of and supplements to the
Information Statement and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC.
Each of the Company, Parent and Acquisition agrees to use its commercially
reasonable efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause the
Information Statement and all required amendments thereof and supplements
thereto to be mailed to the holders of Shares entitled to vote at the
Stockholders' Meeting at the earliest practicable time.
28
SECTION 5.4. INSURANCE. The Company shall keep, or cause to be kept, all
insurance policies presently maintained relating to the Company and its
Subsidiaries and its properties, or suitable replacements therefor, in full
force and effect through the close of business on the day of the Closing.
SECTION 5.5. ESTOPPEL CERTIFICATES. Promptly following the execution and
delivery of this Agreement, the Company agrees to request an estoppel
certificate in the form of EXHIBIT B from each tenant under each Lease. The
Company shall use commercially reasonable efforts to obtain and deliver to
Parent or its designee prior to the Closing Date an Estoppel Certificate from
each tenant under each Lease, and shall deliver to Parent or its designee each
Estoppel Certificate promptly following receipt thereof by the Company.
SECTION 5.6. CONSTRUCTION AND MAINTENANCE WORK. The Company shall use
commercially reasonable efforts to complete in accordance with the pre-existing
practices at the respective Properties the construction and maintenance work
described on SCHEDULE 5.6 attached hereto.
SECTION 5.7. NO SOLICITATION OF TRANSACTIONS.
(a) Prior to the Closing, the Company and its officers,
directors, employees, advisors, representatives and authorized agents shall not,
directly or indirectly, solicit, initiate or encourage (including by means of
furnishing nonpublic information), or take any other action to facilitate, any
inquiries or the making of any proposal or offer (including, without limitation,
any proposal or offer to its stockholders) that constitutes, or may reasonably
be expected to lead to, a Competing Transaction (as defined below), or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction, or authorize any of its officers,
directors or employees or any Subsidiary, or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any
Subsidiary, to take any such action. The Company shall notify Parent promptly
if, to the Company's Knowledge, any proposal or offer, or any inquiry or contact
with any person with respect thereto, regarding a Competing Transaction is made
and shall describe to Parent in reasonable detail the terms and conditions of
such offer or proposal. The Company immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to a Competing Transaction. The Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party. Notwithstanding anything to the
contrary in this Section 5.7, the Company may furnish information to, and enter
into discussions with, a person or entity who has made an unsolicited proposal
or offer regarding a Competing Transaction, and the Company Board has (i)
reasonably concluded after consultation with the Company's financial advisor or
any successor thereto that such proposal or offer was made in good faith and is
reasonably likely, if negotiated, to lead to a Superior Proposal (as defined
below), (ii) provided written notice to Parent of its intent to furnish
information or enter into discussions with such person at least 48 hours prior
to taking any such action and (iii) obtained from such person an executed
confidentiality agreement on terms no less favorable to the Company than those
contained in the Confidentiality Agreement.
29
(b) A "COMPETING TRANSACTION" means any of the following
involving the Company (other than the Merger): (i) a merger, consolidation,
share exchange, business combination or other similar transaction; (ii) any
sale, lease, exchange, transfer or other disposition of 25% or more of the
assets of the Company and the Subsidiaries, taken as a whole; (iii) a tender
offer or exchange offer for 25% or more of the outstanding voting securities of
the Company; or (iv) any solicitation in opposition to adoption of this
Agreement by Company stockholders.
(c) A "SUPERIOR PROPOSAL" means an unsolicited written bona
fide proposal or offer made by a third party to consummate any of the following
transactions: (i) a merger, consolidation, share exchange, business combination
or other similar transaction involving the Company pursuant to which the
stockholders of the Company immediately preceding such transaction hold less
than 50% of the equity interest in the surviving or resulting entity of such
transaction or (ii) the acquisition by any person or group (including by means
of a tender offer or an exchange offer or a two-step transaction involving a
tender offer followed with reasonable promptness by a cash-out merger involving
the Company), directly or indirectly, of ownership of 100% of the then
outstanding shares of stock of the Company, on terms (including conditions to
consummation of the contemplated transaction) that the Company Board determines,
in its reasonable judgment (after have received the advice of the Company's
financial advisor or any successor thereto), to be more favorable to the Company
stockholders than the terms of the Merger and after having taken into account
the reasonable likelihood of such party's ability to consummate the transaction;
PROVIDED, HOWEVER, that any such proposal or offer shall not be deemed to be a
"Superior Proposal" if any financing required to consummate the transaction
contemplated by such proposal or offer is not committed and is not likely, in
the reasonable judgment of the Company Board (after having received the advice
of the Company's financial advisor or any successor thereto), to be obtained by
such third party on a timely basis.
(d) Nothing contained in this Agreement shall prohibit (i) the
Company or the Company Board from taking and disclosing to its stockholders a
position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act or (ii) the Company Board from modifying or withdrawing its recommendation
that the stockholders of the Company approve this Agreement if the Company Board
determines, after receiving the advice of the Company's outside counsel, that
the Company Board's fiduciary duties under Maryland law require it to do so.
SECTION 5.8. EMPLOYEE MATTERS. Immediately prior to the Closing, the
Company shall terminate all employees of the Company and its Subsidiaries,
including the Transition Personnel. All severance amounts payable to all such
terminated Employees shall be paid on the Closing Date.
ARTICLE 6
COVENANTS OF PARENT AND ACQUISITION
SECTION 6.1. CONFIDENTIALITY. Each of Parent and Acquisition
acknowledges that the information being provided to it by or on behalf of the
Company is subject to the terms of the Confidentiality Agreement, the terms of
which are incorporated herein by reference.
30
The Confidentiality Agreement will terminate with respect to information
relating to the Company effective as of, and only as of, the Closing.
SECTION 6.2. NO ADDITIONAL REPRESENTATIONS. Each of Parent and
Acquisition acknowledges that neither the Company nor any other person has made
any representation or warranty, expressed or implied, as to the accuracy or
completeness of any information regarding the Company except as expressly set
forth in this Agreement or the schedules hereto, and neither the Company nor any
other person will have or be subject to any liability or indemnification
obligation to Parent or Acquisition or any other person resulting from the
distribution to Parent or Acquisition, or Parent's or Acquisition's use of, any
such information, including any information contained in the Confidential
Information Memorandum dated September 1999, and any information, document, or
material made available to Parent or Acquisition in certain "data rooms,"
management presentations or in any other form in anticipation of the
transactions contemplated by this Agreement.
SECTION 6.3. INDEMNITY; INSURANCE.
(a) INDEMNIFICATION. The Articles of Incorporation and By-laws
of the Surviving Company shall contain provisions with respect to
indemnification and exculpation from liability that are at least as favorable to
the Company's present and former officers, directors, employees and agents as
are set forth in the Company's Articles of Incorporation and By-laws on the date
of this Agreement, which provisions shall not be amended, repeated or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or prior to
the Effective Time were officers, directors, employees or agents of the Company
or any Subsidiary unless such modification is required by law.
(b) INSURANCE. Effective as of the Effective Time, Parent shall
purchase and maintain or cause the Surviving Company to purchase and maintain,
for a period of six (6) years following the Closing, non-cancellable policies of
directors' and officers' liability insurance covering each person who was a
director or officer of the Company at any time prior to the Closing with respect
to claims arising from facts or events that occurred at or prior to the Closing
and providing at least the same coverage and amounts and containing terms that
are no less advantageous to the insured parties as those in effect immediately
prior to the Closing for officers and directors of Company.
(c) INTENDED THIRD-PARTY BENEFICIARIES. The provisions of this
Section 6.3 are intended to be for the benefit of, and shall be enforceable by,
each Indemnified Individual and each party entitled to insurance coverage under
Section 6.3(b), respectively, and his or her heirs and legal representatives,
and shall be in addition to any other rights an Indemnified Individual may have
under the Articles of Incorporation or bylaws of the Surviving Company or any of
its Subsidiaries, under Applicable Law or otherwise.
ARTICLE 7
MUTUAL COVENANTS
SECTION 7.1. PUBLICITY. Each of the Company, Parent and Acquisition
agrees that, from the date of this Agreement through the Effective Time, no
public release or
31
announcement concerning the transactions contemplated hereby shall be issued by
any party without the prior consent of each other party (which consent shall not
be unreasonably withheld), except as such release or announcement may be
required by Applicable Law or the rules or regulations of any United States or
foreign securities exchange, in which case the party required to make the
release or announcement shall allow each other party reasonable time to comment
on such release or announcement in advance of such issuance.
SECTION 7.2. ANTITRUST NOTIFICATION. The Company and Parent have
independently concluded that no filings by any party hereto are required
pursuant to the HSR Act with respect to the transactions contemplated by this
Agreement.
SECTION 7.3. REASONABLE EFFORTS; ADDITIONAL AGREEMENTS. Subject to the
terms and conditions provided herein, each of the parties hereto agrees to use
commercially reasonable efforts to take or cause to be taken all actions and to
do or cause to be done all things reasonably necessary, proper or advisable
under Applicable Laws to consummate and make effective the transactions
contemplated by this Agreement, including executing any additional agreements,
instruments or other documents necessary to consummate the transactions
contemplated hereby. In case, at any time after the Closing, any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper trustees, officers and directors of each party to this Agreement, as
applicable, shall use their commercially reasonable efforts to take all such
action. Each of the parties hereto agrees to cooperate and use its commercially
reasonable efforts to vigorously contest and resist any action, suit, proceeding
at law or in equity, including any administrative or judicial action, suit or
proceeding and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the transactions contemplated by this Agreement, including,
without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal.
SECTION 7.4. NOTIFICATION OF CERTAIN MATTERS. The Company shall give
prompt notice to Parent, and Parent and Acquisition shall give prompt notice to
the Company, of (i) the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would likely cause any representation or warranty
contained in this Agreement to be untrue in any material respect at any time
from date of this Agreement to the Closing Date and (ii) any failure of the
Company, Parent or Acquisition, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder: PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 7.4 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice. Each of the Company and Parent shall give
prompt notice to the other party of any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement.
SECTION 7.5 BENEFIT PLANS; COBRA. The Company shall terminate all benefit
plans listed on Schedule 3.13(a) before the Closing Date. After the Effective
Time, Parent shall or shall cause the Surviving Company to offer to persons who
are employed by the Company or any Subsidiary before the Effective Time and
eligible to participate in the health insurance plans maintained by the Company
or any Subsidiary immediately prior to
32
the Effective Time, if their employment by the Company is terminated in
connection with the Merger, participation in the Surviving Company's health
insurance plan in accordance with the provisions of the Consolidated Omnibus
Budget Reconciliation Act ("COBRA"). Following the Effective Date, such former
employees shall have the right to continue their coverage under the provisions
of COBRA for up to a total of eighteen (18) months.
ARTICLE 8
TERMINATION; AMENDMENT; WAIVER
SECTION 8.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing, notwithstanding any requisite approval and adoption of this Agreement
and the transactions contemplated hereby by the stockholders of the Company:
(a) MUTUAL CONSENT. By mutual written consent of the Company,
Parent and Acquisition;
(b) INJUNCTION OR DELAY. By the Company, Parent or Acquisition
if (i) any federal, state or foreign governmental authority or other agency or
commission or court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any order, decree or ruling which remains in
effect, and which has the effect of making the transactions contemplated hereby
illegal or otherwise prohibiting consummation of the transactions contemplated
by this Agreement and such order, decree, ruling or other action is or shall
have become nonappealable or (ii) the Closing has not occurred on or before the
120th day after the date of this Agreement (the "Outside Closing Date");
PROVIDED that, in the event of a Qualifying Casualty or Condemnation, the
Outside Closing Date shall be extended, as necessary, to ensure that Parent and
Acquisition have at least thirty-five (35) days following receipt of notice of a
Qualifying Casualty or Condemnation in which to elect to terminate this
Agreement; PROVIDED, further no party may terminate this Agreement pursuant to
this clause (ii) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Closing shall not have
occurred on or before the Outside Closing Date;
(c) BREACH BY PARENT OR ACQUISITION. By the Company if (i)
there shall have been a material breach of any representation or warranty on the
part of Parent or Acquisition set forth in this Agreement or if any
representation or warranty of Parent or Acquisition shall have become untrue in
any material respect, and such breach shall not have been cured or such
representation or warranty shall not have been made true within 15 business days
after notice by the Company thereof, PROVIDED that the Company shall not have
breached in any material respect any of its obligations hereunder; (ii) there
shall have been a breach by Parent or Acquisition of any of its respective
covenants or agreements hereunder having a Parent Material Adverse Effect, and
Parent or Acquisition has not cured such breach within 15 business days after
notice by the Company thereof, PROVIDED that the Company shall not have breached
in any material respect any of its obligations hereunder;
(d) BREACH BY THE COMPANY. By Parent or Acquisition, if (i)
there shall have been a material breach of any representation or warranty on the
part of the Company
33
as set forth in this Agreement or if any representation or warranty of the
Company shall have become untrue in any material respect, and such breach shall
not have been cured or such representation or warranty shall not have been made
true within 15 business days after notice by Parent or Acquisition thereof,
PROVIDED that neither Parent or Acquisition shall have breached in any material
respect any of its obligations hereunder; (ii) there shall have been a breach by
the Company of any of its covenants or agreements hereunder having a Company
Material Adverse Effect, and the Company has not cured such breach within 15
business days after notice by Parent and Acquisition thereof, PROVIDED that
neither Parent nor Acquisition shall have breached in any material respect any
of its obligations hereunder; or
(e) COMPETING TRANSACTION; CHANGE OF RECOMMENDATION. By Parent
or Acquisition, if (i) the Company Board shall withdraw, modify or change the
Recommendation in a manner adverse to Parent or shall have resolved to do any of
the foregoing; or (ii) the Company Board shall have recommended to the Company
stockholders, or agreed to enter into, a Competing Transaction.
(f) CASUALTY OR CONDEMNATION. By Parent or Acquisition (which
shall have thirty-five (35) days from the date of receipt of written notice of
such casualty or condemnation to elect to terminate), if (i) any or all of the
Properties is damaged or destroyed by casualty and the cost to repair such
damage or destruction (as reasonably estimated by the Company and Parent) would
exceed $3,000,000 in the event of an insured loss or $2,000,000 in the event of
an uninsured loss, or (ii) all or any material portion of the Properties (taken
as a whole), or any material interest therein, is taken pursuant to the power of
eminent domain, or any proceedings with respect thereto are instituted or
threatened (each of the circumstances described in clauses (i) and (ii) being a
"Qualifying Casualty or Condemnation").
SECTION 8.2. CONFIDENTIAL INFORMATION. In the event of termination by any
party pursuant to Section 8.1, written notice thereof shall forthwith be given
to the other parties and the transactions contemplated by this Agreement shall
be terminated, without further action by any party. If the transactions
contemplated by this Agreement are terminated as provided herein:
(a) RETURN OF MATERIALS. Parent and Acquisition shall return
and cause to be returned all documents and copies and other material received
from or on behalf of the Company relating to the business of the Company or any
Subsidiary or to the transactions contemplated hereby, whether obtained before
or after the execution hereof, to the Company; and
(b) SURVIVAL OF CONFIDENTIALITY AGREEMENT. All confidential
information received by Parent or Acquisition with respect to the businesses of
the Company or any Subsidiary shall be treated in accordance with the
Confidentiality Agreement, which shall remain in full force and effect
notwithstanding the termination of this Agreement.
Section 8.3. EFFECTS OF TERMINATION. If this Agreement is terminated and
the transactions contemplated hereby are abandoned pursuant to Section 8.1, this
Agreement shall become void and of no further force and effect, except for the
provisions of (a) Section 6.1 relating to the obligations of Parent and
Acquisition to keep confidential
34
certain information and data obtained by it, (b) Section 6.2 relating to the
acknowledgment by each of Parent and Acquisition that no additional
representations were made by or on behalf of the Company other than those set
forth in this Agreement, (c) Section 7.1 relating to publicity, (d) Section 9.1
relating to expenses generally, (e) Section 9.2 relating to attorneys' fees and
expenses, (f) Section 9.5 relating to notices, (g) Section 9.12 relating to
exclusive jurisdiction and (h) this Article 8. Nothing in this Article 8 shall
be deemed to release any party from any liability for any breach by such party
of the terms and provisions of this Agreement or to impair the right of any
party to compel specific performance by any other party of its obligations under
this Agreement.
Section 8.4. LIQUIDATED DAMAGES.
(a) (i) If this Agreement is terminated by Parent or
Acquisition pursuant to:
(A) Section 8.1(d); or
(B) clauses (i) or (ii) of Section 8.1(e); or
(ii) If this Agreement is terminated by the Company,
Parent or Acquisition pursuant to Section 8.1(b); provided, that (i) neither
Parent nor Acquisition shall be in material breach of any of their
representations or obligations and shall not have been the cause of any
injunction leading to such termination or (ii) the failure by either Parent or
Acquisition to fulfill its obligations under this Agreement shall not have been
the reason that the Closing shall not have occurred on or before the Outside
Closing Date; in any such case, the Company shall pay to Parent, within five
business days after notice of such termination is received by the Company from
Parent or Acquisition, in immediately available funds, liquidated damages in an
amount equal to $1,900,000, plus reasonable expenses actually incurred by Parent
and/or Acquisition (in an amount not to exceed $125,000).
(b) If this Agreement is terminated by the Company pursuant to
Section 8.1(c) and the transactions contemplated hereby are abandoned, Parent
shall pay to the Company, within five business days after notice of such
termination is received by Parent and Acquisition from the Company, in
immediately available funds, liquidated damages in an amount in cash equal to
$2,025,000.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. EXPENSES. Whether or not the transactions contemplated
hereby are consummated, and except as otherwise provided in Section 8.4, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs or expenses.
SECTION 9.2. ATTORNEYS' FEES. Should any arbitration or litigation be
commenced concerning this Agreement or the rights and duties of any party with
respect to it, the party prevailing shall be entitled, in addition to such other
relief as may be granted, to a
35
reasonable sum for such party's attorneys' fees and expenses determined by the
court in such arbitration or litigation or in a separate action brought for that
purpose.
SECTION 9.3. ASSIGNMENT. This Agreement and the rights and obligations
hereunder shall not be assignable or transferable by Parent, Acquisition or the
Company (including by operation of Applicable Law in connection with a merger,
or sale of substantially all the assets, of Parent or the Company) without the
prior written consent of the other parties hereto (except that nothing herein
shall be construed as obligating (i) Parent to obtain the consent of Acquisition
or (ii) Acquisition to obtain the consent of Parent to any of the transactions
described in the immediately prior parenthetical); PROVIDED, HOWEVER, that no
assignment shall limit or affect the assignor's obligations hereunder.
SECTION 9.4. NO THIRD-PARTY BENEFICIARIES. Except as set forth in Section
6.3 and Article 9, this Agreement is for the sole benefit of the parties hereto
and their permitted assigns and nothing herein expressed or implied shall give
or be construed to give to any person or entity, other than the parties hereto
and such assigns, any legal or equitable rights hereunder.
SECTION 9.5. NOTICES. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent prepaid telecopy, or sent, postage prepaid, by registered,
certified or express mail, or reputable overnight courier service and shall be
deemed given when so delivered by hand or telecopied, or if mailed, three days
after mailing (one Business Day in the case of express mail or overnight courier
service), as follows:
(i) if to Parent, Acquisition or, after the Effective Time, the
Surviving Company,
Mission Orchard Statutory Trust
c/o First Union National Bank, as trustee
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopier No.: (000) 000-0000
Attention: W. Xxxxxxx Xxxxxx
with a copy to:
Xxxxxxx Xxxx LLP
Xxx Xxxxx Xxxxxx
Xxxxxxxx, XX 00000
Telecopier No: (000) 000-0000
Attention: Xxxxx Xxxxxxxxx
if to Acquisition:
PGP Acquisition, Inc.
c/o Shearman & Sterling
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
00
Xxx Xxxxxxxxx, XX 00000
Telecopier No: (000) 000-0000
Attention: Xxxxx Xxxxx
(ii) if to the Company, prior to the Closing,
Pacific Gateway Properties, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier No: (000) 000-0000
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
Xxx Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Telecopier No.: (000) 000-0000
and
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxxx Xxx., X.X.
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
SECTION 9.6. REPRESENTATIONS AND WARRANTIES NOT TO SURVIVE. Each
representation and warranty in this Agreement or in the exhibits, schedules or
certificates delivered pursuant to this Agreement shall terminate and expire as
of, and shall not survive, the Closing.
SECTION 9.7. 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 such counterparts have been signed by
each of the parties and delivered to the other party.
SECTION 9.8. ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter.
SECTION 9.9. SEVERABILITY. If any term or provision specified herein is
held by a court of competent jurisdiction to be in violation of any applicable
local, state or federal ordinance, statute, law, administrative or judicial
decision, or public policy, and if such court should declare such term or
provision to be illegal, invalid, unlawful, void, voidable, or unenforceable as
written, then such provision shall be given full force and effect to the fullest
possible extent that it is legal, valid and enforceable, and the remainder of
the terms
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and provisions herein shall be construed as if such illegal, invalid, unlawful,
void, voidable or unenforceable term or provision was not contained herein, but
only to the extent that giving effect to such provision and the remainder of the
terms and provisions hereof shall be in accordance with the intent of the
parties as reflected in this Agreement.
SECTION 9.10. AMENDMENT. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time only by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 9.11. EXTENSION; WAIVER. At any time prior to the Closing, any
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of any other party, (b) waive any inaccuracies in the
representations and warranties of any other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by any other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto 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 hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
SECTION 9.12. EXCLUSIVE JURISDICTION OF CALIFORNIA COURTS. Parent,
Acquisition and the Company irrevocably submit to the exclusive jurisdiction of
the state courts of the State of California and the United States Federal
District Court located in San Francisco California, for purposes of any suit,
action or other proceeding arising out of this Agreement or any transaction
contemplated hereby. Parent, Acquisition and the Company agree to commence any
action, suit or proceeding relating hereto in such courts. Parent, Acquisition
and the Company further agree that service of any process, summons, notice or
document by U.S. registered mail to such party's respective address set forth in
Section 9.5 above shall be effective service of process for any action, suit or
proceeding in the State of California with respect to any matters to which it
has submitted to jurisdiction as set forth above in the immediately preceding
sentence. Parent, Acquisition and the Company irrevocably and unconditionally
waive any objection to the laying of venue of any action, suit or proceeding
arising out of this Agreement or the transactions contemplated hereby in any
such court and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in such court has been brought in an inconvenient forum.
SECTION 9.13. INTERPRETATION OF THIS AGREEMENT.
(a) CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, the singular
includes the plural, the part includes the whole, "including" is not limiting
and "or" has the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole (including the Preamble, the Recitals, the
Schedules and the Exhibits) and not to any particular provision of this
Agreement. Article, section, exhibit, schedule, recital and preamble references
in this Agreement are to those portions of this Agreement unless otherwise
specified.
(b) KNOWLEDGE. Whenever any representation or warranty of the
Company contained in this Agreement or in any certificate or other document
delivered in
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connection with this Agreement is qualified to the "KNOWLEDGE" of the Company,
such qualification shall mean the actual (not constructive or imputed) personal
knowledge, of (A) the officers and directors of the Company and its Subsidiaries
and the management company which, in each case, is responsible for overseeing
any portion of the Properties and (B) the on-site project managers at the South
Bay Property, the Walnut Creek Property and the West Valley Property (as defined
in Schedule 3.9(a)(1)) (collectively, the "KNOWLEDGE GROUP"); (ii) shall in no
case mean or refer to the actual or constructive knowledge of any other
employee, partner, member, officer, director, agent, trustee or member, partner,
representative or employee of a partner, member, officer, director, agent or
other representative of the Company or of its Subsidiaries or their affiliates
or any investment advisor, attorney, independent accountant, contractor or
representative of Company or any of its Subsidiaries or their affiliates
(together with the Knowledge Group, the "COMPANY REPRESENTATIVES"); and (iii)
shall in no event or circumstance impose upon the Company or any of the Company
Representatives any duty or obligation to verify, inquire or make any
independent inquiry or investigation of any such representation, warranty or
statement, or to otherwise investigate the facts or circumstances relating or
otherwise pertinent thereto, other than to review their files. Parent and
Acquisition further acknowledge and agree that none of the Company
Representatives shall be personally liable, or otherwise have any personal
liability, under or in connection with this Agreement, including without
limitation, in connection with any of the representations, warranties or
statements made in connection with, or pursuant to, this Agreement.
(c) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to agreements made and to be performed entirely within such State.
(d) HEADINGS, EXHIBITS AND SCHEDULES. The headings contained in
this Agreement, in any Exhibit or Schedule hereto and in the Table of Contents
to this Agreement, are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Any capitalized terms used
in any Exhibit or Schedule but not otherwise defined therein shall have the
meaning as defined in this Agreement. Any matter disclosed in one Schedule
hereto shall be deemed incorporated by reference into each other Schedule hereto
and disclosed in each such Schedule to the extent that the relevancy of such
matter to each such other Schedule is apparent from the disclosure included on
the Schedule.
(e) REPRESENTATION BY COUNSEL; INTERPRETATION. The Company,
Parent and Acquisition each acknowledges that each party to this Agreement has
been represented by counsel in connection with this Agreement and the
transactions contemplated by this Agreement. Accordingly, any rule of law or any
legal decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be interpreted in a
reasonable manner to effect the intent of the Company, Parent and Acquisition.
SECTION 9.14. TRUSTEE EXCULPATION. It is expressly understood and agreed
that this Agreement is executed and delivered on behalf of Parent by First Union
National Bank ("First Union"), not in its individual capacity but solely as
trustee under the Trust Agreement (Mission Orchard Statutory Trust) dated as of
June 1, 2000 between First
39
Union and the Beneficiary named therein (the "Trust Agreement"), in the exercise
of the powers and authority conferred and vested in it as the trustee
thereunder, and that each of the representations, warranties, undertakings and
agreements herein made on the part of Parent is made solely as a representation,
warranty, undertaking or agreement of Parent and not as a personal
representation, warranty, undertaking or agreement of First Union and is made
solely for the purpose of binding the trust estate created by the Trust
Agreement (the "Trust Estate") and all persons having any claim by reason of any
such representation, warranty, undertaking or agreement shall look only to the
Trust Estate for payment or satisfaction thereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the date first written above.
PACIFIC GATEWAY PROPERTIES, INC.,
a Maryland corporation
By:
-------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
MISSION ORCHARD STATUTORY TRUST,
a Connecticut statutory trust
By: First Union National Bank, not in its
individual capacity, but solely as trustee
By:
-------------------------------------------
Name:
Title:
PGP ACQUISITION, INC.
a Maryland corporation
By:
-------------------------------------------
Name:
Title:
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