Exhibit 2.01
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AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 30, 2001
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION,
GALAHAD ACQUISITION CORP.
and
FRANCHISE FINANCE CORPORATION OF AMERICA
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SECTION INDEX OF DEFINED TERMS
DEFINED TERM SECTION
------------ -------
1995 Stock Option Plan ....................................... ss. 3.1(b)(iii)
2001 Bonus Amount ............................................ ss. 5.6(d)
Acquisition Proposal ......................................... ss. 5.5
Agreement .................................................... Preamble
Articles of Merger ........................................... ss. 1.3
BAF Business ................................................. ss. 5.4(b)
Benefit Plans ................................................ ss. 8.11(a)
Board Approval ............................................... ss. 3.1(h)
Board of Directors ........................................... ss. 8.11(b)
Business Day ................................................. ss. 8.11(c)
Cancelled Shares ............................................. ss. 1.8(a)(ii)
CERCLA ....................................................... ss. 3.1(q)(iv)
Certificate .................................................. ss. 1.8(b)
Claims ....................................................... ss. 3.1(m)
Closing ...................................................... ss. 1.2
Closing Date ................................................. ss. 1.2
COBRA ........................................................ ss. 3.1(p)(vii)
Code ......................................................... ss. 2.8
Company ...................................................... Preamble
Company Common Stock ......................................... Recitals
Company Disclosure Schedule .................................. ss. 3.1
Company Employees ............................................ ss. 3.1(p)(i)
Company Permits .............................................. ss. 3.1(n)
Company Plans ................................................ ss. 3.1(p)(i)
Company SEC Reports .......................................... ss. 3.1(d)
Company Stockholders Meeting ................................. ss. 5.1(b)
Company Voting Debt .......................................... ss. 3.1(b)(ii)
Confidentiality Agreement .................................... ss. 5.3(b)
Costs ........................................................ ss. 5.8(a)
Covered Persons .............................................. ss. 5.8(a)
Data Tape .................................................... ss. 3.1(x)
Disposition .................................................. Recitals
DOJ .......................................................... ss. 5.4(c)
Effective Time ............................................... ss. 1.3
Environmental Claims ......................................... ss. 3.1(q)(iv)
Environmental Law ............................................ ss. 3.1(q)(iv)
Environmental Liabilities .................................... ss. 3.1(q)(iv)
Environmental Policies ....................................... ss. 3.1(v)
ERISA ........................................................ ss. 3.1(p)(i)
ERISA Affiliate .............................................. ss. 3.1(p)(i)
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SECTION INDEX OF DEFINED TERMS
(continued)
DEFINED TERM SECTION
------------ -------
ESPP ......................................................... ss. 5.6(e)
Exchange Act ................................................. ss. 3.1(c)(iii)
Exchange Agent ............................................... ss. 2.1
Exchange Fund ................................................ ss. 2.1
Executives ................................................... ss. 8.11(d)
Expenses ..................................................... ss. 5.7
Filed Audited Financials ..................................... ss. 3.1(e)
Financial Advisor ............................................ ss. 3.1(j)
FRIC ......................................................... Recitals
FTC .......................................................... ss. 5.4(c)
Funding ...................................................... ss. 3.1(o)(ii)
Galahad ...................................................... Recitals
Governmental Entity .......................................... ss. 3.1(c)(iii)
Hazardous Materials .......................................... ss. 3.1(q)(iv)
Holdings ..................................................... Recitals
HSR Act ...................................................... ss. 3.1(c)(iii)
knowledge .................................................... ss. 8.11(e)
Laws ......................................................... ss. 3.1(c)(ii)
Leased Real Property ......................................... ss. 3.1(r)
Liens ........................................................ ss. 3.1(b)(iv)
Material Adverse Effect ...................................... ss. 8.11(f)
Material Contracts ........................................... ss. 3.1(s)
Merger ....................................................... Recitals
Merger Consideration ......................................... ss. 1.8(b)
Merger Sub ................................................... Preamble
MGCL ......................................................... ss. 1.1
NYSE ......................................................... ss. 3.1(c)(iii)
Option ....................................................... ss. 1.9(a)
Option Plans ................................................. ss. 1.9(c)
Owned Real Property .......................................... ss. 3.1(r)
Parent ....................................................... Preamble
Permitted Liens .............................................. ss. 8.11(g)
Person ....................................................... ss. 8.11(h)
Policies ..................................................... ss. 3.1(v)
Proxy Statement .............................................. ss. 5.1(a)
Qualifying Acquisition Proposal .............................. ss. 7.2(b)
RCRA ......................................................... ss. 3.1(q)(iv)
Real Property ................................................ ss. 3.1(r)
Regulatory Law ............................................... ss. 5.4(c)
REIT ......................................................... ss. 3.1(o)(ii)
Release ...................................................... ss. 3.1(q)(iv)
ii
SECTION INDEX OF DEFINED TERMS
(continued)
DEFINED TERM SECTION
------------ -------
Required Company Vote ........................................ ss. 3.1(i)
Required Consents ............................................ ss. 3.1(c)(iii)
Rights ....................................................... ss. 3.1(b)(i)
Rights Agreement ............................................. ss. 3.1(b)(i)
SEC .......................................................... ss. 3.1(d)
Securitization Interests ..................................... Recitals
Subsidiary ................................................... ss. 8.11(i)
Superior Proposal ............................................ ss. 8.11(j)
Surviving Corporation ........................................ ss. 1.1
Systems ...................................................... ss. 3.1(w)
Tax, Taxes ................................................... ss. 3.1(o)(i)
Tax Authority ................................................ ss. 3.1(o)(i)
Tax Return, Tax Returns ...................................... ss. 3.1(o)(i)
Termination Date ............................................. ss. 7.1(b)
Termination Fee .............................................. ss. 7.2(b)
U.S. GAAP .................................................... ss. 3.1(d)
Violation .................................................... ss. 3.1(c)(ii)
WARN ......................................................... ss. 3.1(p)(viii)
Warrants ..................................................... ss. 3.1(b)(iii)
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PAGE INDEX OF DEFINED TERMS
DEFINED TERM PAGE
------------ ----
1995 Stock Option Plan ..................................................... 8
2001 Bonus Amount .......................................................... 38
Acquisition Proposal ....................................................... 36
Agreement .................................................................. 1
Articles of Merger ......................................................... 2
BAF Business ............................................................... 35
Benefit Plans .............................................................. 50
Board Approval ............................................................. 12
Board of Directors ......................................................... 50
Business Day ............................................................... 50
Cancelled Shares ........................................................... 3
CERCLA ..................................................................... 21
Certificate ................................................................ 4
Claims ..................................................................... 14
Closing .................................................................... 2
Closing Date ............................................................... 2
COBRA ...................................................................... 19
Code ....................................................................... 6
Company .................................................................... 1
Company Common Stock ....................................................... 1
Company Disclosure Schedule ................................................ 7
Company Employees .......................................................... 17
Company Permits ............................................................ 14
Company Plans .............................................................. 17
Company SEC Reports ........................................................ 11
Company Stockholders Meeting ............................................... 33
Company Voting Debt ........................................................ 8
Confidentiality Agreement .................................................. 34
Costs ...................................................................... 39
Covered Persons ............................................................ 39
Data Tape .................................................................. 24
Disposition ................................................................ 1
DOJ ........................................................................ 35
Effective Time ............................................................. 2
Environmental Claims ....................................................... 20
Environmental Law .......................................................... 20
Environmental Liabilities .................................................. 21
Environmental Policies ..................................................... 23
ERISA ...................................................................... 17
ERISA Affiliate ............................................................ 17
ESPP ....................................................................... 38
Exchange Act ............................................................... 10
Exchange Agent ............................................................. 5
Exchange Fund .............................................................. 5
Executives ................................................................. 50
Expenses ................................................................... 39
Filed Audited Financials ................................................... 11
Financial Advisor .......................................................... 13
FRIC ....................................................................... 1
FTC ........................................................................ 35
Funding .................................................................... 17
Galahad .................................................................... 1
Governmental Entity ........................................................ 10
Hazardous Materials ........................................................ 21
Holdings ................................................................... 1
HSR Act .................................................................... 10
knowledge .................................................................. 50
Laws ....................................................................... 10
Leased Real Property ....................................................... 22
Liens ...................................................................... 9
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PAGE INDEX OF DEFINED TERMS
DEFINED TERM PAGE
------------ ----
Material Adverse Effect .................................................... 50
Material Contracts ......................................................... 22
Merger ..................................................................... 1
Merger Consideration ....................................................... 4
Merger Sub ................................................................. 1
MGCL ....................................................................... 2
NYSE ....................................................................... 10
Option ..................................................................... 4
Option Plans ............................................................... 4
Owned Real Property ........................................................ 22
Parent ..................................................................... 1
Permitted Liens ............................................................ 51
Person ..................................................................... 51
Policies ................................................................... 23
Proxy Statement ............................................................ 32
Qualifying Acquisition Proposal ............................................ 46
RCRA ....................................................................... 21
Real Property .............................................................. 22
Regulatory Law ............................................................. 35
REIT ....................................................................... 16
Release .................................................................... 21
Required Company Vote ...................................................... 13
Required Consents .......................................................... 10
Rights ..................................................................... 8
Rights Agreement ........................................................... 8
SEC ........................................................................ 10
Securitization Interests ................................................... 1
Subsidiary ................................................................. 51
Superior Proposal .......................................................... 52
Surviving Corporation ...................................................... 2
Systems .................................................................... 24
Tax ........................................................................ 16
Tax Authority .............................................................. 16
Tax Return ................................................................. 16
Tax Returns ................................................................ 16
Taxes ...................................................................... 16
Termination Date ........................................................... 44
Termination Fee ............................................................ 46
U.S. GAAP .................................................................. 11
Violation .................................................................. 10
WARN ....................................................................... 19
Warrants ................................................................... 8
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER.................................................... 2
1.1 The Merger.................................................... 2
1.2 Closing....................................................... 2
1.3 Effective Time................................................ 2
1.4 Effects of the Merger......................................... 2
1.5 Charter....................................................... 2
1.6 By-Laws....................................................... 2
1.7 Officers and Directors of the Surviving Corporation........... 3
1.8 Effect on Capital Stock....................................... 3
1.9 Treatment of Options and Restricted Stock..................... 4
ARTICLE II EXCHANGE OF CERTIFICATES...................................... 5
2.1 Exchange Fund................................................. 5
2.2 Exchange Procedures........................................... 5
2.3 No Further Ownership Rights in Company Common Stock........... 5
2.4 Termination of Exchange Fund.................................. 6
2.5 No Liability.................................................. 6
2.6 Investment of the Exchange Fund............................... 6
2.7 Lost Certificates............................................. 6
2.8 Withholding Rights............................................ 6
2.9 Further Assurances............................................ 7
2.10 Stock Transfer Books.......................................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES................................ 7
3.1 Representations and Warranties of the Company................. 7
(a) Organization, Standing and Power.................... 7
(b) Capital Structure................................... 8
(c) Authority; No Conflicts............................. 9
(d) Reports and Financial Statements.................... 10
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TABLE OF CONTENTS
(continued)
PAGE
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(e) Liabilities......................................... 11
(f) Absence of Certain Changes or Events................ 11
(g) Information Supplied................................ 12
(h) Board Approval...................................... 12
(i) Vote Required....................................... 13
(j) Opinion of Financial Advisor........................ 13
(k) Rights Agreement.................................... 13
(l) Related Party Transactions.......................... 13
(m) Litigation.......................................... 14
(n) Compliance with Laws; Permits....................... 14
(o) Taxes............................................... 14
(p) Employee Benefits; Employees........................ 17
(q) Environmental Matters............................... 19
(r) Properties.......................................... 22
(s) Contracts........................................... 22
(t) Disposition Properties.............................. 23
(u) Brokers or Finders.................................. 23
(v) Insurance........................................... 23
(w) Intellectual Property............................... 24
(x) Data Tape........................................... 24
(y) Canadian Assets..................................... 24
3.2 Representations and Warranties of Parent...................... 25
(a) Organization, Standing and Power.................... 25
(b) Authority; No Conflicts............................. 25
(c) Board Approval...................................... 26
(d) Vote Required....................................... 26
(e) Information Supplied................................ 26
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TABLE OF CONTENTS
(continued)
PAGE
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(f) Financing........................................... 27
(g) Brokers or Finders.................................. 27
(h) Interest in Company................................. 27
(i) BAF Business........................................ 27
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS..................... 27
4.1 Covenants of the Company...................................... 27
(a) Ordinary Course.......................................... 28
(b) Dividends; Changes in Share Capital...................... 28
(c) Issuance of Securities................................... 29
(d) Governing Documents...................................... 29
(e) No Acquisitions.......................................... 29
(f) No Dispositions.......................................... 30
(g) Investments; Indebtedness................................ 30
(h) Accounting Methods; Income Tax Elections................. 30
(i) Compensation............................................. 31
(j) Fundamental Transactions................................. 31
(k) Material Contracts....................................... 31
(l) Settlements and Compromises.............................. 32
(m) Commitments.............................................. 32
4.2 No Control of Company Business................................ 32
ARTICLE V ADDITIONAL AGREEMENTS......................................... 32
5.1 Preparation of Proxy Statement; Company Stockholders Meeting.. 32
5.2 Disposition................................................... 33
5.3 Access to Information......................................... 33
5.4 Reasonable Best Efforts....................................... 34
5.5 Acquisition Proposals......................................... 36
5.6 Employee Benefits Matters..................................... 37
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TABLE OF CONTENTS
(continued)
PAGE
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5.7 Fees and Expenses............................................. 38
5.8 Directors' and Officers' Indemnity............................ 39
5.9 Sale of Securitization Interests.............................. 40
5.10 Public Announcements.......................................... 41
ARTICLE VI CONDITIONS PRECEDENT.......................................... 41
6.1 Conditions to Each Party's Obligation to Effect the Merger.... 41
(a) Stockholder Approval..................................... 41
(b) No Injunctions or Restraints; Illegality................. 41
(c) HSR Act.................................................. 41
6.2 Additional Conditions to Obligations of Parent and Merger Sub. 41
(a) Representations and Warranties........................... 41
(b) Performance of Obligations of the Company................ 42
(c) REIT and Subsidiary Status Opinion....................... 42
(e) No Material Adverse Change............................... 42
(f) No Governmental Suits.................................... 42
(g) No Adverse Changes in Tax Laws........................... 43
(h) No Adverse Changes in Equity Markets..................... 43
(i) Closing of the Disposition............................... 43
6.3 Additional Conditions to Obligations of the Company........... 43
(a) Representations and Warranties........................... 44
(b) Performance of Obligations of Parent and Merger Sub...... 44
ARTICLE VII TERMINATION AND AMENDMENT..................................... 44
7.1 Termination................................................... 44
7.2 Effect of Termination......................................... 45
7.3 Amendment..................................................... 46
7.4 Extension; Waiver............................................. 46
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TABLE OF CONTENTS
(continued)
PAGE
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ARTICLE VIII GENERAL PROVISIONS........................................... 47
8.1 Non-Survival of Representations, Warranties and Agreements.... 47
8.2 Notices....................................................... 47
8.3 Interpretation................................................ 48
8.4 Counterparts.................................................. 48
8.5 Entire Agreement; No Third Party Beneficiaries................ 48
8.6 Governing Law................................................. 49
8.7 Severability.................................................. 49
8.8 Assignment.................................................... 49
8.9 Submission to Jurisdiction Waivers............................ 49
8.10 Enforcement................................................... 50
8.11 Definitions................................................... 50
v
AGREEMENT AND PLAN OF MERGER, dated as of March 30, 2001 (this
"AGREEMENT"), among General Electric Capital Corporation, a New York corporation
("PARENT"), Galahad Acquisition Corp., a Maryland corporation ("MERGER SUB") and
a wholly owned subsidiary of Parent, and Franchise Finance Corporation of
America, a Maryland corporation (the "COMPANY").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have each determined that the merger of the Company with Merger Sub (the
"MERGER"), upon the terms and subject to the conditions set forth in this
Agreement, is advisable and in the best interests of their respective
stockholders, and such Boards of Directors have approved such Merger pursuant to
which each outstanding share of common stock, par value $.01 per share, of the
Company (the "COMPANY COMMON STOCK") issued and outstanding immediately prior to
the Effective Time (as defined in SECTION 1.3), other than shares owned or held
directly or indirectly by Parent or directly by the Company, will be converted
into the right to receive the Merger Consideration (as defined in SECTION
1.8(B)); and
WHEREAS, following the date hereof and prior to the Effective Time, the
Company intends, with the cooperation of Parent, to dispose of certain assets
set forth on ANNEX A hereto (as amended from time to time pursuant to SECTION
5.2 hereof) and certain liabilities associated therewith (the "DISPOSITION");
WHEREAS, immediately prior to the Effective Time, the Company intends, with
the cooperation and at the direction of Parent, to transfer all of the interests
in the securitizations of the Company set forth on Section 5.9 of the Company
Disclosure Schedule (excluding any rights, duties or obligations as a servicer
or subservicer) that are held by the Company or any of its Subsidiaries
(including those held by FFCA Residual Interest Corporation ("FRIC") (the
"SECURITIZATION INTERESTS")) to Galahad REIT Corporation, a Delaware corporation
("GALAHAD") and a wholly owned subsidiary of General Electric Capital Services,
Inc. ("HOLDINGS"), the parent corporation of Parent; and
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Maryland General Corporation Law (the
"MGCL"), Merger Sub shall be merged with and into the Company at the Effective
Time. From and after the Effective Time, the separate corporate existence of
Merger Sub shall cease and the Company shall continue its corporate existence
under the MGCL as the surviving corporation (the "SURVIVING CORPORATION").
1.2 CLOSING. Subject to the terms and conditions hereof, the closing of the
Merger (the "CLOSING") will take place on the second Business Day after the
satisfaction or waiver (subject to applicable law) of the conditions set forth
in ARTICLE VI (excluding conditions that, by their terms, cannot be satisfied
until the Closing Date), unless another time or date is agreed to in writing by
the parties hereto (any such date, the "CLOSING DATE"). The Closing shall be
held at the offices of Xxxxxxx Xxxxxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx, unless another place is agreed to by the parties hereto.
1.3 EFFECTIVE TIME. As soon as practicable following the Closing, the
parties shall (i) file articles of merger (the "ARTICLES OF MERGER") in such
form as is required by, and executed in accordance with the relevant provisions
of, the MGCL, and (ii) make all other filings or recordings required under the
MGCL. The Merger shall become effective at such time as the Articles of Merger
are duly filed with the State Department of Assessments and Taxation of
Maryland, or at such subsequent time as Parent and the Company shall agree and
specify in the Articles of Merger (the date and time the Merger becomes
effective being the "EFFECTIVE TIME").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger will
have the effects set forth in the MGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Merger Sub shall be vested
in the Surviving Corporation, and all debts, liabilities, obligations and duties
of the Company and Merger Sub shall become the debts, liabilities, obligations
and duties of the Surviving Corporation.
1.5 CHARTER. The charter of the Company as in effect immediately prior to
the Effective Time, shall upon the Effective Time and by virtue of the Merger be
amended to read in its entirety as set forth in EXHIBIT 1.5, and as so amended
shall be the charter of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
1.6 BY-LAWS. The by-laws of the Company as in effect immediately prior to
the Effective Time shall upon the Effective Time be amended to read in their
entirety as set forth in EXHIBIT 1.6, and as so amended shall be the by-laws of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
2
1.7 OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION. Except as set
forth on Section 1.7 of the Company Disclosure Schedule, the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, until their respective successors are duly elected and
qualified or their earlier resignation or removal or otherwise ceasing to be an
officer, as the case may be. The Company shall use its reasonable best efforts
to cause each of the directors of the Company to tender their resignations as
directors of the Company immediately prior to the Effective Time, which such
resignations shall become effective at and as of the Effective Time. The
directors of Merger Sub immediately prior to the Effective Time shall be the
directors of the Surviving Corporation until their respective successors are
duly elected and qualified or their earlier resignation or removal or otherwise
ceasing to be a director, as the case may be.
1.8 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the Merger
and without any action on the part of the Company, Merger Sub or any holder of
any capital stock thereof:
(a) (i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than Cancelled Shares (as
defined in SECTION 1.8(A)(II)), shall be converted into the right to
receive $25.00 per share in cash, without interest thereon.
(ii) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned or held by Parent or any
of its Subsidiaries and each share of Company Common Stock held in treasury
of the Company at the Effective Time ("CANCELLED SHARES") shall, by virtue
of the Merger, cease to be outstanding and shall be cancelled and no Merger
Consideration or other consideration shall be delivered in exchange
therefor. For purposes of this SECTION 1.8(A)(II), shares of Company Common
Stock owned beneficially or held of record by any plan, program or
arrangement sponsored or maintained for the benefit of any current or
former employee of the Company, Parent or any of their respective
Subsidiaries will not be deemed to be held by the Company, Parent or any
such Subsidiary, regardless of whether the Company, Parent or any such
Subsidiary has the power, directly or indirectly, to vote or control the
disposition of such shares.
(iii) Each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
3
(b) As a result of the Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of Company Common
Stock outstanding immediately prior to such time shall cease to be
outstanding and shall be cancelled and shall cease to exist, and each
holder of a certificate which immediately prior to the Effective Time
represented any such shares of Company Common Stock (a "Certificate") shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive the consideration specified in
SECTION 1.8(A)(I) (the "MERGER CONSIDERATION") in accordance with ARTICLE
II upon the surrender of such Certificate (other than in the case of
Cancelled Shares); PROVIDED, HOWEVER, that the foregoing shall not affect
the payment of dividends with a record date prior to the Effective Time to
the holders of record on such record date.
1.9 TREATMENT OF OPTIONS AND RESTRICTED STOCK.
(a) Immediately prior to the Effective Time, each then outstanding
employee or other stock option and each then outstanding director stock
option (each, an "OPTION"), whether or not then vested or exercisable,
shall be (or, if not previously vested and exercisable, shall become)
vested and exercisable and such Options immediately thereafter shall be
cancelled by the Company, and each holder of a cancelled Option shall be
entitled to receive at the Effective Time or as soon as practicable
thereafter from the Company (and, if necessary, Parent shall provide funds
to the Company sufficient for such payments) in consideration for the
cancellation of such Option an amount in cash equal to the product of (i)
the number of shares of Company Common Stock previously subject to such
Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of Company Common Stock previously subject to such
Option, less any applicable withholding taxes.
(b) Immediately prior to the Effective Time, all restrictions on all
outstanding shares of restricted Company Common Stock granted to employees
or directors shall lapse, and such shares of Company Common Stock shall be
converted into the right to receive the Merger Consideration in accordance
with SECTION 1.8(A)(I).
(c) The Company shall (i) take all actions necessary and appropriate
so that all stock or other equity based plans maintained with respect to
the Company Common Stock, including, without limitation, the stock or other
equity based plans listed on Section 3.1(p) of the Company Disclosure
Schedule ("OPTION PLANS"), shall terminate as of the Effective Time, (ii)
use its reasonable best efforts to provide that any other Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company
shall be amended to provide that no further issuances, transfers or grants
shall be permitted from and after the Effective Time, and (iii) use its
reasonable best efforts to provide that, from and after the Effective Time,
no holder of an Option or any participant in any Option Plan shall have any
right thereunder to acquire any capital stock of the Company, Parent or the
4
Surviving Corporation. Prior to the Effective Time, the Company shall use
its reasonable best efforts to (x) obtain all necessary consents from, and
provide (in a form reasonably acceptable to Parent) any required notices
to, holders of Options and (y) amend the terms of the applicable Option
Plan, in each case, as is necessary to give effect to the provision of this
paragraph (c).
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. Prior to the Effective Time, Merger Sub shall appoint a
bank or trust company acceptable to the Company to act as exchange agent (the
"EXCHANGE AGENT") for the payment of the Merger Consideration. At or prior to
the Effective Time, Parent shall deposit or cause to be deposited with the
Exchange Agent, in trust for the benefit of holders of shares of Company Common
Stock, for exchange in accordance with SECTION 1.8, all the cash to be paid
pursuant to this Agreement in exchange for outstanding Company Common Stock. Any
cash deposited with the Exchange Agent shall hereinafter be referred to as the
"EXCHANGE FUND."
2.2 EXCHANGE PROCEDURES. As promptly as practicable, but in any event
within five (5) Business Days after the Effective Time, the Exchange Agent will
send to each record holder of a Certificate, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in a form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. As soon as reasonably
practicable after the Effective Time, each holder of a Certificate, upon
surrender of a Certificate to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, shall be entitled to receive in exchange
therefor the Merger Consideration with respect to the aggregate number of shares
of Company Common Stock previously represented by such Certificate. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. No interest will be paid
or will accrue on any cash payable pursuant to SECTION 1.8. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a check in the proper amount of cash pursuant
to SECTION 1.8 may be issued with respect to such Company Common Stock to such a
transferee if the Certificate formerly representing such shares of Company
Common Stock is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
2.3 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash paid upon
surrender of Certificates in accordance with the terms of ARTICLE I and this
ARTICLE II shall be deemed to have been issued or paid in full satisfaction of
all rights pertaining to the shares of Company Common Stock formerly represented
thereby, except as otherwise provided herein or by law.
5
2.4 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for twelve months after the
Effective Time shall be delivered to the Surviving Corporation or otherwise on
the instruction of the Surviving Corporation, and any holders of Certificates
who have not theretofore complied with this ARTICLE II shall thereafter look
only to the Surviving Corporation (subject to abandoned property, escheat or
other similar laws) for the Merger Consideration to which such holders are
entitled pursuant to SECTION 1.8 with respect to the shares of Company Common
Stock formerly represented thereby.
2.5 NO LIABILITY. None of Parent, Merger Sub, the Company, the Surviving
Corporation or the Exchange Agent shall be liable to any Person in respect of
any Merger Consideration from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.6 INVESTMENT OF THE EXCHANGE FUND. Any funds included in the Exchange
Fund may be invested by the Exchange Agent, as directed by Parent; PROVIDED,
HOWEVER, that such investments shall be in obligations of or guaranteed by the
United States of America and backed by the full faith and credit of the United
States of America or in commercial paper obligations rated A-l or P-1 or better
by Xxxxx'x Investors Service, Inc. or Standard & Poor's Corporation,
respectively. Any interest and other income resulting from such investments
shall be paid to Parent upon termination of the Exchange Fund pursuant to
SECTION 2.4 hereof.
2.7 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Company Common
Stock formerly represented thereby pursuant to this Agreement.
2.8 WITHHOLDING RIGHTS. Each of the Exchange Agent, the Surviving
Corporation and Parent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Common Stock or Options such amounts as are required to be
deducted and withheld with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended from time to time (the "CODE"), and
the rules and regulations promulgated thereunder, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Common Stock or Options in
respect of which such deduction and withholding was made.
6
2.9 FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company or Merger Sub, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets deemed acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
2.10 STOCK TRANSFER BOOKS. At the close of business, New York City time, on
the day the Effective Time occurs, the stock transfer books of the Company shall
be closed and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of Certificates shall cease to have any rights
with respect to such shares of Company Common Stock formerly represented
thereby, except as otherwise provided herein or by law. On or after the
Effective Time, any Certificates presented to the Exchange Agent, the Surviving
Corporation or Parent for any reason shall be cancelled and exchanged for the
Merger Consideration with respect to the shares of Company Common Stock formerly
represented thereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in
the Company Disclosure Schedule delivered by the Company to Parent in connection
with the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant to the extent specified therein and all other
representations and warranties to the extent a matter is disclosed in such a way
as to make its relevance to the information called for by such other
representation and warranty readily apparent), the Company represents and
warrants to Parent as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of the Company and each of
its Subsidiaries (i) is a corporation or other entity duly incorporated or
organized, validly existing and in good standing under the laws of its
state of incorporation or organization, (ii) has all requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted and (iii) is duly qualified and in good
standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary, except in the case of clause (iii) for such
failures as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (as defined in SECTION 8.11(F))
on the Company. The copies of the charter, articles or certificate of
incorporation and by-laws (or similar governing document) of the Company
and each of its Subsidiaries which were previously furnished to Parent are
true, complete and correct copies of such documents as in effect on the
date of this Agreement.
7
(b) CAPITAL STRUCTURE.
(i) As of March 26, 2001, the authorized capital stock of the
Company consisted of (A) 200,000,000 shares of Company Common Stock,
of which 56,124,714.6660 shares were issued and outstanding and no
shares were held in treasury and (B) 10,000,000 shares of preferred
stock, par value $.01 per share, of which 300,000 shares of Series A
Junior Participating Preferred Stock have been designated and reserved
for issuance upon exercise of the rights (the "RIGHTS") distributed to
the holders of Company Common Stock pursuant to the Rights Agreement,
dated as of April 7, 1999, between the Company and Xxxxx Fargo Bank
Minnesota, N.A., as successor rights agent (as amended, the "RIGHTS
AGREEMENT"). Since March 26, 2001 to the date of this Agreement, there
have been no issuances or deliveries by the Company of shares of its
capital stock or any other securities of the Company except deliveries
by the Company of Company Common Stock (and the associated Rights)
related to open market purchases by the Company of shares of Company
Common Stock pursuant to the Company's Dividend Reinvestment Plan and
the 1997 Employee Stock Purchase Plan. All issued and outstanding
shares of the capital stock of the Company are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital
stock is entitled to preemptive rights. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to the
Company or any of its Subsidiaries.
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of the Company having the right to vote on
any matters on which stockholders may vote ("COMPANY VOTING DEBT") are
issued or outstanding.
(iii) Except (A) for the acquisition by stockholders of the
Company of shares of Company Common Stock pursuant to the Company's
Dividend Reinvestment Plan (all of which shares shall be acquired
after the date hereof by the Company for delivery to the applicable
stockholders of the Company solely through open market purchases), (B)
for Options and other rights representing in the aggregate the right
to purchase 3,973,618 shares of Company Common Stock under (1) the
1995 Stock Option and Incentive Plan, as amended, of the Company (the
"1995 STOCK OPTION PLAN") and (2) the 1997 Employee Stock Purchase
Plan, (C) for the Rights, (D) for warrants to acquire (1) 1,476,908
shares of Company Common Stock issued on March 13, 1998 and (2)
2,000,000 shares of Company Common Stock issued on December 14, 1999
(collectively, the "WARRANTS") and (E) for the acquisition by the
Company of shares of Company Common Stock pursuant to the Company's
401(k) Plan (all of which shares shall be acquired after the date
hereof by the Company solely through open market purchases), as of the
date of this Agreement, there are no securities, options, warrants,
8
calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company or any of its Subsidiaries is a party
or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver, sell, repurchase, redeem or otherwise
acquire or cause to be issued, delivered, sold, repurchased, redeemed
or acquired, shares of capital stock or other voting securities of the
Company or any of its Subsidiaries or obligating the Company or any of
its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
(iv) All the outstanding shares of capital stock or other
ownership interests of each Subsidiary of the Company have been
validly issued and are fully paid and nonassessable and are owned (of
record and beneficially) by the Company and/or one or more of its
wholly owned Subsidiaries, free and clear of all pledges, claims,
liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "LIENS"). Except (A) for the capital
stock or other ownership interests of its Subsidiaries, (B) as
acquired in the ordinary course of business pursuant to foreclosure,
workout, settlement or similar transactions, and (C) for security
interests held in the ordinary course of business, the Company does
not own, directly or indirectly, any capital stock or other ownership
interest in any Person that is material to the business of the Company
and its Subsidiaries, taken as a whole.
(c) AUTHORITY; NO CONFLICTS.
(i) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby, subject in the case of the consummation of the
Merger, to the receipt of the Required Company Vote (as defined in
SECTION 3.1(I)). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject in the case of the consummation of the Merger to the
receipt of the Required Company Vote. This Agreement has been duly
executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against it in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
relating to or affecting creditors generally, by general equity
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law) or by an implied covenant of good
faith and fair dealing.
(ii) The execution and delivery of this Agreement does not, and
the consummation of the Merger and the other transactions contemplated
hereby will not, conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time, or
both) under, or require an offer to purchase to be made under, or give
9
rise to a right of termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit
under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "VIOLATION") pursuant to: (A) any
provision of the charter, articles or certificate of incorporation or
by-laws or similar governing document of the Company or any Subsidiary
of the Company, or (B) except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Company and subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise
or license, or any judgment, order, decree, statute, law, ordinance,
rule or regulation ("LAWS") applicable to the Company or any
Subsidiary of the Company or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Person or the United
States government or any United States domestic state, municipal or
local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
United States domestic quasi-governmental or private body exercising
any regulatory, taxing, importing or other United States domestic
governmental or quasi-governmental authority (a "GOVERNMENTAL
ENTITY"), is required by the Company or any Subsidiary of the Company
as a result of the execution and delivery of this Agreement by the
Company or the consummation of the Merger and the other transactions
contemplated hereby, except for those required under or in relation to
(A) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR ACT"), (B) the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (C) the MGCL with respect to the filing
of the Articles of Merger, (D) the Required Company Vote, (E) the
rules and regulations of the New York Stock Exchange (the "NYSE"), (F)
state approvals required in connection with the Surviving
Corporation's commercial loan and lease origination, servicing and
selling activities and (G) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company. Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of the
foregoing clauses (A) through (F) are hereinafter referred to as
"REQUIRED CONSENTS."
(d) REPORTS AND FINANCIAL STATEMENTS. The Company has filed all
material reports, schedules, forms, statements and other documents required
to be filed by it with the Securities and Exchange Commission (the "SEC")
since January 1, 2000 (collectively, including all exhibits thereto, the
10
"COMPANY SEC REPORTS"). No Subsidiary of the Company is required to file
any form, report or other document with the SEC. None of the Company SEC
Reports filed as of their respective dates (or, if amended or superseded by
a subsequent filing, then as of the date of such filing), as so amended or
superseded, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading or failed to comply as to form in all material
respects with the applicable requirements of the Securities Act of 1933, as
amended, the Exchange Act and, in each case, the rules and regulations
promulgated thereunder. Each of the consolidated financial statements
(including the related notes) included in the Company SEC Reports presents
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of the Company and its
Subsidiaries as of the respective dates or for the respective periods set
forth therein, all in conformity with United States generally accepted
accounting principles ("U.S. GAAP") (except, in the case of unaudited
consolidated quarterly statements, as permitted by Form 10-Q of the SEC)
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring year-end adjustments.
(e) LIABILITIES. Except for (i) liabilities incurred in the ordinary
course of business consistent with past practice or otherwise permitted
hereunder, (ii) liabilities arising from this Agreement or the transactions
contemplated hereby and transaction expenses incurred in connection with
this Agreement, (iii) liabilities disclosed in the Company SEC Reports
filed prior to the date hereof, and (iv) liabilities which, individually or
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on the Company, since the date of the most recent audited
annual financial statements included in the Company SEC Reports filed with
the SEC prior to the date of this Agreement (the "FILED AUDITED
FINANCIALS"), neither the Company nor any of its Subsidiaries has incurred
any liabilities (whether accrued, absolute, contingent or otherwise and
whether due or to become due) that would be required to be reflected or
reserved against in a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with U.S. GAAP as applied in preparing
the fiscal year end consolidated balance sheet of the Company and its
Subsidiaries contained in the Filed Audited Financials.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise
contemplated hereby, from the date of the Filed Audited Financials to the
date hereof: (i) the Company and its Subsidiaries have conducted their
business in all material respects in the ordinary course in substantially
the same manner as heretofore conducted; (ii) there has not been any
Material Adverse Effect on the Company; (iii) the Company has not declared
any dividends on or made any other distributions in respect of any of its
capital stock, except regular quarterly dividends by the Company in an
amount not in excess of $0.56 per share for each dividend; (iv) the Company
has not changed its methods of accounting for financial accounting or tax
11
purposes in any manner that would be reasonably expected to have a
significant adverse effect on its financial statements; (v) the Company has
not made or revoked any material express or deemed election relating to
Taxes; and (vi) neither the Company nor any of its Subsidiaries has (A)
waived in writing any rights which waiver would reasonably be expected to
have a Material Adverse Effect on the Company, (B) suffered any
extraordinary loss or extraordinary losses (as defined in Opinion No. 30 of
the Accounting Principles Board of the American Institute of Certified
Public Accountants and any amendments or interpretations thereof) which
would reasonably be expected to have a Material Adverse Effect on the
Company, (C) made or agreed to make any material increase in the
compensation payable or to become payable to any Company Employee, except
for regularly scheduled increases in compensation payable or increases
otherwise occurring in the ordinary and usual course of business consistent
with past practices, (D) made or agreed to make any increase in any Company
Plan or adopt a new employee benefit plan, which in either case would
result in a material increase in liability to the Company, or (E) made any
capital expenditures in respect of its business or operations (excluding
capital expenditures made in respect of portfolio or other properties held
or controlled in the course of its business) in excess of $2,500,000 in the
aggregate.
(g) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by the
Company for inclusion or incorporation by reference in the Proxy
Statement (as defined in SECTION 5.1(A)), on the date it is first
mailed to stockholders of the Company or at the time of the Company
Stockholders Meeting, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading.
(ii) Notwithstanding the foregoing provisions of this SECTION
3.1(G), no representation or warranty is made by the Company with
respect to statements made in the Proxy Statement based on information
supplied by Parent for inclusion therein. For purposes of the
foregoing, it is understood and agreed that information concerning or
related to Holdings, Parent or Merger Sub or their respective
Subsidiaries will be deemed to have been supplied by Parent and
information concerning or related to the Company and the Company
Stockholders Meeting shall be deemed to have been supplied by the
Company.
(h) BOARD APPROVAL. The Board of Directors of the Company, by
resolutions duly adopted at a meeting duly called and held and not
subsequently rescinded or modified in any way (the "BOARD APPROVAL"), has
duly (i) declared that this Agreement and the Merger and the other
12
transactions contemplated hereby are advisable to, and in the best
interests of, the Company and its stockholders, (ii) approved this
Agreement and the Merger and the other transactions contemplated hereby and
(iii) recommended that the stockholders of the Company approve the Merger
and the other transactions contemplated hereby, including the amendment to
the Company's charter contemplated hereby. The Board Approval (assuming the
accuracy of the representation in SECTION 3.2(H)) (together with opt-out
exemptions incorporated in the Company's by-laws) is sufficient to render
inapplicable to the Merger and this Agreement (and the transactions
provided for herein) the restrictions on "business combinations" (as
defined in Subtitle 6 of Title 3 of the MGCL) set forth in Subtitle 6 of
Title 3 of the MGCL and the limitations on the voting rights of shares of
stock acquired in a "control share acquisition" (as defined in Subtitle 7
of Title 3 of the MGCL) set forth in Subtitle 7 of Title 3 of the MGCL, and
to the knowledge of the Company as of the date hereof, no other state
business combination or takeover statute or similar statute or regulation
applies to the Merger and this Agreement (and the transactions provided for
herein).
(i) VOTE REQUIRED. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock entitled to vote (the
"REQUIRED COMPANY VOTE") is the only vote of the holders of any class or
series of Company capital stock necessary to approve the Merger and the
other transactions contemplated hereby, including the amendment to the
Company's charter contemplated hereby (assuming the accuracy of the
representation in SECTION 3.2(H)).
(j) OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Xxxxxxx Xxxxx & Co. (the "FINANCIAL ADVISOR"), dated the date of this
Agreement, to the effect that, as of such date, the Merger Consideration is
fair, from a financial point of view, to the holders of the Company Common
Stock.
(k) RIGHTS AGREEMENT. The Company has amended the Rights Agreement to
ensure that (i) none of a "Flip-In Event", a "Distribution Date" or a
"Stock Acquisition Date" (in each case as defined in the Rights Agreement)
will occur, and none of Parent, Merger Sub or any of their "Affiliates" or
"Associates" will be deemed to be an "Acquiring Person" (in each case as
defined in the Rights Agreement), by reason of the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby, and (ii) the Rights will expire immediately prior to the Effective
Time. On or prior to the date hereof, no "Flip-In Event", "Distribution
Date" or "Stock Acquisition Date" (as defined in the Rights Agreement) has
occurred.
(l) RELATED PARTY TRANSACTIONS. Except for those arrangements,
agreements and contracts disclosed (or incorporated by reference) in the
Company SEC Reports filed prior to the date hereof and except for the
Company Plans, set forth on Section 3.1(l) of the Company Disclosure
Schedule is a list of all written arrangements, agreements and contracts
currently in effect entered into by the Company or any of its Subsidiaries
13
with any Person who is an officer, director or affiliate of the Company, or
any entity of which any of the foregoing is an affiliate, other than those
arrangements, agreements and understandings which (i) are terminable by the
Company upon no more than 30 days' prior notice without payment of any
premium or penalty or (ii) would not, individually or in the aggregate,
reasonably be expected to create or result in a liability to the Company in
excess of $100,000.
(m) LITIGATION. There are no claims, actions, suits, proceedings or
investigations (collectively, "CLAIMS") pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, or any
properties or rights of the Company or any of its Subsidiaries, before any
Governmental Entity, nor is there any judgment, decree, injunction, ruling
or order of any Governmental Entity or arbitrator outstanding specifically
against the Company or any of its Subsidiaries, except for any of the
foregoing as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. To the Company's
knowledge, there has not been any investigation of the Company or any of
its Subsidiaries conducted by any Governmental Entity during the two years
prior to the date hereof which was concluded and resulted in a significant
adverse effect on the ability of the Company and its Subsidiaries to
conduct their respective businesses.
(n) COMPLIANCE WITH LAWS; PERMITS. The businesses of the Company and
its Subsidiaries are not being and have not during the past two years been,
conducted in violation of any Law of any Governmental Entity, except for
any violations that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. The Company
and each of its Subsidiaries hold all permits, licenses, variances,
exemptions, authorizations, operating certificates, orders and approvals of
all Governmental Entities (the "COMPANY PERMITS"), that are required for
each of them to own, lease or operate their assets and to carry on their
businesses as presently conducted, except where the failure to hold Company
Permits would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on the Company. The Company and its
Subsidiaries have not received any notice of any default under or violation
of, any such Company Permit, except for such violations or defaults that
would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company.
(o) TAXES.
(i) The Company and each of its Subsidiaries and any
consolidated, combined, unitary or aggregate group for tax purposes of
which the Company or any of its Subsidiaries is or has been a member
has timely filed all income or franchise Tax Returns and all other
material Tax Returns (as defined below) required to be filed by it
(after giving effect to any extension properly granted by a Tax
Authority (as defined below) having authority to do so) and has timely
paid (or the Company has timely paid on its behalf), or adequately
14
provided for on the Company's financial statements in accordance with
U.S. GAAP, all income, franchise and other material Taxes (as defined
below) due and owing except such Taxes that are being contested in
good faith by appropriate proceedings and for which the Company or any
of its Subsidiaries shall have set aside on its books adequate
reserves. Each such Tax Return is complete and accurate in all
material respects. The most recent financial statements of the Company
filed with the SEC reflect an adequate reserve for all Taxes payable
by the Company and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements for
which no Tax Return is yet due. No material deficiencies for any Taxes
have been proposed, asserted or assessed in writing against the
Company or any of its Subsidiaries and, to the knowledge of the
Company, no such deficiencies otherwise have been proposed, asserted
or assessed. No requests for waivers of the time to assess any federal
income taxes or other material Taxes are pending and no extensions of
time to assess any such Taxes are in effect. There are no material
pending actions or proceedings by any Tax Authority for assessment or
collection of any Tax. No claim has been made in writing by a Tax
Authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns that it is or may be subject to
taxation by the jurisdiction and, to the knowledge of the Company, no
such claim otherwise has been made, in both cases, where such claim,
were it to be sustained, would result in a material Tax liability to
the Company and/or any of its Subsidiaries. All Taxes required to be
withheld, collected and paid over to any Tax Authority by the Company
or any of its Subsidiaries have been timely withheld, collected and
paid over to the proper Tax Authority. Since the most recent audited
financial statements contained in thc Company SEC Reports, the Company
has incurred no liability for Taxes under Sections 857(b), 857(f),
860(c) or 4981 of the Code, including without limitation any Tax
arising from a prohibited transaction described in Section 857(b)(6)
of the Code, determined without regard to the transactions
contemplated under this Agreement and any actions taken by Parent on
or after the Closing Date, and since December 31, 2000, neither the
Company nor any of its Subsidiaries has incurred any material
liability for Taxes other than in the ordinary course of business,
determined without regard to the transactions contemplated under this
Agreement and any actions taken by Parent on or after the Closing
Date. Determined without regard to the transactions contemplated under
this Agreement and any actions taken by Parent on or after the Closing
Date, no event has occurred, and no condition or circumstance exists,
which presents a material risk and, since December 31, 2000, no event
has occurred, and no condition or circumstance has arisen, which
presents a risk that (i) any Tax described in the preceding sentence
will be imposed upon the Company or any of its Subsidiaries in a
material amount or (ii) the Company has not or will not qualify as a
REIT for federal income tax purposes. Complete copies of all federal
15
and all material state and local income or franchise Tax Returns that
have been filed by the Company and each of its Subsidiaries for all
taxable years beginning on or after January 1, 1996, all extensions
filed with any Tax Authority that are currently in effect and all
written communications with a Tax Authority relating thereto
(including all examination reports relating thereto), have been made
available to Parent and the representatives of Parent. Neither the
Company nor any of its Subsidiaries holds any material asset (A) the
disposition of which would be subject to rules similar to Section 1374
of the Code as a result of an election under Internal Revenue Service
Notice 88-19 or Treas. Reg.ss.1.337-5T, or (B) that is subject to a
consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder. Neither the Company nor any of its
Subsidiaries is obligated, at the date hereof, to make any payment
that would not be deductible pursuant to Section 162(m) of the Code
prior to or at the Closing. Neither the Company nor any of its
Subsidiaries is party to, nor has any liability under (including
liability with respect to any predecessor entity), any
indemnification, allocation or sharing agreement with respect to Taxes
(other than any reimbursement agreement relating to payroll Taxes in
respect of shared employees). As used in this Agreement, "TAX" or
"TAXES" shall include all federal, state, local and foreign income,
property, sales, use, occupancy, transfer, recording, withholding,
franchise, employment, excise and other taxes, or governmental charges
of any nature whatsoever, together with penalties, interest or
additions to tax with respect thereto and any liability in respect of
Taxes as a transferee, successor, by contract or otherwise. As used in
this Agreement, "TAX RETURN" or "TAX RETURNS" shall include all
original and amended returns and reports (including elections, claims,
declarations, disclosures, estimates, computations and information
returns) required to be supplied to a Tax Authority in any
jurisdiction. As used in this Agreement, "TAX AUTHORITY" shall mean
the Internal Revenue Service and any other domestic or foreign bureau,
department, entity, agency or other Governmental Entity responsible
for the administration of any Tax.
(ii) The Company (x) for all taxable years commencing with the
taxable year beginning June 1, 1994 through December 31, 2000 has been
properly subject to taxation as a real estate investment trust within
the meaning of Section 856 of the Code (a "REIT") and has qualified as
a REIT for such years, (y) has operated since December 31, 2000, and
will continue to operate to and including the Closing, in such a
manner as to qualify as a REIT for its taxable year beginning January
1, 2001, determined as if such taxable year ended as of the Closing
and (z) has not taken or omitted to take any action which action or
omission would reasonably be expected to result in a challenge to its
status as a REIT and no such challenge is pending or to the Company's
knowledge threatened; PROVIDED, HOWEVER, that the Company shall not be
deemed to be in breach of this representation by reason of its failure
to make a distribution in excess of that permitted to be made pursuant
to Section 4.1(b). Each of the Company's Subsidiaries which is a (x)
16
partnership, joint venture or limited liability company (A) has been
since its formation and continues to be treated for federal income tax
purposes as a partnership or disregarded as a separate entity, as the
case may be, and has not been treated for federal income tax purposes
as a corporation or an association taxable as a corporation and (B)
has not since the later of its formation or the acquisition by the
Company of a direct or indirect interest therein owned any assets
(including, without limitation, securities) that would cause the
Company to violate Section 856(c)(4) of the Code, or (y) corporation
has been since its formation a qualified REIT subsidiary under Section
856(i) of the Code, except as set forth on Section 3.1(o) of the
Company Disclosure Schedule. The Company and FFCA Funding Corporation,
a Delaware corporation ("FUNDING") have properly and timely elected,
effective for the taxable year beginning on January 1, 2001, to treat
Funding as a "taxable REIT subsidiary" for purposes of the Code. The
Company has not elected and will not elect to pay Tax on any capital
gain recognized on or after January 1, 2001.
(iii) The representations set forth in this SECTION 3.1(O) that
are qualified as to Material Adverse Effect on the Company shall be
deemed to be untrue if the aggregate failures of any such
representations to be true has a Material Adverse Effect on the
Company.
(p) EMPLOYEE BENEFITS; EMPLOYEES.
(i) Section 3.1(p) of the Company Disclosure Schedule sets forth
a list of each "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), severance, change in control or employment plan,
program or agreement, and vacation, incentive, bonus, stock option,
stock purchase, and restricted stock plan, program or policy sponsored
or maintained by the Company, any of its Subsidiaries, any of their
affiliates and any trade or business (whether or not incorporated)
which is or has ever been under common control, or which is or has
ever been treated as a single employer, with any of them under Section
4.14(b), (c), (m) or (o) of the Code ("ERISA AFFILIATE"), in which
present or former employees of the Company or any of its Subsidiaries
or ERISA Affiliates ("COMPANY EMPLOYEES") participate (collectively,
the "COMPANY PLANS"). All Company Plans set forth on Section 3.1(p) of
the Company Disclosure Schedule, if any, that would result in the
payment to any Company Employee of any money or other property or
accelerate or provide any other rights or benefits thereto as a result
of the transactions contemplated by this Agreement, whether or not
such payment or acceleration would constitute a parachute payment
within the meaning of Code Section 280G, are so indicated by an
asterisk. The Company Plans are in compliance with all applicable
requirements of ERISA, the Code, and other applicable Laws and have
been administered in all material respects in accordance with their
17
terms and such Laws, except where the failure to so comply or be
administered would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on the Company. Each
Company Plan which is intended to be qualified within the meaning of
Section 401 of the Code has received a favorable determination letter
as to its qualification, and, to the knowledge of the Company, nothing
has occurred that would reasonably be expected to cause the loss of
such qualification or the loss of the tax-exempt status for any trust
maintained with respect to any such Company Plan.
(ii) Except with respect to (A) the Company's Change of Control
Severance Plan and (B) any liabilities which arise under any Company
Plans which by their terms are required to be satisfied after the
Effective Time, neither the Company nor Parent shall, at or after the
Effective Time, have any liability with respect to any employment,
change in control, "continuity" or severance agreement, plan, program
or policy with or with respect to any Company Employee.
(iii) No Company Plan is subject to Title IV of ERISA (including
any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)),
and neither the Company nor any of its ERISA Affiliates has ever
contributed or been obligated to contribute to any pension plan
subject to Title IV of ERISA (including any multiemployer plan).
(iv) No event or condition has occurred, to the knowledge of the
Company, in connection with which the Company or any of its ERISA
Affiliates would be subject to any liability, encumbrance or Lien with
respect to any Company Plan under ERISA, the Code or any other
applicable Law or under any agreement or arrangement pursuant to or
under which the Company or any of its ERISA Affiliates are required to
indemnify any person against such liability, where such liability,
individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on the Company.
(v) True, correct and complete copies of the following documents
with respect to each of the Company Plans have been made available or
delivered to Parent by Company, to the extent applicable: (A) any
plans or agreements, all amendments thereto and related trust
documents, and amendments thereto; (B) the most recent Form 5500 and
all schedules thereto and the most recent actuarial report, if any;
(C) the most recent IRS determination letter; and (D) any summary plan
descriptions.
(vi) With respect to any Company Plan, (A) no actions, suits or
claims (other than routine claims for benefits in the ordinary course)
are pending or threatened in writing and (B) to the knowledge of the
Company, no facts or circumstances exist that could give rise to any
18
such actions, suits or claims, in each case which, individually or in
the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Company.
(vii) None of the Company Plans provide for post-employment life
or health insurance, benefits or coverage for any participant or any
beneficiary of a participant, except as may be required under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") and any such participation is at the expense of the
participant or the participant's beneficiary.
(viii) None of the Company Employees is represented in his or her
capacity as an employee of the Company or any of its Subsidiaries by
any labor organization, nor has the Company or any of its Subsidiaries
recognized any labor organization nor has any labor organization been
elected as the collective bargaining agent of any such employees. To
the knowledge of the Company, there is no union organization activity
involving any of the Company Employees, pending or threatened in
writing, nor has there been any union representation involving such
employees within the past two years. To the Company's knowledge, there
are no complaints, charges or claims against the Company or any of its
Subsidiaries pending or, threatened in writing, by or before any
Governmental Entity based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment or
failure to employ by the Company or any of its Subsidiaries, of any
individual which would reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on the Company. The
Company and its Subsidiaries are in compliance with all laws,
regulations and orders relating to the employment of labor, including
all such laws, regulations and orders relating to wages, hours, the
Worker Adjustment and Retraining Notification Act ("WARN") and any
similar state or local "mass layoff' or "plant closing" law,
collective bargaining, discrimination, civil rights, safety and
health, workers' compensation and the collection and payment of
withholding and/or social security taxes and any similar tax, except
where the failure to be so in compliance would not be reasonably
expected, individually or in the aggregate, to have a Material Adverse
Effect on the Company. There has been no "mass layoff" or "plant
closing" as defined by WARN with respect to the Company or any of its
Subsidiaries in the 90 day period immediately prior to the date
hereof.
(q) ENVIRONMENTAL MATTERS.
(i) Other than exceptions to any of the following that would not
result in the Company and its Subsidiaries incurring Environmental
Liabilities (as hereinafter defined) that would, individually or in
the aggregate, reasonably be expected to have a Material Adverse
19
Effect on the Company (including, for avoidance of doubt, after giving
effect to any environmental insurance policies for which the Company
or any of its Subsidiaries is a named insured): (A) the Company and
its Subsidiaries and, to the knowledge of the Company, all Owned Real
Property or any real property on which the Company or its Subsidiaries
have a mortgage, are in compliance with applicable Environmental Laws
(as hereinafter defined); (B) there are no Environmental Claims (as
hereinafter defined) pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries or, to the
knowledge of the Company, with respect to any Owned Real Property or
any real property on which the Company or its Subsidiaries has a
mortgage; and (C) there are no facts, circumstances or conditions
associated with the Company or its Subsidiaries or any Owned Real
Property, Leased Real Property or real property over which the Company
or its Subsidiaries exercise day-to-day control or, to the knowledge
of the Company, any real property on which the Company or any of its
Subsidiaries has a mortgage, that, individually or in the aggregate,
would reasonably be expected to result in the assertion of an
Environmental Claim against the Company or its Subsidiaries or
otherwise result in the Company or its Subsidiaries incurring any
Environmental Liability.
(ii) Neither the Company nor any of its Subsidiaries is a party
to any order or, to the knowledge of the Company, any written
agreement pursuant to which any of them is obligated under any
applicable Environmental Law to remediate any condition relating to
any Hazardous Materials.
(iii) Notwithstanding the generality of any other representations
and warranties in this Agreement, the representations and warranties
in this SECTION 3.1(Q) are the only representations and warranties in
this Agreement with respect to Environmental Laws or Hazardous
Materials.
(iv) For purposes of this Agreement, the terms below shall be
defined as follows:
"ENVIRONMENTAL CLAIMS" refers to any complaint, summons, written
allegation, citation, notice, directive, order, claim, litigation,
judicial or administrative proceeding, judgment, or letter made or
filed by, or from, any Governmental Entity or Person involving known
or alleged violations of Environmental Laws, or Releases or threatened
Releases of Hazardous Materials.
"ENVIRONMENTAL LAW" means any and all federal, state, local or
foreign law (including common law), statute, code, ordinance, rule,
regulation or other requirement relating to the environment, natural
resources, or public or employee health and safety (as such health and
safety relates to the environment or natural resources or conditions
20
affecting either the environment or natural resources) and includes,
but is not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C.ss.9601 ET SEQ.,
the Hazardous Materials Transportation Act, 49 U.S.C.ss.1801 ET SEQ.,
the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.ss.6901
ET SEQ., the Clean Water Act, 33 U.S.C.ss.1251 ET SEQ., the Clean Air
Act, 33 U.S.C.ss.2601 ET SEQ., the Toxic Substances Control Act, 15
U.S.C.ss.2601 et SEQ., the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C.ss.136 ET SEQ., the Oil Pollution Act of
1990, 33 U.S.Css.2701 ET SEQ. and the Occupational Safety and Health
Act, 29 U.S.C.ss.651 ET SEQ. (to the extent it regulates occupational
exposure to Hazardous Materials) as such laws have been amended or
supplemented, and the statutes, regulations, rules, ordinances or
other legal requirements, and all analogous federal, state or local
statutes imposing liability in connection with, or establishing
standards for, or requirements for conduct in connection with, the
protection of any of the environment, natural resources or public or
employee health and safety (as such health and safety relates to the
environment or natural resources or conditions affecting either the
environment or natural resources).
"ENVIRONMENTAL LIABILITIES" means any monetary obligations,
losses, liabilities (including strict liability), damages, punitive
damages, consequential damages, treble damages, reasonable costs and
expenses (including out-of-pocket fees, disbursements and expenses of
counsel, out-of-pocket expert and consulting fees and out-of-pocket
costs for environmental site assessments, remedial investigation and
feasibility studies), fines, penalties, sanctions and interest
relating to any Environmental Claim.
"HAZARDOUS MATERIALS" means any substance, chemical, material or
waste defined, characterized, classified as or otherwise included in
the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "regulated substances," "extremely hazardous
waste," "restricted hazardous waste," "toxic substances,"
"contaminants," "pollutants," "medical waste," "infectious waste,"
"solid waste," "special waste," or words of similar meaning or import
under any applicable Environmental Law. Without limiting the
generality of the foregoing, the term "Hazardous Materials" shall
include (a) any petroleum or petroleum byproducts, gasoline, oil,
flammable substances, explosive or radioactive materials; (b) methyl
tertiary butyl ether; (c) asbestos in any form; (d) urea formaldehyde
foam insulation; (e) transformers or other equipment which contain
polychlorinated biphenyls; and (f) radon gas.
"RELEASE" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping or disposing of Hazardous Materials (including the abandoning
or discarding of barrels, containers or other closed receptacles
21
containing Hazardous Materials) into the environment, which could
reasonably be expected to result in liability of the Company or any of
its Subsidiaries.
(r) PROPERTIES. Except for any exceptions to the following as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company: (i) each of the Company and its
Subsidiaries has good and valid fee simple title to the real property owned
by it (the "OWNED REAL Property"), free and clear of all Liens other than
Permitted Liens (as defined in SECTION 8.11(G)); (ii) each of the Company
and its Subsidiaries has valid leasehold interests in the real property
leased (as landlord or as tenant) by or from it (the "LEASED REAL
PROPERTY", and together with the Owned Real Property, the "REAL PROPERTY"),
free and clear of all Liens other than Permitted Liens; (iii) all leases
pursuant to which the Company or any of its Subsidiaries leases (as
landlord or as tenant) any Real Property are in full force and effect and
grant in all respects the leasehold estates or rights of occupancy or use
they purport to grant; and (iv) the Company and its Subsidiaries have not
received any notice of any default either on the part of the Company or any
of its Subsidiaries under any such lease and, to the knowledge of the
Company, no event has occurred which, with notice or the lapse of time, or
both, would constitute a default on the part of the Company or any of its
Subsidiaries under any of such leases. Funding, a wholly owned Subsidiary
of the Company, has good and valid fee simple title to the Company's
headquarters location at 17207 North Perimeter Drive, Scottsdale, Arizona,
and the Company has good and valid fee simple title to the 3.6 acres of
real property described on Section 3.1(r) of the Company Disclosure
Schedule, in each case, free and clear of all Liens other than Permitted
Liens.
(s) CONTRACTS. From the last day to which the Company's most recently
filed Form 10-K or Form 10-Q relates, whichever is later, to the date
hereof, neither the Company nor any of its Subsidiaries has entered into
any contract, agreement or other document or instrument (i) (other than
this Agreement) that is required to be filed with the SEC that has not been
so filed or any material amendment or modification to, or waiver under, any
such contract, (ii) that would be required to be disclosed under Item 404
of Regulation S-K under the Securities Act, or (iii) related to voting or
governing how any shares of Company Common Stock shall be voted (the
documents referred to in clauses (i) through (iii), together with all
contracts, agreements or other documents or instruments listed in Item 14
of the Company's Annual Report on Form 10-K most recently filed with the
SEC which are in effect on the date hereof or listed on Section 3.1(s) of
the Company Disclosure Schedule, are collectively referred to as the
"MATERIAL CONTRACTS"). The Company and its Subsidiaries have not received
any notice of any default under any Material Contract either by the Company
or any of its Subsidiaries which is a party thereto or by any other party
thereto which would, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, and to the
knowledge of the Company, no event has occurred that with the lapse of time
or the giving of notice or both would constitute such a default by the
Company or such Subsidiary or any other party thereto. Neither the Company
nor any of its Subsidiaries is subject to or bound by any exclusive dealing
22
arrangement, or other contract or arrangement, containing covenants which
materially limit the ability of the Company or any of its Subsidiaries to
compete in any line of business or with any person or which involve any
material restriction of geographical area in which, or method by which, the
Company or any of its Subsidiaries may carry on its business (other than as
may required by Law or any applicable Governmental Entity). The aggregate
amounts payable to the Executives pursuant to Sections 7(a)(i)(A),
7(a)(i)(C)(ii) and 9 of the Employment Agreements between the Company and
each of the Executives shall not exceed $23 million. The aggregate amounts
payable to other employees of the Company or its Subsidiaries pursuant to
Sections 4(a), 4(b)(i), 4(b)(iii) and 6 of the Continuity Agreements
between the Company and any such employee and the aggregate amounts payable
pursuant to the Change of Control Severance Plan for Certain Covered
Executives of the Company would not reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(t) DISPOSITION PROPERTIES. To the Company's knowledge, ANNEX A hereto
sets forth a true and complete list of each parcel of Owned Real Property
or real property over which the Company exercises day-to-day control on
which an underground storage tank containing, or intended for the storage
of, gasoline is located.
(u) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company, except the Financial Advisor, whose
fees and expenses will be paid by the Company in accordance with the
Company's agreement with such firm, based upon arrangements made by or on
behalf of the Company and previously disclosed to Parent.
(v) INSURANCE. The Company and its Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management
of the Company reasonably has determined to be prudent in accordance with
industry practices or as is required by Law. Set forth on Section 3.1(v) of
the Company Disclosure Schedule is a list of all insurance policies
acquired or maintained by the Company or its Subsidiaries specifically with
respect to any potential Environmental Claims or Environmental Liabilities
(the "ENVIRONMENTAL POLICIES"). Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, (i) all of the insurance policies, binders or bonds acquired or
maintained by the Company or its Subsidiaries, other than the Environmental
Policies, (the "POLICIES") are in full force and effect and neither the
Company nor any of its Subsidiaries is in default thereunder and (ii) all
claims under the Policies have been filed in due and timely fashion. All of
the Environmental Policies are in full force and effect and neither the
Company nor any of its Subsidiaries are in default thereunder and all
claims under the Environmental Policies have been filed in due and timely
23
fashion, except for any lack of such effectiveness, default or untimely
claim that is not, individually or in the aggregate, reasonably likely to
result in the incurrence of a liability or loss on the part of the Company
or any of its Subsidiaries in excess of $500,000.
(w) INTELLECTUAL PROPERTY. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company: (i) the Company and its Subsidiaries own or have the right to use,
and following the Closing will continue to own or have the right to use all
significant proprietary systems and databases used by the Company and its
Subsidiaries to conduct their businesses as currently conducted which are
not generally commercially available ("SYSTEMS") without the necessity of
obtaining a consent or payment of any additional, material license fees or
other material payments; (ii) neither the Company nor any of its
Subsidiaries has granted any unaffiliated third party access to or the
right to use or access such Systems; (iii) to the Company's knowledge, no
unaffiliated third party has obtained access to or copies of the Systems
by, through or from the Company or any of its Subsidiaries; (iv) the sale,
license, lease, transfer, use, reproduction, distribution, modification or
other exploitation by the Company or any Subsidiary of the Company of any
Systems (as such Systems are currently used or otherwise exploited by the
Company) does not (A) infringe on any valid and subsisting patent,
trademark, copyright or other right of any other Person, (B) constitute a
misuse or misappropriation of any valid rights in any trade secret,
know-how, process or proprietary information of any other Person, or (C)
entitle any other Person to any interest therein, or right to compensation
from the Company or any Subsidiary of the Company, by reason thereof (it
being understood and agreed that insofar as each of the foregoing
representations and warranties relate to any System that is licensed to the
Company or any Subsidiary of the Company by any third party, such
representations and warranties are made to the Company's knowledge); and
(v) neither the Company nor any of its Subsidiaries has received any
complaint, assertion, threat or allegation or otherwise has notice of any
lawsuit, claim, demand, proceeding or investigation involving matters of
the type contemplated by clause (iv) above, or has knowledge of any facts
or circumstances that would reasonably be expected to give rise to any such
lawsuit, claim, demand, proceeding or investigation.
(x) DATA TAPE. The Company has furnished or made available to Parent a
data tape which provides certain information with respect to loans and
leases of the Company and its Subsidiaries (the "DATA TAPE"). To the
knowledge of the Company, except as would not, individually or in the
aggregate, reasonably be likely to have a Material Adverse Effect on the
Company, the Data Tape was prepared in good faith by the Company in
accordance with the books and records of the Company and its Subsidiaries
and in a manner not to have intentionally contained incorrect information.
(y) CANADIAN ASSETS. Neither the Company nor any of its affiliates
carries on a business in Canada that has (i) a place of business in Canada,
(ii) an individual or individuals in Canada who are employed or
24
self-employed in connection with such business, or (iii) assets in Canada
used in carrying on such business (without regard to any mortgage loans
made by the Company secured by real property located in Canada). Neither
the Company nor any of its affiliates carries on a business undertaking in
Canada to which employees employed in connection with such undertaking
ordinarily report to work.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent represents and
warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Each of Parent and the Merger
Sub is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted. The copies of the charter
and by-laws of Merger Sub which were previously furnished to the Company
are true, complete and correct copies of such documents and have not been
amended or otherwise modified.
(b) AUTHORITY; NO CONFLICTS.
(i) Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by each of Parent
and Merger Sub and the consummation by each of Parent and Merger Sub
of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Parent and Merger Sub.
This Agreement has been duly executed and delivered by each of Parent
and Merger Sub and constitutes a valid and binding agreement of Parent
and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws relating to or affecting creditors generally, by general
equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied
covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement does not, and
the consummation of the Merger and the other transactions contemplated
hereby will not, result in a Violation of: (A) any provision of the
charter or by-laws of Parent or Merger Sub, or (B) except as would
not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Parent and subject to obtaining or making
the consents, approvals, orders, authorizations, registrations,
declarations and filings referred to in paragraph (iii) below, any
loan or credit agreement, note, mortgage, bond, indenture, lease,
benefit plan or other agreement, obligation, instrument, permit,
concession, franchise or license, or any Law applicable to Parent or
its Subsidiaries or their respective properties or assets.
25
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Person or any
Governmental Entity is required by or with respect to Parent or Merger
Sub as a result of the execution and delivery of this Agreement by
each of Parent and Merger Sub or the consummation of the Merger and
the other transactions contemplated hereby, except for the Required
Consents and such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make
or obtain would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Parent.
(c) BOARD APPROVAL. The Board of Directors of each of Parent and
Merger Sub, by resolutions duly adopted at a meeting duly called and held
and not subsequently rescinded or modified in any way, has duly (i)
declared that this Agreement and the Merger and the other transactions
contemplated hereby are advisable and in the best interests of it and its
stockholders and (ii) approved this Agreement and the Merger.
(d) VOTE REQUIRED. On or prior to the date hereof, GE Capital
Franchise Finance Corporation has duly executed and delivered a written
consent as the only stockholder of Merger Sub, approving the Merger. Other
than those consents or approvals given or made on or as of the date hereof,
no other vote of holders of any shares of any class or series of the
capital stock of Merger Sub or Parent is necessary to approve the Merger
and the other transactions contemplated hereby and the consent executed in
connection with this SECTION 3.2(D) will not be amended, modified or
withdrawn prior to Closing.
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by Parent
or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement (as defined in SECTION 5.1(A)), on the date it is first
mailed to stockholders of the Company or at the time of the Company
Stockholders Meeting, contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made not
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Company Stockholders Meeting which has become false or misleading.
(ii) Notwithstanding the foregoing provisions of this SECTION
3.2(E), no representation or warranty is made by Parent with respect
to statements made or incorporated by reference in the Proxy Statement
26
based on information supplied by the Company for inclusion or
incorporation by reference therein. For purposes of the foregoing, it
is understood and agreed that information concerning or related to
Parent or Merger Sub will be deemed to have been supplied by Parent
and information concerning or related to the Company and the Company
Stockholders Meeting shall be deemed to have been supplied by the
Company.
(f) FINANCING. Parent has and will at the Effective Time have, and
will make available to Merger Sub and the Surviving Corporation, sufficient
funds available to satisfy the obligations to pay all Merger Consideration
and other amounts contemplated in ARTICLE I hereof.
(g) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any
of the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent, except Xxxxxxx, Xxxxx & Co., whose fees and
expenses will be paid by Parent in accordance with Parent's agreement with
such firm based upon arrangements made by or on behalf of Parent.
(h) INTEREST IN COMPANY. Parent and Merger Sub are not, nor at any
time during the last five years has any of them been, an "interested
stockholder" of the Company as defined in Section 3-601 of the MGCL.
Neither Parent nor Merger Sub owns (directly or indirectly, beneficially or
of record) or is a party to any agreement, arrangement or understanding
(other than this Agreement) for the purpose of acquiring, holding, voting
or disposing of, in each case, any shares of capital stock of the Company.
(i) BAF BUSINESS. Other than the BAF Business, there is no other line
of business or operation conducted by General Electric Company and its
controlled affiliates whose primary business consists of providing loan or
lease financing advances to borrowers or lessees for the purpose of
financing such Persons' acquisition and/or operation of one or more
individual locations as franchisees of restaurant concepts or retail
businesses.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to
itself and its Subsidiaries that (except as contemplated or permitted by this
Agreement, as otherwise indicated on Section 4.1 of the Company Disclosure
Schedule, as required by Law or by the rules and regulations of a Governmental
Entity or the NYSE, or to the extent that Parent shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed):
27
(a) ORDINARY COURSE.
(i) The Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact
their present lines of business, maintain their rights and franchises
and preserve their relationships with customers, suppliers and others
having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the
Effective Time, and shall pay, discharge or satisfy claims,
liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), only in the usual, regular and
ordinary course of business; PROVIDED, HOWEVER, that no action by the
Company or its Subsidiaries with respect to matters specifically
addressed by any other provision of this SECTION 4.1 shall be deemed a
breach of this SECTION 4.1(A)(I) unless such action would constitute a
breach of one or more of such other provisions.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any new material line of business.
(iii) The Company shall take all action necessary to continue to
qualify as a REIT; PROVIDED, HOWEVER, that the Company shall not be
deemed to be in breach of this SECTION 4.1(A)(III) by reason of its
failure to make a distribution in excess of that permitted to be made
pursuant to SECTION 4.1(B).
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall not, and
shall not permit any of its Subsidiaries to, (i) declare or pay any
dividends on or make other distributions in respect of any of its capital
stock, except for regular quarterly dividends by the Company in an amount
not in excess of $0.56 per share for each such dividend (including a pro
rated dividend for the portion of the quarterly dividend period ending the
day prior to the Effective Time), and except for dividends by Subsidiaries
of the Company to the Company or another wholly owned Subsidiary of the
Company, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly owned Subsidiary of the Company
which remains a wholly owned Subsidiary after consummation of such
transaction, or (iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock except pursuant to the Rights Agreement or for
the purchase from time to time by the Company of Company Common Stock (and
the associated Rights) in the ordinary course of business consistent with
past practice in connection with the Company Plans.
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(c) ISSUANCE OF SECURITIES. The Company shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock
of any class, any Company Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Company Voting Debt, or any stock appreciation, phantom stock or
similar rights with respect to the Company or its Subsidiaries, or enter
into any agreement or commitment with respect to any of the foregoing,
other than (i) the issuance of Company Common Stock (and the associated
Rights) upon the exercise of Options outstanding as of the date hereof and
Warrants in accordance with their terms, (ii) issuances by a wholly owned
Subsidiary of the Company of capital stock to the Company or another wholly
owned Subsidiary of the Company, (iii) issuances in accordance with the
Rights Agreement, (iv) deliveries of Company Common Stock (and the
associated Rights) pursuant to the Company's Dividend Reinvestment Plan, or
(v) the deliveries of Company Common Stock (and the associated Rights)
pursuant to the 1997 Employee Stock Purchase Plan.
(d) GOVERNING DOCUMENTS. The Company and its material Subsidiaries
shall not amend, in the case of Subsidiaries, in any material respect,
their respective charter, articles or certificates of incorporation,
by-laws or other governing documents.
(e) NO ACQUISITIONS. Other than pursuant to the agreements and
contracts set forth on Section 4.1(e) of the Company Disclosure Schedule,
the Company shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in 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
(other than the acquisition of real property and other assets in the
ordinary course); PROVIDED, HOWEVER, that so long as the Company delivers
prompt notice thereof to Parent, the foregoing shall not prohibit (i)
internal reorganizations or consolidations involving existing Subsidiaries
of the Company or (ii) the creation of new Subsidiaries of the Company
organized to conduct or continue activities otherwise permitted by this
Agreement; and PROVIDED, FURTHER, that notwithstanding the foregoing,
neither the Company nor any of its Subsidiaries (other than FFCA Capital
Holding Corporation or a special purpose business trust or other special
purpose entity created in connection with a securitization or warehouse
transaction) shall knowingly, after reasonable investigation, acquire or
operate, or agree to acquire or operate, any real property (whether in fee
or pursuant to a lease) on which an underground storage tank containing or
intended for the storage of, gasoline is located (it being agreed that FFCA
Capital Holding Corporation (or a special purpose business trust or other
special purpose entity created in connection with a securitization or
warehouse transaction) may and the Company may permit FFCA Capital Holding
Corporation (or a special purpose business trust or other special purpose
entity created in connection with a securitization or warehouse
transaction) to, foreclose upon or acquire any real property in the
ordinary course of its business, consistent with past practices).
29
(f) NO DISPOSITIONS. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of the Company, (ii) in the
ordinary course of business (including in connection with (A) permanent
securitizations, temporary warehousing facilities in contemplation thereof,
and any similar financing activities and (B) the administration of
properties acquired by the Company or its Subsidiaries in foreclosures,
workouts or settlements), (iii) whole Loan sales or sales of Loans in the
secondary market or (iv) pursuant to SECTION 5.2 hereof, the Company shall
not, and shall not permit any Subsidiary of the Company to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of the Company) which are material, individually or in the
aggregate, to the Company and its Subsidiaries, taken as a whole.
(g) INVESTMENTS; INDEBTEDNESS. The Company shall not, and shall not
permit any of its Subsidiaries to (i) other than in connection with actions
permitted by SECTION 4.1(E), make any loans, advances or capital
contributions to, or investments in, any other Person, other than (A) by
the Company or a Subsidiary of the Company to or in the Company or any
wholly owned Subsidiary of the Company or (B) in the ordinary course of
business (including in connection with any financing transactions of the
type or similar to those previously engaged in by the Company and its
Subsidiaries, in amounts consistent therewith, taking into account any
growth in the business of the Company and its Subsidiaries) or (ii) create,
incur, assume or suffer to exist any indebtedness, issuances of debt
securities, guarantees, loans or advances not in existence as of the date
of this Agreement except (A) pursuant to the credit facilities, indentures
and other arrangements in existence on the date of this Agreement, in each
case, as such credit facilities, indentures, and other arrangements may be
amended, extended, modified, refunded, renewed or refinanced in the
ordinary course of the Company's business, consistent with its past
practices after the date of this Agreement so long as the aggregate
principal amount thereof is not increased thereby, the term thereof is not
extended thereby and the other terms and conditions thereof, taken as a
whole, are not materially less advantageous to the Company and its
Subsidiaries than those in existence as of the date of this Agreement, (B)
in the ordinary course of business (including in connection with any
financing transactions of the type or similar to those previously engaged
in by the Company and its Subsidiaries, in amounts consistent therewith,
taking into account any growth in the business of the Company and its
Subsidiaries) or (C) intercompany indebtedness between the Company and any
of its wholly owned Subsidiaries or between such wholly owned Subsidiaries.
(h) ACCOUNTING METHODS; INCOME TAX ELECTIONS. The Company shall not
(i) materially change its methods of accounting or accounting principles or
practices used by it, except as required by changes in U.S. GAAP as
concurred in by the Company's independent accountants, or (ii) change its
fiscal year, or (iii) make or revoke any material express or deemed
30
election relating to Taxes, or (iv) settle or compromise any Tax liability
material to the Company and its Subsidiaries taken as a whole, or (v)
change (or make a request to any Tax Authority to change) any material
aspect of its method of accounting for Tax purposes. The Company shall, and
shall cause each of its Subsidiaries to, duly and timely file all material
Tax Returns and other documents required to be filed with federal, state,
local and other Tax Authorities, subject to timely extensions permitted by
law; PROVIDED, HOWEVER, that the Company promptly notifies Parent that it
is availing itself of such extensions; and PROVIDED, FURTHER that such
extensions do not adversely affect the Company's status as a REIT under the
Code.
(i) COMPENSATION. The Company shall not, and shall not permit any of
its Subsidiaries to, enter into or adopt any employment, change in control,
"continuity," severance or other similar plan, program, policy or agreement
with or with respect to any Company Employee. Except in the ordinary course
of business consistent with past practice or as required by Law or an
existing agreement, the Company shall not, and shall not permit any of its
Subsidiaries to: (i) except pursuant to SECTION 5.6(F), enter into, adopt
or amend or terminate any bonus, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase, pension, retirement, deferred
compensation or other employee benefit agreement, trust, plan, fund, award
or other arrangement for the benefit or welfare of any director, officer or
employee in any manner; (ii) except for normal increases in the ordinary
course of business consistent with past practice that, in the aggregate, do
not result in a material increase in benefits or compensation expense to
the Company or any of its Subsidiaries, increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any Company Plan as in effect as of the date
hereof; (iii) except as otherwise provided in SECTION 5.6(D), pay any
bonuses or annual incentive awards with respect to fiscal 2000 or the
interim period of fiscal 2001 ending on the Closing Date in excess of
$100,000 in the aggregate; (iv) make any contribution, other than regularly
scheduled contributions, to any Company Plan; or (v) make a commitment or
agree to do any of the foregoing.
(j) FUNDAMENTAL TRANSACTIONS. The Company shall not, and shall not
permit any of its material Subsidiaries to, adopt a plan of complete or
partial liquidation, dissolution, restructuring, recapitalization or other
reorganization (other than the Merger) or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
corporate structure or ownership of any of its Subsidiaries.
(k) MATERIAL CONTRACTS. Except in connection with an action otherwise
specifically permitted pursuant to this SECTION 4.1, neither the Company
nor any of its Subsidiaries shall enter into, renew or modify any agreement
which, if in effect on the date hereof, would have been a Material
Contract, other than any such agreement which may be terminated upon no
more than 60 days notice without payment of any premium or penalty.
31
(l) SETTLEMENTS AND COMPROMISES. The Company shall not, and shall not
permit any of its Subsidiaries to, settle or compromise any suit, action or
claim pending or threatened against any of them relating to any potential
or actual liability of the Company or its Subsidiaries under Environmental
Law that is not otherwise covered by environmental insurance which,
individually or together with all other such settlements and compromises,
is in excess of $500,000.
(m) COMMITMENTS. The Company shall not and shall not permit any of its
Subsidiaries to enter into an agreement, contract, commitment or
arrangement to take any of the actions prohibited by the foregoing
provisions of this SECTION 4.1.
4.2 NO CONTROL OF COMPANY BUSINESS. Nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct the
Company's or its Subsidiaries' operations prior to the Effective Time. Prior to
the Effective Time, the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its and its
Subsidiaries' operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF PROXY STATEMENT; COMPANY STOCKHOLDERS MEETING.
(a) As promptly as practicable following the date hereof, the Company
shall prepare and file with the SEC preliminary proxy materials which shall
constitute the Proxy Statement (such proxy statement, and any amendments or
supplements thereto, the "PROXY STATEMENT"). The Proxy Statement shall
comply as to form in all material respects with the applicable provisions
of the Exchange Act and the rules and regulations thereunder. The Company
will provide Parent with a reasonable opportunity to review and comment on
the Proxy Statement and any amendment or supplement to the Proxy Statement
prior to filing such with the SEC, and will provide Parent with a
reasonable number of copies of all such filings made with the SEC. The
Company shall, as promptly as practicable after receipt thereof, provide
copies of any written comments received from the SEC with respect to the
Proxy Statement to Parent and advise Parent of any oral comments with
respect to the Proxy Statement received from the SEC. Each of Parent and
the Company shall use all reasonable efforts to resolve all SEC comments
with respect to the Proxy Statement as promptly as practicable after
receipt thereof.
(b) Subject to SECTIONS 5.5 and 7.1(F), (i) the Company shall, as
promptly as practicable following the execution of this Agreement, duly
call, give notice of, convene and hold a meeting of its stockholders for
the purpose of obtaining the Required Company Vote with respect to the
32
transactions contemplated by this Agreement (the "COMPANY STOCKHOLDERS
MEETING") and (ii) the Company shall take all lawful action to solicit the
approval of the Merger and the transactions contemplated hereby, including
the amendment to the Company's charter contemplated hereby, by the Required
Company Vote unless the Board of Directors of the Company, after
consultation with its outside counsel, determines in good faith that such
action would be inconsistent with applicable law. Without limiting the
generality of the foregoing but subject to its rights pursuant to SECTION
7.1(F), the Company agrees that its obligations pursuant to the preceding
provisions of this SECTION 5.1 shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
Acquisition Proposal.
5.2 DISPOSITION. The Company shall use its reasonable best efforts to
effect the Disposition prior to the Effective Time for the consideration and on
the terms and conditions set forth on Section 5.2 of the Company Disclosure
Schedule. Parent agrees to use its reasonable best efforts to cooperate and
assist the Company to effect the Disposition as promptly as practicable after
the date hereof, and shall take all actions that are designated to be taken by
Parent or its Subsidiaries set forth on Section 5.2 of the Company Disclosure
Schedule. From time to time during the period commencing on the date hereof and
ending immediately prior to the Effective Time, each of the Company and Parent
may supplement ANNEX A to include additional Owned Real Property on which an
underground storage tank containing, or intended for the storage of, gasoline is
located by delivery of written notice pursuant to SECTION 8.2 hereof.
5.3 ACCESS TO INFORMATION.
(a) Upon reasonable notice, the Company shall (and shall cause its
Subsidiaries to), subject to any limitations in loan, lease or other
documentation, afford to the officers, employees, accountants, counsel,
financial advisors and other representatives of Parent reasonable access
during normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, officers, employees,
commitments and records and, during such period, the Company shall (and
shall cause its Subsidiaries to) furnish promptly to Parent (i) a copy of
(A) each material report, schedule, registration statement and other
document filed, published, announced or received by it during such period
pursuant to the requirements of federal or state securities laws, as
applicable (other than reports or documents which such party is not
permitted to disclose under applicable law) and (B) each compliance
certificate delivered by it pursuant to any of the facilities listed in
Section 5.3(a) of the Company Disclosure Schedule, and (ii) consistent with
its legal obligations, all other information concerning its business,
properties and personnel as Parent may reasonably request; PROVIDED,
HOWEVER, that Company may restrict the foregoing access to the extent that
any Law of any Governmental Entity (which, for purposes of this SECTION 5.3
shall include any foreign governmental entities) applicable to the Company
or any existing agreement requires the Company or its Subsidiaries to
restrict access to any properties or information.
33
(b) Parent and its representatives will hold any such information in
confidence to the extent required by, and in accordance with, the
provisions of the letter dated April 8, 1999 between the Company and Parent
(the "CONFIDENTIALITY AGREEMENT").
(c) Any investigation by Parent shall not affect the representations
and warranties of the Company.
5.4 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party
will (i) use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws and otherwise to consummate the Merger and
the other transactions contemplated by this Agreement as soon as
practicable after the date hereof, including with respect to obtaining the
opinion referred to in SECTION 6.2(C) hereof, and all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable in order to consummate the transactions contemplated
by this Agreement and (ii) keep the other party apprised of the status of
matters relating to completion of the transactions contemplated hereby.
Subject to applicable Laws relating to the exchange of information, each of
the Company and Parent shall have the right to review in advance, and will
consult with the other with respect to, all the information relating to the
other party and each of their respective Subsidiaries, which appears in any
filings, announcements or publications made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement. In exercising the
foregoing right, each of the parties hereto agrees to act reasonably and as
promptly as practicable.
(b) In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable, and in any event within five (5)
Business Days of the date hereof, and to supply as promptly as practicable
any additional information and documentary material that may be requested
pursuant to the HSR Act and to take all other actions necessary to cause
the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable. Nothing in this SECTION 5.4 shall require
the Company, Merger Sub, Parent or any of their respective Subsidiaries to
sell, hold separate or otherwise dispose of or conduct their respective
businesses in a specified manner, whether as a condition to obtaining any
approval from a Governmental Entity or any other Person or for any other
reason, if such sale, holding separate or other disposition or the conduct
of their business in a specified manner would reasonably be expected to
have a material adverse effect on the business, financial condition or
results of operations of either the Company and its Subsidiaries, taken as
a whole or the BAF Business (as defined below) (it being understood that
(i) any obligation of Parent or any of its Subsidiaries to sell, hold
separate or otherwise dispose of or conduct its business in a specified
34
manner, is strictly limited to the assets, properties and operations of (A)
the franchise finance business conducted by Parent under the name of
"Business Asset Funding" (the "BAF BUSINESS") and (B) in addition to the
obligations under clause (i)(A) above, after the Effective Time, the
Company and its Subsidiaries, (ii) in no event shall Parent or any of its
Subsidiaries have any obligation to sell, hold separate or otherwise
dispose of or conduct any of its businesses in a specified manner other
than the BAF Business and, after the Effective Time, that of the Company
and its Subsidiaries and (iii) in the case of any such action required of
Parent or Merger Sub or their respective Subsidiaries, the determination of
such a material adverse effect will be measured instead against aggregate
business, financial condition or results of operations of the BAF Business
that would be equivalent economically to the aggregate assets and
businesses of the Company and its Subsidiaries, taken as a whole).
(c) Each of Parent and the Company shall, in connection with the
efforts referenced in SECTION 5.4(B) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Agreement under
the HSR Act or any other Regulatory Law (as defined below), use its
reasonable best efforts to (i) cooperate in all respects with each other in
connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a
private party, (ii) promptly inform the other party of any communication
received by such party from, or given by such party to, the Antitrust
Division of the Department of Justice (the "DOJ"), the Federal Trade
Commission (the "FTC") or any other Governmental Entity (including any
foreign governmental entity) and of any material communication received or
given in connection with any proceeding by a private party, in each case,
regarding any of the transactions contemplated hereby, and (iii) permit the
other party to review any communication given by it to, and consult with
each other in advance of any meeting or conference with, the DOJ, the FTC
or any such other Governmental Entity (including any foreign governmental
entity) or, in connection with any proceeding by a private party, with any
other Person, and to the extent permitted by the DOJ, the FTC or such other
applicable Governmental Entity (including any foreign governmental entity)
or other Person, give the other party the opportunity to attend and
participate in such meetings and conferences. For purposes of this
Agreement, "REGULATORY LAW" means the Xxxxxxx Act, as amended, the Xxxxxxx
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended,
and all other federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and
other laws that are designed or intended to prohibit, restrict or regulate
actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger or acquisition.
(d) In furtherance and not in limitation of the covenants of the
parties contained in this SECTION 5.4, if any administrative or judicial
action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
Parent and the Company shall cooperate in all respects with each other and
35
use its respective reasonable best efforts to resolve, contest and resist
any such action 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 prohibits,
prevents or restricts consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this SECTION 5.4 shall limit a party's right to
terminate this Agreement pursuant to SECTION 7.1(B) or 7.1(C).
5.5 ACQUISITION PROPOSALS. The Company agrees that after the date hereof
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall direct and use its reasonable
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit or knowingly encourage any inquiries or the making of any
proposal or offer with respect to a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving it or any of its material Subsidiaries, or any
purchase or sale of all or 20% or more of the equity securities of it or any of
its material Subsidiaries or of the assets of it and its Subsidiaries taken as a
whole (any such proposal or offer, other than a proposal or offer made by Parent
or an affiliate thereof, being hereinafter referred to as an "ACQUISITION
PROPOSAL"); PROVIDED, HOWEVER, that the Company may take any of the foregoing
actions to the extent such actions are in connection with any transaction
permitted under SECTION 4.1(E) or 4.1(F). The Company further agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall direct and use its reasonable
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, have
any discussion with or provide any confidential information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or accept an Acquisition Proposal.
Notwithstanding anything in this Agreement to the contrary, the Company and its
Board of Directors, including all of the aforementioned Persons, shall be
permitted to (A) to the extent applicable, comply with Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, and (B) in response to an unsolicited bona fide written Acquisition
Proposal by any Person, (I) furnish information to, request information from,
and engage in discussions or negotiations with the Person making such
Acquisition Proposal and (II) recommend such an unsolicited bona fide written
Acquisition Proposal to the stockholders of the Company, or withdraw or modify
in any adverse manner its approval or recommendation of this Agreement, if and
only to the extent that, in any such case as is referred to in clause (B), (i)
the Board of Directors of the Company concludes in good faith that such
Acquisition Proposal (x) in the case of clause (I) above could reasonably be
expected to constitute or result in a Superior Proposal or (y) in the case of
clause (II) above constitutes a Superior Proposal (after giving effect to any
concessions which are offered by Parent, if any, following delivery of notice to
Parent required pursuant to SECTION 7.1(F)), and (ii) prior to providing any
information to any Person in connection with an Acquisition Proposal by any such
36
Person, the Company receives from such Person an executed confidentiality
agreement and standstill agreement no less favorable in the aggregate to the
Company than the Confidentiality Agreement. The Company agrees that it will keep
Parent informed as promptly as practicable (but in any case by the end of the
next Business Day) of the status and material terms of any such proposals or
offers, including any material revisions thereof, and any material developments
in the status of any such material discussions or negotiations, including the
identity of any Person making an Acquisition Proposal. The Company agrees that
it will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal.
5.6 EMPLOYEE BENEFITS MATTERS.
(a) Effective immediately prior to the Effective Time, the Company
shall and shall cause its Subsidiaries to terminate any Company Plans which
are tax-qualified 401(k) plans, and any Company Employees who are employed
by the Surviving Corporation shall be allowed to roll over their accounts
under such plan to a 401(k) plan offered by Parent or one of its affiliates
following the Effective Time.
(b) Except with respect to the Executives:
(i) for at least 18 months after the Effective Time, Parent
shall, or shall cause the Surviving Corporation to, provide the
Company Employees with base salaries that are at least equal to the
respective base salaries of such Company Employees immediately prior
to the Effective Time; and
(ii) for the period commencing on the Effective Time and ending
on December 31, 2002, Parent shall, or shall cause the Surviving
Corporation to, provide Company Employees with (A) bonus opportunities
(limited, for purposes of this SECTION 5.6(B)(II)(A), solely to the
cash component thereof) that are the same as, or substantially
equivalent to, those provided to such Company Employees immediately
prior to the Effective Time, and (B) benefits (other than those
described in SECTIONS 5.6(B)(I) and 5.6(B)(II)(A) above) that are the
same as, or substantially equivalent to, those provided to similarly
situated employees of Parent.
Nothing contained in SECTION 5.6(B)(I) or 5.6(B)(II) shall
prevent Parent from causing the Company Employees to be provided with
benefits under Benefit Plans maintained by Parent or any of its
affiliates which comply with the foregoing provisions.
(c) Parent will, or will cause the Surviving Corporation to: (i) waive
all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable
to the Company Employees under any Benefit Plan in which such employees may
be eligible to participate after the Effective Time; (ii) provide each
37
Company Employee with credit for any co-payments and deductibles paid in
the calendar year in which the Effective Time occurs in satisfying any
applicable deductible or out-of-pocket requirements under any welfare
Benefit Plans in which such employees are eligible to participate after the
Effective Time; and (iii) provide each Company Employee with credit for all
purposes (other than for the purpose of benefit accruals under any
qualified or nonqualified defined benefit pension plan) for all service
with the Company and its affiliates (to the extent such service was
credited under the applicable Company Plans) under each Benefit Plan of the
Parent or its affiliates in which such employees become eligible to
participate after the Effective Time.
(d) In lieu of the annual bonus otherwise payable in respect of the
portion of the calendar year ending prior to the Effective Time to Company
Employees who are eligible, immediately prior to the Effective Time, to
receive such bonus, Parent shall, or shall cause the Surviving Corporation
to, pay in the aggregate for the benefit of all such Company Employees, an
amount for such calendar year set forth on Section 5.6(d) of the Company
Disclosure Schedule (the "2001 BONUS AMOUNT") prorated on a daily basis
from January 1 of the calendar year in which the Effective Time occurs
through the Effective Time. The allocation of the 2001 Bonus Amount shall
be made (i) in the case of the Executives, based on the recommendation of
the Compensation Committee and approved by the Board of Directors of the
Company, and (ii) in the case of any other Company Employee, based on the
recommendation of the Executives and approved by the Compensation Committee
and the Board of Directors of the Company. The payment of the 2001 Bonus
Amount shall be made as soon as practicable after the Effective Time, but
in no event later than 60 days after the Effective Time.
(e) Immediately prior to the Effective Time, the Option Period (as
defined in the Company's 1997 Employee Stock Purchase Plan (the "ESPP")),
shall be terminated in accordance with the terms of SECTION 1.9(C) hereof,
and Parent shall, or shall cause the Surviving Corporation to, pay to all
participants in the ESPP the per share Merger Consideration in respect of
the shares of Company Common Stock (including fractional shares, in
accordance with the terms of the ESPP) that such participants would
otherwise have been eligible to receive at such time. The Company shall
take all such actions as may be necessary to effect the foregoing.
(f) The Company shall terminate each of the Company Employees set
forth on Section 5.6(f) of the Company Disclosure Schedule prior to the
Effective Time and the Company shall have performed all obligations to such
Company Employees under all applicable Company Plans, except for those
obligations which by their terms are to be performed after the Effective
Time.
5.7 FEES AND EXPENSES. Whether or not the Merger is consummated, all
Expenses (as defined below) incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except if the Merger is consummated, the Surviving Corporation shall
pay, or cause to be paid, any and all property or transfer taxes imposed on the
38
Company or its Subsidiaries and any real property transfer tax imposed on any
holder of shares of capital stock of the Company resulting from the Merger. As
used in this Agreement, "EXPENSES" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants,
investment bankers, experts and consultants to a party hereto and its
affiliates) incurred by a party or on its behalf in connection with or related
to the preparation, negotiation, authorization, execution and performance of
this Agreement and the transactions contemplated hereby, including the
preparation, printing, filing and mailing of the Proxy Statement and the
solicitation of the Required Company Vote and all other matters related to the
transactions contemplated hereby.
5.8 DIRECTORS' AND OFFICERS' INDEMNITY.
(a) Parent agrees that from and after the Effective Time it will or
will cause the Surviving Corporation to indemnify and hold harmless each
present and former director and officer of the Company and other persons
entitled to indemnification under the charter and by-laws or similar
organizational documents of the Company or any of its Subsidiaries as in
effect on the date hereof ("COVERED PERSONS") against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities (collectively, "COSTS") incurred in connection with
any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, arising out of or pertaining to
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under applicable Law (and Parent shall, or shall
cause the Surviving Corporation to, also advance expenses as incurred to
the fullest extent permitted under applicable Law; PROVIDED, HOWEVER, that
if required under applicable Law, the person to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification). Each
Covered Person will be entitled to advancement of expenses incurred in the
defense of any claim, action, suit, proceeding or investigation from Parent
and the Surviving Corporation within ten (10) Business Days of receipt from
the Covered Party of a request therefor; PROVIDED, HOWEVER, that any person
to whom expenses are advanced provides an undertaking, to the extent
required by the MGCL, to repay such advances if it is ultimately determined
that such person is not entitled to indemnification.
(b) Parent shall cause the Surviving Corporation and all other
Subsidiaries of the Company to maintain for a period of at least six years
the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by the Company (PROVIDED that the
Surviving Corporation may substitute therefor policies of at least the same
coverage and amounts provided by reputable and financially sound insurance
companies containing terms and conditions which are, in the aggregate, no
less advantageous to the insured) with respect to claims arising from facts
or events that occurred on or before the Effective Time, including in
respect of the transactions contemplated by this Agreement; PROVIDED,
39
HOWEVER, that in no event shall the Surviving Corporation be required to
pay premiums therefor in any one year in an amount in excess of 200% of the
annual premiums currently paid by the Company for such insurance; PROVIDED,
FURTHER, that if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding such amount.
The provisions of the immediately preceding sentence shall be deemed to
have been satisfied if prepaid policies have been obtained by the Company
prior to the Closing for purposes of this SECTION 5.8, which policies
provide such directors and officers with coverage for an aggregate period
of not less than six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including in respect
of the transactions contemplated by this Agreement. If such prepaid
policies have been obtained by the Company prior to the Closing, Parent
shall and shall cause the Surviving Corporation to maintain such policies
in full force and effect, and continue to honor the Company's obligations
thereunder.
(c) If Parent, the Surviving Corporation, any of its Subsidiaries or
any of their successors or assigns (i) consolidates with or merges with or
into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers or
conveys all or substantially all of its properties and assets to any
Person, then, and in each such case, to the extent necessary, proper
provision shall be made so that the successors and assigns of Parent, the
Surviving Corporation, such Subsidiary or such successor or assign assume
the obligations set forth in this SECTION 5.8.
(d) This SECTION 5.8 is intended to benefit and shall be enforceable
by the Covered Persons and their respective heirs, executors and personal
representatives and shall be binding on and enforceable against Parent,
Merger Sub and the Surviving Corporation and their successors and assigns.
5.9 SALE OF SECURITIZATION INTERESTS. Immediately prior to the Effective
Time, Parent shall cause Galahad, which shall be a REIT eligible under the terms
of the securitizations of the Company set forth on Section 5.9 of the Company
Disclosure Schedule to own all of the capital stock of FRIC and the
Securitization Interests, to purchase, and the Company shall sell or cause to be
sold, all of the Securitization Interests for the consideration set forth on
Section 5.9 of the Company Disclosure Schedule; PROVIDED, HOWEVER, that in no
event shall such purchase and sale (i) reduce, alter or otherwise change the
Merger Consideration to be paid to the Company's stockholders pursuant to
SECTION 1.8 or (ii) impede or delay the Closing of the Merger. The sale of the
Securitization Interests shall, at Parent's election (to be made at least 5
business days prior to Closing), be in the form of a transfer of all of the
capital stock of FRIC and/or an assignment and transfer of the Securitization
Interests. Each of the Company and Parent shall take (or shall cause to be
taken) all actions and shall execute (or shall cause to be executed) all
documents as are reasonably necessary to effect the transactions contemplated by
this SECTION 5.9.
40
5.10 PUBLIC ANNOUNCEMENTS. The Company and Parent shall use all reasonable
efforts to develop a joint communications plan and each party shall use all
reasonable efforts (i) to ensure that all press releases and other public
statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable Law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Parent and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) STOCKHOLDER APPROVAL. The Company shall have obtained the Required
Company Vote approving the Merger and the other transactions contemplated
hereby, including the amendment to the Company's charter contemplated
hereby.
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order issued by a court or other Governmental
Entity of competent jurisdiction shall be in effect, having the effect of
making the Merger illegal or otherwise prohibiting consummation of the
Merger.
(c) HSR ACT. The waiting period (and any extension thereof) applicable
to the Merger under the HSR Act shall have been terminated or shall have
expired.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction of, or waiver by Parent, on or prior to the Closing Date of the
following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of the Company set forth in this Agreement that is qualified as
to materiality and Material Adverse Effect shall have been true and correct
at and as of the Closing Date as if made at and as of the Closing Date, and
each of the representations and warranties of the Company that is not so
qualified shall have been true and correct in all material respects at and
as of the Closing Date as if made at and as of the Closing Date (except, in
each case, for those representations and warranties which address matters
only as of a particular date, in which case, they shall be true and
correct, or true and correct in all material respects, as applicable, as of
such date); PROVIDED, HOWEVER, that if the foregoing provisions of this
41
paragraph (a) shall not be satisfied, such provisions shall nevertheless be
deemed to be satisfied so long as all failures of such representations and
warranties to be so true and correct, taken together, would not reasonably
be expected to have a Material Adverse Effect on the Company; and PROVIDED,
FURTHER that notwithstanding anything to the contrary set forth
hereinabove, the provisions of this paragraph (a) shall not be satisfied if
the representations and warranties of the Company set forth in SECTION
3.1(T) shall not be true and correct in all respects as of the Closing Date
(after giving effect to any additions to ANNEX A hereto as permitted
pursuant to SECTION 5.2 hereof); and Parent shall have received a
certificate of the chief executive officer and the chief financial officer
of the Company certifying to the satisfaction of the conditions set forth
in this SECTION 6.2(A).
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are qualified as to materiality and shall have performed or complied in all
material respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that
are not so qualified as to materiality, and Parent shall have received a
certificate of the chief executive officer and the chief financial officer
of the Company to such effect.
(c) REIT AND SUBSIDIARY STATUS OPINION. Parent shall have received an
opinion of Xxxxx Xxxx LLP, or other counsel to the Company reasonably
acceptable to Parent, dated as of the Effective Time, substantially in the
form of EXHIBIT 6.2(C) and with no substantive change in the legal
conclusions, legal analysis or qualifications or limitations set forth in
EXHIBIT 6.2(C). Such opinion may be based on the certificate substantially
in the form attached as EXHIBIT 6.2(C), PROVIDED, HOWEVER, that there are
no substantive changes in the statements or representations set forth in
such Exhibit and no assumptions or representations are added that are not
set forth in such Exhibit.
(d) [Intentionally Omitted].
(e) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement
through and including the time immediately prior to the Effective Time,
there shall not have been any changes, circumstances or effects which,
individually or in the aggregate, have had or would reasonably be expected
to have, a Material Adverse Effect on the Company.
(f) NO GOVERNMENTAL SUITS. There shall not be pending or threatened
(as evidenced by a writing), any suit, action or proceeding by a federal,
state or foreign governmental entity (other than a suit, action or
proceeding based on facts solely relating to Parent or Merger Sub or any of
their respective Subsidiaries) which would reasonably be expected to (i)
restrain, prohibit or declare illegal the consummation of the Merger, (ii)
in connection with the Merger, prohibit or impose any material limitations
on Parent's or Merger Sub's ownership or operation (or that of any of their
42
respective affiliates) of all or a material portion of the Company's
businesses or assets after giving effect to the Merger, or (iii) in
connection with the Merger, compel Parent or Merger Sub or their respective
Subsidiaries and affiliates to dispose of or hold separate (A) any material
portion of the business or assets of the BAF Business or (B) any portion of
the business or assets of the Company or any of its Subsidiaries (after
giving effect to the Merger), if such disposition or holding separate would
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole.
(g) NO ADVERSE CHANGES IN TAX LAWS. No "change of law" shall have
occurred after the date hereof and be continuing as a result of which it
would reasonably be expected (after taking into account, in the case of
prospective changes of law, the likelihood of such change of law occurring)
that at the Effective Time there would be a material risk that the Company
would not qualify at or prior to the Effective Time as a REIT. For this
purpose, the term "change in law" shall mean any amendment to or change
(including any announced prospective change having a proposed effective
date at or prior to the Effective Time) in the federal tax laws of the
United States or any provision of the federal securities laws of the United
States containing a definition which is applied for purposes of
interpreting the federal tax laws, including any statute, regulation or
proposed regulation or any official administrative pronouncement
(consisting of the issuance or revocation of any revenue ruling, revenue
procedure or notice, private letter ruling, technical advice memorandum, no
action letter, exemptive application or other administrative guidance or
official pronouncement) or any judicial decision interpreting such federal
tax laws or federal securities laws (whether or not such pronouncement or
decision is issued to, or in connection with, a proceeding involving the
Company or a Subsidiary of the Company or is subject to review or appeal).
(h) NO ADVERSE CHANGES IN EQUITY MARKETS. There shall have not
occurred and be continuing (i) any general suspension of trading in, or
limitation on prices for, securities in the New York Stock Exchange for a
period in excess of three hours (excluding suspensions in limitations
resulting solely from physical damage or interference with such exchanges
not related to market conditions) or (ii) any decline in the New York Stock
Exchange composite index by an amount in excess of 25% measured from the
close of business on the date of this Agreement.
(i) CLOSING OF THE DISPOSITION. The Company shall have consummated the
Disposition in a manner and for consideration consistent with SECTION 5.2
hereof.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to effect the Merger are subject to the satisfaction of, or waiver
by the Company, on or prior to the Closing Date of the following additional
conditions:
43
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement that is
qualified as to materiality and Material Adverse Effect shall have been
true and correct at and as of the Closing Date as if made at and as of the
Closing Date, and each of the representations and warranties of each of
Parent and Merger Sub that is not so qualified shall have been true and
correct in all material respects at and as of the Closing Date as if made
at and as of the Closing Date (except, in each case, for those
representations and warranties which address matters only as of a
particular date, in which case, they shall be true and correct, or true and
correct in all material respects, as applicable, as of such date);
PROVIDED, HOWEVER, that if the foregoing provisions of this paragraph (a)
shall not be satisfied, such provisions shall nevertheless be deemed to be
satisfied so long as all failures of such representations and warranties to
be so true and correct, taken together, would not reasonably be expected to
have a Material Adverse Effect on Parent, and the Company shall have
received a certificate of a duly authorized representative of Parent
certifying to the satisfaction of the conditions set forth in this SECTION
6.3(A).
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND MERGER SUB. Each of
Parent and Merger Sub shall have performed or complied with all agreements
and covenants required to be performed by it under this Agreement at or
prior to the Closing Date that are qualified as to materiality and shall
have performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior
to the Closing Date that are not so qualified as to materiality, and the
Company shall have received a certificate of a duly authorized
representative of Parent to such effect.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the
terminating party or parties whether before or after receipt of the Required
Company Vote or approval of the Merger by the stockholder(s) of Merger Sub:
(a) By mutual written consent of Parent and the Company;
(b) By either the Company or Parent if the Effective Time shall not
have occurred on or before December 31, 2001 (the "TERMINATION DATE");
(c) By either the Company or Parent if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger, and such order, decree, ruling or other action
shall have become final and nonappealable;
44
(d) By either the Company or Parent if the Required Company Vote shall
not have been obtained at a duly held meeting of stockholders of the
Company, called for the purpose of approving the Merger, including any
adjournment or postponement thereof;
(e) By Parent if the Board of Directors of the Company, (i) shall
withdraw or modify in any adverse manner its approval or recommendation of
this Agreement or (ii) shall approve or recommend a Superior Proposal;
(f) By the Company, upon two (2) Business Days' prior notice to
Parent, if the Board of Directors of the Company shall determine to approve
or recommend a Superior Proposal; PROVIDED, HOWEVER, that (i) the Company
shall have complied in all material respects with SECTION 5.5, and (ii) the
Board of Directors of the Company shall have concluded in good faith, after
giving effect to any concessions which are offered by Parent during such
two (2) Business Day period, after consulting with its financial advisors
and outside counsel, that such proposal is a Superior Proposal; and
PROVIDED, FURTHER, that it shall be a condition to termination by the
Company pursuant to this SECTION 7.1(F) that the Company shall have made
the payment of the Termination Fee to Parent required by SECTION 7.2(B);
(g) By Parent, if any of the conditions set forth in SECTION 6.1 or
6.2 shall become impossible to fulfill (other than as a result of any
breach by Parent of the terms of this Agreement) and shall not have been
waived in accordance with the terms of this Agreement; or
(h) By the Company, if any of the conditions set forth in SECTION 6.1
or 6.3 shall become impossible to fulfill (other than as a result of any
breach by the Company of the terms of this Agreement) and shall not have
been waived in accordance with the terms of this Agreement.
7.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either the
Company or Parent as provided in SECTION 7.1, this Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of Parent or the Company or their respective officers or directors
under this Agreement or any other agreement or understanding among the
parties with respect to the subject matter hereof except with respect to
SECTION 3.1(U), SECTION 3.2(G), SECTION 5.3(B), SECTION 5.7, SECTION 7.2
and ARTICLE VIII of this Agreement; PROVIDED, HOWEVER, that the termination
of this Agreement shall not relieve any party from any liability for any
material breach of any obligation under this Agreement occurring prior to
termination.
(b) If (i) Company shall terminate this Agreement pursuant to SECTION
7.1(F), (ii) Parent shall terminate this Agreement pursuant to SECTION
7.1(E) (or the Company or Parent shall terminate this Agreement pursuant to
45
SECTION 7.1(D) at any time that Parent shall be entitled to terminate this
Agreement pursuant to SECTION 7.L(E)), or (iii) (x) the Company or Parent
shall terminate this Agreement pursuant to SECTION 7.1(D), (y) at the time
of the event giving rise to such termination, an Acquisition Proposal with
respect to the Company in which the consideration proposed to be received
by the holders of Company Common Stock has a value in excess of the Merger
Consideration shall have been publicly announced (any such Acquisition
Proposal, whenever announced, being a "QUALIFYING ACQUISITION PROPOSAL")
and shall not have been publicly rejected by the Company's Board of
Directors and (z) within 12 months of the termination of this Agreement,
the Company either (1) consummates the transaction contemplated by such
Qualifying Acquisition Proposal or any other Qualifying Acquisition
Proposal or (2) enters into a definitive agreement with respect to the
transaction contemplated by such Qualifying Acquisition Proposal or any
other Qualifying Acquisition Proposal and any such transaction is
consummated at any time thereafter, then the Company shall pay to Parent an
amount equal to $60 million (the "TERMINATION FEE")
(c) The Termination Fee required to be paid pursuant to SECTION
7.2(B)(I) or 7.2(B)(II) shall be paid (x) in the case of SECTION 7.2(B)(I),
prior to, and shall be a pre-condition to the effectiveness of, and (y) in
the case of SECTION 7.2(B)(II), within five (5) Business Days after, the
termination of this Agreement referred to in such Section. The Termination
Fee required to be paid pursuant to SECTION 7.2(B)(III) shall be made to
Parent not later than two (2) Business Days after the consummation of the
transaction contemplated by a Qualifying Acquisition Proposal. All payments
under this SECTION 7.2 shall be made by wire transfer of immediately
available funds to an account designated by Parent. Notwithstanding
anything to the contrary herein, the Company shall not be required to pay
more than one Termination Fee under this Agreement.
7.3 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after receipt of the Required Company Vote or approval of the Merger
by Merger Sub's stockholder(s), but, after any such approval, no amendment shall
be made which by law or in accordance with the rules of any relevant stock
exchange requires further approval by such stockholders without such further
approval. Except as provided in SECTION 5.2, this Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties
hereto may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those or any other rights.
46
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of the
representations, warranties, covenants or other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants or
other agreements, shall survive the Effective Time, except (i) for those
covenants and agreements contained herein and therein that by their terms apply
or are to be performed in whole or in part after the Effective Time and (ii) for
this ARTICLE VIII.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (i) on the date of delivery if delivered
personally, or if by telecopy upon confirmation of receipt, (ii) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (iii) on the day of receipt if delivered by
registered or certified mail, return receipt requested, postage prepaid. All
notices hereunder shall be delivered in one of the means set forth above to the
addresses set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Parent or Merger Sub, to:
General Electric Capital Corporation
00 Xxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.,
General Counsel - CEF
Facsimile No.: (000) 000-0000
in each case with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx XxXxxxxx, Esq.
Facsimile No.: (000) 000-0000
; PROVIDED, HOWEVER, that with respect to any requests for consents pursuant to
SECTION 4.1 of this Agreement, to:
47
General Electric Capital Corporation
00 Xxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: W. Xxxxxx Xxxxxxx,
Manager - Business Development - CEF
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Franchise Finance Corporation of America
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.,
Executive Vice President and
General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
8.3 INTERPRETATION. When a reference is made in this Agreement to Sections,
Exhibits or Schedules, such reference shall be to a Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents,
index of defined terms and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof', "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
term "or" is not exclusive.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement, which shall survive the execution and delivery
48
of this Agreement. The parties hereto acknowledge and agree that, except as
otherwise expressly set forth in this Agreement, the rights and obligations
of the Company and Parent under any other agreement between the parties not
relating to the subject matter hereto shall not be affected by any
provision of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than SECTION 5.8.
8.6 GOVERNING LAW. Except to the extent that rights of the stockholders of
the Company and the transactions contemplated hereby, including the Merger, are
governed by the MGCL, this Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of laws.
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void; PROVIDED, HOWEVER that this
Agreement may be assigned by any party to its successor in a merger, the purpose
of which is to change the state of domicile of such party. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION WAIVERS. Each of Parent, Merger Sub and the
Company irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by another party hereto or its successors or assigns may be
brought and determined in the Courts of the State of Delaware, and each of
Parent, Merger Sub and the Company hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of Parent, Merger Sub and the Company hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense, counterclaim or otherwise, in any
49
action or proceeding with respect to this Agreement, (a) any claim that it is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to serve process in accordance with applicable
law, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts. This Agreement does not
involve less than $100,000 and the parties intend that 6 Del. C. ss.2708 shall
apply to this Agreement. Parent acknowledges that service or delivery to
Corporation Trust Company at 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000,
whom Parent hereby appoints as its agent for service of process, shall
constitute good and sufficient service.
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.11 DEFINITIONS. As used in this Agreement:
(a) "BENEFIT PLANS" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of
ERISA and any bonus, deferred compensation, stock bonus, stock purchase,
restricted stock, stock option, employment, termination, stay agreement or
bonus, change in control and severance plan, program, arrangement and
contract) to which such Person is a party or which is maintained or
contributed to by such Person.
(b) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any committees thereof.
(c) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in New York City, New York and Phoenix, Arizona.
(d) "EXECUTIVES" shall mean, collectively, Xxxxxx X. Xxxxxxxxx, Xxxx
X. Xxxxxxxxxxxx, Xxxxxxxxxxx X. Xxxx, Xxxxxx X. Xxxxx and Xxxxxxx X.
Xxxxxxx.
(e) "KNOWLEDGE" of the Company or similar references means the actual
knowledge of any of Xxxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxxxxxxx, Xxxxxxxxxxx
X. Xxxx, Xxxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxx, Xxx Xxxxxx or Xxxxxxxxx X.
Xxxx, after reasonable inquiry of the executive or senior managerial
employees responsible for the relevant matters.
(f) "MATERIAL ADVERSE EFFECT" means, (x) with respect to the Company,
any change, circumstance or effect that (after giving effect to any
50
benefits or beneficial or mitigating consequences or effects occasioned by
or arising out of or in connection therewith, including the availability of
any insurance, any Tax credits, deductions or other benefits, or any
contractual reimbursement or indemnity) is materially adverse to the
business, properties, assets, financial condition or results of operations
of the Company and its Subsidiaries taken as a whole, other than change,
circumstance or effect relating to (i) the economy or securities markets in
general, (ii) the announcement, pendency or consummation of the Merger or
any other action contemplated by this Agreement, (iii) any changes in
general economic conditions in industries in which the Company or any of
its Subsidiaries operates, which changes do not affect the Company and its
Subsidiaries disproportionately relative to other entities operating in
such industries, or (iv) any action required to be taken by the Company or
any of its Subsidiaries by the terms hereof; and (y) with respect to the
Company or Parent, any change, circumstance or event that would prevent,
hinder or materially delay the consummation of the transactions
contemplated by this Agreement by such party or its Subsidiaries.
(g) "PERMITTED LIENS" means the collective reference to (i) Liens set
forth in Section 3.1(r) of the Company Disclosure Schedule, (ii) Liens for
current property taxes, assessments and other governmental charges not yet
due and payable or delinquent or being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with U.S. GAAP, (iii) statutory liens of
landlords, mechanics, carriers, warehousemen, and other Liens imposed by
law incurred in the ordinary course of business, original purchase price
conditional sales contracts and equipment leases with third parties entered
into in the ordinary course of business, (iv) easements, patent
reservations, covenants, rights of way and other similar restrictions of
record, (v) any conditions that may be shown by a current, accurate survey
or physical inspection of any Real Property and (vi) (A) zoning, building
and other similar restrictions, (B) mortgages, liens, security interest or
encumbrances that have been placed by any developer, landlord or third
party on Real Property over which the Company or any Subsidiary has
easement rights or on any of the Leased Real Property and subordination or
similar agreements relating thereto and (C) unrecorded easements,
covenants, rights of way and other similar restrictions, none of which
items set forth in clauses (A), (B) and (C), individually or in the
aggregate, materially impair the continued use and operation of the Real
Property to which they relate in the business of the Company and its
Subsidiaries taken as a whole as presently conducted.
(h) "PERSON" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
(i) "SUBSIDIARY" (i) when used with respect to any Person means any
corporation or other organization, whether incorporated or unincorporated,
(A) of which such party or any other Subsidiary of such party is a general
partner (excluding partnerships the general partnership interests of which
held by such party or any Subsidiary of such party do not have a majority
51
of the voting interests in such partnership) or (B) at least a majority of
the securities or other interests of which having by their terms ordinary
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries and (ii) when used with respect to the Company, includes
each Delaware business trust created by one or more wholly owned
Subsidiaries of the Company in connection with its securitization or
warehouse transactions in which the Company or any of its wholly owned
Subsidiaries holds an interest.
(j) "SUPERIOR PROPOSAL" means a bona fide, written Acquisition
Proposal made by a third party which the Board of Directors of the Company
concludes in good faith (after consultation with its financial advisors and
legal counsel), (i) would, if consummated, result in a transaction that
represents greater value to the Company's stockholders (in their capacities
as stockholders), from a financial point of view, than the Merger
Consideration, and (ii) is reasonably capable of being completed (including
with respect to the ability of such third party to obtain any external
financing).
52
IN WITNESS WHEREOF, Parent, the Company and Merger Sub have caused this
Agreement to be signed by their respective officers or authorized
representatives thereunto duly authorized, all as of the date first above
written.
FRANCHISE FINANCE CORPORATION OF AMERICA
By: /s/ Xxxxxx X. Xxxxxxxxx
-------------------------------------
Xxxxxx X. Xxxxxxxxx
Chairman and Chief Executive Officer
GALAHAD ACQUISITION CORP.
By: /s/ W. Xxxxxx Xxxxxxx
-------------------------------------
W. Xxxxxx Xxxxxxx
Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Xxxx X. Xxxxxxx
-------------------------------------
Xxxx X. Xxxxxxx
Vice President
Exhibit 6.2(c)
[LETTERHEAD OF XXXXX XXXX LLP]
_________, 2001
Franchise Finance Corporation
of America
00000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Re: Certain Federal Income Tax Issues
Ladies and Gentlemen:
We have acted as your tax counsel, in connection with the merger of
Gallahad Acquisition Corp., a Maryland corporation ("Merger Sub") with and into
Franchise Finance Corporation of America (the "Company") pursuant to that
certain Agreement and Plan of Merger (the "Merger Agreement") among General
Electric Capital Corporation ("Capital"), Merger Sub and the Company, dated as
of March 30, 2001.
You have requested our opinion concerning certain federal income tax
matters, including but not limited to, your continued characterization as a real
estate investment trust for federal income tax purposes (a "REIT") under the
provisions of Section 856 of the Internal Revenue Code of 1986, as amended (the
"Code"). This opinion is based on various facts and assumptions concerning your
business, operations and properties. In connection with rendering this opinion,
you have delivered certain representations to us and, with your permission, we
have relied upon such representations.
Based on such facts, assumptions and representations, it is our opinion
that as of the date hereof: (i) beginning with the taxable year of the Company
ended December 31, 1994 through the taxable year ended December 31, 2000, the
Company has been organized in conformity with and has satisfied the requirements
for qualification and taxation as a REIT; (ii) for the taxable year of the
Company that began on January 1, 2001, the Company has been organized in
conformity with the requirements for qualification and taxation as a REIT and
the Company's methods of operation have enabled it to qualify as a REIT; (iii)
each of FFCA Acquisition Corporation, FFCA Institutional Advisors, Inc., FFCA
Residual Interest Corporation, FFCA Secured Assets Corporation, FFCA Secured
Lending Corporation, FFCA Secured Franchise Loan Trust 1997-1, FFCA Franchise
Loan Owner Trust 1998-1, FFCA Secured Franchise Loan Trust 1998-1, FFCA Secured
Franchise Loan Trust 1999-1, FFCA Secured Franchise Loan Trust 1999-2, FFCA
Secured Franchise Loan Trust 2000-1, FFCA Secured Franchise Loan Trust 1996-C1,
FFCA Loan Warehouse Corporation and FFCA Capital Holding Corporation has been
(at all times during the period each such entity has been in existence) and will
be treated as a qualified REIT subsidiary within the meaning of Section 856(i)
of the Code; and (iv) FFCA Co-Investment Limited Partnership has been (at all
times on and after June 1, 1994) and will be treated as a partnership, rather
than as an association or publicly traded partnership taxable as a corporation
for federal income tax purposes.
This opinion is based in part on the Code, Treasury Regulations promulgated
thereunder and interpretations thereof by the Internal Revenue Service and the
courts having jurisdiction over such matters, each as of the date hereof and all
of which are subject to change either prospectively or retroactively. Also, any
variation or difference in the facts from those set forth in the representations
furnished to us by you may affect the conclusions stated herein. Moreover, your
qualification and taxation as a REIT depends upon your ability to meet, through
actual annual operating results, distribution levels and diversity of stock
ownership, the various qualification tests imposed under the Code, the results
of which have not been and will not be reviewed by Xxxxx Xxxx LLP. Accordingly,
no assurance can be given that the actual results of your operation for any
taxable year will satisfy such requirements.
In rendering this opinion we have assumed that, with respect to the period
commencing the first day subsequent to the date hereof and ending on the last
day of the Company's current taxable year, the Company will be organized and
operated in a manner which will permit it to remain qualified as a REIT.
However, in rendering this opinion, we have analyzed the effect of the sales of
the assets pursuant to Sections 5.2 and 5.9 of the Merger Agreement on the
characterization of the Company as a REIT.
This opinion is rendered only to the Company and its successor-in-interest,
and may not be furnished to, quoted to, or relied upon by any other person, firm
or corporation, other than Capital and its affiliates or in connection with an
audit or examination by a taxing authority, without our prior written consent.
Please be advised that we have rendered no opinion regarding any tax issues,
other than as set forth herein.
Very truly yours,
OFFICER'S CERTIFICATE
FOR FRANCHISE FINANCE CORPORATION OF AMERICA
REGARDING CERTAIN INCOME TAX MATTERS
_________, 2001
The undersigned officers of Franchise Finance Corporation of America, a
Maryland corporation (the "Company"), in connection with the merger of the
Company with Gallahad Acquisition Corp. pursuant to the terms of that certain
Agreement and Plan of Merger (the "Merger Agreement") dated as of March 30,
2001, hereby certify that, to the best of their knowledge, each of the following
statements is and will continue to be true and correct:
1. At all times during the period commencing on June 1, 1994 and ending on
the date hereof, one hundred (100) or more shareholders have simultaneously held
beneficial ownership of the outstanding capital stock of the Company.
2. The Company will issue its capital stock, including but not limited to
the capital stock described in paragraphs 37, 39, 40, 41, 42 and 43 hereof, in a
manner so that at all times, such stock is not closely-held within the meaning
of Section 856(a)(6) of the Code.
3. Effective for its taxable year which ended December 31, 1994, the
Company has filed an election to be a taxed as a real estate investment trust
and such election has not been and will not be terminated or revoked.
4. At all times the Company has and will continue to use its diligent
efforts to enforce the transfer and ownership restrictions on its common stock
and preferred stock (to the extent issued) as set forth in the Company's
Amendment and Restatement of Charter (the "Charter").
5. A representative sample of each of the Company's Leases and Loans, as of
the date hereof, has been made available to Xxxxx Xxxx LLP for its review.
6. The Company does not perform services with respect to any of its rental
properties other than (a) leasing vacant space, (b) developing and leasing new
space, (c) repairing or maintaining a tenant's premises after the expiration or
termination of a lease and prior to opening the premises to new tenants, (d)
restoration of the leased property after a casualty; and (e) such other services
as may have been disclosed to Xxxxx Xxxx LLP in writing.
7. Except as otherwise disclosed to Xxxxx Xxxx LLP in writing, with respect
to each Lease, the amount of rent received or accrued by the Company (either
directly or through any partnership in which the Company may acquire an
interest) is not based in whole or in part on the income or profits of the
lessee. In certain cases, rent under a Lease is based in whole or in part on a
fixed percentage or percentages of gross receipts or gross sales of a tenant.
8. With respect to each and every tenant under a Lease, neither the Company
nor any owner (actual or Constructive) of 10% or more of the outstanding capital
stock of the Company, is the owner (actual or Constructive) (a) in the case of a
tenant that is a corporation, capital stock of such tenant possessing 10% or
more of the total combined voting power of all classes of capital stock entitled
to vote, or 10% or more of the total number of shares of all classes of capital
stock of such tenant; or (b) in the case of a tenant that is not a corporation,
an interest of 10% or more in the assets or net profits of such tenant.
9. Except as otherwise disclosed to Xxxxx Xxxx LLP in writing, with respect
to each Lease from which the Company receives or accrues rent attributable to
personal property: (a) such personal property is leased in connection with a
lease of real property, and (b) the rent attributable to personal property is
less than 15% of the total rent received or accrued under the Lease, determined
by: (i) in the case of tax years ending on or before December 31, 2000,
comparing the relative tax basis of the personal property being leased to the
tax basis of all of the property being leased; and (ii) in the case of tax years
ending after December 31, 2000, by comparing the relative fair market value of
the personal property being leased to the aggregate fair market value of all
property being leased.
10. Except as otherwise disclosed to Xxxxx Xxxx LLP in writing, no amount
of interest accruing with respect to any debt obligation owned by the Company is
based in whole or in part on the income or profits of any person. In certain
cases, such interest is based in whole or in part on a fixed percentage or
percentages of the gross sales or receipts of the obligor of such debt
instruments.
11. Except for the Subsidiaries and FFCA Funding Corporation, the Company
does not presently own shares of capital stock in any corporation (including
mutual funds) or equity interests in entities which are characterized as
associations taxable as corporations for federal income tax purposes (including
Delaware business trusts) except for as provided in paragraph 34 of this
Officers' Certificate, either directly, through a partnership or through any
other arrangement.
12. The Company owns 100% of the issued and outstanding capital stock of
FFCA Funding Corporation.
13. The Company timely filed an election to treat FFCA Funding Corporation
as a taxable REIT subsidiary, as described in Section 856(l) of the Code.
14. The assets, liabilities, items of income, deductions and credits of the
Company are as follows:
(a) In each taxable year commencing with the Company's taxable year
ended December 31, 1994, at least ninety-five percent (95%) of the gross
income of the Company (excluding gross income from Prohibited Transactions)
has been or is expected to be derived from (i) dividends, (ii) interest,
(iii) rents from real property, (iv) gain from the sale or other
disposition of capital stock, securities and real property (including
Interests in Real Property and interests in mortgages on real property),
but excluding gain on real property which is Section 1221(a)(1) Property,
(v) abatements and refunds of taxes on real property, (vi) income and gain
derived from Foreclosure Property, (vii) amounts (other than amounts, the
determination of which depends in whole or in part on income or profits of
2
any person) received or accrued as consideration for entering into
agreements (A) to make loans secured by mortgages on real property or on
Interests in Real Property, or (B) to purchase or lease real property
(including Interests in Real Property and interests in mortgages on real
property), (viii) gain from the sale or other disposition of a Real Estate
Asset which is not a Prohibited Transaction, and (ix) payments pursuant to
an interest rate swap or other arrangement described in Section
856(c)(5)(G) of the Code;
(b) In each taxable year commencing with the Company's taxable year
ended December 31, 1994, at least seventy-five percent (75%) of the gross
income of the Company (excluding gross income from Prohibited Transactions)
has been or is expected to be derived from (i) rents from real property,
(ii) interest on obligations secured by mortgages on real property or on
Interests in Real Property, (iii) gain from the sale or disposition of real
property (including Interests in Real Property and interests in mortgages
on real property), but excluding gain from real property which is Section
1221(a)(1) Property, (iv) dividends or other distributions on, and gain
(other than gain from Prohibited Transactions) from the sale or other
disposition of, transferable shares or beneficial certificates in other
REITS, (v) abatements and refunds of taxes on real property, (vi) income
and gain derived from Foreclosure Property, (vii) amounts (other than
amounts, the determination of which depends in whole or in part on the
income or profits of any person) received or accrued as consideration for
entering into agreements (A) to make loans secured by mortgages on real
property or on Interests in Real Property, or (B) to purchase or lease real
property (including Interests in Real Property and interests in mortgages
on real property), (viii) gain from the sale or other disposition of a Real
Estate Asset which is not a Prohibited Transaction, and (ix) Qualified
Temporary Investment Income;
(c) In each taxable year commencing prior to August 5, 1997, the
Company (including the Company's share of the gross income of any
partnership in which the Company may acquire an interest) derived less than
thirty percent (30%) of its aggregate gross income from the sale or other
disposition of (i) capital stock or securities held for less than one year,
(ii) property in a Prohibited Transaction, and (iii) real property
(including Interests in Real Property and interests in mortgages on real
property) held for less than four years, other than property compulsorily
or involuntarily converted (by means of destruction, theft, seizure,
requisition, condemnation or threat of imminence thereof) and Foreclosure
Property;
(d) In each taxable year commencing with the Company's taxable year
ended December 31, 1994 and ending with the taxable year ended December 31,
2000, the Company has paid or expects to pay dividends (without regard to
capital gains dividends) equal to or in excess of the sum of (i)
ninety-five percent (95%) of the Company's taxable income for the year
(determined without regard to the deduction for dividends paid and by
excluding any net capital gain), and (ii) ninety-five percent (95%) of the
excess of the net income (after tax) from Foreclosure Property, minus (iii)
any excess noncash income;
(e) With respect to the taxable year commencing January 1, 2001, the
Company has paid or expects to pay dividends (without regard to capital
gains dividends) equal to or in excess of the sum of (i) ninety percent
(90%) of the Company's taxable income for the year (determined without
3
regard to the deduction for dividends paid and by excluding any net capital
gain), and (ii) ninety percent (90%) of the excess of the net income (after
tax) from Foreclosure Property minus (iii) any excess non-cash income; and
(f) In each taxable year commencing with the Company's taxable year
ended December 31, 1994, the dividends paid or to be paid by the Company on
each class of the Company's capital stock has been or will be paid pro rata
with no preference to any share of such class as compared with other such
shares and with no preference to one class of capital stock as compared to
another class except to the extent the former is entitled to such
preference.
15. At the close of each quarter of each taxable year commencing with the
Company's taxable year ended December 31, 1994 and ending with the taxable year
ended December 31, 2000, (a) at least seventy-five percent (75%) of the value of
the combined total assets of the Company were represented by Real Estate Assets,
cash and cash items (including receivables), and U.S. Government securities, (b)
not more than twenty-five percent (25%) of the value of the Company's total
assets were represented by securities other than those described in clause (a)
above, and (c) with respect to those assets described in clause (b) above, the
value of any one issuer's securities (other than securities of subsidiaries
described in section 856(i) of the Code), owned by the Company did not and will
not exceed five percent (5%) of the value of the Company's total assets and the
Company did not and will not own more than ten percent (10%) of any one issuer's
outstanding voting securities. For the purposes of the above representations,
the assets and income of the Company include the Company's allocable share of
the assets owned by or income received by any partnership in which the Company
has or may acquire an interest including, but not limited to, FFCA Co-Investment
Limited Partnership.
16. With respect to the tax year commencing January 1, 2001, (a) at least
seventy-five percent (75%) of the value of the combined total assets of the
Company were represented by Real Estate Assets, cash and cash items (including
receivables) and U.S. Government securities, (b) not more than twenty-five
percent (25%) of the value of the Company's total assets were represented by
securities other than those described in clause (a) above, (c) not more than
twenty percent (20%) of the value of the Company's total assets were represented
by securities of one or more taxable REIT subsidiaries, as described in Section
865(l) of the Code, (d) except with respect to a taxable REIT subsidiary, as
described in Section 856(l) of the Code and securities described in clause (a)
above, not more than five percent (5%) of the value of the Company's total
assets is represented by securities of any one issuer, (e) except with respect
to a taxable REIT subsidiary as described in Section 856(l) of the Code and
securities described in clause (a) above, the Company does not own securities
possessing more than ten percent (10%) of the total voting power of the
outstanding securities of any issuer, and (f) except with respect to a taxable
REIT subsidiary, as described in Section 856(l) of the Code and securities
described in clause (a) above, the Company does not own securities having a
value of more than ten percent (10%) of the total value of the outstanding
securities of any issuer. For the purposes of the above representations, the
assets and income of the Company include the Company's allocable share of the
assets owned by or income received by any partnership in which the Company has
or may acquire an interest including, but not limited to, FFCA Co-Investment
Limited Partnership.
4
17. Except as otherwise disclosed in writing to Xxxxx Xxxx LLP, neither the
Company, any Subsidiary nor any partnership in which the Company has or may
acquire an interest will actively conduct a business from which they earn fees
for services they perform or other income (whether or not through a manager),
other than with respect to (a) Foreclosure Property (if any); (b) the rental of
their properties pursuant to the Leases; and (c) services rendered with respect
to the Leases to the extent described in paragraph 6 above.
18. As required by Treasury Regulation Section 1.857-8, for each year
commencing with the Company's taxable year ended December 31, 1994, the Company
(a) has and will maintain the necessary records relating to the actual ownership
of its capital stock, (b) has, no later than January 30 of each following year,
made the requisite information requests of its shareholders regarding capital
stock ownership and has maintained a list of the persons failing or refusing to
comply in whole or in part with the Company's demand for statements regarding
capital stock ownership, and (c) will maintain such records for all years
commencing with the Company's taxable year ended December 31, 1994.
19. Other than with respect to FFCA Co-Investment Limited Partnership, the
Company is not a partner in any entity characterized as a partnership for
federal income tax purposes or an owner of less than 100% of any property (for
example, as a joint tenant or tenant-in-common) or, except as described in
paragraph 34 and other than with respect to the Subsidiaries and FFCA Funding
Corporation, an owner of 5% or more of the voting securities of any other
entity.
20. All shares of capital stock issued by the Company are freely
transferable except as required by federal securities laws.
21. The Company has owned one hundred percent (100%) of the capital stock
or beneficial interests, as the case may be, of the Subsidiaries at all times
during the period in which the Subsidiaries have been in existence and will
continue to own all such stock. For purposes of making the certifications set
forth herein, the Company's ownership of capital stock of the Subsidiaries was
disregarded and all assets, liabilities and items of income, deduction and
credit of the Subsidiaries were treated as assets, liabilities and such items
(as the case may be) of the Company.
22. The purchase price under any option to purchase property granted in
connection with a Lease was set in good faith by the parties to the Lease at an
amount reasonably estimated to equal or exceed the fair market value of the
property on the date or dates of the possible exercise of the option.
23. The limited partners of FFCA Co-Investment Limited Partnership do not
own, directly or indirectly, taking into account the constructive ownership
rules of Section 318 of the Code, individually or in the aggregate, any interest
in the Company or any of its affiliates.
24. The Company anticipates that its interest in the net profits and losses
of FFCA Co-Investment Limited Partnership over its anticipated life will be
material.
5
25. FFCA Co-Investment Limited Partnership has been formed and operated
strictly in accordance with the partnership agreement relating to its
organization.
26. As of the date hereof, FFCA Co-Investment Limited Partnership has no
outstanding indebtedness incurred in connection with its operation, with the
acquisition of its properties or otherwise.
27. The Company has not registered the interests in FFCA Co-Investment
Limited Partnership on any securities exchange or applied to quote the interests
on any national automated quotations system.
28. All REMIC Interests owned by the Company are regular or residual REMIC
interests under Section 860D of the Code and 95% or more of the assets of such
REMIC are Real Estate Assets as defined in Section 856(c)(5)(B) of the Code.
29. FFCA Mortgage Corporation has been dissolved.
30. Except as otherwise described to Xxxxx Xxxx LLP in writing, the Company
has not paid and will not pay any employee compensation in excess of reasonable
amounts, as described by Section 162 of the Code and administrative or judicial
interpretations thereof.
31. The Revolving Loan Agreement, dated as of September 1, 1996, between
the Company and FFCA Mortgage Corporation has been terminated.
32. The Company has not, prior to August 5, 1997, entered into any interest
rate swap or cap agreement unless income therefrom was treated as qualifying
income under Section 856(c)(5)(G) of the Code and shall not enter into any
interest rate swap or cap agreement, option, futures contract, forward rate
agreement, or any similar instrument unless, pursuant to Section 856(c)(5)(G) of
the Code, the Company enters into such a transaction to reduce interest rate
risks with respect to any indebtedness incurred to acquire or carry Real Estate
Assets.
33. Except as otherwise disclosed to Xxxxx Xxxx LLP in writing, with
respect to its taxable years commencing on or prior to August 5, 1997, the
Company has not held any Foreclosure Property for more than two years and with
respect to taxable years commencing after August 5, 1997, the Company has not
held any Foreclosure Property for more than three years.
34. The Company has not and does not own or expect to own more than 10% of
the voting securities in each of Express Franchise, Inc. and JKMO Company, Inc.
35. Except as otherwise disclosed to Xxxxx Xxxx LLP in writing, the Company
has not originated and does not expect to originate any unsecured Loans and all
Loans originated by the Company have been made in accordance with the Company's
internal underwriting standards.
36. The Equipment Revolving Loan Agreement, dated as of September 1, 1996,
between the Company and FFCA Mortgage Corporation, has been terminated.
6
37. The selling price of the Company's common stock $.01 par value (the
"Common Stock"), as described in the Prospectus Supplement dated September 11,
1997, was equal to the last reported trading price of the Common Stock on
September 11, 1997. The Company paid customary underwriting commissions and
other selling expenses incurred in connection with the sale of Common Stock
described in this paragraph 37.
38. The Company has no earnings and profits attributable to any taxable
year commencing prior to June 1, 1994.
39. The selling price of the Common Stock, as described in the Stock
Purchase Agreement dated February 12, 1998 between the Company and Xxxxxxx Xxxxx
Barney Inc., was equal to the last reported trading price of the Common Stock on
February 12, 1998. The Company paid customary underwriting commissions and other
selling expenses incurred in connection with the sale of Common Stock described
in this paragraph 39.
40. The selling price of the Common Stock, as described in the Underwriting
Agreement dated February 18, 1998, by and between the Company and X.X. Xxxxxxx &
Sons, Inc., was equal to the last reported trading price of the Common Stock on
February 18, 1998, reduced by customary underwriting discounts and other
customary selling expenses incurred in connection with the sale of the Common
Stock described in this paragraph 40.
41. The selling price of the Common Stock as described in the Stock
Purchase Agreement dated as of February 13, 1998 between the Company and Colony
Investors III, L.P. was determined as described therein and was not less than
the fair market value of such Common Stock.
42. The selling price of the Common Stock, as described in the Underwriting
Agreement dated April 21, 1998 by and between the Company and X.X. Xxxxxxx &
Sons, Inc. was equal to the last reported trading price of the Common Stock on
April 21, 1998, reduced by customary underwriting discounts and other customary
selling expenses incurred with the sale of Common Stock described in this
paragraph 42.
43. The selling price of the Common Stock, as described in the Purchase
Agreement dated January 27, 1999 by and between the Company, Xxxxxxx Xxxxx &
Co., Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated and Bear, Xxxxxxx & Co.
Inc., as representatives of the several underwriters named therein, was equal to
the fair market value of the Common Stock on January 27, 1999, reduced by
customary underwriting discounts and other customary selling expenses incurred
with the sale of Common Stock described in this paragraph 43.
44. To the best of Company's knowledge, the representations and warranties
set forth in Section 2.2(d), (b) and (g) of the Purchase Agreement, dated as of
February 13, 1998 and in Section 4.01 of the Warrant Agreement, dated as of
March 13, 1998, by and between the Company and Colony Investors III, L.P., are
true, complete and correct.
45. The Company has operated in a manner since June 1, 1994, such that the
representations set forth in this Certificate were true at all times since June
1, 1994.
7
46. The Company intends to operate in a manner such that the
representations set forth in this Certificate will continue to be true in the
future; provided however, the Company may operate in a manner which is different
from the representations, as set forth above, if it obtains the advice of tax
counsel that such differences will not impair its status as a REIT under the
Code.
47. Any matters required to be furnished to Xxxxx Xxxx LLP in writing have
been furnished together with this Certificate.
48. As an officer of the Company, it is my responsibility to have knowledge
of the matters described in the above representations.
[END OF OFFICERS' CERTIFICATE]
8
IN WITNESS WHEREOF, the undersigned have executed this Certificate as of
the date first written above.
FRANCHISE FINANCE CORPORATION OF AMERICA,
a Delaware corporation
By
------------------------------------------
Xxxxxxxxxxx X. Xxxx, President and
Chief Operating Officer
By
------------------------------------------
Xxxx Xxxxxxxxxxxx, Executive Vice President,
Chief Financial Officer, Treasurer and
Assistant Secretary
By
------------------------------------------
Xxxxxx X. Xxxxx, Executive Vice President,
General Counsel and Secretary
9
EXHIBIT A
DEFINITIONS
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSTRUCTIVE" means the constructive capital stock ownership rules of
Section 318 of the Code, except that "10 percent" shall be substituted for "50
percent" in subparagraph (c) of Sections 318(a)(2) and 318(a)(3) and Section
318(a)(3)(A) shall be applied in the case of a partnership by taking into
account only partners who own (directly or indirectly) twenty-five percent or
more of the capital interest in such partnership.
"FORECLOSURE PROPERTY" means any real property (including Interests in Real
Property), and any personal property incident to such real property, acquired by
the Company as a result of the Company having bid in such property at
foreclosure, or having otherwise reduced such property to ownership or
possession by agreement or process of law, after there was default (or default
was imminent) on a lease of such property or on an indebtedness which such
property secured; provided that an election for foreclosure property status is
in effect with respect to such property and such election has not been
terminated under Section 856(e)(4) of the Code. Such term does not include
property acquired by the Company as a result of indebtedness arising from the
sale or other disposition of property of the Company which is Section 1221(a)(1)
Property which was not originally acquired as foreclosure property.
"INTERESTS IN REAL PROPERTY" includes fee ownership and co-ownership of
land or improvements thereon, leaseholds of land or improvements thereon,
options to acquire land or improvements thereon, and options to acquire
leaseholds of land or improvements thereon, but does not include mineral, oil or
gas royalty interests.
"LEASE" means any lease from which the Company derives revenue, either
directly or through one or more partnerships or Subsidiaries.
"LOAN" means an obligation to pay principal and interest on the terms
described therein with respect to which the Company is the obligee and which is
secured by either real or personal property or both.
"PROHIBITED TRANSACTION" means the sale or other disposition of Section
1221(a)(1) Property, other than Foreclosure Property, unless (a) the property
sold was a Real Estate Asset; (b) the Company held the Real Estate Asset for at
least four years; (c) aggregate expenditures made by the Company during the four
(4) year period preceding the date of the sale which are included in the basis
of the Real Estate Asset do not exceed thirty percent (30%) of the net selling
price of such asset; (d) (i) during the taxable year the Company did not make
more than seven sales of property (other than Foreclosure Property) or (ii) the
aggregate adjusted bases (as determined for purposes of computing earnings and
profits) of property (other than Foreclosure Property) sold during the taxable
year does not exceed ten percent (10%) of the aggregate adjusted bases (as so
determined) of all the assets of the Company as of the beginning of the taxable
year; (e) in the case of property, which consists of land or improvements, not
acquired through foreclosure (or deed in lieu of foreclosure), or lease
termination, the Company has held the property for not less than four (4) years
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for production of rental income; and (f) if the requirement of clause (d)(i) is
not satisfied, substantially all of the marketing and development expenditures
with respect to the property were made through an independent contractor (as
defined in Section 856(d)(3) of the Code) from whom the Company does not receive
income.
"QUALIFIED TEMPORARY INVESTMENT INCOME" means any income which (a) is
attributable to capital stock, or a bond, debenture, note, certificate or other
evidence of indebtedness (excluding any annuity contract which depends (in whole
or in substantial part) on the life expectancy of one or more individuals, or is
issued by an insurance company subject to tax under subchapter L of the Code (i)
in a transaction in which there is no consideration other than cash or another
annuity contract meeting the requirements of this definition, (ii) pursuant to
the exercise of an election under an insurance contract by a beneficiary thereof
on the death of the insured party under such contract, or (iii) in a transaction
involving a qualified pension or employee benefit plan), (b) is attributable to
the temporary investment of new capital (as defined in Section 856(c)(5)(D)(ii)
of the Code) received by the Company and (c) is received or accrued during the
one-year period beginning on the date the Company received such capital.
"REAL ESTATE ASSET" means real property (including Interests in Real
Property and interests in mortgages on real property), shares (or transferable
certificates) of beneficial interests in other REITs and such other property as
described in Section 856(c)(5) of the Code.
"REIT" means a real estate investment trust which meets the requirements of
Sections 856 through 860 of the Code.
"REMIC INTERESTS" means regular interests and residual interests in a Real
Estate Mortgage Investment Conduit as defined under Section 860D of the Code.
"SECTION 1221(A)(1) PROPERTY" means capital stock in trade of the Company
or other property of a kind which would be property included in inventory of the
Company if on hand at the close of the taxable year, or property held by the
Company primarily for sale to customers in the ordinary course of its trade or
business.
"SUBSIDIARIES" means FFCA Acquisition Corporation, FFCA Institutional
Advisors, Inc., FFCA Residual Interest Corporation, FFCA Secured Assets
Corporation, FFCA Secured Lending Corporation, FFCA Secured Franchise Loan Trust
1997-1, FFCA Franchise Loan Owner Trust 1998-1, FFCA Secured Franchise Loan
Trust 1998-1, FFCA Secured Franchise Loan Trust 1999-1, FFCA Secured Franchise
Loan Trust 1999-2, FFCA Secured Franchise Loan Trust 2000-1, FFCA Secured
Franchise Loan Trust 1996-C1, FFCA Loan Warehouse Corporation and FFCA Capital
Holding Corporation.
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