Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 16, 2004
BY AND AMONG
HRPT PROPERTIES TRUST,
HWP LP ACQUISITION LLC,
HALLWOOD REALTY, LLC
AND
HALLWOOD REALTY PARTNERS, L.P.
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INDEX OF DEFINED TERMS
Term Section
---- -------
affiliate ..................................................... 9.03
Agreement ..................................................... Preamble
business day .................................................. 9.03
Certificate of Merger ......................................... 1.03
Certificates .................................................. 2.02(b)
Closing ....................................................... 1.02
Closing Date .................................................. 1.02
Code .......................................................... 2.02(g)
Confidentiality Agreement ..................................... 6.05(f)
Consent ....................................................... 3.05(b)
Contingent Liabilities ........................................ 9.03
Continuing Employees .......................................... 6.13(b)
Contract ...................................................... 3.03(b)
Declaration ................................................... 9.13
Defect ........................................................ 6.02
Deposit ....................................................... 6.01
Determination Date ............................................ 9.03
DRULPA ........................................................ 1.01
DLLCA ......................................................... 1.01
Effective Time ................................................ 1.03
Encumbrances .................................................. 3.18(c)
Environmental Claim ........................................... 3.14
Environmental Laws ............................................ 3.14
ERISA ......................................................... 3.11(e)
ERISA Affiliate ............................................... 3.11(e)
Exchange Act .................................................. 3.05(b)(i)
Exchange Fund ................................................. 2.02(a)
1st Odyssey ................................................... 3.08(d)
GAAP .......................................................... 3.06(c)
General Partner ............................................... Preamble
Governmental Entity ........................................... 3.05(b)
Gross Merger Consideration .................................... 2.01(b)(i)(x)
Group ......................................................... Recitals
Hazardous Substance ........................................... 3.14
HCRE .......................................................... Recitals
HWG95 ......................................................... Recitals
HWG98 ......................................................... Recitals
HWG Realty .................................................... Recitals
HWG, LLC ...................................................... Recitals
HWG Parties ................................................... Recitals
in the ordinary course of business ............................ 9.03
Indemnification Obligations ................................... 3.21
Indemnified Party ............................................. 6.06(a)
Indemnitees ................................................... 6.08(a)
Inspection Period ............................................. 6.02
Intellectual Property ......................................... 3.20(a)
Judgment ...................................................... 3.05(a)(iii)
Law ........................................................... 3.05(a)(iii)
Legal Requirements ............................................ 3.18(d)
Xxxxxx Brothers ............................................... 3.16
Liens ......................................................... 3.05(a)(ii)
Litigation .................................................... 9.03
Material Contracts ............................................ 3.15(a)
Merger ........................................................ Recitals
Merger Price .................................................. 2.01(b)(i)
Xxxxxx Xxxxxxx ................................................ 3.16
Mortgage Document ............................................. 9.03
MREIT ......................................................... 9.03
Net Indebtedness .............................................. 9.03
Net Working Capital ........................................... 9.03
Other Transactions ............................................ Recitals
Parent ........................................................ Preamble
Parent Material Adverse Effect ................................ 4.04(a)
Partnership ................................................... Preamble
Partnership Agreement ......................................... 1.05(b)
Partnership Benefit Agreements ................................ 3.11(a)(ii)
Partnership Benefit Plans ..................................... 3.11(a)(i)
Partnership Certificate ....................................... 3.01(c)
Partnership Disclosure Letter ................................. 3.01(a)
Partnership Employees ......................................... 6.13(b)
Partnership Leased Property ................................... 3.18(a)(ii)
Partnership Leases ............................................ 3.19(a)
Partnership Material Adverse Effect ........................... 9.03
Partnership Owned Property .................................... 3.18(a)(i)
Partnership Pension Plans ..................................... 3.11(a)
Partnership Real Property ..................................... 3.18(a)(ii)
Partnership SEC Documents ..................................... 3.06(a)
Partnership Takeover Proposal ................................. 5.02(b)(i)
Paying Agent .................................................. 2.02(a)
Permits ....................................................... 3.13(c)
Permitted Encumbrances ........................................ 3.18(c)
Permitted Investments ......................................... 2.02(f)
person ........................................................ 9.03
Post Closing Employer ......................................... 6.13(a)
Prepaid Debt .................................................. 9.03
Proxy Statement ............................................... 3.05(b)(i)
Purchase Agreement ............................................ Recitals
Purchaser ..................................................... Preamble
Rent Defect ................................................... 6.03(c)(ii)
Representatives ............................................... 5.02(a)
Rights Agent .................................................. 3.03(a)
Rights Agreement .............................................. 3.03(a)
Xxxxxxxx-Xxxxx Act ............................................ 3.06(b)
SEC ........................................................... 3.05(b)(i)
Securities Act ................................................ 3.06(b)
Subsidiary .................................................... 3.01(a)
subsidiary .................................................... 9.03
Subsidiary Corporation ........................................ 6.15(d)
Subsidiary Organizational Documents ........................... 3.01(c)
Subsidiary Partnership ........................................ 3.09(a)
Subsidiary Resulting LLC ...................................... 6.15(d)
Successor GP .................................................. Recitals
Superior Partnership Proposal ................................. 5.02(b)(ii)
Surveys ....................................................... 6.03(b)
Survey Defect ................................................. 6.03(b)
Survivor ...................................................... 1.01
Tax Authority ................................................. 3.09(p)
Tax Return .................................................... 3.09(p)
Taxes ......................................................... 3.09(p)
Tenant Rent Roll .............................................. 3.19(a)
Termination Fee ............................................... 6.09(b)
Title Company ................................................. 9.03
Title Defect .................................................. 6.03(a)
Title Policies ................................................ 6.03(a)
Transaction Costs ............................................. 9.03
Transactions .................................................. 3.04(a)
Transfer Taxes ................................................ 6.11
Treasury Regulations .......................................... 3.09(p)
Unitholder Approval ........................................... 3.04(d)
Unitholder Meeting ............................................ 6.04(b)
Unit Option ................................................... 6.07(c)
Unit Option Plan .............................................. 6.07(c)
Unit Purchase Right ........................................... 3.03(a)
Units ......................................................... Recitals
Working Capital Adjustment .................................... 9.03
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 16, 2004 (this
"Agreement"), is by and among HRPT PROPERTIES TRUST, a Maryland real estate
investment trust ("Parent"), HWP LP ACQUISITION LLC, a Delaware limited
liability company and a wholly-owned subsidiary of Parent ("Purchaser"),
HALLWOOD REALTY PARTNERS, L.P., a Delaware limited partnership (the
"Partnership") and HALLWOOD REALTY, LLC, a Delaware limited liability company
and the general partner (the "General Partner") of the Partnership.
RECITALS:
The Board of Trustees of Parent and the sole Member of the Purchaser have
approved the merger (the "Merger") of the Purchaser into the Partnership on the
terms and subject to the conditions set forth in this Agreement, whereby each
unit of limited partner interest in the Partnership (the "Units") outstanding
immediately before the closing of the Merger, shall be converted into the right
to receive an amount in cash equal to the Merger Price.
The Board of Directors of the General Partner has determined that the
Merger is fair to, and in the best interests of, the holders of Units, has
approved the Merger and resolved to recommend that holders of Units approve this
Agreement and the Merger.
The Parent, HRP GP, LLC, a Delaware limited liability company and a
wholly-owned subsidiary of Parent ("Successor GP"), the General Partner, HWG,
LLC, a Delaware limited liability company ("HWG, LLC"), Hallwood Commercial Real
Estate, LLC, a Delaware limited liability company ("HCRE"), HWG Realty
Investors, LLC, a Delaware limited liability company ("HWG Realty"), HWG 98
Advisors, Inc., a Delaware corporation ("HWG98"), HWG 95 Advisors, Inc., a
Delaware corporation ("HWG95") and The Hallwood Group Incorporated, a Delaware
corporation ("Group") (the General Xxxxxxx, XXX, XXX, XXXX, XXX Xxxxxx, XXX00,
XXX00 and Group are referred to collectively as the "HWG Parties"), have
separately entered into an agreement (the "Purchase Agreement"), dated the same
date as this Agreement, providing for the consummation of certain other
transactions (the "Other Transactions"), including, without limitation, the
acquisition (x) by Parent from HWG, LLC of all of the Units owned by HWG, LLC
and (y) by Successor GP from the General Partner of the entire general partner
interest in the Partnership immediately before the closing of the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and other terms contained in this Agreement, the parties
hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware Revised Uniform Limited
Partnership Act (the "DRULPA") and the Delaware Limited Liability Company Act
(the "DLLCA"), the Purchaser
shall be merged with and into the Partnership at the Effective Time. At the
Effective Time, the separate limited liability company existence of the
Purchaser shall cease and the Partnership shall continue as the survivor (as
such, the "Survivor") and a wholly-owned subsidiary of Parent.
1.02 Closing. Subject to the satisfaction or waiver of all of the
conditions set forth in Article VII, the closing (the "Closing") of the Merger
shall take place at the offices of Xxxxxxxx & Worcester LLP at 10:00 a.m. on the
business day following the satisfaction (or, to the extent permitted by Law,
waiver) of the conditions set forth in Article VII (other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or, to the extent permitted by Law, waiver of those conditions), or
at such other place, time and date as shall be agreed in writing between Parent
and the Partnership. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date."
1.03 Effective Time. On the Closing Date the Partnership shall file with
the Secretary of State of the State of Delaware, a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DRULPA and the DLLCA and shall make all other filings or recordings required
under the DRULPA and the DLLCA. The Merger shall become effective at such time
as the Certificate of Merger is duly filed with such Secretary of State of
Delaware (the time the Merger becomes effective being the "Effective Time").
1.04 Effects. The Merger shall have the effects set forth in Section
17-211 of the DRULPA and Section 18-209 of the DLLCA.
1.05 Agreement of Limited Partnership.
(a) The certificate of limited partnership of the Partnership shall
be the certificate of limited partnership of the Survivor until thereafter
changed or amended in accordance with the provisions thereof and applicable Law.
(b) The Amended and Restated Agreement of Limited Partnership of the
Partnership ("Partnership Agreement") as in effect immediately prior to the
Effective Time shall be the agreement of limited partnership of the Survivor
until thereafter changed or amended in accordance with the provisions thereof
and applicable Law.
1.06 General Partner. On the Closing Date, pursuant to the Purchase
Agreement, the General Partner shall withdraw from the Partnership and the
Successor GP shall be admitted to the Partnership as a successor general
partner.
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ARTICLE II
EFFECT ON THE UNITS AND THE EQUITY INTERESTS IN
THE PURCHASER; EXCHANGE OF CERTIFICATES
2.01 Effect on Interests. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder of any Units, the equity
interests in Purchaser or the general partner interest in the Partnership:
(a) Membership interests of Purchaser. Each issued and outstanding
membership interest in Purchaser shall be converted into one newly issued Unit
of the Survivor.
(b) Conversion of Units.
(i) Each Unit issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive an amount in cash
equal to 91.5% of the quotient which results by dividing:
(x) two hundred fifty million dollars ($250,000,000), increased or
decreased, as the case may be, by the Working Capital Adjustment
(but not decreased to less than two hundred forty-five million
dollars ($245,000,000)) (the "Gross Merger Consideration"), by
(y) the sum of (1) the total number of Units outstanding immediately
prior to the Effective Time, plus (2) the total number of Units for
which Unit Options outstanding immediately prior to the Effective
Time are then exercisable
(such quotient, the "Merger Price"), without interest, less any
withholding (as provided in Section 2.02(g)), upon surrender and exchange
of the Certificate representing such Unit.
(ii) As of the Effective Time, all such Units shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a Certificate representing any such Units shall
cease to have any rights with respect thereto, except the right to receive the
Merger Price, without interest, less any required withholding taxes, upon
surrender of such Certificate in accordance with Section 2.02.
(c) Unit Options. All Unit Options outstanding immediately prior to
the Effective Time shall be cancelled and shall cease to exist, and each holder
of a Unit Option shall cease to have any rights with respect thereto, except as
provided in Section 6.07.
(d) General Partner Interest. The general partner interest in the
Partnership shall remain outstanding as a general partner interest of the
Survivor and no payment or distribution shall be made by the Partnership with
respect thereto.
2.02 Exchange of Certificates.
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(a) Paying Agent. Prior to the Effective Time, Parent shall select a
bank or trust company reasonably acceptable to the Partnership to act as paying
agent (the "Paying Agent") for the payment of the Merger Price upon surrender of
Certificates. The Purchaser shall, and Parent shall cause the Purchaser to,
deposit with the Paying Agent prior to the Effective Time, an amount in cash
which, together with the Deposit, is equal to the aggregate Merger Price payable
to holders of all the Units converted pursuant to Section 2.01(b) (such cash,
inclusive of the Deposit, being hereinafter referred to as the "Exchange Fund").
The expenses of the Paying Agent shall not be paid from the Exchange Fund, but
shall be paid directly by the Purchaser.
(b) Exchange Procedure. As soon as reasonably practicable after the
Effective Time, the Survivor shall cause the Paying Agent to mail to each holder
of record of Units whose Units were converted into the right to receive the
Merger Price pursuant to Section 2.01(b), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificate or certificates that immediately prior to the Effective Time
represented outstanding Units (the "Certificates") shall pass, only upon
delivery of the Certificates to the Paying Agent and shall be in such 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 Price. Upon surrender of a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Survivor, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
cash in an amount equal to the product of (A) the number of Units theretofore
represented by such Certificate, and (B) the Merger Price, and the Certificate
so surrendered shall forthwith be canceled. No interest shall be paid or shall
accrue on the cash payable upon surrender of any Certificate. For purposes of
this Article II, the Successor GP shall be deemed to be the record owner of all
Units purchased pursuant to the Purchase Agreement.
(c) No Further Ownership Rights in Units; Transfer Books. The Merger
Price paid in accordance with the terms of this Article II upon conversion of
Units shall be deemed to have been paid in full satisfaction of all rights
pertaining to such Units, subject, however, to the Survivor's obligation to pay
any distributions with a record date prior to the Effective Time that may have
been declared or made by the Partnership on such Units in accordance with the
terms of this Agreement and which remain unpaid at the Effective Time, and after
the Effective Time there shall be no further registration of transfers on the
transfer books of the Survivor of Units that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, any Certificates are
presented to the Survivor or the Paying Agent for any reason, they shall be
canceled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including any interest or other income received by the Paying Agent in respect
thereof that has not previously been distributed pursuant to Section 2.02(f))
that remains undistributed to the holders of Units for one hundred eighty (180)
days after the Effective Time shall be delivered to the Survivor, upon demand,
and any holder of Units who has not theretofore complied with this
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Article II shall thereafter look only to the Survivor for payment of such
holder's claim for the Merger Price.
(e) No Liability. None of Parent, Purchaser, the General Partner,
the Successor GP, the Partnership, the Survivor or the Paying Agent shall be
liable to any person in respect of any payments or distributions payable from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(f) Investment of Exchange Fund. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by the Survivor, on a daily
basis; provided, however, that substantially all of such investments shall be in
obligations of or guaranteed by the United States of America, in commercial
paper obligations receiving the highest rating from either Xxxxx'x Investors
Service, Inc. or Standard & Poor's Ratings Group, or in certificates of deposit,
bank repurchase agreements or bankers' acceptances of commercial banks with
capital exceeding One Billion Dollars ($1,000,000,000) (collectively, "Permitted
Investments") or in money market funds which are invested solely in Permitted
Investments; provided further, however, that the maturities of Permitted
Investments shall be such as to permit the Paying Agent to make prompt payment
of the Merger Price at and after the Effective Time. Any interest and other
income resulting from such Permitted Investments shall be payable to the
Survivor on demand.
(g) Withholding Rights. Parent, Purchaser or the Survivor shall be
entitled to deduct and withhold, or cause the Paying Agent to deduct and
withhold, from the consideration otherwise payable to any holder of Units
pursuant to this Agreement, (i) such amounts as may be required to be deducted
and withheld with respect to the making of such payment under the Internal
Revenue Code of 1986, as amended (the "Code"), or under any provision of state,
local or foreign Law, and (ii) such amounts as may be required to be deducted or
withheld from or paid by holders of Units upon the order of the Court of
Chancery of the state of Delaware, New Castle County in connection with the
Litigation. To the extent that amounts are so deducted and withheld by Parent,
Purchaser or the Survivor, such deducted and withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Units in respect of which such deduction and withholding was made by Parent,
Purchaser or the Survivor.
(h) Transfers of Units. If the Merger Price (or any portion thereof)
is to be paid to a person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition to the
payment of the Merger Price that the Certificate so surrendered shall be
properly endorsed or accompanied by appropriate stock powers or assignments
(with signatures guaranteed in accordance with the transmittal form) and
otherwise in proper form for transfer, that such transfer otherwise be proper
and that the person requesting such transfer pay to the Paying Agent any
transfer or other Taxes payable by reason of the foregoing or establish to the
satisfaction of the Paying Agent that such Taxes have been paid or are not
required to be paid.
(i) 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
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be lost, stolen or destroyed and, if required by the Survivor, the posting by
such person of a bond, in such reasonable amount as the Survivor may direct, as
indemnity against any claim that may be made against Parent or the Survivor with
respect to such Certificate, the Paying Agent will pay, in exchange for such
lost, stolen or destroyed Certificate, the Merger Price to be paid in respect of
the Units represented by such Certificate, as contemplated by this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE PARTNERSHIP
The Partnership hereby represents and warrants to Parent and Purchaser
that:
3.01 Organization, Standing and Power.
(a) Each of the Partnership and each subsidiary (a "Subsidiary") of
the Partnership listed in Section 3.02 of the letter dated as of the date of
this Agreement from the Partnership to the Parent and Purchaser (the
"Partnership Disclosure Letter") is an entity duly organized, validly existing
and in good standing under the Laws of the state of its organization and has all
requisite power and authority necessary to enable it to own, lease, operate or
otherwise hold its properties and assets and to conduct its business as
currently conducted.
(b) The Partnership and each Subsidiary is duly qualified to do
business in each jurisdiction where (i) the nature of its business or its
ownership or leasing of its properties make such qualification necessary, or
(ii) the failure to so qualify, individually or in the aggregate, has had or
could reasonably be expected to have a Partnership Material Adverse Effect.
(c) The Partnership has delivered to Parent true, correct and
complete copies of the certificate of limited partnership of the Partnership, as
amended to the date of this Agreement (as so amended, the "Partnership
Certificate"), and the Partnership Agreement, as amended to the date of this
Agreement, and complete copies of the organizational documents of the
Subsidiaries (the "Subsidiary Organizational Documents").
(d) The Partnership Certificate, the Partnership Agreement and the
Subsidiary Organizational Documents are in full force and effect, and no other
organizational documents are applicable to or binding upon the Partnership or
any Subsidiary.
(e) Neither the Partnership nor any Subsidiary is in violation of
any provision of the Partnership Certificate, the Partnership Agreement or the
Subsidiary Organizational Documents.
3.02 Subsidiaries; Equity Interests. The Partnership has no subsidiaries
and does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity or
ownership interest in any person, other than as set forth in Section 3.02 of the
Partnership Disclosure Letter.
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3.03 Capital Structure.
(a) At the close of business on the date of this Agreement, (i)
1,593,948 Units were issued and outstanding, (ii) 64,800 Units were subject to
issuance upon exercise of outstanding Unit Options under the Unit Option Plan at
an exercise price of $11.875 per Unit, and (iii) one unit purchase right (a
"Unit Purchase Right") for each Unit outstanding was issued and outstanding, and
one Unit Purchase Right was reserved for issuance in connection with each Unit
Option, in accordance with that certain Unit Purchase Rights Agreement, dated as
of November 30, 1990, as amended by Amendment No. 1 to Unit Purchase Rights
Agreement, dated February 14, 2000, as further amended by Amendment No. 2 to
Unit Purchase Rights Agreement, dated March 28, 2003, (as amended, the "Rights
Agreement") between the Partnership and Equiserve Trust Company, N.A., as Rights
Agent (the "Rights Agent"). Except as set forth above, at the close of business
on the date of this Agreement, no other voting securities of the Partnership
were issued, reserved for issuance or outstanding.
(b) All outstanding Units are, and all such Units that may be issued
prior to the Effective Time will be when issued, duly authorized, validly
issued, fully paid and nonassessable (subject to the obligation of a limited
partner to repay the amount of any distribution wrongly received from the
Partnership for a period of three (3) years from the date of the distribution),
and not subject to or issued in violation of any purchase option, call option,
right of first refusal, preemptive right, subscription right or any similar
right under any provision of the DRULPA, the Partnership Certificate, the
Partnership Agreement or any contract, lease, license, indenture, note, bond,
agreement, permit, concession, franchise or other instrument (a "Contract") to
which the Partnership is a party or otherwise bound.
(c) Except as set forth in this Section or in Section 3.03(c) of the
Partnership Disclosure Letter, there are no options, warrants, calls, rights,
convertible or exchangeable securities, units, commitments, Contracts,
arrangements or undertakings to which the Partnership is a party or by which it
is bound (x) obligating the Partnership to issue, deliver or sell, or cause to
be issued, delivered or sold, additional Units or other equity interests in, or
any security convertible or exercisable for or exchangeable into Units or other
equity interest in, the Partnership, or (y) obligating the Partnership to issue,
grant, extend or enter into any such option, warrant, call, right, security,
unit, commitment, Contract, arrangement or undertaking. There are not any
outstanding contractual obligations of the Partnership to repurchase, redeem or
otherwise acquire any Units of the Partnership. Other than the Purchase
Agreement, there are no unitholder agreements, voting trusts or other agreements
or understandings to which the Partnership is a party or to which it is bound
relating to the holding, voting or disposition of any Units of the Partnership.
(d) The Board of Directors of the General Partner or a committee
administering the Unit Option Plan has the power and authority to cause the Unit
Option Plan to terminate as of the Effective Time. Following the Effective Time,
no holder of a Unit Option or any participant in the Unit Option Plan or other
Partnership Benefit Plan will have any right thereunder to acquire any
partnership interest in the Survivor.
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(e) All Unit Options outstanding as of the date of this Agreement,
the price at which they are exercisable and the vesting schedule therefor are
listed on Section 3.03(e) of the Partnership Disclosure Letter.
(f) The capital structure of each Subsidiary is as set forth in
Section 3.03(f) of the Partnership Disclosure Letter. The capital stock or other
equity ownership interest in each Subsidiary is owned by the Partnership or by
an affiliate of the Partnership, as set forth in Section 3.03(f) of the
Partnership Disclosure Letter.
(g) There are no options, warrants, calls, rights, convertible or
exchangeable securities, units, commitments, Contracts, arrangements or
undertakings to which any Subsidiary is a party or by which it is bound (x)
obligating any Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, equity interests in, or any security convertible or
exercisable for or exchangeable into equity interests in, any Subsidiary or (y)
obligating any Subsidiary to issue, grant, extend or enter into any such option,
warrant, call, right, security, unit, commitment, Contract, arrangement or
undertaking.
(h) Each outstanding share of capital stock or other equity
ownership interest of each Subsidiary is duly authorized, validly issued, fully
paid and nonassessable (subject to the requirements, if any, under applicable
state Law, obligating any limited partner of a Subsidiary that is a limited
partnership to repay the amount of any distribution wrongly received from such
Subsidiary), and, except as set forth in Section 3.03(h) of the Partnership
Disclosure Letter, each such share or other equity ownership interest is owned
by the Partnership or another Subsidiary free and clear of all Liens, options,
rights of first refusal, agreements, limitations on the Partnership's or any
Subsidiary's voting rights, charges and other encumbrances whatsoever.
3.04 Authority; Execution and Delivery; Enforceability.
(a) The Partnership has all requisite partnership power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby (the "Transactions").
(b) The execution, delivery and performance by the Partnership of
this Agreement and the consummation by the Partnership of the Transactions have
been duly authorized by all necessary partnership action on the part of the
Partnership, subject to receipt of Unitholder Approval.
(c) The Partnership has duly executed and delivered this Agreement,
and this Agreement constitutes its legal, valid and binding obligation,
enforceable against the Partnership in accordance with its terms, except that
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws affecting the enforcement of
creditor's rights generally and the application of general principles of equity
(regardless of whether that enforceability is considered in a proceeding at law
or in equity).
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(d) The affirmative vote of the holders of a majority of the
outstanding Units ("Unitholder Approval") is the only vote of any class or
series of the Partnership's limited partner interests required to approve the
Merger and adopt this Agreement.
(e) (i) The Audit Committee of the Board of Directors of the General
Partner has approved the payment of the "Purchase Price" provided for in the
Purchase Agreement and the Merger Price, and (ii) the Board of Directors of the
General Partner has duly adopted resolutions (A) approving this Agreement, the
Merger, and the Other Transactions (including the payment to certain of the HWG
Parties of the consideration to be paid to such parties pursuant to the Purchase
Agreement) in accordance with the applicable provisions of the DRULPA and the
Partnership Agreement, (B) determining that the terms of the Merger and the
Other Transactions are fair to and in the best interests of the Partnership and
its unitholders, other than the General Partner and its affiliates, and (C)
recommending that the holders of Units approve and adopt this Agreement and the
Merger and the transfer of the general partner interest in the Partnership
pursuant to the Purchase Agreement.
3.05 No Conflicts; Consents.
(a) Except as set forth in Section 3.05(a) of the Partnership
Disclosure Letter, the execution, delivery and performance by the Partnership of
this Agreement do not, and the consummation of the Merger and the Other
Transactions and compliance with the terms of this Agreement will not:
(i) conflict with or result in any violation of any provision
of the Partnership Certificate, the Partnership Agreement or the Subsidiary
Organizational Documents,
(ii) subject to the filings and other matters referred to in
Section 3.05(b), conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation of any
pledge, lien, charge, mortgage, deed of trust, claims against title, encumbrance
or security interest of any kind or nature whatsoever (collectively, "Liens")
upon any of the properties or assets of the Partnership or any Subsidiary under,
or require the consent of any person under, any provision of any Contract to
which the Partnership or any Subsidiary is a party or by which any of its
properties or assets is bound or affected, or
(iii) subject to the filings and other matters referred to in
Section 3.05(b)(i), conflict with or result in any violation of any domestic or
foreign judgment, verdict, jury award, injunction, order or decree ("Judgment")
or domestic or foreign statute, law (including common law), ordinance, rule or
regulation ("Law") applicable to the Partnership or any Subsidiary or their
respective properties or assets,
except in the case of clauses (ii) and (iii) above, for such matters as,
individually or in the aggregate, could not reasonably be expected to have a
Partnership Material Adverse Effect.
9
(b) No consent, approval, license, permit, order or authorization
("Consent") of, or registration, declaration or filing with, or notice to, or
Permit from, any federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity") is required to be obtained or made by or with respect to the
Partnership or any Subsidiary in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than:
(i) the filing with the Securities and Exchange Commission
(the "SEC") of (A) a proxy statement relating to the Unitholder Approval (the
definitive form of such proxy statement is referred to as the "Proxy
Statement"), and (B) such reports under Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement, the Merger and the Other Transactions;
(ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of the other jurisdictions in which the Partnership is
qualified to do business;
(iii) such filings as may be required in connection with the
Transfer Taxes described in Section 6.11; and
(iv) such filings as may be required after the consummation of
the Merger to reflect the fact that the Merger has been consummated.
(c) The Board of Directors of the General Partner has amended the
Rights Agreement so that (i) neither Parent nor Purchaser nor any of its
"affiliates" or "associates" is or will become an "Acquiring Person" (each as
defined in the Rights Agreement) by reason of this Agreement, the Merger or any
Other Transaction, and (ii) a "Distribution Date" (as defined in the Rights
Agreement) will not occur by reason of this Agreement, the Merger or any of the
Other Transactions. The Unit Purchase Rights will expire concurrently with the
consummation of the Merger.
3.06 SEC Documents; Undisclosed Liabilities.
(a) The Partnership has timely filed all reports, schedules, forms,
statements and other documents with the SEC required to be filed by it on or
after December 31, 2000 (such reports, schedules, forms, statements and other
documents, collectively with all other reports, schedules, forms, statements and
other documents filed by the Partnership with the SEC, if any, being hereinafter
referred to as the "Partnership SEC Documents").
(b) As of their respective dates, the Partnership SEC Documents
complied in all material respects with the requirements of the Securities Act of
1933 (the "Securities Act"), the Exchange Act and the Xxxxxxxx-Xxxxx Act of 2002
(the "Xxxxxxxx-Xxxxx Act") and the rules and regulations of the SEC promulgated
thereunder, to the extent applicable to such Partnership SEC Documents, and none
of the Partnership SEC Documents as of such dates contained any
10
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Subsidiaries is required to file any forms, reports or
other documents with the SEC pursuant to Section 12 or 15 of the Exchange Act.
(c) The consolidated financial statements of the Partnership
included in the Partnership SEC Documents comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, including all applicable
requirements of the Xxxxxxxx-Xxxxx Act, have been prepared in accordance with
generally accepted accounting principles in the United States ("GAAP") (except,
in the case of unaudited quarterly statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may
otherwise be indicated in the notes thereto) and fairly present in all material
respects the financial position of the Partnership as of the dates thereof and
the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited quarterly statements, to normal year-end
audit adjustments).
(d) Except as set forth in the financial statements included in the
Partnership's Annual Report on Form 10-K for the Year Ended December 31, 2003,
as of the date of those financial statements, neither the Partnership nor any
Subsidiary had any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) which would be required by GAAP to be
reflected in the Partnership's financial statements, and there was no condition,
situation or set of circumstances that could reasonably be expected to result in
such a liability or obligation. All Contingent Liabilities and off-balance sheet
financing arrangements of the Partnership are identified on Section 3.06(d) of
the Partnership Disclosure Letter.
3.07 Information Supplied. Subject to Parent's and Purchaser's fulfillment
of their obligations with respect thereto, the Proxy Statement will contain (or
will be amended in a timely manner so as to contain) all information that is
required to be included therein in accordance with the Exchange Act and the
rules and regulations thereunder and any other applicable Law and will conform
in all material respects with the requirements of the Exchange Act and any other
applicable Law; and neither the Proxy Statement nor any amendment or supplement
thereto will, at the time they are filed with the SEC or published, sent or
given to the Partnership's unitholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading or, in the case of the
Proxy Statement, will, at the time of the Unitholder Meeting, omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Unitholder Meeting which
shall have become false or misleading in any material respect. Notwithstanding
the foregoing, no representation or warranty is hereby made by the Partnership
with respect to any information supplied by Parent or Purchaser in writing for
inclusion in or incorporation by reference into, the Proxy Statement.
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3.08 Absence of Certain Changes or Events. Except as contemplated by this
Agreement, since December 31, 2003, the Partnership and the Subsidiaries have
conducted their respective business only in the ordinary course of business, and
there has not been:
(a) any event, change, occurrence, effect or development that,
individually or in the aggregate, has had or could reasonably be expected to
have a Partnership Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, limited partner interests, stock, property
or otherwise) with respect to any limited partner interests of the Partnership
or equity securities of any Subsidiary or any repurchase, redemption or other
acquisition by the Partnership or any Subsidiary of any limited partner
interests, capital stock or other equity securities of, or other ownership
interests in, the Partnership or any Subsidiary;
(c) any split, combination or reclassification of any limited
partner interests, capital stock or any issuance of or the authorization of any
issuance of any other securities in respect of, in lieu of or in substitution
for, limited partner interests of the Partnership or equity securities of any
Subsidiary;
(d) except as set forth in Section 3.08(d) of the Partnership
Disclosure Letter, (i) any grant by any of the Partnership, any Subsidiary, or
HWG, LLC to any director or officer of HWG, LLC or to any individual considered
to be jointly employed by HWG, LLC and 1st Odyssey Group, Inc. ("1st Odyssey"),
of any increase in compensation, bonus or other benefits, other than increases
to persons who are not directors or officers of HWG, LLC, granted in the
ordinary course of business consistent with past practice, or (ii) any grant or
increase by the Partnership, any Subsidiary, or HWG, LLC to any such director,
officer or employee of any severance, change of control or termination pay
benefits;
(e) any change in accounting methods, principles or practices by the
Partnership or any Subsidiary, except for such changes as may have been required
by a change in GAAP;
(f) any (i) material elections with respect to Taxes by the
Partnership or any Subsidiary, (ii) settlement or compromise by the Partnership
or any Subsidiary of any material Tax liability or refund or (iii) assessment of
a material Tax against the Partnership or any Subsidiary by any Governmental
Entity;
(g) any amendment of any term of any outstanding security of the
Partnership or any Subsidiary;
(h) any incurrence, assumption or guarantee by the Partnership or
any Subsidiary of any indebtedness for borrowed money;
12
(i) any making of any loan, advance or capital contribution to or
investment in any person by the Partnership or any Subsidiary other than in
connection with any acquisition or capital expenditure permitted by Section
5.01;
(j) except as set forth in Section 3.08(j) of the Partnership
Disclosure Letter, (i) any acquisition by the Partnership or any Subsidiary 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, joint venture, association or other business
organization or division thereof or any acquisition by the Partnership or any
Subsidiary of any assets that are material to the Partnership and its
Subsidiaries, taken as a whole, (ii) any sale, lease, license, encumbrance or
other disposition (other than Partnership Leases) of material assets of the
Partnership or any Subsidiary, (iii) any material incurrence of capital
expenditures by the Partnership or any Subsidiary, other than in the ordinary
course of business, or (iv) any modification, amendment, assignment, termination
or relinquishment by the Partnership or any Subsidiary of any Contract, license
or other right that, individually or in the aggregate with all such
modifications, amendments, assignments, terminations and relinquishments, has
had or could reasonably be expected to have a Partnership Material Adverse
Effect;
(k) except as set forth in Section 3.08(k) of the Partnership
Disclosure Letter, any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of the Partnership or any Subsidiary that,
individually or in the aggregate, has had or could reasonably be expected to
have a Partnership Material Adverse Effect;
(l) except as provided by the Purchase Agreement, any entry by the
Partnership or any Subsidiary into any commitment or transaction material to the
Partnership and its Subsidiaries, taken as a whole;
(m) any revaluation by the Partnership or any Subsidiary of any of
their material assets, including but not limited to writing down the value of
any Partnership Owned Property, inventory or writing off of notes or accounts
receivable, other than in the ordinary course of business; or
(n) any agreement, commitment or undertaking to take any action
referred to in Sections 3.08(a) through 3.08(m).
3.09 Taxes.
(a) Each of the Partnership and each Subsidiary listed in Section
3.09(a) of the Partnership Disclosure Letter (a "Subsidiary Partnership") is,
and since its formation has been, properly characterized as a partnership (or a
"disregarded entity" under Treasury Regulation Sections 301.7701-2 and
301.7701-3) for United States federal (and except as set forth in Section
3.09(a) of the Partnership Disclosure Letter for state or local) income tax
purposes and not as an association taxable as a corporation and for avoidance of
doubt has never been a "publicly traded partnership" treated as a corporation
under Section 7704 of the Code (or any similar Tax Law). The Subsidiaries listed
in Section 3.09(a) of the Partnership Disclosure
13
Letter represent all of the Subsidiaries characterized as partnerships (or
"disregarded entities," as the case may be) for U.S. federal income tax
purposes. Except as disclosed in Section 3.09(a) of the Partnership Disclosure
Letter, for each Taxable year since the Partnership's inception:
(i) ninety percent (90%) or more of the gross income of the
Partnership (as measured under the Code) has consisted of "qualifying income" as
defined by Section 7704(d) of the Code;
(ii) neither the Partnership nor any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has received or accrued, or will receive
or accrue, rent with respect to any property attributable to personal property,
except where the average adjusted bases (for Taxable years beginning after
December 31, 2000, the average fair market value) of the personal property with
respect to such property at the beginning and at the end of such Taxable year,
leased in connection with each lease of real property, do not exceed fifteen
(15%) of the average adjusted bases (for Taxable years beginning after December
31, 2000, the average fair market value) of the real property and the personal
property together with respect to such property at the beginning and at the end
of such Taxable year, all within the meaning of Section 856(d)(1) of the Code;
(iii) neither the Partnership nor any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has received or accrued, or will receive
or accrue, directly or indirectly, any rent or interest with respect to real or
personal property, including base rent, percentage rent or any other amount
received or accrued in the nature of rent or interest, where the determination
of the amount of rent or interest depends in whole or in part on the income or
profits derived by any person from the property, except where rent or interest
is based on a fixed percentage or percentages of receipts or sales within the
meaning of Section 856(d)(2)(A) or Section 856(f)(1)(A) of the Code;
(iv) any sublease interest entered into between the
Partnership's or any Subsidiary Partnership's (including for this purpose any
partnership or disregarded entity for tax purposes in which the Partnership or
any Subsidiary Partnership directly or indirectly held or holds an interest)
tenants and their subtenants has not been based and will not be based, in whole
or in part, on the income or profits of any person; and
(v) each of the Partnership and each Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) has not received or accrued, and will not
receive or accrue, directly or indirectly, rent or any other consideration under
a lease from any person in which the Partnership or any Subsidiary Partnership
(including for this purpose any partnership or disregarded entity for tax
purposes in which the Partnership or any Subsidiary Partnership directly or
indirectly held or holds an interest) owned or owns (a) in the case of a
corporation, 9.5 percent or more of the total combined voting power of all
classes of stock entitled to vote, or 9.5 percent or more of the value or total
number of shares of all
14
classes of stock, or (b) in the case of an entity other than a corporation, an
interest of 9.5 percent or more in the assets or net profits of such entity (it
being understood that for purposes of determining ownership in the Partnership
or any Subsidiary Partnership, in a tenant or in any other person, the
constructive ownership rules specified in Section 318 of the Code (as modified
by Sections 856(d)(5) and 7704(d)(3)(B) of the Code) shall apply).
(b) Except as will not and could not reasonably be expected to have,
individually or in the aggregate, a Partnership Material Adverse Effect, each of
the Partnership and each Subsidiary has timely filed, or has caused to be timely
filed on its behalf, all Tax Returns (including those returns requiring
estimates of Tax payments) required to be filed by it, and all such Tax Returns
are true, complete and accurate in all material respects. Such Tax Returns have
been prepared in accordance with all applicable Laws. All Taxes shown to be due
on such Tax Returns, or otherwise owed, have been timely paid. Section 3.09(b)
of the Partnership Disclosure Letter contains a list of all jurisdictions
(whether foreign or domestic) in which the Partnership or any Subsidiary
currently files Tax Returns.
(c) Except as set forth in Section 3.09(c) of the Partnership
Disclosure Letter, (i) neither the Partnership nor any Subsidiary requested any
extension of time in which to file any Tax Return, which Tax Return has not
since been filed, and (ii) no audits, investigations or other proceedings by a
Governmental Entity are presently pending against the Partnership or any
Subsidiary that could materially affect the liability of the Partnership and its
Subsidiaries, taken as a whole, for Taxes, and no notification has been received
by the Partnership or any Subsidiary that any such audit, investigation or
proceeding is threatened. Section 3.09(c) of the Partnership Disclosure Letter
includes a list of all issues in dispute in any audit, investigation or
proceeding against the Partnership or any Subsidiary and an estimate of the
amount of Tax in dispute as to each issue.
(d) The most recent financial statements contained in the
Partnership SEC Documents reflect an adequate reserve for all Taxes payable by
the Partnership and its Subsidiaries, taken as a whole, for all Taxable periods
and portions thereof through the date of such financial statements. No material
claim or deficiency with respect to any Taxes has been threatened, proposed,
asserted or assessed against the Partnership or any Subsidiary, and no waivers
or extensions of the statute of limitations for assessments or payment with
respect to any Taxes of the Partnership or any Subsidiary are pending.
(e) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Partnership or any
Subsidiary. Neither the Partnership nor any Subsidiary is bound by any agreement
with respect to Taxes. Neither the Partnership nor any Subsidiary has ever been
a member of any "affiliated group" of corporations within the meaning of Section
1504(a) of the Code. Other than with respect to the Partnership or a Subsidiary
Partnership, neither the Partnership nor any Subsidiary Partnership is party to
any joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for Tax purposes.
15
(f) Within the past three (3) years, neither the Partnership nor any
Subsidiary has made any change in Tax reporting method, received a ruling from
any Tax Authority or signed an agreement with regard to Taxes, other than any
ruling received or agreement signed in the ordinary course of business with
respect to real estate Taxes. Section 3.09(f) of the Partnership Disclosure
Letter describes the real estate Taxes paid or payable with respect to each
Partnership Owned Property for each of the last three years.
(g) To the extent that the Tax Returns of the Partnership and each
Subsidiary have been examined by the applicable Tax Authorities (or the
applicable statutes of limitation for the assessment of Taxes for such periods
have expired) for periods through and including December 31, 2003, no material
adjustments were asserted as a result of such examinations which have not been
resolved and fully paid, and no issue has been raised by any Tax Authority in
any audit that, if raised with respect to any other period not so audited, could
be expected to result in a proposed material deficiency for any period not so
audited.
(h) Neither the Partnership nor any Subsidiary has made or filed an
election under Sections 108, 441 or 1017 of the Code.
(i) Neither the Partnership nor any Subsidiary is a party to any
safe harbor lease within the meaning of Section 168(f)(8) of the Code, as in
effect prior to the amendment by the Tax Equity and Fiscal Responsibility Act of
1982. Neither the Partnership nor any Subsidiary has any property or asset which
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
(j) Neither the Partnership nor any Subsidiary is liable for any
material Taxes to the Tax Authority of any foreign country. Neither the
Partnership nor any Subsidiary has or has had a permanent establishment in any
foreign country, as defined by the laws of such foreign country as supplemented
by any applicable Tax treaty or convention between the United States and such
foreign country.
(k) Neither the Partnership nor any Subsidiary is required to
include in income any adjustment under Section 481(a) of the Code by reason of a
change in accounting method initiated by the Partnership or any Subsidiary, and
no Tax Authority has proposed any such adjustment or change in accounting
method.
(l) Neither the Merger under this Agreement nor any Other
Transaction will terminate, invalidate or cause the recapture of any Tax
abatements, Tax credits, Tax exemptions, or Tax rebates which are in effect for
the Partnership or any Subsidiary, all of which are described in Section 3.09(l)
of the Partnership Disclosure Letter.
(m) Fifty percent (50%) or more of the value of the gross assets of
the Partnership consist of "U.S. real property interests" (as defined under
Section 897 of the Code) and ninety percent (90%) or more of the value of the
gross assets of the Partnership consist of "U.S. real property interests" plus
cash or cash equivalents (as defined under Treasury Regulation Section
1.1445-11T(d)).
16
(n) Except as set forth in Section 3.09(n) of the Partnership
Disclosure Letter, no Subsidiary has Subchapter C current or accumulated
earnings and profits (as measured for Code purposes).
(o) Except as set forth in Section 3.09(o) of the Partnership
Disclosure Letter, the Partnership (i) has not made an election pursuant to
Section 10.08 of Internal Revenue Service Revenue Procedure 89-31, 1989-1 C.B.
895 relating to withholding on effectively connected income allocable to
"foreign partners" (as defined in Section 1446(e) of the Code) and (ii) has
complied with the withholding requirements with respect to any "foreign
partners" (as defined in Section 1446(e) of the Code) consistent with Section 10
of Internal Revenue Service Revenue Procedure 89-31, 1989-1 C.B. 895.
(p) For purposes of this Agreement:
"Tax Authority" means the Internal Revenue Service and any other domestic
or foreign governmental authority responsible for the administration of
any Taxes.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross income,
gross receipts, excise, stamp, real or personal property, ad valorem,
withholding, social security (or similar), unemployment, occupation, use,
service, service use, license, net worth, payroll, franchise, severance,
transfer, recording, employment, premium, windfall profits, environmental
(including taxes under Section 59A of the Code), customs duties, capital
stock, profits, disability, sales, registration, value added, alternative
or add-on minimum, estimated or other taxes, assessments or charges
(whether or not determined on a consolidated, combined or stand alone
basis) imposed by any federal, state, local or foreign governmental entity
and interest, penalties or additions to tax attributable thereto.
"Tax Return" means any federal, state, local, provincial or foreign Tax
return, declaration, statement, report, schedule, form or information
return or any amended Tax return relating to Taxes.
"Treasury Regulations" means one or more regulations promulgated under the
Code by the Treasury Department of the United States.
3.10 Absence of Changes in Benefit Plans. Neither the Partnership nor any
Subsidiary has or ever had any employees. The individuals who perform services
for the Partnership are currently employees of HWG, LLC through 1st Odyssey, a
professional employer organization. None of the Partnership, the Subsidiaries or
HCRE is a party to any collective bargaining agreement or other labor union
contract applicable to persons employed by the General Partner, HCRE or 1st
Odyssey.
17
3.11 ERISA Compliance; Excess Parachute Payments.
(a) Section 3.11(a) of the Partnership Disclosure Letter contains a
list of all plans or arrangements providing compensation or benefits to any
current or former employee (including those individuals considered to be jointly
employed by 1st Odyssey and HWG, LLC), officer or director or consultant of HWG,
LLC, or with respect to which the Partnership or any ERISA Affiliate of the
Partnership has or may have any liability:
(i) "employee pension benefit plans" (as defined in Section
3(2) of ERISA), "employee welfare benefit plans" (as defined in Section 3(1) of
ERISA), collective bargaining agreement, or bonus, pension, profit sharing,
deferred compensation, incentive compensation, Unit ownership, Unit purchase,
Unit option, retirement, thrift, savings, Unit bonus, restricted Units,
cafeteria, severance, disability, medical or other compensation or benefit plan,
(each of the foregoing, a "Partnership Benefit Plan," and collectively,
"Partnership Benefit Plans"); and
(ii) employment, consulting, deferred compensation,
indemnification, severance or termination agreements or arrangements,
non-compete agreements, confidentiality agreements, nonsolicitation and business
diversion agreements or tax gross-up agreements (each a "Partnership Benefit
Agreement," and collectively, "Partnership Benefit Agreements").
(b) Except as set forth in Section 3.11(b) of the Partnership
Disclosure Letter, since December 31, 2003, there has not been any adoption or
amendment in any material respect of any Partnership Benefit Plan or Partnership
Benefit Agreement.
(c) The Partnership has made available to Purchaser true, complete
and correct copies of:
(i) each Partnership Benefit Plan and Partnership Benefit
Agreement (or, in the case of any unwritten Partnership Benefit Plan or
Partnership Benefit Agreement, a description thereof);
(ii) the most recent annual report on Form 5500 filed with the
Internal Revenue Service with respect to each Partnership Benefit Plan (if any
such report was required under ERISA);
(iii) the most recent summary plan description for each
Partnership Benefit Plan for which a summary plan description is required; and
(iv) each trust agreement and group annuity contract relating
to any Partnership Benefit Plan.
(d) Except as set forth in Section 3.11(d) of the Partnership
Disclosure Letter, all Partnership Pension Plans that are eligible to do so have
received favorable determination letters from the Internal Revenue Service, to
the effect that such Partnership Pension Plans are
18
qualified and exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, and no such determination letter has been revoked
nor, to the knowledge of the Partnership, has revocation been threatened, nor
has any such Partnership Pension Plan been amended since the date of its most
recent determination letter or application therefor in any respect that would
adversely affect its qualification or materially increase its costs. There is no
material pending or, to the knowledge of the Partnership, threatened litigation
relating to the Partnership Benefit Plans or Partnership Benefit Agreements.
Each Partnership Benefit Plan and Partnership Benefit Agreement has been
maintained in compliance with its terms and with the requirements prescribed by
all applicable laws, including but not limited to ERISA and the Code, which are
applicable thereto, except to the extent that any failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Partnership Material Adverse Effect.
(e) No Partnership Benefit Plan is or has been subject to Title IV
of ERISA. No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Partnership with respect to any ongoing, frozen
or terminated "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by it, or any ERISA Affiliate. None
of such Partnership Benefit Plans and trusts has been terminated. No Partnership
Benefit Plan is a multiemployer plan, within the meaning of Section 4001(a)(3)
of ERISA, and the Partnership has not incurred a "complete withdrawal" or a
"partial withdrawal" (as such terms are defined in Sections 4203 and 4205,
respectively, of ERISA) since the effective date of such Sections 4203 and 4205.
For the purposes hereof, "ERISA Affiliate" of any person means any other person
which, together with such person, would be treated as a single employer under
Section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 414(b) or (c) of the Code.
(f) With respect to any Partnership Benefit Plan that is an employee
welfare benefit plan, (i) each such Partnership Benefit Plan that is a "group
health plan" (as such term is defined in Section 5000(b)(1) of the Code)
complies with the applicable requirements of Section 4980B(f) of the Code and
(ii) each such Partnership Benefit Plan (including any such Partnership Benefit
Plan covering retirees or other former employees) may be amended or terminated
without material liability to the Partnership on or at any time after the
Effective Time. There are no obligations for retiree health and life benefits
under any Partnership Benefit Plan or Partnership Benefit Agreement.
(g) Except as disclosed in Section 3.11(g) of the Partnership
Disclosure Letter, the consummation of the Merger or any Other Transaction will
not (i) entitle any employee, officer or director of the Partnership, the
General Partner or HCRE to severance pay or an election to terminate and receive
severance pay, (ii) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any of the Partnership Benefit Plans or Partnership
Benefit Agreements, or (iii) result in any breach or violation of, or a default
under, any of the Partnership Benefit Plans or Partnership Benefit Agreements.
19
(h) No amount or economic benefit that could be received (whether in
cash or property or the vesting of property) under any Partnership Benefit Plan
or Partnership Benefit Agreement or otherwise as a result of the Merger, any
Transaction, any Other Transaction, or any other event (including upon, as a
result of or in connection with a termination of employment on or following the
Effective Time) by any employee, officer or director of the General Partner,
HCRE or any of their affiliates who is a "disqualified individual" (as such term
is defined in Treasury Regulation Section 1.280G-1, Q&A 15) will be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code). The payments and estimated cost of benefit continuation that could
be provided to disqualified individuals as a result of the Merger, any
Transaction, any Other Transaction, or any other event (including upon, as a
result of or in connection with a termination of employment on or following the
Effective Time) are listed on Section 3.11(h) of the Partnership Disclosure
Letter.
(i) After the Closing, the Partnership will not have any obligation,
liability or expense under or with respect to any Partnership Benefit Plan or
Partnership Benefit Agreement to any person, including any employee, service
provider or insurer (other than such obligations, liabilities or expenses
incurred prior to the Effective Time which are reflected or reserved against in
the financial statements of the Partnership (or the notes thereto) or are
otherwise taken into account in determining the Working Capital Adjustment).
3.12 Litigation.
(a) Except as set forth in Section 3.12(a) of the Partnership
Disclosure Letter and other than routine appeals relating to real property Tax
assessments, there is no suit, claim, action, proceeding or investigation
pending against, or to the knowledge of the Partnership threatened against or
affecting, the General Partner, the Partnership or any Subsidiary or any of
their respective properties before any arbitrator, court or other Governmental
Entity (and neither the Partnership nor any Subsidiary is aware of any basis for
any such suit, action, proceeding or investigation) that, individually or in the
aggregate, could reasonably be expected to have a Partnership Material Adverse
Effect.
(b) Except as set forth in Section 3.12(b) of the Partnership
Disclosure Letter, there are no suits, claims, actions, proceedings or
investigations pending or, to the knowledge of the Partnership or any
Subsidiary, threatened, seeking to prevent, hinder, modify or challenge the
transactions contemplated by this Agreement or the Other Transactions.
(c) Except as set forth in Section 3.12(c) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary is subject to any
outstanding Judgment against them or naming them as a party.
3.13 Compliance with Applicable Laws.
(a) Except as set forth in Section 3.13(a) of the Partnership
Disclosure Letter, the Partnership and each Subsidiary is, and their operations
are being conducted, in compliance
20
with all applicable Laws, except for such failures to comply as, individually or
in the aggregate, could not reasonably be expected to have a Partnership
Material Adverse Effect.
(b) Except as set forth in Section 3.13(b) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has received any
written notice: (i) of any administrative, civil or criminal investigation or
audit (other than Tax audits) by any Governmental Entity relating to the
Partnership or any Subsidiary or (ii) during the past two (2) years, from any
Governmental Entity alleging that the Partnership or any Subsidiary is not in
compliance in any material respect with any applicable Law.
(c) The Partnership and each Subsidiary, to their knowledge, has in
effect all approvals, authorizations, certificates, filings, franchises,
licenses, notices, permits and rights of or with all Governmental Entities
("Permits") necessary for it to own, lease or otherwise hold and to operate its
properties and assets and to carry on their business and operations as now
conducted, except for the failure to have such Permits that, individually or in
the aggregate, has not had and could not reasonably be expected to have a
Partnership Material Adverse Effect. Neither the Partnership nor any Subsidiary
has received notice of any defaults under, or violations of, any such Permit,
except for such defaults and violations that, individually and in the aggregate,
have not had and could not reasonably be expected to have a Partnership Material
Adverse Effect. The Merger, in and of itself, will not cause the revocation or
cancellation of any such Permit that, individually or in the aggregate, could
reasonably be expected to have a Partnership Material Adverse Effect.
(d) This Section 3.13 does not relate to matters with respect to
Taxes, which are the subject of Section 3.09, or to environmental matters, which
are the subject of Section 3.14.
3.14 Environmental Matters.
(a) Each of the Partnership, each Subsidiary and each Partnership
Real Property is, and within the period of all applicable statutes of limitation
has been, in material compliance with all applicable Environmental Laws.
(b) Each of the Partnership and each Subsidiary holds and is, and
within the period of all applicable statutes of limitation has been, in material
compliance with all Permits required to conduct its business and operations
under all applicable Environmental Laws.
(c) Except as disclosed in Section 3.14(c) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has received any
written Environmental Claim against it, and neither the Partnership nor any
Subsidiary has knowledge of any such Environmental Claim being threatened.
(d) To the knowledge of the Partnership and each Subsidiary, no
Hazardous Substance or other conditions are present on any property owned,
leased or operated by the Partnership or any Subsidiary, or at any other
location, that are in violation of any applicable
21
Environmental Law or are reasonably likely to form the basis of any
Environmental Claim against the Partnership or any Subsidiary or against any
person (including any predecessor of the Partnership or any Subsidiary) whose
liability the Partnership or any Subsidiary has retained or assumed either
contractually or by operation of law.
(e) Neither the Partnership nor any Subsidiary has entered into or
agreed to any Governmental Entity decree, order or agreement or is subject to
any Judgment or order relating to compliance with, or to investigation or
cleanup, or to liability, under any Environmental Law.
(f) No person has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any Hazardous
Substance, or owned or operated any property or facility in a manner that has
given or would reasonably be expected to give rise to any liability, including
any liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to any
Environmental Laws.
(g) None of the property owned, leased or operated by the
Partnership or any Subsidiary contains (i) any underground storage tanks, (ii)
any friable asbestos, (iii) any urea formaldehyde foam insulation, or (iv) any
landfills, surface impoundments or disposal areas.
(h) None of the property now or formerly owned, operated or leased
by the Partnership or any Subsidiary is listed or proposed for listing on the
National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Comprehensive
Environmental Response, Compensation and Liability Information System or on any
analogous list maintained by any Governmental Entity.
(i) True and complete copies of all environmental reports, studies
and analyses possessed or commissioned by the Partnership or any Subsidiary have
been provided to Parent and are listed on Section 3.14(i) of the Partnership
Disclosure Letter.
(j) For purposes of this Agreement:
"Environmental Claim" means any claim, demand, action, suit, complaint,
proceeding, directive, investigation, information request, Lien, demand
letter or notice of noncompliance, violation or liability by any person
asserting liability or potential liability (including liability or
potential liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of, based on or resulting
from (x) the presence, discharge, emission, release or threatened release
of any Hazardous Substance at any location, (y) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
any Permit issued under any Environmental Law, or (z) matters otherwise
relating to obligations or liabilities under any Environmental Law.
22
"Environmental Laws" means any and all applicable federal, state, local,
foreign statutes, regulations, ordinances, guidelines, codes, decrees, or
other legally enforceable requirement (including common law) of any
foreign government, the United States, or any state, local, municipal or
other Governmental Entity, regulating, relating to or imposing liability
or standards of conduct concerning protection of the environment
(including indoor air, ambient air, surface water, groundwater, land
surface, subsurface strata, or plant or animal species) or human health as
affected by the environment or pollutants, contaminants, chemicals,
industrial, hazardous, toxic, explosive or radioactive substances,
materials or waste (including employee health and safety).
"Hazardous Substance" means all explosive or radioactive substances,
materials or wastes, hazardous or toxic substances, materials or wastes,
asbestos, asbestos-containing materials, pollutants and contaminants
(including petroleum or any fraction thereof) and all other substances,
materials or wastes, whether or not defined as such, that are regulated
pursuant to or that could result in liability under any applicable
Environmental Law.
3.15 Contracts.
(a) Except as set forth in Section 3.15(a) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary is a party to or
bound by or otherwise subject to any Contracts of the following nature
(collectively, the "Material Contracts"):
(i) any Contract which restricts the Partnership or any of its
affiliates from competing in any line of business or with any person in any
geographical area;
(ii) any Contract involving (A) the acquisition, merger or
purchase of all or substantially all the assets or business of a third party,
(B) the purchase or sale or other transfer of assets, or a series of purchases
or sales or other transfers of assets involving consideration of $100,000 or
more or any Partnership Real Property, or (C) the grant to any person of any
preferential right to purchase or lease any material asset or assets of the
Partnership or any Subsidiary;
(iii) any Contract that contains a "change in control" or
similar provision pursuant to which the execution and delivery of this
Agreement, the consummation of the Merger or any of the Other Transactions would
give rise to any right (including any right of termination, cancellation,
acceleration or vesting) or benefit;
(iv) any Contract, including any mortgage or other grant of
security interests, guarantee or note, relating to the borrowing of money;
(v) any Contract to indemnify for any Environmental Claim or
any other liability or cost with respect to any Environmental Law;
23
(vi) any Contract that would prohibit or materially delay the
consummation of the Merger or any of the Other Transactions;
(vii) any other Contract that is material to the business,
assets, condition (financial or otherwise), prospects or results of operations
of the Partnership and its Subsidiaries, taken as a whole (provided Partnership
Leases identified on the Tenant Rent Roll need not be separately listed in
Section 3.15(a)(vii) of the Partnership Disclosure Letter).
(viii) any Contract with the General Partner or an affiliate
of the General Partner; or
(ix) any "material contract" (as such term is defined in item
601(b)(10) of regulation S-K of the SEC).
(b) Except as, individually or in the aggregate, could not
reasonably be expected to have a Partnership Material Adverse Effect, neither
the Partnership nor any Subsidiary is in breach or default (and no event has
occurred that, with notice or the lapse of time or both, would constitute a
default by the Partnership or any Subsidiary) under any Material Contract nor,
to the knowledge of the Partnership or any Subsidiary, is any other party to any
Material Contract in breach or default thereunder (and no event has occurred
that, with notice or the lapse of time or both, would constitute such a
default).
3.16 Brokers; Fees and Expenses. No broker, investment banker, financial
advisor or other person, other than Xxxxxx Xxxxxxx & Co. Incorporated ("Xxxxxx
Xxxxxxx") and Xxxxxx Brothers Inc. ("Xxxxxx Brothers"), the fees and expenses of
which will be paid by the Partnership, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with, the
Merger and the Other Transactions based upon arrangements made by or on behalf
of the Partnership or any Subsidiary. The Partnership has furnished to Parent a
true and complete copy of all agreements between the Partnership (or any
Subsidiary) and Xxxxxx Xxxxxxx and Xxxxxx Brothers Inc. relating to the Merger
and the Other Transactions and disclosed to Parent all fees and expenses to be
paid to such advisors.
3.17 Opinion of Financial Advisors. The Partnership has received (a) the
opinion of Xxxxxx Xxxxxxx, dated April 15, 2004, that the aggregate
consideration to be received by the holders of the limited and general
partnership interests of the Partnership pursuant to this Agreement and the
Purchase Agreement is fair from a financial point of view to such holders, and
(b) the opinion of Xxxxxx Brothers, dated April 15, 2004, that (i) the
consideration to be received by the holders of Units (other than the General
Partner and its affiliates, including but not limited to HWG, LLC) in connection
with the Merger, taking into account the consideration received by or otherwise
allocated to the General Partner or its affiliates, on the one hand, and the
holders of the Units (other than the General Partner and its affiliates as
holders of Units), on the other hand, is fair, from a financial point of view,
to the holders of Units of the Partnership (other than the General Partner and
its affiliates, including but not limited to HWG, LLC), and (ii) the allocation
of the consideration between the General Partner and its affiliates, on the one
24
hand, and the holders of the Units (other than the General Partner and its
affiliates as holders of Units), on the other hand, is reasonable.
3.18 Properties.
(a) Section 3.18(a) of the Partnership Disclosure Letter sets forth:
(i) all real properties (indicating the name of the owner and
the address or location of the property) owned by the Partnership or any
Subsidiary (the "Partnership Owned Property"), and
(ii) all real properties (indicating the name of the lessee
and lessor and the address or location of the property) leased or operated by
the Partnership or any Subsidiary as lessee (the "Partnership Leased Property").
The Partnership Owned Property and the Partnership Leased Property are referred
to as the "Partnership Real Property."
(b) The Partnership or the Subsidiaries own fee simple title to the
Partnership Owned Property and a valid leasehold interest in the Partnership
Leased Property.
(c) Each Partnership Owned Property is owned and each Partnership
Leased Property is leased free and clear of Liens and Laws affecting building
use or occupancy, or reservations of an interest in title or other encumbrances
on title (collectively "Encumbrances"), except for the Mortgage Documents
related to those loans listed in Section 3.05(a)(ii) of the Partnership
Disclosure Letter and "Permitted Encumbrances" which means:
(i) The rights of the tenants, as tenants only, under the
Partnership Leases;
(ii) Any title exceptions arising out of the acts of
Purchaser;
(iii) Encumbrances affecting only the leasehold estate of a
tenant under a Partnership Lease which is permitted under the terms of such
Partnership Lease;
(iv) real property Taxes and assessments encumbering the
Partnership Real Property, not yet due and payable; and
(v) any and all easements, rights-of-way, protrusions,
encroachments and such other Encumbrances that, individually or in the
aggregate, do not detract in any material respect from the value, as currently
operated, of any Partnership Real Property or impose any material restriction or
limitation on the Partnership's (or any Subsidiary's) current use of any
Partnership Real Property.
(d) The Partnership and the Subsidiaries have not received notice
of, and have no other knowledge or information of, any violation of, or pending
or contemplated change in,
25
any Legal Requirements or Permits applicable to the Partnership Real Property or
abutting streets and alleys, or of any pending or threatened judicial or
administrative action, or any action pending or threatened by adjacent
landowners or other persons, relating to the Partnership Real Property, and
there are no Legal Requirements which would prohibit or preclude the
reconstruction or repair of any buildings, fixtures or other improvements
located at any Partnership Owned Property following a casualty thereto "as of
right." "Legal Requirements" means (i) any and all Laws, Judgments, restrictive
covenants or other written or oral agreements, and (ii) any and all insurance
requirements, documents or instruments, relating to the Partnership Real
Property or to or by which the Partnership Real Property or its owner may be
bound or encumbered.
(e) Except as set forth in Section 3.18(e) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has received
written notice that any condemnation proceedings or similar actions or
proceedings are now pending or threatened with respect to the Partnership Real
Property or any part thereof.
(f) On the Closing Date, none of the Partnership Real Property will
be subject to any materialmen's, mechanics' lien or other similar Lien other
than those which are (i) not yet due and payable or (ii) which are being
contested in good faith by appropriate proceedings.
(g) All documents and instruments delivered or made available to
Parent or Purchaser in connection with the Partnership (or any Subsidiary) are
true, accurate and complete copies of such items in its possession or control.
(h) To the Partnership's and the Subsidiaries' knowledge, all
utilities and services necessary for the use and operation of the Partnership
Real Property (including, road access, gas, water, electricity and telephone)
are available thereto. To the Partnership's and the Subsidiaries' knowledge, no
fact, condition or proceeding exists which would result in the termination or
impairment of the furnishing of such utilities to the Partnership Real Property.
(i) To the Partnership's and the Subsidiaries' knowledge, other than
the amounts disclosed by bills or statements for local real estate Taxes and
assessments of any kind (special, bond or otherwise), copies of which have
previously been made available to Parent, and other than as disclosed in Section
3.09(f) of the Partnership Disclosure Letter, no such Taxes or assessments are
or have been levied with respect to the Partnership Real Property, or any
portion thereof, there have been no increases in such Taxes or assessments since
December 31, 2003 and neither the Partnership nor any Subsidiary has received
notice that any levy for any such Taxes or assessments is pending or threatened.
(j) Neither the Partnership nor any Subsidiary has received any
written notice from any insurance carrier of defects or inadequacies in any
Partnership Real Property which, if uncorrected, would result in a termination
of insurance coverage or an increase in the premiums charged therefor.
26
(k) The Partnership Real Property, including the buildings, fixtures
and other improvements forming a part thereof and the equipment located therein
or serving the same, is in a state of good repair and maintenance and sound
operating condition, with adequate parking, and has been maintained in a manner
consistent with good real estate management practices.
(l) The Partnership or a Subsidiary owns all material items of
tangible personal property located at the Partnership Real Property (other than
such property which is owned by tenants under Partnership Leases, their
employees, guests or contractors or by third party service providers and their
employees or subcontractors) free and clear of all Liens and the same is in a
state of good repair and maintenance and sound operating condition.
(m) There are no defaults, and to the knowledge of the Partnership
and the Subsidiaries, there exist no facts or circumstances which with the
giving of notice, the passage of time or both would constitute a default under
any lease pursuant to which the Partnership or a Subsidiary leases Partnership
Leased Property from a third party. Each such lease is in full force and effect.
A true, complete and accurate copy of each such lease (including any amendments
thereof) has been delivered to the Parent.
(n) There are no defaults, and to the knowledge of the Partnership
and the Subsidiaries, there exist no facts or circumstances which with the
giving of notice, the passage of time or both would constitute a default under
any Mortgage Document. The Partnership has provided to the Parent true, complete
and accurate copies of all of the Mortgage Documents. Section 3.18(n) of the
Partnership Disclosure Letter sets forth a true, complete and accurate list of
the Partnership Owned Properties which are encumbered by Mortgage Documents, the
debt secured thereby, the dates on which such debt was originally incurred, the
original principal amounts of the debt secured thereby, the current outstanding
principal amount, the interest rates and the maturity date of such debt.
(o) Section 3.18(o) of the Partnership Disclosure Letter lists all
of the Contracts pertaining to the management, operation or servicing of any
Partnership Real Property which (i) obligate the Partnership or any Subsidiary
to incur charges in excess of $50,000 annually and (ii) are not terminable
without fee or penalty upon thirty (30) or fewer days' notice.
(p) Except as set forth in Section 3.18(p) of the Partnership
Disclosure Letter and subject to the terms of the Mortgage Documents, on the
Closing Date immediately after the Merger neither the Partnership nor any
Subsidiary will be party to or bound by or otherwise subject to any Contract
which constrains or limits (or purports to constrain or limit) Parent's, the
Partnership's or any Subsidiary's ability to, from time to time, engage and
replace property managers for the Partnership Real Property, and Section 3.18(p)
of the Partnership Disclosure Letter contains an accurate, true and complete
description of such constraints and limitations.
(q) Except as set forth in Section 3.18(q) of the Partnership
Disclosure Letter, all income of the Partnership and the Subsidiaries from and
after the Closing Date under each Partnership Lease (as in effect on the Closing
Date) will qualify as "rents from real property" pursuant to Section 856(d) of
the Code, and without limiting the generality of the foregoing, (i)
27
each unattended parking facility (if any) at each Partnership Owned Property
complies with (and can, without breach of or penalty under any Partnership
Lease, continue to comply with) Situation 1 or Situation 2 of Internal Revenue
Service Revenue Ruling 2004-24, 2004-10 I.R.B. 550, (ii) each attended parking
facility (if any) at each Partnership Owned Property complies with (and can,
without breach of or penalty under any Partnership Lease, continue to comply
with) Situation 3 of such Revenue Ruling 2004-24, and (iii) neither valet
services nor detailing services are provided at any parking facility at any
Partnership Owned Property.
(r) Except as set forth in Section 3.18(r) of the Partnership
Disclosure Letter, neither the Partnership nor any Subsidiary has altered or
otherwise modified any of the improvements located on any Partnership Owned
Property in a manner that would affect the location, exterior lines or
footprints of such improvements since the date of the Survey (as hereinafter
defined) for such Partnership Owned Property and neither the Partnership nor any
Subsidiary has constructed any additional alterations or improvements on any
Partnership Owned Property since the date of the Survey for such Partnership
Owned Property. Any buildings located on any Partnership Owned Property are
identical to the buildings shown on the Survey for such Partnership Owned
Property. To the knowledge of the Partnership and each Subsidiary, each Survey
accurately depicts the location of all Improvements located on each Partnership
Owned Property.
3.19 Leases.
(a) The Partnership has previously delivered to Purchaser the rent
roll for each property included in the Partnership Owned Property as of April
12, 2004 described in Section 3.19(a) of the Partnership Disclosure Letter (the
"Tenant Rent Roll") and the information set forth in the Tenant Rent Roll is
correct and complete in all material respects as of the date thereof. All
leases, subleases, licenses and other occupancy agreements affecting the
Partnership Real Property (other than the leases pursuant to which the
Partnership or any Subsidiary leases from third parties the Partnership Leased
Property) (the "Partnership Leases") as of the date of the Tenant Rent Roll are
set forth on the Tenant Rent Roll.
(b) The Partnership has previously delivered to Purchaser true,
complete and correct copies of all of the Partnership Leases and all of the
brokerage agreements to which it is a party, including all amendments,
modifications and supplements thereto.
(c) Except as expressly set forth in Section 3.19(c) of the
Partnership Disclosure Letter, there are no adverse or other parties in
possession of the Partnership Real Property, or of any part thereof, except the
Partnership (and the Subsidiaries) and tenants or licensees under the
Partnership Leases, and no party has been granted any license, lease or other
right relating to the use, occupancy or possession of the Partnership Owned
Property, or any part thereof, except tenants or licensees under the Partnership
Leases.
(d) The Tenant Rent Roll together with Section 3.19(d) of the
Partnership Disclosure Letter contains a true, complete and accurate list of
each tenant under a Partnership Lease and summary of the economic terms of each
Partnership Lease including the fixed or
28
minimum rent and additional rent payable throughout the term, the percentage of
operating expenses and Taxes, operating expense and Tax stops, the amount
currently payable in connection with operating expenses and/or Taxes, the
security deposit and the other material terms, the demised premises, the term,
any abatement, set-off, renewal, extension, purchase, termination, expansion,
contraction, or exclusive rights or other rights to lease.
(e) Except as expressly set forth in Section 3.19(e) of the
Partnership Disclosure Letter or the Tenant Rent Roll:
(i) each Partnership Lease is in good standing and in full
force and effect, and the economic and other material terms (e.g., term and
renewal, termination, expansion and contraction options) of the Partnership
Leases have not been amended, modified, or supplemented in any way that has not
been shown on the Tenant Rent Roll;
(ii) the Partnership Leases constitute all written and oral
agreements of any kind for the leasing, rental, or occupancy of any tenant space
constituting a portion of the Partnership Owned Property and have been duly
executed and delivered on behalf of tenants pursuant to proper authority
therefor;
(iii) each Partnership Lease constitutes a legally valid
instrument binding and enforceable upon the tenant thereunder in accordance with
its terms, subject to equitable principles of general application (whether in a
proceeding at law or in equity) and applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and the exercise of judicial discretion.
(iv) no rental under any Partnership Lease has been collected
in advance of the current month, and there are no refunds, credits, concessions,
bonuses, free months' rental, rebates, finish-out allowances in or other
agreements or matters affecting the rental for any tenant under any Partnership
Leases;
(v) the Partnership is the owner of the entire lessor's
interest in and to each of the Partnership Leases, subject to the Permitted
Encumbrances, and none of the Partnership Leases or the rentals or other sums
payable thereunder has been assigned or otherwise encumbered except as security
for the loans that are presently secured by liens and security interests in the
Partnership Owned Property identified in Section 3.18(n) of the Partnership
Disclosure Letter;
(vi) no tenant has asserted any claim that would materially
affect the collection of rent from such tenant;
(vii) none of the Partnership, any of the Subsidiaries, any
tenant or any licensee is in default or breach of a Partnership Lease and no
tenant or licensee has any right to credits, offsets or deductions under its
Partnership Lease;
29
(viii) to the Partnership's and the Subsidiaries' knowledge,
there are no facts or circumstances which with notice, the passage of time or
both would constitute a default under any Partnership Lease by the Partnership,
any Subsidiary, any tenant or licensee;
(ix) neither the Partnership nor any Subsidiary has received
written notice of and, to the Partnership's and the Subsidiaries' knowledge,
there is no insolvency or bankruptcy proceeding (pending, contemplated or
threatened) involving any such tenant;
(x) all of the Partnership Leases are the result of bona fide
arms-length negotiations between the parties;
(xi) none of the rents or other charges billed to or collected
from any tenant violate any Legal Requirements;
(xii) the Partnership and the Subsidiaries have delivered, and
each tenant or licensee under a Partnership Lease has accepted, its premises;
(xiii) other than customary ongoing maintenance and repair
obligations, any work and all other improvements to the premises demised under a
Partnership Lease required to be furnished or constructed by the lessor
thereunder pursuant to its terms have been completed and any lease buyout costs
and/or design allowances, construction allowances or other allowances to which
the tenant or licensee thereunder may now or thereafter be entitled have been
paid in full;
(xiv) all leasing fees and commissions pertaining to the
Partnership Leases have been paid in full;
(xv) none of the Partnership Leased Property is leased by the
Partnership to third parties;
(xvi) the lessor's liability under each Partnership Lease is
limited to its interest in the Partnership Owned Property to which such
Partnership Lease pertains; and
(xvii) each Partnership Lease and the tenant's rights
thereunder are (or at landlord's election, can be made) subject and subordinate
to the lien of any mortgage, deed of trust, deed to secure debt, ground or
underlying lease now or hereafter encumbering the applicable Partnership Owed
Property subject only to the holder thereof agreeing not to disturb such
tenant's occupancy on customary terms.
3.20 Intellectual Property.
(a) Each of the Partnership and each Subsidiary owns the right,
title and interest, free and clear of any Lien, including, any restriction on
use, voting, transfer, receipt of income or other exercise of any attributes of
ownership, in and to, or a license to use, or otherwise have the right to use,
all patents and patent rights, trademarks, trademark rights, trade names, trade
name rights, service marks, service xxxx rights, logos, domain names, corporate
30
names and goodwill associated therewith, and copyrights, technology, trade
secrets know-how, processes, confidential business information, seismic rights,
geological data, geophysical data, engineering data, maps, interpretations and
other proprietary intellectual property rights and computer software
("Intellectual Property") currently used in the conduct of the business of such
Partnership or such Subsidiary, except where the failure to so own, be licensed
or otherwise have the right to use such Intellectual Property could not,
individually or in the aggregate, reasonably be expected to have a Partnership
Material Adverse Effect.
(b) No person has notified the Partnership or any Subsidiary that
the Partnership's or any Subsidiary's use of the Intellectual Property infringes
on the rights of any person, subject to such claims and infringements as do not,
individually or in the aggregate, give rise to any liability on the part of the
Partnership or any Subsidiary that could reasonably be expected to have a
Partnership Material Adverse Effect, and, to the Partnership's or any
Subsidiary's knowledge, no person is infringing on any right of the Partnership
or any Subsidiary with respect to and no action is pending or to the knowledge
of the Partnership or any Subsidiary threatened, which challenges, and neither
the Partnership nor any Subsidiary is aware of any fact which, individually or
in the aggregate, could reasonably be argued to detrimentally affect the
validity, enforceability, use or ownership of, any such Intellectual Property.
(c) No claims are pending or, to the Partnership's or any
Subsidiary's knowledge, threatened that any activity of the Partnership or any
Subsidiary now conducted or presently contemplated to be conducted, infringes,
violates or otherwise adversely affects the Intellectual Property or other
proprietary rights of any person.
3.21 Indemnification Obligations. Except as will not have, and upon
becoming payable could not reasonably be expected to have, individually or in
the aggregate, a Partnership Material Adverse Effect, and except as contained in
the Partnership Leases or as set forth on Section 3.21 to the Partnership
Disclosure Letter, there are no Indemnification Obligations that the Partnership
or any Subsidiary has to any person. "Indemnification Obligations" means any
obligations of the Partnership or any Subsidiary to hold harmless or to
indemnify any person from any cost, expense, liability, penalty, damage,
deficiency, claim or loss arising from, resulting from, based in any way on,
relating to or attributable to a breach by the Partnership or any Subsidiary of
any portion of an agreement between the Partnership or any Subsidiary and such
person, including but not limited to any breach of a representation, warranty,
or covenant under any such agreement.
3.22 Insurance.
(a) The Partnership and its Subsidiaries are covered as "Insureds"
under insurance policies obtained by Group. Section 3.22(a) of the Partnership
Disclosure Letter lists each of the insurance polices relating to the
Partnership and the Subsidiaries which are currently in effect and describes any
self-insurance arrangement affecting the Partnership or any Subsidiary. The
insurance policies relating to the Partnership and the Subsidiaries are of the
type and in amounts customarily carried by Persons conducting businesses or
owning assets similar to those of the Partnership and the Subsidiaries and
provides adequate coverage for all risks to which the Partnership and the
Subsidiaries are normally exposed and is sufficient to comply with all Contracts
to
31
which the Partnership and the Subsidiaries are parties. Upon completion of the
Merger, the Partnership and its Subsidiaries will not be covered as Insureds
under these policies.
(b) The Partnership has made available to Parent true and correct
copies or descriptions of each of the insurance policies relating to the
Partnership and the Subsidiaries that are currently in effect.
(c) With respect to each such insurance policy, neither the
Partnership nor any Subsidiary, or to the knowledge of the Partnership or any
Subsidiary, any other party to the policy is in breach or default thereunder
(including with respect to the payment of premiums or the giving of notice) and
the Partnership and the Subsidiaries do not know of any occurrence of any event
which, with notice or the lapse of time or both, would constitute such a breach
or default or permit termination, modification or acceleration under the policy,
except for such breaches or defaults as could not result in a Partnership
Material Adverse Effect.
(d) Set forth on Section 3.22(d) of the Partnership Disclosure
Letter is a listing of all claims pending with respect to any of such policies,
none of which individually or in the aggregate exceed the amount of coverage
provided by the applicable policy. Neither the Partnership nor any Subsidiary
has received (i) any written notice of cancellation of any such policy or
refusal of coverage thereunder, (ii) any written notice that any issuer of such
policy has filed for protection under applicable bankruptcy or other insolvency
laws or is otherwise in the process of liquidating or has been liquidated, or
(iii) any other written indication that such policies are no longer in full
force or effect or that the issuer of any such policy is no longer willing or
able to perform its obligations thereunder. All premiums and other payments
relating to the insurance have been paid for coverage through the date of this
Agreement.
3.23 Disclosure. None of the information concerning the Partnership, any
of the Subsidiaries or their respective business, condition (financial or
otherwise), assets, liabilities, properties, prospects, personnel, products,
plans and policies contained herein, in the Partnership Disclosure Letter (as
the same is supplemented prior to the Closing Date) or, in the Partnership SEC
Documents, contains, or in the case of the Proxy Statement, will contain, an
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Partnership as follows:
4.01 Organization, Standing and Power. Each of Parent and Purchaser is
duly organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is
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organized and has all requisite power and authority necessary to enable it to
own, lease or otherwise hold its properties and assets and to conduct its
businesses as presently conducted.
4.02 Purchaser. Since the date of its organization, Purchaser has not
carried on any business or conducted any operations other than the execution of
this Agreement, the performance of its obligations hereunder and matters
ancillary thereto. Purchaser is a wholly-owned subsidiary of Parent.
4.03 Authority; Execution and Delivery; Enforceability.
(a) Each of Parent and Purchaser has all requisite power and
authority to execute, deliver and perform this Agreement and to consummate the
Transactions. The execution, delivery and performance by each of Parent and
Purchaser of this Agreement and the consummation by it of the Transactions have
been duly authorized by all necessary action on the part of Parent and
Purchaser. Parent, as sole member of Purchaser, has adopted this Agreement. Each
of Parent and Purchaser has duly executed and delivered this Agreement, and this
Agreement constitutes its legal, valid and binding obligations, enforceable
against it in accordance with its terms, except as that enforceability may be
limited by any applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws affecting the enforcement of creditor's rights generally and the
application of general principles of equity (regardless of whether that
enforceability is considered in a proceeding at law or in equity).
(b) Each of the Board of Trustees of Parent and the sole member of
Purchaser has duly adopted resolutions, approving and declaring the advisability
of this Agreement, the Merger, and the Transactions, in accordance with the
applicable provisions of the MREIT and the DLLCA, respectively.
4.04 No Conflicts; Consents.
(a) The execution, delivery and performance by each of Parent and
Purchaser of this Agreement do not, and the consummation of the Merger and the
Transactions and compliance with the terms of this Agreement will not, conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, any provision of (i) the charter or organizational
documents of Parent or any of its subsidiaries, (ii) any Contract to which
Parent or any of its subsidiaries is a party or by which any of their respective
properties or assets is bound or (iii) subject to the filings and other matters
referred to in Section 4.04(b), any Judgment or Law applicable to Parent or any
of its subsidiaries or their respective properties or assets, subject in the
case of clauses (ii) and (iii) above, for such matters as, individually or in
the aggregate, could not reasonably be expected to have a material adverse
effect on (A) the ability of Parent or Purchaser to perform its obligations
under this Agreement or (B) the ability of Parent or Purchaser to consummate the
Merger and the Transactions (any of the foregoing, a "Parent Material Adverse
Effect").
(b) No Consent of, or registration, declaration or filing with, or
notice to, or Permit from any Governmental Entity is required to be obtained or
made by or with respect to
33
Parent or any of its subsidiaries in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions, other
than (i) the filing with the SEC of (A) the Proxy Statement and (B) such reports
under the Exchange Act as may be required in connection with this Agreement, the
Merger and the Transactions, (ii) the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, (iii) such filings as may be
required in connection with the Taxes described in Section 6.11, (iv) filings
under state securities Laws, and (v) such other items as, individually or in the
aggregate, could not reasonably be expected to have a Parent Material Adverse
Effect.
4.05 Information Supplied. None of the information supplied or to be
supplied by Parent or Purchaser for inclusion or incorporation by reference in,
or which may be deemed to be incorporated by reference in, the Proxy Statement
will, at the time the Proxy Statement is filed with the SEC or published, sent
or given to the Partnership's unitholders, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. If any time prior to the Effective Time any
event with respect to Parent or Purchaser, or with respect to any information
supplied by Parent or Purchaser for inclusion in the Proxy Statement, shall
occur which is required to be described in an amendment of, or a supplement to,
such document, Parent or Purchaser shall so describe the event to the
Partnership.
4.06 Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Merger and the Transactions
based upon arrangements made by or on behalf of Parent or its subsidiaries.
4.07 Financing. Parent and Purchaser have available (through cash on hand
and existing credit arrangements or otherwise) all of the funds necessary for
the acquisition of all of the Units pursuant to the Merger, as and when needed,
and to perform their respective obligations under this Agreement.
4.08 Litigation. There is no suit, action, proceeding or investigation
pending against, or to the knowledge of Parent threatened against or affecting,
Parent or any of its subsidiaries before any Governmental Entity that questions
the validity of this Agreement or any action to be taken by Parent or Purchaser
in connection with the consummation of the Transactions or would otherwise
prevent or delay the consummation of the Transactions.
4.09 Ownership of Units. As of the date hereof, neither Parent nor any of
its subsidiaries beneficially own any Units.
34
ARTICLE V
COVENANTS OF THE PARTNERSHIP
5.01 Conduct of Business.
(a) Conduct of Business by the Partnership. Except as otherwise
expressly contemplated by this Agreement, from the date of this Agreement to the
Effective Time, the Partnership shall, and shall cause each of the Subsidiaries
to, conduct its business in the usual, regular and ordinary course of business
and in substantially the same manner as previously conducted and use its
commercially reasonable efforts to preserve intact its current business
organization, keep available the services of its current officers and keep its
relationships with customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. The Partnership
shall, and shall cause each of the Subsidiaries to, maintain its assets and all
parts thereof in as good working order and condition as at present, ordinary
wear and tear excepted, consistent with past practice, and shall maintain in
full force and effect current insurance policies or other comparable insurance
coverage with respect to the assets and potential liabilities thereof. In
addition, and without limiting the generality of the foregoing, except for
conduct otherwise expressly permitted by this Agreement, from the date of this
Agreement to the Effective Time, the Partnership shall not, and shall not permit
any of the Subsidiaries to, do any of the following without the prior written
consent of Parent:
(i) (A) declare, set aside or make any other distributions
(whether in cash, limited partner interests, property or otherwise) in respect
of, any of its Units, (B) split, combine or reclassify any of its Units or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for Units or (C) purchase, redeem or otherwise acquire any Units
of the Partnership or any shares of capital stock of any Subsidiary or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
(ii) issue, deliver, sell, grant, pledge, transfer or
otherwise encumber or dispose of or subject to any Lien (A) any Units, (B) any
securities convertible into or exchangeable for, or any options, warrants,
commitments or rights of any kind to acquire, any Units, voting securities or
convertible or exchangeable securities or other equity in the Partnership or any
Subsidiary or (C) any "phantom" Unit rights, Unit appreciation rights or
Unit-based performance units, other than the issuance of Units upon the exercise
of Unit Options outstanding on the date of this Agreement and in accordance with
terms as in effect on the date of this Agreement;
(iii) except as required to consummate the Merger or the Other
Transactions, amend the Partnership Certificate, the Partnership Agreement or
the Subsidiary Organizational Documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in or all or
a substantial portion of the assets of, or
35
by any other manner, any business or any corporation, partnership, limited
liability company, joint venture, association or other business organization or
division thereof or (B) any assets except purchases in the ordinary course of
business that are not in excess of $100,000 individually or $3,000,000 in the
aggregate (considering the Partnership and its Subsidiaries as a whole) or as
set forth in Section 5.01 of the Partnership Disclosure Letter;
(v) enter into any employment agreement, any collective
bargaining agreement, other labor union agreement, Partnership Benefit Plan,
Partnership Pension Plan or Partnership Benefit Agreement, amend, or consent to
the amendment of, any Partnership Benefit Plan, Partnership Pension Plan or
Partnership Benefit Agreement or take any action to accelerate any rights or
benefits, fund or in any way secure the payment of compensation or benefits
under any Partnership Benefit Plan, Partnership Pension Plan or Partnership
Benefit Agreement or amend any agreement with HWG, LLC or 1st Odyssey relating
to employees providing services to the Partnership;
(vi) make any change in accounting methods, principles or
practices affecting the reported assets, liabilities or results of operations of
the Partnership or any Subsidiary, except as required by a change in GAAP;
(vii) encumber, sell, lease (as lessor, including renewal or
extension of any Partnership Lease), transfer, assign, license, convey or
otherwise dispose of (or contract to dispose of) or subject to any Lien (or
contract to subject to any Lien), any Material Contract or Partnership Real
Property, or amend or terminate any such lease or license, except matters set
forth in Section 5.01 of the Partnership Disclosure Letter; provided, however,
that the Partnership shall actively attempt to lease vacant Partnership Real
Property and may enter into leases of Partnership Owned Property without the
prior written consent of Parent if the lease is for less than 5000 square feet,
is on then current market terms and the Partnership gives Parent prompt notice
that such lease has been entered into and the terms thereof, and may make all
necessary tenant improvements and capital expenditures required under the
Partnership Leases as in effect on the date of this Agreement;
(viii) (A) incur, assume or prepay any indebtedness for
borrowed money or guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for any indebtedness or obligation
of another person or issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Partnership or any Subsidiary,
except for short-term borrowings incurred in the ordinary course of business,
matters set forth in Section 5.01 of the Partnership Disclosure Letter and
additional borrowings under its credit facility to the extent they do not cause
total borrowings under the credit facility to exceed $2,000,000, or (B) make or
forgive any loans, advances or capital contributions to, or investments in, any
other person;
(ix) except as permitted by paragraph (vii) or as set forth on
Section 5.01(a)(ix) of the Partnership Disclosure Letter, make or agree to make
any capital expenditure or expenditures, except those that are not in excess of
$100,000 individually or $3,000,000 in the aggregate and are incurred in the
ordinary course of business;
36
(x) make or change any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) except as required by this Agreement and to the extent
taken into account in determining the Working Capital Adjustment, (A) pay,
discharge, settle or satisfy any claims, liabilities, obligations or litigation,
other than the payment, discharge, settlement or satisfaction, in the ordinary
course of business or in accordance with their terms, of liabilities reflected
or reserved against in the most recent financial statements (or the notes
thereto) of the Partnership included in the Partnership SEC Documents or
incurred since the date of such financial statements in the ordinary course of
business or (B) cancel any indebtedness that is material, individually or in the
aggregate, to the Partnership or any Subsidiary, or waive any claims or rights
of substantial value;
(xii) adopt a plan or agreement of, or resolutions providing
for or authorizing, complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization;
(xiii) make, enter into or renew, extend, amend, modify, or
waive any provisions of any Material Contract or relinquish or waive any rights
under, or agree to the termination of, any Material Contract, whether or not in
the ordinary course of business;
(xiv) permit any insurance policy, set forth in Section
3.22(a) of the Partnership Disclosure Letter naming it as a beneficiary or a
loss payable payee, to lapse, be canceled or expire unless a new policy with
substantially identical coverage is in effect as of the date of lapse,
cancellation or expiration; or
(xv) authorize, or commit or agree to take, any of the
foregoing actions or take any action that would (A) make any representation or
warranty in Article III hereof untrue or incorrect in any material respect, or
(B) result in any of the conditions to the Merger set forth in Article VII
hereof not being satisfied.
(b) Conduct of Business After Determination Date. Anything in
Section 5.01(a) to the contrary notwithstanding, from the Determination Date to
the Effective Time, the Partnership shall not, and shall not permit any of the
Subsidiaries to, do any of the following without the prior written consent of
Parent:
(i) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in or all or
a substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or (B) any
assets;
(ii) encumber, sell, lease (as lessor), transfer, assign,
license, convey or otherwise dispose of (or contract to dispose of) or subject
to any Lien (or contract to subject to any Lien), any Material Contract (except
as provided in the Purchase Agreement) or Partnership
37
Real Property, or amend or terminate any such lease or license; provided,
however, that the Partnership shall actively attempt to lease vacant Partnership
Real Property;
(iii) (A) incur, assume or prepay any indebtedness for
borrowed money or guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for any indebtedness or obligation
of another person or issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Partnership or any Subsidiary, or
(B) make or forgive any loans, advances or capital contributions to, or
investments in, any other person;
(iv) make or agree to make any capital expenditure or
expenditures;
(v) make or change any Tax election or settle or compromise
any Tax liability or refund;
(vi) except as required by this Agreement and to the extent
taken into account in determining the Working Capital Adjustment, (A) pay,
discharge, settle or satisfy any claims, liabilities, obligations or litigation,
other than the payment, discharge, settlement or satisfaction, in the ordinary
course of business or in accordance with their terms, of liabilities reflected
or reserved against in the most recent financial statements (or the notes
thereto) of the Partnership included in the Partnership SEC Documents or
incurred since the date of such financial statements in the ordinary course of
business and permitted by this Section 5.01 or (B) cancel any indebtedness or
waive any claims or rights; or
(vii) authorize, or commit or agree to take, any of the
foregoing actions or take any action that would (A) make any representation or
warranty in Article III hereof untrue or incorrect in any material respect, or
(B) result in any of the conditions to the Merger set forth in Article VII
hereof not being satisfied.
(c) Advice of Changes. The Partnership shall promptly advise Parent
of any change or event that would be likely to cause any representation or
warranty contained in this Agreement to be untrue in any material respect or
which has had or could reasonably be expected to have a Partnership Material
Adverse Effect.
5.02 No Solicitation.
(a) From the date hereof, the General Partner (whether directly or
indirectly through advisors, agents, representatives or other intermediaries)
shall not and shall use its reasonable best efforts to cause its officers,
directors, advisors, representatives and other agents (collectively, its
"Representatives") not to, directly or indirectly, (i) continue any discussions
or negotiations, if any, with any parties, other than Parent and Purchaser,
conducted heretofore with respect to any Partnership Takeover Proposal or which
could reasonably be expected to lead to a Partnership Takeover Proposal, (ii)
solicit, initiate or knowingly encourage any inquiries relating to, or the
submission of, any Partnership Takeover Proposal, (iii) participate in any
discussions or negotiations regarding any Partnership Takeover Proposal, or, in
connection with
38
any Partnership Takeover Proposal, furnish to any person any information or data
with respect to or access to the properties of the Partnership or any
Subsidiary, or (iv) enter into any agreement with respect to any Partnership
Takeover Proposal. Nothing contained in this Section 5.02 shall prohibit the
General Partner or its Representatives from (x) taking and disclosing a position
with respect to a tender offer by a third party pursuant to Rules 14d-9 and
14e-2 promulgated by the SEC under the Exchange Act, or (y) furnishing
information including nonpublic information to, or entering into negotiations or
discussions with, any person that has indicated its willingness to make an
unsolicited bona fide Partnership Takeover Proposal, if, and only to the extent
that, (A) the Board of Directors of the General Partner determines in good
faith, after consultation with its outside legal counsel and its independent
financial advisors, that the Partnership Takeover Proposal may constitute, or
could reasonably be expected to lead to, a Superior Partnership Proposal, (B)
contemporaneously with furnishing such information to, or entering into
discussions or negotiations with, such person, the Partnership provides written
notice to Parent to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person and (C) the Partnership uses
all reasonable efforts to keep Parent informed in all material respects of the
status and terms of any such negotiations or discussions (including the identity
of the person with whom such negotiations or discussions are being held).
Nothing in this Section 5.02 shall restrict or limit the obligations of
defendants in the Litigation to comply with any discovery obligations in those
actions. To the extent permitted by applicable court orders, the Partnership
will provide Purchaser copies of all discovery materials provided to the
plaintiffs in those actions after the date of this Agreement.
(b) For purposes of this Agreement:
"Partnership Takeover Proposal" means any inquiry, proposal or offer
(other than by Parent, Purchaser or any of their affiliates) relating to,
or that could reasonably be expected to lead to (i) a merger,
consolidation, share exchange of securities, dissolution,
recapitalization, liquidation or other business combination involving the
Partnership, (ii) the acquisition by any person in any manner, directly or
indirectly, of a number of shares of any class of equity securities of the
Partnership equal to or greater than 15% of the Units outstanding before
such acquisition or (iii) the acquisition in any manner, directly or
indirectly, in a single transaction or in a series of related
transactions, of assets that generate or constitute 20% or more of the net
revenues, net income or assets of the Partnership and its Subsidiaries
(taken as a whole), in each case other than the Other Transactions.
"Superior Partnership Proposal" means any bona fide written Partnership
Takeover Proposal made by a third party (other than by Parent, Purchaser
or any of their affiliates) to acquire directly or indirectly (i) a
majority of the equity securities or (ii) the assets of the Partnership
substantially as an entirety, which the Board of Directors of the General
Partner determines in good faith (after consultation with its independent
financial advisors and outside counsel), taking into account all legal,
financial, regulatory and other aspects of the proposal and the person
making such proposal, (x) would, if consummated, be more favorable, from a
financial point of view, to the holders of Units
39
other than the General Partner and its affiliates, than the Merger, (y) is
made by a third party that has the good faith intent to proceed with
negotiations, and (z) the proposal is reasonably capable of being
consummated.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Deposit. Within ten (10) days of the execution of this Agreement,
Parent will deposit $10,000,000 in escrow (the "Deposit") with the Paying Agent.
The Paying Agent shall hold the Deposit in accordance with the terms of an
agreement among Parent, the Partnership and the Paying Agent which shall
provide, among other things, (a) if the transactions contemplated by this
Agreement are consummated, the Paying Agent shall cause the Deposit to be
applied as part of the aggregate Merger Price, or (b) if this Agreement is
terminated pursuant to Section 8.01, the Paying Agent shall cause the Deposit to
be repaid to Parent.
6.02 Inspection of and Access to Information. For 30 days following the
date of this Agreement (the "Inspection Period") and thereafter until the
Effective Time upon reasonable notice, the Partnership will and will cause each
of the Subsidiaries to permit Parent and its representatives to inspect, during
the Partnership's normal business hours, the Partnership Real Property
(including, without limitation, all roofs, electric, mechanical and structural
elements, and HVAC systems therein), to perform due diligence, soil analysis and
environmental investigations (including subsurface investigations), to examine
the Contracts, books, records and other information of the Partnership and the
Subsidiaries, including, without limitation, the Partnership Leases and all
other Contracts affecting the Partnership Real Property, and make copies
thereof, at such reasonable times as Parent or its representatives may
reasonably request by notice to the Partnership (which notice may be oral). If
Parent gives the Partnership notice on or before the 25th day following the date
of this Agreement that it requires additional time to complete its diligence,
the Inspection Period will extend to the 45th day following the date of this
Agreement. To the extent that, in connection with such investigations, the
Parent, its agents, representatives or contractors, damages or disturbs any of
the Partnership Real Property, Parent shall return the same to substantially the
same condition which existed immediately prior to such damage or disturbance. In
addition, during the period after the date of this Agreement and prior to the
Effective Time, the Partnership agrees to provide to Parent with such operating
information, from time to time, as Parent may reasonably request, regarding the
Partnership Real Property and the condition and operation thereof. Prior to the
expiration of the Inspection Period, Parent may give the Partnership notice of
any structural, physical, environmental, legal(1) or other defects or conditions
(including, without limitation, any fact or condition which would constitute a
breach of any of the representations, warranties or covenants of the Partnership
contained herein, which breach shall be determined as though such
representations and warranties were made as of the last day of the Inspection
Period and without giving effect to any qualification as to "materiality" or
"Partnership Material Adverse Effect" or "knowledge" set
------------------------
(1) We have proposed these changes to deal with the air rights issue
with M&T.
40
forth therein) which affect any of the Partnership Real Property in any material
respect and which has not been disclosed in the Partnership Disclosure Letter
(each a "Defect"). Parent's failure to give notice of any Defect (absent the
then actual, present knowledge of Xxxx X. Xxxxxxx, Executive Vice President of
Parent, or Xxxxx X. Xxxxxx, Senior Vice President of Parent, of such Defect)
shall not restrict Parent from terminating this Agreement pursuant to Section
8.01(d)(v).
6.03 Title and Survey Matters.
(a) Title Matters. The Partnership has obtained title insurance
policies (the "Title Policies") with respect to each Partnership Owned Property
and, except as set forth in Section 6.03 of the Partnership Disclosure Letter,
has provided Purchaser true and complete copies of (i) the Title Policies, and
(ii) all instruments, documents or agreements referenced in the Title Policies
and in the possession of the Partnership that create or evidence conditions or
exceptions to title affecting the Partnership Owned Property. Prior to the
expiration date of the Inspection Period, Parent shall give the Partnership
notice of any title exceptions (whether the same appear in Title Polices or any
other title commitment or title report obtained by Parent), other than Permitted
Encumbrances, Liens under the Mortgage Documents related to those loans listed
in Section 3.05(a)(ii) of the Partnership Disclosure Letter, Liens for Taxes not
yet due and payable and Liens of mechanics and materialmen for goods and
services for amounts not then due and payable, and of any other matters which
adversely affect any of the Partnership Owned Property as to which Parent
reasonably objects (each a "Title Defect").
(b) Survey Matters. The Partnership has obtained an ALTA survey with
respect to each Partnership Owned Property (the "Surveys") by a licensed
surveyor in the jurisdiction in which each Partnership Owned Property is located
and has provided Purchaser true and complete copies of the Surveys. Prior to the
expiration of the Inspection Period, Parent shall give the Partnership notice of
any matters shown on such Surveys (or any updates to such Surveys or new surveys
obtained by Parent) or any other zoning or land use matter (other than Permitted
Encumbrances and matters set forth in the Partnership Disclosure Letter) which
adversely affect any of the Partnership Owned Property in any material respect
and as to which Parent reasonably objects (each a "Survey Defect").
(c) Defects, Title Defects and Survey Defects.
(i) On or before the Closing Date, the Partnership shall
pay-off or otherwise discharge of record all monetary Encumbrances (other than
the Encumbrances specified in Section 6.03(c) of the Partnership Disclosure
Letter) and any Encumbrance (other than the Encumbrances specified in Section
6.03(c) of the Partnership Disclosure Letter) created by, through or under the
Partnership, its Subsidiaries, affiliates or agents after the date hereof.
(ii) With respect to all other Defects, Title Defects and
Survey Defects, the Partnership shall take all commercially reasonable action
required to (A) remedy such Defects such that the affected Partnership Owned
Property, if any, is brought into a condition reasonably satisfactory to Parent
and in accordance with prevailing standards for like properties,
41
and (B) cure such Title Defects and Survey Defects and cause the same to be
removed from the applicable title insurance policy obtained by the Partnership
or any applicable title commitment or report obtained by Parent; it being
understood that it may not be commercially reasonable to, and in that case the
Partnership will not be expected to, remedy or remove such items prior to the
Closing Date. If for any reason the Partnership reasonably believes that the
expenditures required to remedy or remove such Defects, Title Defects or Survey
Defects would reasonably be expected to exceed $10,000,000, or if Parent
reasonably believes that the estimated aggregate costs of remedying, curing and
removing such other Defects, Title Defects and Survey Defects will exceed
$10,000,000, the Partnership or Parent, as the case may be, shall have the
option of electing to terminate this Agreement by written notice given at any
time prior to the 20th business day following the expiration of the Inspection
Period. With respect to any Defect which arises from a breach of the
representation contained in Section 3.19(d) as to rent (a "Rent Defect"), the
estimated cost of remedying such Rent Defect shall be deemed to be an amount
equal to the product obtained by multiplying ten (10) by the annualized amount
of such Rent Defect.
6.04 Preparation of Proxy Statement; Unitholder Meeting.
(a) The Partnership shall, as soon as practicable, prepare and file
with the SEC the Proxy Statement in preliminary form, and each of the
Partnership and Parent shall use all reasonable efforts to respond as promptly
as practicable to any comments of the SEC with respect thereto. The Partnership
shall notify Parent promptly of the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff for amendments or supplements
to the Proxy Statement or for additional information and shall supply Parent
with copies of all correspondence between the Partnership or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement. If at any time prior to receipt of the
Unitholder Approval there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Partnership shall promptly
prepare and mail to its unitholders such an amendment or supplement. No filing
of, or amendment to, the Proxy Statement will be made by the Partnership without
providing Parent the opportunity to review and comment thereon. The Partnership
shall not mail any Proxy Statement, or any amendment or supplement thereto, to
which Parent reasonably objects. The Partnership shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to the Partnership's
unitholders as promptly as practicable after filing with the SEC.
(b) The Partnership shall, as soon as practicable after the SEC
completes its review of the Proxy Statement, duly call, give notice of, convene
and hold a meeting of its unitholders (the "Unitholder Meeting") for the purpose
of seeking the Unitholder Approval. Unless the Board of Directors of the General
Partner determines in good faith that its fiduciary duties otherwise require,
the Partnership shall, through the Board of Directors of the General Partner,
recommend to its unitholders that they give the Unitholder Approval and use its
reasonable efforts to obtain Unitholder Approval.
(c) If Unitholder Approval is obtained, Parent shall use all
reasonable efforts to cause the Merger to be completed as soon as practicable.
42
(d) The Partnership, and after the Effective Time, the General
Partner, shall cooperate with Parent in the preparation of any documents Parent
files under the Securities Act or the Exchange Act, and for this purpose shall
use commercially reasonable efforts to provide Parent with financial statements
and other financial information that Parent requests relating to periods prior
to the Effective Time, including such certifications with respect to such
financial statements and financial information as Parent shall reasonably
require, and shall afford to Parent, and to Parent's officers, employees,
accountants, and other representatives, copies of, or at Parent's request,
access during reasonable business hours to (i) all of the Partnership's and each
Subsidiary's properties, books, personnel and records and other information and
business documents, (ii) by appointment, the Partnership's accountants and (iii)
the premises of the Partnership and each Subsidiary for the purpose of
inspecting the books and records of the Partnership and each Subsidiary,
provided that access to the premises shall be permitted only with the prior
consent of the Partnership (which consent shall not be unreasonably withheld or
delayed) and provided further that Parent shall pay any third party expenses and
photocopying charges incurred by the Partnership in connection with such
activities. The Partnership shall have the right to have a representative
present at all times of any such inspections and communications conducted by
Parent or its representatives.
6.05 Access to Information; Confidentiality Agreement.
(a) The Partnership shall afford to Parent, and to Parent's
officers, employees, accountants, counsel, financial advisors and other
representatives, access during reasonable business hours during the period prior
to the Effective Time to (i) all of the Partnership's and each Subsidiary's
properties, books, contracts, commitments, personnel and records and other
information and business documents, (ii) by appointment, the Partnership's
accountants and (iii) the premises of the Partnership and each Subsidiary for
the purpose of inspecting the books and records of the Partnership and each
Subsidiary, provided that access to the premises shall be permitted only with
the prior consent of the Partnership (which consent shall not be unreasonably
withheld or delayed). The Partnership shall have the right to have a
representative present at all times of any such inspections, interviews and
communications conducted by Parent or its representatives.
(b) At Parent's request and cost, the Partnership and the
Subsidiaries shall (i) obtain surveys, title commitments and policies,
engineering reports, environmental reports, and appraisals with respect to the
Partnership Real Property, and (ii) provide Parent reasonable access to the
Partnership Real Property, and all documents and information regarding the
Partnership Real Property. Parent and Purchaser shall use reasonable efforts not
to interfere with, interrupt or disrupt the operation of any tenant's business
on the Partnership Real Property and, such access by Parent, Purchaser or their
agents, contractors and representatives shall be subject to the rights of tenant
and the restrictions on the Partnership's (or applicable Subsidiary's) access to
the Partnership Owned Property set forth in the Partnership Leases. Parent and
Purchaser shall not permit any construction, mechanic's or materialman's liens
or any other liens to attach to the Partnership Real Property or any portion
thereof by reason of the performance of any work or the purchase of any
materials by Parent, Purchaser or any other
43
party in connection with any studies or tests conducted pursuant to this
Section. Parent and Purchaser shall give reasonable notice to the Partnership
prior to entry onto the Partnership Real Property and shall permit the
Partnership to have a representative present during all investigations and
inspections conducted with respect to the Partnership Real Property. Parent and
Purchaser shall take all reasonable actions and implement all reasonable
protections necessary to ensure that all actions taken in connection with the
investigations and inspections of the Partnership Real Property, and all
equipment, materials and substances generated, used or brought onto the
Partnership Real Property pose no threat to the safety of persons or the
environment and cause no damage to the Partnership Real Property, any tenant or
other persons. Parent and Purchaser shall indemnify, defend and hold the
Partnership harmless for, from and against any and all claims, liabilities,
causes of action, damages, liens, losses and expenses (including attorneys' fees
and costs) incident to, resulting from or in any way arising out of any of
Parent's, Purchaser's or their agents', contractors' or representatives'
activities on the Partnership Real Property or from Parent's or Purchaser's
breach of their obligations or agreements under this Section, excluding,
however, any liability arising from the discovery or disclosure of any
condition. The cost of obtaining any reports or surveys shall be borne
exclusively by Parent and Purchaser.
(c) Between the date of this Agreement and the Closing Date, the
Partnership will cooperate with Parent to arrange meetings with such tenants
under Partnership Leases as Parent may, from time to time, reasonably request.
Parent shall not contact any tenants under Partnership Leases without the prior
consent of the Partnership, which consent will not be unreasonably withheld or
delayed.
(d) Parent shall notify the Partnership promptly of any facts,
information, documentation or materials which come to Parent's or Purchaser's
attention during the course of its review pursuant to this Section that lead
Parent to believe that any of the Partnership's representations or warranties
herein are inaccurate or incomplete.
(e) Neither any investigation conducted by Parent or its
representatives pursuant to this Section 6.05 nor the results thereof shall
affect any representation or warranty of the Partnership contained in this
Agreement or the ability of Parent or Purchaser to rely thereon.
(f) All information exchanged pursuant to this Section 6.05 shall be
subject to the confidentiality agreement dated August 12, 2003, between the
Partnership and Parent (the "Confidentiality Agreement"). Notwithstanding
anything herein or in the Confidentiality Agreement to the contrary, (i) the
parties may make such disclosure as is reasonably necessary to comply with
applicable securities laws, and (ii) the parties (and each employee,
representative or agent of the parties hereto) may disclose to any and all
persons, without limitation of any kind, the tax treatment (as defined in
Treasury Regulation Section 1.6011-4) and tax structure (as defined in Treasury
Regulation Section 1.6011-4) of the transactions contemplated hereby and all
materials of any kind (including opinions or other tax analyses) that are or
have been provided to the parties hereto relating to such tax treatment or tax
structure, provided that, in the case of any materials that contain information
other than the tax treatment or tax structure of the transactions contemplated
hereby (including, but not limited to, any information relating to the pricing
or any
44
cost of the transactions contemplated hereby or the identity of any party to the
transactions contemplated hereby), this clause (ii) shall apply to such
materials only to the extent that such materials contain the tax treatment or
tax structure of the transactions contemplated hereby and the parties hereto
shall take all action necessary to prevent the disclosure of such other
information as otherwise provided herein.
6.06 Efforts. Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties shall use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the Transactions, including (i) determining
whether any action by or in respect of or filing with any Governmental Entities
is required or any actions, consents, approvals or waivers are required to be
obtained from third parties in connection with the Transactions, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities, if any)
and the taking of all reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(iii) the obtaining of all necessary consents, approvals or waivers from third
parties (including consents, approvals or waivers from lenders with respect to
the loans listed in Section 3.05(a)(ii) of the Partnership Disclosure Letter),
(iv) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this Agreement or the consummation of the
Transactions, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed and (v)
the execution and delivery of any additional instruments necessary to consummate
the Transactions and to fully carry out the purposes of this Agreement. Nothing
in this Agreement shall be deemed to require Parent to waive any rights or agree
to any limitation on its operations or to dispose of any asset or collection of
assets of the Partnership, Parent or any of their respective subsidiaries or
affiliates. Without limiting the foregoing, the Partnership and its Subsidiaries
shall deliver such documents or instruments (including, if necessary,
authorizing resolutions or other evidence of their authority) and shall comply
with such requirements as may be required of them under the terms of any
Partnership Lease under which the General Services Administration or any other
organization or agency of the United States is the tenant or as otherwise may be
required under the regulations and policies of the United States Government in
connection with the Merger, including, if applicable, the execution and delivery
of a novation agreement in such form as the United States Government shall
require. The Partnership and the Subsidiaries will also request, and use
commercially reasonable efforts to obtain, from the tenants under the
Partnership Leases and the Partnership's or any of the Subsidiaries' lessors and
from lenders, estoppel certificates (and/or, with respect to the Prepaid Debt,
pay-off letters) in form and substance satisfactory to Purchaser. The
Partnership shall deliver to the Purchaser all responses received by the
Partnership or the Subsidiaries from such tenants or lenders in connection with
any Partnership request for such estoppel certificates and/or pay-off letters.
45
6.07 Unit Options. The Partnership has taken all actions necessary to
cause each Unit Option outstanding to be canceled automatically at the Effective
Time and thereafter represent only the right to receive from the Survivor an
amount of cash in respect of such Unit Option equal to the product of (i) the
excess, if any, of (x) the Merger Price over (y) the exercise price per Unit
subject to such Unit Option and (ii) the number of Units subject to such Unit
Option immediately prior to its cancellation.
(a) All amounts payable pursuant to this Section 6.07 shall be
subject to any required withholding of Taxes and shall be paid as soon as
practicable, without interest.
(b) The Board of Directors of the General Partner has taken such
actions as are required to cause (i) the Unit Option Plan to terminate as of the
Effective Time and (ii) the provisions in any other Partnership Benefit Plan
providing for the issuance, transfer or grant of any Units or any interest in
respect of any limited partner interests of the Partnership (or any Subsidiary)
to be terminated as of the Effective Time such that following the Effective Time
no holder of a Unit Option or any participant in the Unit Option Plan or other
Partnership Benefit Plan shall have any right thereunder to acquire any capital
stock or other equity interest of the Survivor (or any Subsidiary).
(c) For purposes of this Agreement:
"Unit Option" means any option to purchase Units granted under the Unit
Option Plan.
"Unit Option Plan" means the Partnership's 1995 Unit Option Plan.
6.08 Indemnification; Insurance.
(a) All rights to indemnification and exculpation from liability and
rights to advancements of expenses relating thereto now provided in the
Partnership Agreement in favor of the General Partner, its "Affiliates" as
defined in the Partnership Agreement, and all officers, partners, directors,
employees and agents of the General Partner and its Affiliates (the
"Indemnitees") shall survive the Merger with respect to acts and omissions
occurring at or prior to the Effective Time, provided, however, that
notwithstanding anything to the contrary contained herein or in the Partnership
Agreement, the Survivor shall have no obligation to indemnify Group or any of
the HWG Parties for any liability for which Parent or the Survivor is entitled
to indemnification pursuant to the Purchase Agreement.
(b) At or prior to the Effective Time, the Partnership shall obtain
a "single premium tail insurance policy" of directors' and officers' insurance
and fiduciary liability insurance, for the benefit of those persons who are
Indemnitees at the date of this Agreement, providing coverage for a period of
six (6) years after the Effective Time, for the benefit of such Indemnitees,
providing coverage with respect to matters occurring prior to the Effective Time
that is at least equal to the coverage provided under the directors' and
officers' liability insurance and fiduciary liability insurance policies
currently applicable to those persons.
46
(c) In the event Parent or the Survivor or any of its successors or
assigns (i) consolidates with or merges into any other person and is not the
continuing or surviving 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, proper provision shall be made so that
the successors and assigns of the Survivor shall assume the obligations set
forth in this Section 6.08.
(d) The Survivor shall pay all expenses (including fees and expenses
of counsel) that may be incurred by any Indemnitee in successfully enforcing the
indemnity or other obligations under this Section 6.08.
(e) The provisions of this Section 6.08 are (i) intended to be for
the benefit of, and to be enforceable by, each Indemnitee, his or her heirs and
his or her representatives and (ii) in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
6.09 Fees and Expenses.
(a) Except as provided below, all fees and expenses incurred in
connection with the Merger and the Transactions shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
(b) In the event that this Agreement is terminated by (i) the
Partnership pursuant to Section 8.01(e) or (ii) by Parent or Purchaser pursuant
to Section 8.01(d)(ii), (iii) or (iv) then the Partnership shall promptly, but
in no event later than the date of such event, pay to Parent a fee equal to
$10,000,000 plus an amount equal to fifty percent (50%) of the out-of-pocket
expenses of Parent and Purchaser incurred in connection with the Transactions up
to a maximum amount of such reimbursement of $750,000 (collectively, the
"Termination Fee"), payable by wire transfer of same day funds, which shall be
deemed to be sole and exclusive liquidated damages for such termination. If:
(A)(x) this Agreement is terminated by Parent or Purchaser pursuant to Section
8.01(d)(v), (y) prior to such termination a Partnership Takeover Proposal has
been publicly announced, disclosed or communicated and not withdrawn (excluding
for this purpose any offer or proposal made by Xxxx Xxxxx or any of his
affiliates prior to the date of this Agreement) and (z) on the date of such
termination, neither Parent nor Purchaser is in material breach of this
Agreement and (B) within twelve (12) months after such termination pursuant to
clause (A), (1) the Partnership shall consummate or enter into an agreement with
respect to any Partnership Takeover Proposal or (2) any "group" (as defined in
Section 13(d)(3) of the Exchange Act) or person (including the Partnership or
any of its affiliates), other than Parent or any of its affiliates, shall have
become the beneficial owner of more than fifty percent (50%) of the Units; then
the Partnership shall pay the Termination Fee concurrently with the earlier of
entering into any such agreement or consummating such transaction.
(c) In the event this Agreement is terminated by Parent or Purchaser
pursuant to Section 8.01(d)(i) or (v), by either Parent or the Partnership
pursuant to Section 8.01(b) or (c), or if the Purchase Agreement is terminated
pursuant to Section 6.01(c) thereof, the Partnership
47
shall promptly pay to Parent an amount, up to a maximum amount of $2,000,000,
equal to the amounts actually and reasonably paid or incurred by Parent or
Purchaser to third party professionals in connection with Parent's and
Purchaser's diligence including fees and expenses of title examiners, surveyors,
environmental and other engineers, by wire transfer of same day funds which
shall be deemed to be sole and exclusive liquidated damages for such
termination. Immediately following such payment, Parent and Purchaser shall
deliver to the Partnership all work product produced by such third party
professionals and such work product shall be the property of the Partnership.
6.10 Public Announcements. Parent and Purchaser, on the one hand, and the
Partnership, on the other hand, shall consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the Merger and the Other
Transactions and shall not issue any such press release or make any such public
statement prior to such consultation, except after it has used all reasonable
efforts to consult with the other party and such release or statement is
required by applicable Law, by New York Stock Exchange rule or by American Stock
Exchange rule.
6.11 Transfer Taxes. All Unit transfer, real estate transfer, documentary,
stamp, recording and other similar Taxes (including interest, penalties and
additions to any such Taxes) ("Transfer Taxes") incurred in connection with the
Transactions shall be paid by the Purchaser. The party that is required by
applicable Law to file the Tax Returns and to handle any audits or controversies
with respect to any of the foregoing Transfer Taxes shall do so, and each party
shall cooperate with the other in preparing, executing and filing any such Tax
Returns including supplying in a timely manner a complete list of all real
property interests held by the Partnership and the Subsidiaries and any
information with respect to such property that is reasonably necessary to
complete such Tax Returns. The parties shall cooperate in obtaining any
available exemptions with respect to such Transfer Taxes.
6.12 Further Assurances. At and after the Effective Time, the officers and
directors of the Survivor shall be authorized to execute and deliver, in the
name and on behalf of the Partnership or Purchaser, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Partnership or Purchaser, any other actions and things to vest, perfect or
confirm of record or otherwise in the Survivor any and all right, title and
interest in, to and under any of the rights, properties or assets of the
Partnership acquired or to be acquired by the Survivor as a result of, or in
connection with, the Merger.
6.13 Benefit Matters.
(a) Each employee of HWG, LLC (including those individuals
considered to be jointly employed by 1st Odyssey and HWG, LLC) who is a
participant in the Hallwood Group Tax Favored Savings Plan (401(k) plan) and who
is employed by Purchaser, Parent or an affiliate of either (a "Post Closing
Employer") on the date that is sixty (60) days after the Effective Time will be
permitted to "roll over" his or her account balance into the Post Closing
Employer's 401(k) Plan.
48
(b) At the Effective Time (or following a reasonable transition
period as set forth below), employees of HWG, LLC (including those individuals
considered to be jointly employed by 1st Odyssey and HWG, LLC) ("Partnership
Employees") who have become employees of a Post Closing Employer ("Continuing
Employees") shall be eligible to participate in those employee benefit plans
maintained for similarly situated employees of a Post Closing Employer, or in
substantially similar programs, on the same terms applicable to similarly
situated employees of such Post Closing Employer. Each Continuing Employee shall
be given credit for any sick leave time accrued, but unused, as of the day
immediately preceding the Effective Time (or, if later, the time of the
transition of such employee from a Partnership Benefit Plan to a Employee Plan).
Each Continuing Employee shall be given credit, for purposes of any service
requirements for participation, vesting or length of service requirements (but
not benefit accrual for purposes of any defined benefit pension plan), for his
or her period of service with HWG, LLC (including any period of joint employment
with 1st Odyssey and employment by the General Partner, HCRE and their
predecessors) credited under a similar plan prior to the Effective Time, subject
to appropriate break in service rules. Each such employee shall, with respect to
any Post Closing Employer plans or programs which have co-payment, deductible or
other co-insurance features, receive credit for any amounts such individual has
paid to date in the plan year of the Effective Time under comparable plans or
programs maintained by Post Closing Employer prior to the Effective Time. Each
such employee shall be subject to any pre-existing condition limitations under
such Post Closing Employer's group health plan only to the extent that the
employee's benefits were so limited under the group health plan as of the
Effective Time.
(c) Nothing in this Section 6.13 shall be construed as granting any
Partnership Employee any right of employment with Purchaser, Parent or any
affiliate of either or if employed by a Post Closing Employer, any rights with
respect to benefits except as provided in this Section 6.13.
6.14 Name Change. Parent agrees that (i) within three (3) months after the
Effective Time it will cause all subsidiaries of the Survivor to take all
necessary steps to change their names so as not to include, and cease doing
business under any name that includes, the word "Hallwood," or any derivative,
(ii) at any time after the Effective Time, Group and its affiliates may engage
in business in the real estate industry or any other activity using a name that
includes the word "Hallwood," other than a name that is identical to the name at
that time of any entity that is a Subsidiary of the Partnership immediately
prior to the Effective Time, and (iii) after the Effective Time Parent will and
will cause all subsidiaries of the Survivor to take all necessary steps to
consent to the formation by Group or its affiliates of any entity under a name,
and the use of a name by that entity, that includes the word "Hallwood" in any
jurisdiction, to the extent contemplated by clause (ii).
6.15 Tax Matters.
(a) The General Partner, as the Partnership's tax matters partner
(within the meaning of Section 6231 of the Code), will prepare and file all Tax
Returns required to be filed by the Partnership or its Subsidiaries or delivered
to the partners of the Partnership (including for
49
avoidance of doubt (i) Internal Revenue Service Schedule K-1 and any state or
local Tax Authority equivalent to said Schedule K-1, (ii) any additional
reporting required pursuant to Section 6050K of the Code and (iii) any combined
Tax Return filed by the Partnership on behalf of its partners), whether such
preparation, filing or delivery precedes or follows the Effective Time, but only
to the extent that such Tax Returns relate to Taxable periods ending on or prior
to the Closing Date; provided however that Parent shall be provided the
opportunity to review and comment upon any such Tax Returns prepared, filed or
delivered after the date hereof. After the Effective Time, Parent and Survivor
shall cooperate with the General Partner in the preparation of all such Tax
Returns, and for this purpose shall afford to the General Partner, and to the
General Partner's officers, employees, accountants, and other representatives,
copies of, or at the General Partner's request, access during reasonable
business hours to (i) all of the Survivor's and each Subsidiary's properties,
books, personnel and records and other information and business documents, (ii)
by appointment, the Survivor's accountants and (iii) the premises of the
Survivor and each Subsidiary, provided that access to the premises shall be
permitted only with the prior consent of the Survivor (which consent shall not
be unreasonably withheld or delayed) and provided further that the General
Partner shall pay any third party expenses and photocopying charges incurred by
Survivor or any Subsidiary in connection with such preparation. The Survivor
shall have the right to have a representative present at all times of any such
inspections and communications conducted by the General Partner or its
representatives.
(b) The parties hereto agree that the Merger is being effected as an
expedient method for each holder of record of Units to convey its respective
interest in the Partnership. The parties will treat and report, for purposes of
federal income Taxes, the Merger and the Other Transactions consistently with
the principles of Situation 2 of Internal Revenue Service Revenue Ruling 99-6,
1999-1 C.B. 432, and in particular (i) Parent shall treat and report the Merger
and the Other Transactions as a purchase of all of the assets of the Partnership
(and any applicable Subsidiary Partnership or Subsidiary Resulting LLC) and (ii)
the General Partner and each holder of Units will treat the Merger and the Other
Transactions as a sale of their respective partnership interest in accordance
with Section 741 of the Code, and will to the extent applicable similarly treat
and report the Transactions and Other Transactions for state and local income
Taxes.
(c) Prior to the Closing Date, each of the Partnership and the
General Partner shall use its commercially reasonable efforts to obtain, or
cause the Paying Agent to obtain, from the Partnership and each partner of the
Partnership (or if such partner is a "disregarded entity" for federal income Tax
purposes, such partner's first upper tier owner that is not a "disregarded
entity" for federal income Tax purposes) a certificate of non-foreign status of
such person meeting the requirements of the Treasury Regulations under Section
1445 of the Code.
(d) The Partnership shall use commercially reasonable efforts to
cause, at least one day prior to the Closing Date, each Subsidiary set forth in
Section 3.02 of the Partnership Disclosure Letter which is not also listed in
Section 3.09(a) of the Partnership Disclosure Letter (each a "Subsidiary
Corporation") to have converted (in a manner which does not create adverse Tax
consequences to the Purchaser or Parent) into a limited liability company
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organized under Delaware Law (each a "Subsidiary Resulting LLC"). Such
conversion may be achieved through a transaction or series of transactions,
satisfactory to the Purchaser, by conversion, contribution, merger, acquisition
or otherwise, so long as (i) each Subsidiary Resulting LLC owns substantially
all of the assets that were held directly or indirectly by its respective
Subsidiary Corporation immediately prior to such transaction, (ii) all of the
equity interests of each Subsidiary Resulting LLC are held by one or more
Subsidiary Partnerships or Subsidiary Resulting LLCs, (iii) the certificate of
formation of each Subsidiary Resulting LLC is in form and substance reasonably
acceptable to the Purchaser, and (iv) the limited liability company operating
agreement of each Subsidiary Resulting LLC is in form and substance reasonably
acceptable to the Purchaser. From and after each such conversion until Closing,
each Subsidiary Resulting LLC shall be and remain a partnership or disregarded
as an entity separate from its owner for U.S. federal income Tax purposes under
Treasury Regulation Sections 301.7701-2 and -3 (and any comparable provision of
applicable Law of state and local jurisdictions that permit such treatment).
6.16 Purchase of Receivables. Contemporaneously with the determination by
the accountant of Net Working Capital, upon notice to the Successor GP from the
General Partner that it desires to purchase any "accounts receivable" which is
in excess of thirty (30) days past due but less than sixty (60) days past due,
and payment to the Successor GP in cash of an amount equal to the face amount of
such "accounts receivables" the Partnership shall transfer, without recourse or
representation, such "accounts receivables" to the General Partner. Following
the Effective Time, the Partnership shall use commercially reasonable efforts to
collect such "accounts receivable" so transferred short of commencing or
prosecuting any litigation or terminating any tenancy. If any payment on account
of "accounts receivable" which has been so transferred is received by the
Partnership following the Effective Time, the Partnership shall promptly remit
such payment to the General Partner.
6.17 Interim Reports. Prior to the Effective Time, the Partnership shall
deliver to the Purchaser, promptly after filing, a copy of any report or
statement filed by the Partnership pursuant to the Exchange Act after the date
of this Agreement.
6.18 Supplements to Disclosure. From time to time prior to the Effective
Time, each of the Partnership, Parent and Purchaser will promptly supplement or
amend the respective disclosure which they have made in this Agreement with
respect to any matter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described or which
is necessary to correct any information contained in this Agreement, the
Partnership Disclosure Letter or any schedule which has been rendered
inaccurate. The delivery of any supplement or amendment pursuant to this Section
6.17 shall not in any matter constitute a waiver by any of Parent, Purchaser,
the Partnership or the General Partner of any of the conditions contained in
Article VII. Additionally, the Partnership shall deliver to the Purchaser,
promptly upon receipt, copies of all bills or statements for local real estate
Taxes and assessments encumbering the Partnership Owned Property.
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ARTICLE VII
CONDITIONS PRECEDENT
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or, if permitted by applicable Law, waiver on or prior to the
Closing Date of the following conditions:
(a) Unitholder Approval. The Partnership shall have obtained the
Unitholder Approval.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided, however, that prior to
asserting this condition, subject to Section 6.06, the party asserting such
condition shall have used its commercially reasonable efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered.
(c) Statutory Restraints. No statute, code or regulation shall have
been enacted or promulgated by any Governmental Entity that prohibits
consummation of the Merger.
(d) Consents. All consents, authorizations, orders and approvals of
(or filing or registration with) any Governmental Entity required in connection
with the execution, delivery and performance of this Agreement shall have been
obtained. All consents listed in Section 3.05(b) of the Partnership Disclosure
Letter shall have been obtained.
(e) Other Transactions. The closing contemplated by the Purchase
Agreement shall have occurred and the Other Transactions shall have been
consummated or shall be consummated simultaneously with the Closing.
7.02 Conditions to Obligations of the Partnership. The obligations of the
Partnership to effect the Merger shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Purchaser contained in this Agreement shall be true and
correct (without giving effect to any limitation as to "materiality" or "Parent
Material Adverse Effect" set forth therein) at and as of the Effective Time as
if made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except where the failure
of such representations and warranties to be true and correct would not,
individually or in the aggregate, result in a Parent Material Adverse Effect.
52
(b) Performance of Obligations by Parent and Purchaser. Parent and
Purchaser shall have performed in all material respects all covenants and
agreements required to have been performed at or prior to the Effective Time by
them under this Agreement.
(c) Certificates. Parent shall furnish the Partnership with a
certificate of its appropriate officers as to compliance with or satisfaction of
the conditions set forth in Section 7.02 (a) and (b).
7.03 Conditions to Obligations of Parent and Purchaser.
The obligations of Parent and Purchaser to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Partnership contained in this Agreement shall be true and
correct (without giving effect to any limitation as to "materiality" or
"Partnership Material Adverse Effect" set forth therein) at and as of the
Effective Time as if made at and of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier date), except where
the failure of such representations and warranties to be true and correct would
not, individually or in the aggregate, result in a Partnership Material Adverse
Effect.
(b) Performance of Obligations of the Partnership and the
Subsidiaries. The Partnership and each of the Subsidiaries shall have performed
in all material respects all covenants and agreements required to have been
performed at or prior to the Effective Time by them under this Agreement.
(c) Certificates. The General Partner shall furnish Parent with a
certificate of its appropriate officers as to compliance with or satisfaction of
the conditions set forth in Section 7.03(a) and (b).
(d) Estoppels. Purchaser shall have received estoppel letters in
form and substance reasonably satisfactory to Purchaser from (i) those tenants
listed on Section 7.03(d) of the Partnership Disclosure Letter; (ii) tenants
under Partnership Leases representing at least 60% of the leased square footage
of the Partnership Owned Property other than that represented by those tenants
listed on Section 7.03(d) of the Partnership Disclosure Letter, (iii) each
Lessor with respect to Partnership Leased Property, and (iv) each lender with
respect to indebtedness for borrowed money listed in Section 3.05(a)(ii) of the
Partnership Disclosure Letter, together with payoff amounts in the case of the
Prepaid Debt.
(e) Title Insurance. The Title Company shall be prepared, subject
only to payment of usual and customary premiums, to issue title insurance
policies, or endorsements thereto, insuring title to the Partnership Real
Property is vested as of the Effective Time in the Survivor or the appropriate
Subsidiary, pursuant to ALTA title insurance policies or other title insurance
policies if ALTA policies are not available in the state in which the Property
is located in form and substance reasonably satisfactory to Parent, subject only
to any standard form of
53
exception, condition or exclusion printed in the applicable title commitment or
report obtained by Parent and the Permitted Encumbrances, the Mortgage Documents
related to those loans listed in Section 3.05(a)(ii) of the Partnership
Disclosure Letter (other than Prepaid Debt), Liens for Taxes not yet due and
payable and Liens of mechanics and materialmen for goods and services for
amounts not then due and payable, each such title insurance policy to include
such endorsements and affirmative coverages as Parent may require to the extent
such endorsements are available in the applicable jurisdiction.
(f) No Material Adverse Effect. No change which has had, or would
reasonably be expected to have, a Partnership Material Adverse Effect shall have
occurred from the date hereof to the Effective Time.
(g) Conversion of Subsidiary Corporations. Each Subsidiary
Corporation shall, at least one day prior to the Closing Date, have been
converted (in a manner which does not create adverse Tax consequences to the
Purchaser or Parent) into a Subsidiary Resulting LLC. Each such Subsidiary
Resulting LLC, if any, shall at the Closing be a partnership or disregarded as
an entity separate from its owner for U.S. federal income Tax purposes under
Treasury Regulation Sections 301.7701-2 and -3 (and any comparable provision of
applicable Law of state and local jurisdictions that permit such treatment).
(h) Purchase Agreement. The transactions contemplated by the
Purchase Agreement shall have occurred and the Purchase Agreement shall be in
full force and effect.
(i) Management Agreements. Each Management Agreement (as defined in
the Purchase Agreement) shall have been terminated and the Partnership and its
Subsidiaries shall have been released from all obligations thereunder.
(j) Staff Services Agreement. The Staff Services Agreement dated
July 1, 2003 by and between 1st Odyssey and HWG, LLC shall have been assigned to
Reit Management & Research LLC.
(k) Lender Consents. The consent of lenders with respect to the
loans listed in Section 3.05(a)(ii) of the Partnership Disclosure Letter shall
have been obtained, unless such loans are prepaid on the Closing Date.
(l) Sublease. The General Partner and any affiliate of the General
Partner that uses or occupies any of the Partnership Owned Property shall have
entered into a lease or sublease with respect to such use and occupancy in form
and substance reasonably satisfactory to Parent. The General Partner shall have
entered into a sublease of all of the Partnership Leased Property for rental
equal to the rental payable under the lease under which the Partnership leases
such Partnership Leased Property in form and substance reasonably satisfactory
to Parent.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
approval of matters presented in connection with the Merger by the equityholders
of Purchaser or, subject to the terms hereof, the unitholders of the
Partnership:
(a) by mutual written consent of Parent and the Partnership;
(b) by either Parent or the Partnership if a statute, rule or
executive order shall have been enacted, entered or promulgated prohibiting the
transactions contemplated hereby on the terms contemplated by this Agreement or
if any Governmental Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Units pursuant to the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
(c) by either Parent or the Partnership if the conditions described
in Section 7.01 shall not have been satisfied by August 30, 2004; provided,
however, that no party may terminate this Agreement pursuant to this Section
8.01(c) if the party or its affiliates is then in material breach of any
representation, warranty or covenant contained in this Agreement;
(d) by Parent or Purchaser:
(i) pursuant to Section 6.03(c);
(ii) if the Board of Directors of the General Partner shall
have recommended or approved a Partnership Takeover Proposal;
(iii) if any person or "group" (as defined in Section 13(d)(3)
of the Exchange Act), other than Parent, Purchaser or their affiliates or any
group of which any of them is a member, shall have acquired beneficial ownership
(as determined pursuant to Rule 13d-3 under the Exchange Act) of 50% or more of
the outstanding Units;
(iv) if there shall have been a material breach by the
Partnership of any provision of Section 5.02; or
(v) if (A) there shall be a breach of any representation or
warranty of the Partnership in this Agreement that is qualified as to
Partnership Material Adverse Effect, (B) there shall be a breach of any
representation or warranty of the Partnership in this Agreement that is not so
qualified, other than any such breaches which, in the aggregate, have not had or
could not reasonably be expected to have a Partnership Material Adverse Effect,
or (C) there shall be a material breach by the Partnership of any of its
covenants or agreements contained in this Agreement, which breach, in the case
of clause (A), (B) or (C), either is not capable of being
55
cured or, if it is capable of being cured, has not been cured by the earlier of
ten (10) business days following (x) written notice to the Partnership from
Parent or Purchaser of such breach and (y) the Unitholder Meeting; provided,
however, that neither Parent nor Purchaser may terminate this Agreement pursuant
to this Section 8.01(d)(v) if Parent or Purchaser is then in material breach of
this Agreement.
(e) by the Partnership if (A) the Board of Directors of the General
Partner determines, in good faith, after consultation with outside financial
advisors and outside counsel to the Partnership, that a Partnership Takeover
Proposal constitutes a Superior Partnership Proposal, (B) the Partnership has
complied with Section 5.02, (C) the Partnership, at the direction of the Board
of Directors of the General Partner, notifies Parent in writing that it intends
to enter into an agreement with respect to such Superior Partnership Proposal,
which notification identifies the person making the Superior Partnership
Proposal and attaches the most current version of such agreement (or an accurate
description of any material terms and conditions thereof), (D) Parent does not
make, within three (3) business days of receipt of the Partnership's written
notification of its intention to enter into a binding agreement for a Superior
Partnership Proposal, an offer that the Board of Directors of the General
Partner determines, in good faith after consultation with its financial and
legal advisors, is at least as favorable to the unitholders of the Partnership
as such Superior Partnership Proposal, it being understood that the Partnership
shall not enter into any such binding agreement during such three-business day
period and (E) the Partnership concurrently with such termination pursuant to
this Section 8.01(e) pays to Parent in immediately available funds the
Termination Fee (as provided in Section 6.09); provided, however, that prior to
any such termination, the Partnership shall, and shall cause its respective
financial and legal advisors to, negotiate in good faith with Parent to make
such adjustments in the terms and conditions of this Agreement as would enable
the Partnership to proceed with the transactions contemplated herein. The
Partnership agrees to notify Parent promptly of its intention to enter into a
written agreement referred to in its notification shall change at any time after
giving effect to such notification;
(f) by the Partnership if (A) there shall be a breach of any
representation or warranty of Parent or Purchaser in this Agreement that is
qualified as to materiality or Parent Material Adverse Effect, (B) there shall
be a breach of any representation or warranty of Parent or Purchaser in this
Agreement that is not so qualified, other than any such breaches which, in the
aggregate, have not had or could not reasonably be expected to have a Parent
Material Adverse Effect or (C) there shall be a material breach by Parent or
Purchaser of any of its covenants or agreements contained in this Agreement,
which breach, in the case of clause (A), (B) or (C), either is not capable or
being cured or, if it is capable of being cured, has not been cured by the
earlier of (x) ten (10) business days following written notice to Parent from
the Partnership of such breach and (y) the Closing Date; provided, however, that
the Partnership may not terminate this Agreement pursuant to this Section
8.01(f) if the Partnership is then in material breach of this Agreement; or
(g) by the Partnership pursuant to Section 6.03(c).
56
8.02 Effect of Termination. In the event of termination of this Agreement
by either the Partnership or Parent or Purchaser as provided in Section 8.01,
this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent, Purchaser, the General Partner or
the Partnership, other than Section 6.05(f), Section 6.09, this Section 8.02 and
Article IX, which provisions shall survive such termination, and except that
nothing in this Section 8.02 shall relieve a party from liability for fraud or
liability for the willful breach by a party of any representation, warranty or
covenant set forth in this Agreement and such party shall be fully liable for
any and all liabilities and damages incurred or suffered by the other party as a
result of any such breach.
8.03 Amendment. This Agreement may be amended, supplemented or modified by
the parties at any time before or after receipt of the Unitholder Approval only
by an instrument in writing signed on behalf of each of the parties; provided,
however, that after receipt of the Unitholder Approval, there shall be made no
amendment, supplement or modification that by Law requires further approval by
the unitholders of the Partnership or that changes the consideration payable
hereunder to holders of Units without the further approval of such unitholders.
8.04 Extension; Waiver. At any time prior to the Effective Time, (a) the
parties may extend the time for the performance of any of the obligations or
other acts of the other parties, (b) each party may waive any inaccuracies in
the representations and warranties of another party contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, each party may waive compliance with any of the
agreements or conditions of another party contained in this Agreement. Subject
to Section 6.12, any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert any
of its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
8.05 Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment,
modification or supplement of this Agreement pursuant to Section 8.03 or an
extension or waiver pursuant to Section 8.04 shall, in order to be effective,
require in the case of Parent, action by its Board of Trustees, or in the case
of the Partnership, action by the Board of Directors of its General Partner, or
in each case action by the duly authorized designee of the Board of Directors or
Board of Trustees.
ARTICLE IX
GENERAL PROVISIONS
9.01 Nonsurvival of Representations and Warranties. None of the
representations, warranties or covenants in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
57
9.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given upon receipt (or upon the next succeeding business day if received after
5:00 p.m. local time on a business day or if received on a Saturday, Sunday or
United States holiday) by the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Purchaser, to:
HRPT Properties Trust
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxx
with a copy to:
Xxxxxxxx & Worcester LLP
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx
(b) if to the Partnership, to:
Hallwood Realty, LLC
0000 Xxxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
with a copy to:
Jenkens & Xxxxxxxxx, a Professional Corporation
0000 Xxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: W. Xxxx Xxxxxx
9.03 Definitions. For purposes of this Agreement:
An "affiliate," when used with reference to any person, shall have the
meaning ascribed to such term in Rule 12b-2 of the Exchange Act, as in effect on
the date of this Agreement.
A "business day" means any day other than Saturday, Sunday or any other
day on which banks in the City of New York are required or permitted by
applicable Law to close.
"Contingent Liabilities" means (a) all obligations of the Partnership or
any Subsidiary under take-or-pay or similar arrangements, (b) all debt of others
secured by (or for which the
58
holder of such debt has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by the Partnership or any Subsidiary, whether or not
the obligations secured thereby have been assumed, (c) all guaranties of the
Partnership or any Subsidiary with respect to debt of another person, (d) the
net liabilities of the Partnership or any Subsidiary under hedging agreements,
(e) the maximum amount of all standby letters of credit issued or bankers'
acceptances facilities created for the account of the Partnership or any
Subsidiary and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed) and (f) the debt of any partnership or unincorporated joint
venture in which the Partnership or any Subsidiary is a general partner or a
joint venturer, in each case to the extent that such debt is not reflected in
the Partnership's consolidated financial statements included in the Partnership
SEC Documents.
"in the ordinary course of business," with respect to any action, means
such action is: (a) consistent with the past custom and practices of such person
(including with respect to quantity and frequency) and is taken in the ordinary
course of the normal day-to-day operations of such person; (b) not required to
be authorized by the Board of Directors of the General Partner of such person;
and (c) similar in nature and magnitude to actions customarily taken, without
any authorization by the Board of Directors of the General Partner, in the
ordinary course of the normal day-to-day operations of other persons that are in
the same line of business as such person.
"Litigation" means the action captioned High River Limited Partnership x.
Xxxxxxxx Realty, LLC, et al and the action captioned I.G. Holdings, Inc., et xx
x. Xxxxxxxx Realty, LLC, et al, each in the Court of Chancery of the state of
Delaware, New Castle County.
"Mortgage Document" means any mortgage, deed of trust or deed to secure
debt encumbering any part of the Partnership Real Property or any other document
or instrument executed in connection therewith including any note, credit
agreement or any amendments of any of the foregoing.
"MREIT" means Title 8 of the Maryland corporation law entitled "Real
Estate Investment Trusts".
"Net Indebtedness" means, an amount determined by subtracting Net Working
Capital from the aggregate unpaid principal amount and accrued interest of the
indebtedness for borrowed money listed on Section 3.05(a)(ii) of the Partnership
Disclosure Letter.
"Net Working Capital" means the amount equal to:
(a) the amount by which (i) "cash and cash equivalents," "accounts
receivable," "receivable from affiliate, net," "escrow deposits held by
lenders," "prepaid expenses and other assets," and "effective rent receivable,"
(provided that any "accounts receivable" in excess of thirty (30) days past due
shall be excluded) exceed (ii) "accounts payable and accrued expenses," "payable
to affiliates," and "prepaid rent, security deposits and other," all in each
case as reflected on the Partnership's consolidated balance sheet and determined
in accordance with
59
GAAP by a national, independent accounting firm to be agreed upon by the
Partnership and Parent ("Accountant") as of the close of business on the last
day of the calendar month immediately preceding the Closing Date (the
"Determination Date"), plus
(b) the aggregate exercise price of all outstanding Unit Options, minus
(c) the sum of (i) Transaction Costs, (ii) estimated Taxes related to Tax
Returns described in Section 6.15(a) hereof, (iii) all unaccrued real estate
brokerage fees, "tenant inducements", "free rent" and other amounts due from the
landlord under any Partnership Lease, (iv) the estimated cost required to remedy
Rent Defects calculated as set forth in Section 6.03(c)(ii), and (v) the
estimated cost required to remedy or remove any Defects (other than Rent
Defects), Title Defects or Survey Defects pursuant to Section 6.03(c), in each
case to the extent the Partnership or any Subsidiary has not then remedied or
removed such Defects, Title Defects or Survey Defects and paid all costs in
connection therewith prior to the Determination Date, in each case unless
reflected on the books of the Partnership on or prior to the Determination Date
as "accounts payable and accrued expenses".
Net Working Capital shall be determined by the Accountant as of the close
of business on the business day immediately prior to the Closing Date and in a
manner consistent with the schedule set forth in Section 9.03 of the Partnership
Disclosure Letter.
A "Partnership Material Adverse Effect" means any event, circumstance,
condition, development or occurrence causing, resulting in or having a material
adverse effect on (i) the business, operations, assets, financial condition, or
results of operations of the Partnership and the Subsidiaries taken as a whole,
(ii) the ability of the Partnership to perform its obligations under this
Agreement, (iii) the ability of the Partnership to consummate the Merger or (v)
the ability of the HWG Parties to consummate the Other Transactions; provided,
however, that effects relating to (a) the economy in general, (b) changes
affecting the real estate industry generally, (c) changes in the market price or
trading volume of the Partnership's securities, or (d) the announcement of the
transactions contemplated hereby, shall not be deemed to constitute a
Partnership Material Adverse Effect or be considered in determining whether a
Partnership Material Adverse Effect has occurred.
A "person" means any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, association, Governmental Entity or
other entity of any kind.
"Prepaid Debt" means the indebtedness for borrowed money set forth in
Section 9.03 of the Partnership Disclosure Letter.
A "subsidiary" of any person means any other person of which (i) such
person or any subsidiary thereof is a general partner, (ii) such person and/or
one or more of its subsidiaries holds voting power to elect a majority of the
board of directors or others performing similar functions for such entity or
(iii) such person, directly or indirectly, owns or controls more than 50% of the
equity interests of such other person.
60
"Title Company" means a nationally recognized title insurance company
designated by Parent to provide title insurance policies or any applicable title
commitment or report relating to the Partnership Real Property.
"Transaction Costs" means fees and expenses of lawyers, brokers,
investment bankers and financial advisors in connection with the Transactions
and to the extent they are obligations of the Partnership and not the General
Partner, the Other Transactions, costs associated with preparation and making of
the Proxy Statement including legal fees, accountants' fees, filing fees,
printing, mailing and solicitation expenses, payments to employees (including
persons deemed jointly employed by HWG, LLC and 1st Odyssey) resulting from the
Merger (including payments arising under the Amended and Restated Executive
Incentive and Retention Program and the Employee Change of Control Severance
Payment Policy), the greater of $655,000 and the actual amount of consideration
paid to lenders in respect of consent and similar fees, premiums paid for
so-called "tail insurance" and an amount, but not more than $500,000, equal to
one half of anticipated Transfer Taxes. The Partnership shall obtain statements
from all persons who have provided products or services, the cost of which would
constitute Transaction Costs, as of the close of business on the business day
immediately preceding the Closing Date and where applicable, estimated through
the Closing Date. Payments to employees shall be determined based upon a list of
employees whose services will be terminated at or after the Closing Date,
supplied by Parent and anticipated real estate transfer taxes shall be
determined by the Title Company.
"Working Capital Adjustment" means, (i) if Net Indebtedness is greater
than $164,500,000, the negative amount which results by subtracting Net
Indebtedness from $164,500,000, or (ii) if Net Indebtedness is less than
$159,500,000, the positive amount which results by subtracting Net Indebtedness
from $159,500,000. The Working Capital Adjustment shall be determined by the
Accountant as of the close of business on the business day immediately preceding
the Closing Date and in a manner consistent with the schedule set forth in
Section 9.03 of the Partnership Disclosure Letter.
Words and terms used in this Agreement which are defined in other sections
of this Agreement are used throughout this Agreement as therein defined.
9.04 Interpretation.
(a) When a reference is made in this Agreement to a section, exhibit
or schedule, such reference shall be to a section, exhibit or schedule of this
Agreement unless otherwise clearly indicated to the contrary.
(b) The schedules, exhibits and all documents expressly referred to
in this Agreement are incorporated into this Agreement and are made a part of
this Agreement as if set out in full.
61
(c) The titles, captions and table of contents contained in this
Agreement are inserted only as a matter of convenience and for reference and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision of this Agreement.
(d) Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(e) The words "hereof", "herein" and "herewith" and words of similar
import shall, unless otherwise stated, be construed to refer to this Agreement
as a whole and not to any particular provision of this Agreement.
(f) The plural of any defined term shall have a meaning correlative
to such defined term, and words denoting any gender shall include all genders.
Where a word or phrase is defined herein, each of its other grammatical forms
shall have a corresponding meaning.
(g) A reference to any legislation or to any provision of any
legislation shall include any amendment, modification or re-enactment thereof,
any legislative provision substituted therefor and all regulations issued
thereunder or pursuant thereto.
(h) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring a party by virtue of the authorship of any provision of this
Agreement.
9.05 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or 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 and legal substance of
the Transactions 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 to the end that the Transactions are
fulfilled to the extent possible.
9.06 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.
9.07 Entire Agreement; No Third-Party Beneficiaries. This Agreement, taken
together with the Partnership Disclosure Letter all schedules and the Purchase
Agreement, (a) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the Transactions and (b) except for the provisions of Article II,
Section 6.08 and Section 6.13, is not intended to confer upon any person other
than the parties hereto any rights, remedies, obligations or liabilities.
62
9.08 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.09 Consent to Jurisdiction. Any action or proceeding seeking to enforce
any provision of or based on any right arising out of or otherwise relating to
this Agreement may be brought against any party hereto exclusively in the
Delaware Chancery Court, unless the Delaware Chancery Court does not have
jurisdiction over such action or proceeding, in which case such action or
proceeding may be brought in the state courts of the State of Delaware, and each
party hereto irrevocably consents to the exclusive jurisdiction and venue in
Delaware Chancery Court or the state courts of the State of Delaware, as
applicable. Each party hereto hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, any claim that it is not
personally subject to jurisdiction in such court, that its property is exempt or
immune from jurisdiction of such court or from any legal process commenced in
such court (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable Law, that the suit, action or
proceeding in such court is brought in an inconvenient forum, or that this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts and further irrevocably waives, to the fullest extent permitted by
applicable Law, the benefit of any defense that would hinder, xxxxxx or delay
the levy, execution or collection of any amount to which the party is entitled
pursuant to the final judgment of any court having jurisdiction. Each party
irrevocably consents to the service of process out of the aforementioned court
in any such action or proceeding by the mailing of copies thereof by registered
airmail, postage prepaid, to such party at its address set forth in this
Agreement, such service of process to be effective upon acknowledgement of
receipt of such registered mail. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by Law.
9.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties. Any purported assignment without such consent
shall be void. Subject to the preceding sentences, this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
9.11 Limitations on Warranties.
(a) Except for the representations and warranties contained in
Article III of this Agreement and in the Partnership Disclosure Letter, the
Partnership makes no other express or implied representation or warranty to
Parent or Purchaser. Parent and Purchaser each acknowledge that, in entering
into this Agreement, it has not relied on any representations or warranties of
the Partnership other than the representations and warranties of the Partnership
set forth in Article III of this Agreement or the Partnership Disclosure Letter.
63
(b) Except for the representations and warranties contained in
Article IV of this Agreement, Parent and Purchaser make no other express or
implied representation or warranty to the Partnership. The Partnership
acknowledges that, in entering into this Agreement, it has not relied on any
representations or warranties of Parent and Purchaser other than the
representations and warranties of Parent and Purchaser set forth in Article IV
of this Agreement.
9.12 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
9.13 Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING THE
PARENT, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE
"DECLARATION"), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF
THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO
THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE PARENT SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE PARENT. ALL PERSONS
DEALING WITH THE PARENT, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE PARENT
FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
[SIGNATURE PAGE FOLLOWS]
64
IN WITNESS WHEREOF, Parent, Purchaser and the Partnership have duly
executed this Agreement, all as of the date first written above.
HRPT PROPERTIES TRUST
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
HWP LP ACQUISITION LLC
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
HALLWOOD REALTY PARTNERS, L.P.
By: Hallwood Realty, LLC, its general partner
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
HALLWOOD REALTY, LLC
By: /s/ Xxxx X. Xxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Executive Vice President
65
