Exhibit 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
EAGLE HOSPITALITY PROPERTIES TRUST, INC.,
EHP OPERATING PARTNERSHIP, L.P.,
AP AIMCAP HOLDINGS LLC
and
AP AIMCAP CORPORATION
Dated as of April 27, 2007
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS.............................................................................................2
Section 1.01 Definitions...................................................................2
Section 1.02 Interpretation and Rules of Construction.....................................10
ARTICLE II THE MERGER............................................................................................11
Section 2.01 General......................................................................11
Section 2.02 Charter and Bylaws...........................................................11
Section 2.03 Effective Time...............................................................11
Section 2.04 Closing......................................................................11
Section 2.05 Directors and Officers of the Surviving Entity; General Partner..............11
ARTICLE III EFFECTS OF THE MERGER................................................................................12
Section 3.01 Effects on Shares............................................................12
Section 3.02 Effect on Units of Partnership Interest of the Operating Partnership.........13
Section 3.03 Paying Agent.................................................................14
Section 3.04 Withholding Rights...........................................................17
Section 3.05 Further Actions..............................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING PARTNERSHIP...........................17
Section 4.01 Organization and Qualification; Subsidiaries; Authority......................17
Section 4.02 Organizational Documents.....................................................18
Section 4.03 Capitalization...............................................................18
Section 4.04 Authority Relative to this Agreement; Validity and Effect of
Agreements...................................................................20
Section 4.05 No Conflict; Required Filings and Consents...................................20
Section 4.06 Permits; Compliance with Laws................................................21
Section 4.07 SEC Filings; Financial Statements............................................22
Section 4.08 No Unknown Liabilities.......................................................23
Section 4.09 Absence of Certain Changes or Events.........................................23
Section 4.10 Absence of Litigation........................................................23
Section 4.11 Employee Benefit Plans.......................................................24
Section 4.12 Labor Matters................................................................25
Section 4.13 Information Supplied.........................................................26
Section 4.14 Property and Leases..........................................................26
Section 4.15 Personal Property............................................................28
Section 4.16 Intellectual Property........................................................28
Section 4.17 Taxes........................................................................28
Section 4.18 Environmental Matters........................................................31
I
Section 4.19 Material Contracts...........................................................31
Section 4.20 Brokers......................................................................33
Section 4.21 Opinion of Financial Advisor.................................................33
Section 4.22 Insurance....................................................................33
Section 4.23 Special Committee Recommendation; Company Board Recommendation...............34
Section 4.24 Related Party Transactions...................................................34
Section 4.25 State Takeover Statutes......................................................34
Section 4.26 Outstanding Indebtedness.....................................................34
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................34
Section 5.01 Corporate Organization.......................................................35
Section 5.02 Ownership of Merger Sub; No Prior Activities.................................35
Section 5.03 Power and Authority..........................................................35
Section 5.04 No Conflict; Required Filings and Consents...................................36
Section 5.05 Information Supplied.........................................................37
Section 5.06 Absence of Litigation........................................................37
Section 5.07 Financing....................................................................37
Section 5.08 Solvency; Surviving Corporation After the Merger.............................37
Section 5.09 Guaranty.....................................................................38
Section 5.10 No Ownership of Equity Interest..............................................38
Section 5.11 Other Agreements or Understandings...........................................38
Section 5.12 Brokers......................................................................38
Section 5.13 No Other Representations and Warranties......................................38
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER................................................................39
Section 6.01 Conduct of Business by the Company Pending the Merger........................39
Section 6.02 Conduct of Business by Parent Pending the Merger.............................43
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................44
Section 7.01 Proxy Statement; Other Filings...............................................44
Section 7.02 Company Stockholders' Meeting................................................44
Section 7.03 Access to Information; Confidentiality.......................................45
Section 7.04 No Solicitation of Transactions..............................................46
Section 7.05 Employee Benefits Matters....................................................48
Section 7.06 Directors' and Officers' Indemnification and Insurance.......................49
Section 7.07 Further Action; Reasonable Best Efforts......................................52
Section 7.08 Transfer Taxes...............................................................53
Section 7.09 Public Announcements.........................................................53
Section 7.10 Financing....................................................................53
Section 7.11 Stockholder and Limited Partner Litigation...................................54
Section 7.12 Fees and Expenses............................................................55
Section 7.13 State Takeover Laws..........................................................55
Section 7.14 Notification of Certain Matters..............................................55
Section 7.15 Resignations.................................................................55
Section 7.16 Puerto Rico Casino...........................................................55
II
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................56
Section 8.01 Conditions to the Obligations of Each Party..................................56
Section 8.02 Conditions to the Obligations of Parent and Merger Sub.......................56
Section 8.03 Conditions to the Obligations of the Company.................................57
ARTICLE IX TERMINATION AND WAIVER................................................................................57
Section 9.01 Termination..................................................................57
Section 9.02 Effect of Termination........................................................59
Section 9.03 Fees and Expenses............................................................59
Section 9.04 Waiver.......................................................................62
Section 9.05 Payment by Parent............................................................62
ARTICLE X GENERAL PROVISIONS.....................................................................................63
Section 10.01 Non-Survival of Representations and Warranties...............................63
Section 10.02 Non-Survival of Certain Covenants............................................63
Section 10.03 Notices......................................................................63
Section 10.04 Severability.................................................................66
Section 10.05 Amendment....................................................................66
Section 10.06 Entire Agreement; Assignment.................................................66
Section 10.07 Enforcement of Agreement.....................................................67
Section 10.08 Parties in Interest..........................................................68
Section 10.09 Governing Law; Forum.........................................................68
Section 10.10 Headings.....................................................................68
Section 10.11 Counterparts.................................................................68
Section 10.12 WAIVER OF JURY TRIAL.........................................................68
Exhibit A Form of Merger Sub Charter
Exhibit B Articles Supplementary Establishing and Fixing the Rights and Preferences of 8.25% Series A
Cumulative Redeemable Preferred Shares of the Surviving Entity
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 27, 2007 (this
"Agreement"), is made and entered into by and among Eagle Hospitality
Properties Trust, Inc., a Maryland corporation (the "Company"), EHP Operating
Partnership, L.P., a Maryland limited partnership (the "Operating Partnership"
and, together with the Company, the "Company Parties"), AP AIMCAP Holdings
LLC, a Maryland limited liability company ("Parent"), and AP AIMCAP
Corporation, a Maryland corporation and a wholly owned subsidiary of Parent
("Merger Sub" and, together with Parent, the "Parent Parties").
WHEREAS, the parties wish to effect a business combination through a
merger of the Company with and into Merger Sub (the "Merger") on the terms and
subject to the conditions set forth in this Agreement and in accordance with
the Maryland General Corporation Law (the "MGCL");
WHEREAS, the Special Committee of independent directors of the
Company (the "Special Committee") has (a) determined that this Agreement, the
Merger and the other transactions contemplated by this Agreement (the
"Contemplated Transactions") are advisable and in the best interests of the
Company and its stockholders and (b) recommended the approval of this
Agreement, the Merger and the Contemplated Transactions by the board of
directors of the Company (the "Company Board");
WHEREAS, the Company Board, based on the unanimous recommendation of
the Special Committee, has (a) determined that this Agreement, the Merger and
the Contemplated Transactions are advisable and in the best interests of the
Company and its stockholders, (b) approved this Agreement, the Merger and the
Contemplated Transactions, (c) directed that this Agreement, the Merger and
the Contemplated Transactions be submitted for consideration at the Company
Stockholders' Meeting and (d) recommended the approval of this Agreement, the
Merger and the Contemplated Transactions by the Company's stockholders;
WHEREAS, the Company, as the sole general partner of the Operating
Partnership, has approved this Agreement and deemed it advisable and in the
best interests of the Operating Partnership to enter into this Agreement and
to consummate the Merger and the Contemplated Transactions;
WHEREAS, the board of directors of Merger Sub has approved this
Agreement, the Merger and the Contemplated Transactions and declared that this
Agreement, the Merger and the Contemplated Transactions are advisable and in
the best interests of Merger Sub and its stockholders;
WHEREAS, Parent, as the sole stockholder of Merger Sub, has approved
the Merger;
WHEREAS, pursuant to the terms of the Operating Partnership
Agreement, upon the terms and subject to the conditions set forth in this
Agreement, each Existing Unit Holder will have the opportunity to elect to
receive, for each Existing Unit, the Electing Unit Consideration, as described
in Section 3.02;
1
WHEREAS, concurrently with the execution of this Agreement, Parent
has delivered to the Company a full and unconditional guaranty (the
"Guaranty") of the obligations arising under this Agreement of the Parent
Parties executed by Apollo Real Estate Investment Fund V, L.P. (the
"Guarantor");
WHEREAS, upon the terms and subject to the conditions set forth
herein, at the Closing, Merger Sub and the Company shall execute Articles of
Merger (the "Articles of Merger") and shall file such Articles of Merger in
accordance with the MGCL to effectuate the Merger;
WHEREAS, the parties hereto intend that for U.S. federal and state
income Tax purposes, the Merger will be treated as a taxable sale by the
Company of all of the Company's assets to Parent in exchange for the Common
Share Cash Merger Consideration and Preferred Shares Merger Consideration and
the assumption of the Company Liabilities, followed by liquidating
distributions of (i) Common Share Cash Merger Consideration and accrued
dividend on Common Shares to the holders of Company Common Shares and (ii)
Preferred Shares Merger Consideration to the holders of Company Series A
Preferred Shares pursuant to Sections 331 and 562 of the Code; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Merger, and also
to prescribe various conditions to such transactions.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 .Definitions.
(a) For purposes of this Agreement:
"Acquisition Proposal" means any proposal, offer, inquiry or
indication of interest from or by any Person other than Parent and Merger Sub
contemplating or otherwise relating to or involving (i) any direct or indirect
(A) sale, lease, exchange, transfer, acquisition or disposition of more than
20% of the assets of the Company and its Subsidiaries, taken as a whole, (B)
acquisition or purchase of more than 20% of the shares of capital stock,
partnership interests or other equity securities of the Company and its
Subsidiaries, taken as a whole or (C) acquisition or disposition of a business
or businesses that constitute 20% or more of the cash flow, net revenues, net
income or assets of the Company and its Subsidiaries, taken as a whole; (ii)
any tender offer or exchange offer, as defined pursuant to the Exchange Act,
that, if consummated, would result in any Person beneficially owning 20% or
more of the outstanding equity securities of the Company; (iii) any merger,
consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
Merger, pursuant to which the stockholders of the Company prior to
consummation of such transaction would hold less than 80% of the outstanding
shares or equity interests of the surviving or
2
resulting Person or parent thereof; (iv) any similar transaction or business
combination involving the Company or any of its businesses, shares of stock,
partnership interests, other equity interests or assets; or (v) any
combination of any of the foregoing.
"Action" means any claim, action, suit, proceeding, arbitration,
mediation, inquiry or other investigation.
"Affiliate" or "affiliate" of a specified Person means a Person who,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Business Day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday or
Sunday) on which banks are not required or authorized to close in The City of
New York.
"Certificate" means any certificate representing Company Common
Shares.
"Company Bylaws" means the Bylaws of the Company as in effect on the
date hereof.
"Company Charter" means the Articles of Amendment and Restatement of
the Company as amended and supplemented and in effect on the date hereof,
including, as in effect on the date hereof, the Articles Supplementary of the
8.25% Series A Cumulative Redeemable Preferred Shares.
"Company Common Shares" means shares of common stock, par value $0.01
per share, of the Company.
"Company Material Adverse Effect": An event, change, effect,
circumstance or development will be deemed to have a "Company Material Adverse
Effect" if such event, change, effect, circumstance, development or other
matter (a) has had, or would reasonably be expected to have, a material
adverse effect, individually or in the aggregate, on the business, condition
(financial or otherwise), capitalization, assets, liabilities, operations or
financial performance of the Company and its Subsidiaries, taken as a whole,
excluding any effects arising out of or resulting from (i) any change in the
market price or trading volume of the Company Common Shares or the Company
Series A Preferred Shares, (ii) the announcement of the execution of this
Agreement or the performance of obligations under this Agreement or (iii) any
adverse change following the date of this Agreement in the securities,
financial, credit or real estate markets, or other change following the date
of this Agreement in general economic or business conditions, or an outbreak
or escalation of hostilities, a national emergency or war, or the occurrence
of any act of terrorism, or other changes (including changes in Law and GAAP)
in the conditions in the hotel, lodging and hospitality industry, or
earthquakes, hurricanes or other natural disasters or acts of God, in each
case in this part (iii), except if the Company and its Subsidiaries, taken as
a whole, are materially and disproportionately affected thereby, (b) has had,
or would reasonably be expected to have, a material adverse effect on the
ability of the Company Parties to timely consummate the Contemplated
Transactions or to timely perform any of their respective obligations under
this Agreement, or (c) has prevented or materially delayed, or would
3
reasonably be expected to prevent or materially delay, the consummation of the
Contemplated Transactions.
"Company Termination Fee" shall be an amount equal to $12,750,000.
"Company Triggering Event" means (i) a Recommendation Withdrawal;
(ii) the failure of the Company to include in the Proxy Statement the Company
Board Recommendation or a statement to the effect that the Company Board and
the Special Committee has determined and believes that this Agreement, the
Merger and the Contemplated Transactions are in the best interests of the
Company's stockholders; (iii) the approval, endorsement or recommendation of
the Company Board and the Special Committee of, or the public announcement of
its intent to approve, endorse or recommend, any Acquisition Proposal; (iv)
the entry into a Contract (other than a confidentiality agreement entered into
in compliance with Section 7.04(a)) by any of the Company Parties relating to
an Acquisition Proposal, or the public announcement of its intent to do so;
(v) the failure of the Company to comply with Section 7.04(a); or (vi) a
tender or exchange offer relating to securities of any of the Company Parties
shall have been commenced by someone other than Parent or its Affiliates and
the Company shall not have sent to its security holders, within ten (10)
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Company Board recommends rejection of such
tender or exchange offer.
"Contract" means any written or oral agreement, contract,
subcontract, lease, understanding, arrangement, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy or legally
binding commitment or undertaking of any nature other than the Plans,
including, in each case, any amendments, supplements or modifications thereto.
"control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, as trustee or executor, by
contract or credit arrangement or otherwise.
"Disclosure Schedule" means the disclosure schedule delivered by the
Company to Parent concurrently with the execution of this Agreement, which
disclosure schedule is arranged in paragraphs corresponding to the sections
contained in Article IV of this Agreement, provided, however, that the
disclosure of any fact or item in any section of such disclosure schedule
shall, should the existence of such fact or item be relevant to any other
section, be deemed to be disclosed with respect to that other section so long
as the relevance of such disclosure to such other section is reasonably
apparent from the nature of such disclosure. Nothing in the Disclosure
Schedule is intended to broaden the scope of any representation or warranty of
the Company made herein.
"Environmental Laws" means all applicable Legal Requirements relating
to pollution or protection of human health (as such matters relate to
Hazardous Substances) or the environment, including ambient air, surface
water, ground water, land surface or subsurface strata, including laws and
regulations relating to emissions, discharges, releases or threatened releases
of Hazardous Substances, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
4
"Governmental Authority" means any United States, foreign,
territorial, provincial, state, commonwealth, municipal, tribal or local
government, governmental, regulatory or administrative authority, agency,
instrumentality or commission or any court, tribunal, or judicial or arbitral
body.
"Hazardous Substances" means (i) those substances defined in or
regulated under the following United States federal statutes and their state
counterparts, as each has been amended from time to time, and all regulations
thereunder in effect prior to the date hereof: the Resource Conservation and
Recovery Act, CERCLA, the Clean Water Act, the Safe Drinking Water Act, the
Atomic Energy Act, and the Clean Air Act; (ii) petroleum and petroleum
products, including crude oil and any fractions thereof; (iii) polychlorinated
biphenyls, asbestos, and radon; and (iv) chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances and radioactive materials
regulated by any Governmental Authority.
"Intellectual Property" means United States and international (i)
patents, patent applications and invention registrations of any type, (ii)
trademarks, service marks, trade dress, logos, trade names, corporate names
and other source identifiers, and registrations and applications for
registration thereof, (iii) copyrightable works, copyrights, and registrations
and applications for registration thereof, and (iv) confidential and
proprietary information, including trade secrets and know-how.
"Knowledge of the Company" means the actual knowledge of J. Xxxxxxx
Xxxxxxxx and Xxxxxxx X. Xxxxx after such inquiry as is reasonable under the
circumstances.
"Law" means any United States, foreign, territorial, commonwealth,
state, provincial, municipal or local statute, law, ordinance, regulation,
rule, code, executive order, injunction, judgment, decree or other order.
"Legal Requirement" means any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, executive order, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, applied,
implemented or otherwise put into effect by or under the authority of any
Governmental Body (or under the authority of NYSE or any other stock exchange,
if applicable).
"Liens" means, with respect to any asset (including any security),
any mortgage, claim, lien, pledge, charge, security interest or encumbrance of
any kind (other than licenses of Intellectual Property or similar agreements
relating to Intellectual Property which are not intended to secure an
obligation) in respect to such asset.
"Nomination Rights Agreement" means that certain Nomination Rights
Agreement, dated as of October 6, 2004, by and among the Company and Corporex
Companies, LLC.
"Operating Partnership Agreement" means that certain Agreement of
Limited Partnership of the Operating Partnership, dated as of October 6, 2004,
by and among the Company and the limited partners listed on Exhibit A thereto,
and that certain Amendment to Agreement of Limited Partnership of the
Operating Partnership, dated as of June 13, 2005.
5
"Ownership Limitation" has the meaning set forth in the Company
Charter, as amended from time to time, as in effect on the date hereof.
"Parent Material Adverse Effect" means any event, circumstance,
change or effect that would be expected to prevent, hinder or materially delay
Parent or Merger Sub from consummating the Merger or the Contemplated
Transactions or otherwise prevent it from performing its obligations under
this Agreement.
"Permitted Liens" means (i) Liens for Taxes not yet delinquent and
Liens for Taxes being contested in good faith by appropriate proceedings in
respect thereof during which collection or enforcement is stayed and for which
there are adequate reserves on the financial statements of the Company (if
such reserves are required pursuant to GAAP); (ii) inchoate mechanics' and
materialmen's Liens for construction in progress; (iii) inchoate workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company or any Subsidiary of the Company; (iv) zoning
restrictions, survey exceptions, utility easements, rights of way and similar
Liens that are imposed by any Governmental Authority having jurisdiction with
respect thereto or otherwise are typical for the applicable property type and
locality and that, individually or in the aggregate, do not interfere
materially, or would not reasonably be expected to interfere materially, with
the current use and operation of such property (assuming its continued use in
the manner in which it is currently used); (v) with respect to real property,
Liens and obligations arising under the Material Contracts (including but not
limited to any Lien securing mortgage debt disclosed in the Disclosure
Schedule), the Company Leases and any other Lien that does not interfere
materially with the current use of such property (assuming its continued use
in the manner in which it is currently used) or materially adversely affect
the value or marketability of such property; (vi) matters that would be
disclosed on current title reports or surveys that arise or have arisen in the
ordinary course of business and that, individually or in the aggregate, do not
interfere materially, or would not reasonably be expected to interfere
materially, with the current use and operation of such property (assuming its
continued use in the manner in which it is currently used); and/or (vii) other
Liens being contested in good faith in the ordinary course of business and for
which there are adequate reserves on the financial statements of the Company.
"Person" means an individual, corporation, partnership, limited
partnership, limited liability company, syndicate, person (including a
"person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association, entity or government, or political subdivision, agency or
instrumentality of a government.
"Representatives" means, with respect to any Person, the equity
holders, partners, employees, consultants, officers, directors, agents,
attorneys accountants, advisors, debt and equity financing sources and
representatives of such Person.
"Reverse Termination Fee" shall be an amount equal to $12,750,000.
"Scheduled Indebtedness" means (without duplication), at any time and
with respect to the Company, (a) indebtedness of the Company for borrowed
money (whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than amounts
constituting trade payables, accruals or bank drafts arising in the
6
ordinary course of business); (b) indebtedness of others in the amount which
the Company has directly or indirectly assumed or guaranteed or otherwise
provided credit support therefor or for which the Company is liable as a
partner of such other party; (c) indebtedness of others in the amount secured
by a Lien on assets of the Company, whether or not the Company shall have
assumed such indebtedness; and (d) obligations of the Company in respect of
letters of credit, acceptance facilities, or drafts or similar instruments
issued or accepted by banks and other financial institutions for the account
of the Company (other than trade payables or bank drafts arising in the
ordinary course).
"Subsidiary" of the Company, Parent or any other Person means a
corporation, limited liability company, partnership, joint venture or other
organization of which: (a) such party or any other subsidiary of such party is
a general partner; (b) voting power to elect a majority of the board of
directors or others performing similar functions with respect to such
organization is held by such party or by any one or more of such party's
subsidiaries; or (c) at least 50% of the equity interests is controlled by
such party.
"Superior Proposal" means any Acquisition Proposal (except that
references to 20% within the definition of "Acquisition Proposal" shall be
replaced by "50%") made by a third party on terms that the Company Board
(acting through the Special Committee) determines, in its good faith judgment,
after consulting with its or the Special Committee's, as applicable, financial
advisors and outside legal counsel, taking into account, among other things,
all of the terms, conditions and circumstances of the Acquisition Proposal, to
be more favorable to the Company's stockholders from a financial point of view
than the terms of the Merger and the Contemplated Transactions (after giving
effect to any modification to this Agreement proposed by the Parent Parties)
and to be reasonably capable of being consummated.
"Superior Proposal Notice" means at least three (3) Business Days
written notice from the Company to Parent that the Company or its Special
Committee is in receipt of an unsolicited Superior Proposal and is prepared to
approve, authorize or recommend such Superior Proposal or the applicable
amendment to a Superior Proposal, specifying the material terms and conditions
of such Superior Proposal or amendment thereto (and a copy thereof, if
available) and identifying the third party making such Superior Proposal or
amendment thereto.
"Taxes" means any and all taxes, charges, fees, levies and other
assessments, including income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, license, payroll,
franchise, transfer and recording taxes, fees and charges, including estimated
taxes, imposed by the United States or any taxing authority (domestic or
foreign), whether computed on a separate, consolidated, unitary, combined or
any other basis, and similar charges in the nature of a tax (together with any
and all interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority.
(b) the following terms have the meaning set forth in the sections set forth
below:
Location
Defined Terms of Definition
--------------------------------------------------------- ------------------
7
2006 Balance Sheet..................................... Section 4.08
2007 Budget............................................ Section 6.01(k)
Acquisition Agreement.................................. Section 7.04(c)
Additional Company Common Share Merger Consideration... Section 3.01(c)
Agreement.............................................. Preamble
Articles of Merger..................................... Recitals
Blue Sky Laws.......................................... Section 4.05(b)
Capital Expenditures................................... Section 6.01(k)
CERCLA................................................. Section 4.18(c)
Claim.................................................. Section 7.06(a)
Closing................................................ Section 2.04
Closing Date........................................... Section 2.04
Code................................................... Section 4.11(b)
Commitment Letters..................................... Section 5.07
Commitments............................................ Section 5.07
Company................................................ Preamble
Company Board.......................................... Recitals
Company Board Recommendation........................... Section 4.23
Company Common Share Cash Merger Consideration......... Section 3.01(c)
Company Common Share Merger Consideration.............. Section 3.01(c)
Company Employees...................................... Section 7.05(b)
Company Expenses....................................... Section 9.03(e)
Company Intellectual Property.......................... Section 4.16
Company Leases......................................... Section 4.14(f)
Company Parties........................................ Preamble
Company Properties..................................... Section 4.14(a)
Company Property....................................... Section 4.14(a)
Company Representatives................................ Section 7.04(a)
Company Series A Preferred Shares...................... Section 3.01(d)
Company Stockholder Approval........................... Section 7.02
Company Stockholders' Meeting.......................... Section 7.02
Confidentiality Agreement.............................. Section 7.03(b)
Contemplated Transactions.............................. Recitals
Continuing Employees................................... Section 7.05(b)
Effective Time......................................... Section 2.03
Electing Unit.......................................... Section 3.03(d)
Electing Unit Consideration............................ Section 3.02(a)
Electing Unit Holder................................... Section 3.02(a)
Election Form.......................................... Section 3.02(b)
Encumbrances........................................... Section 4.14(a)
Environmental Permits.................................. Section 4.18(a)
ERISA.................................................. Section 4.11(a)
Exchange Act........................................... Section 4.05(b)
Executive Officers..................................... Section 7.05(a)
Existing Unit Holder................................... Section 3.02(a)
Existing Units......................................... Section 3.02(a)
8
Expenses............................................... Section 7.06(a)
Financing.............................................. Section 5.07
GAAP................................................... Section 4.07(b)
Governmental Order..................................... Section 9.01(c)
Ground Lease........................................... Section 4.14(d)
Ground Leases.......................................... Section 4.14(d)
Guaranty............................................... Recitals
Guarantor.............................................. Recitals
HSR Act................................................ Section 4.05(b)
Incentive Plan......................................... Section 3.01(c)
Indemnified Parties.................................... Section 7.06(a)
Insurance Amount....................................... Section 7.06(d)
IRS.................................................... Section 4.11(a)
Material Contract...................................... Section 4.19
Merger................................................. Recitals
Merger Sub............................................. Preamble
MGCL................................................... Recitals
Net Parent Expenses.................................... Section 9.03(e)
NYSE................................................... Section 4.05(b)
Operating Partnership.................................. Preamble
Operating Partnership Offer............................ Section 3.02(a)
Other Filings.......................................... Section 4.13
Outside Date........................................... Section 9.01(b)
Parent................................................. Preamble
Parent Consent Addressees.............................. Section 10.03
Parent Expenses........................................ Section 9.03(a)(i)
Parent Parties......................................... Preamble
Parent Plan............................................ Section 7.05(b)
Paying Agent........................................... Section 3.03(a)
Payment Fund........................................... Section 3.03(a)
Permits................................................ Section 4.06(a)
Plans.................................................. Section 4.11(a)
Preferred Share Merger Consideration................... Section 3.01(d)
Property Restrictions.................................. Section 4.14(a)
Proxy Statement........................................ Section 4.05(b)
Recommendation Withdrawal.............................. Section 7.02
REIT................................................... Section 4.17(b)
Remaining Unit Holder.................................. Section 3.02(a)
Required Vote.......................................... Section 4.04(a)
Restricted Share....................................... Section 3.01(c)
SDAT................................................... Section 2.03
SEC.................................................... Section 4.05(b)
SEC Reports............................................ Section 4.07(a)
Section 16............................................. Section 7.05(b)
Securities Act......................................... Section 4.05(b)
Series A Preferred Partnership Units................... Section 3.02(a)
9
Special Committee...................................... Recitals
Surviving Entity....................................... Section 2.01
Surviving Entity Charter and Bylaws.................... Section 2.02
Surviving Entity Series A Preferred Shares............. Section 3.01(d)
Tax Protection Agreements.............................. Section 4.17(n)
Tax Returns............................................ Section 4.17(a)
Termination Date....................................... Section 9.01
Third Party............................................ Section 4.14(e)
Transfer Taxes......................................... Section 7.08
Section 1.02 Interpretation and Rules of Construction. In this
Agreement, except to the extent otherwise provided or that the context
otherwise requires:
(a) when a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference is to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated;
(b) the table of contents and headings for this Agreement
are for reference purposes only and do not affect in any way the meaning or
interpretation of this Agreement;
(c) whenever the words "include," "includes" or
"including" are used in this Agreement, they are deemed to be followed by the
words "without limitation";
(d) the words "hereof," "herein" and "hereunder" and words
of similar import, when used in this Agreement, refer to this Agreement as a
whole and not to any particular provision of this Agreement;
(e) references to any statute, rule or regulation are to
the statute, rule or regulation as amended, modified, supplemented or replaced
from time to time (and, in the case of a statute, include any rules and
regulations promulgated under the statute) and references to any section of
any statute, rule or regulation include any successor to the section;
(f) all terms defined in this Agreement have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto, unless otherwise defined therein;
(g) the definitions contained in this Agreement are
applicable to the singular as well as the plural forms of such terms;
(h) references to a person are also to its successors and
permitted assigns; and
(i) the use of "or" is not intended to be exclusive unless
expressly indicated otherwise.
10
ARTICLE II
THE MERGER
Section 2.01 General. Subject to the terms and conditions of
this Agreement, and in accordance with the MGCL, at the Effective Time, Merger
Sub and the Company shall consummate the Merger pursuant to which (i) the
Company shall be merged with and into the Merger Sub and the separate
existence of the Company shall thereupon cease and (ii) Merger Sub shall be
the surviving entity in the Merger (the "Surviving Entity"). The Merger shall
have the effects specified in Section 3-114 of the MGCL.
Section 2.02 Charter and Bylaws. Merger Sub's Charter in the
form attached as Exhibit A hereto and Merger Sub's bylaws as in effect
immediately prior to the Effective Time, shall be the charter and bylaws,
respectively, of the Surviving Entity until thereafter amended in accordance
with the provisions thereof and as provided by applicable Law (the "Surviving
Entity Charter and Bylaws").
Section 2.03 Effective Time. At the Closing, Merger Sub and the
Company shall duly execute and file the Articles of Merger in accordance with
the MGCL. The Merger shall become effective at such time as the Articles of
Merger are accepted for record by the State Department of Assessments and
Taxation of Maryland ("SDAT") or such later time as the parties hereto shall
have agreed upon and designated in the Articles of Merger, but not to exceed
thirty (30) days after the Articles of Merger are accepted for record by the
SDAT (the "Effective Time").
Section 2.04 Closing. The closing of the Merger (the "Closing")
shall occur as promptly as practicable (but in no event later than the second
Business Day) after all of the conditions set forth in Article VIII (other
than conditions which by their terms are required to be satisfied or waived at
the Closing, but subject to the satisfaction or waiver thereof) shall have
been satisfied or waived by the party entitled to the benefit of the same,
and, subject to the foregoing, shall take place at such time and on a date to
be specified by the parties (the "Closing Date"). The Closing shall take place
at the offices of Akin Gump Xxxxxxx Xxxxx & Xxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, XX 00000, or at such other place as agreed to by the parties hereto.
Section 2.05 Directors and Officers of the Surviving Entity;
General Partner.
(a) The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Entity, subject to any
rights under the Nomination Rights Agreement, and the officers of the Company
immediately prior to the Effective Time shall be the officers of the Surviving
Entity, in each case to hold office until their successors are elected and
qualified.
(b) The general partner of the Operating Partnership
immediately after the Effective Time shall be the Surviving Entity, and the
limited partners of the Operating Partnership immediately after the Effective
Time shall be those Existing Unit Holders that elect not to accept the
Operating Partnership Offer or did not timely submit an Election Form to the
Company.
11
ARTICLE III
EFFECTS OF THE MERGER
Section 3.01 Effects on Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or any of their respective stockholders:
(a) Each common share of Merger Sub, par value $0.01 per
share, issued and outstanding immediately prior to the Effective Time shall
remain outstanding and be unaffected by the Merger.
(b) Each Company Common Share that is owned by any
Subsidiary or by Parent, Merger Sub or any other Subsidiary of Parent
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and no payment shall be made with respect
thereto.
(c) Each Company Common Share issued and outstanding
immediately prior to the Effective Time (including each restricted share (a
"Restricted Share") granted under the Company's 2004 Long-Term Incentive Plan
(the "Incentive Plan") or otherwise, but other than shares to be canceled in
accordance with Section 3.01(b)) shall automatically be converted into, and
canceled in exchange for, the right to receive an amount equal to the sum of
(i) $13.35 (the "Company Common Share Cash Merger Consideration"), and (ii) to
the extent the Company's regular dividend with respect to the fiscal quarter
in which the Effective Time occurs has not previously been declared and paid,
an amount in cash equal to $0.175 multiplied by the quotient obtained by
dividing (x) the number of days between the last day of the last fiscal
quarter for which full quarterly dividends on the Company Common Shares have
been declared and paid and the Effective Time (including the date on which the
Effective Time occurs) by (y) the total number of days in the fiscal quarter
during which the Effective Time occurs, without interest (the "Additional
Company Common Share Merger Consideration" and, together with the Company
Common Share Cash Merger Consideration, the "Company Common Share Merger
Consideration").
(d) Each share of the Company's 8.25% Series A Cumulative
Redeemable Preferred Shares, par value $0.01 per share (the "Company Series A
Preferred Shares"), issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and nonassessable
share of the Surviving Entity's 8.25% Series A Cumulative Redeemable Preferred
Shares, par value $0.01 per share having the rights and preferences set forth
in Exhibit B hereto (the "Surviving Entity Series A Preferred Shares" and the
consideration issued in exchange for the Company Series A Preferred Shares,
the "Preferred Share Merger Consideration").
(e) By virtue of the Merger and without any action on the
part of Parent, Merger Sub, the Company or the holders of Restricted Shares
granted pursuant to the Incentive Plan or otherwise, all Restricted Shares
automatically shall become fully vested and free of any forfeiture restriction
immediately prior to the Effective Time, and shall be considered Company
Common Shares for all purposes of this Agreement, including receipt of the
Company Common
12
Share Merger Consideration. Prior to the Effective Time, the Company will
adopt such resolutions and will take such other actions, including adopting
any plan amendments and obtaining any required consents, as shall be required
to effectuate the actions contemplated by this Section 3.01(e).
(f) If, subsequent to the date of this Agreement but prior
to the Effective Time, the outstanding Company Common Shares or Company Series
A Preferred Shares shall have been changed into a different number of shares
as a result of a stock split, reverse stock split, stock dividend,
subdivision, reclassification, split, combination, exchange, recapitalization,
or any dividend or other distribution payable in stock or other securities is
declared thereon or rights issued in respect thereof with a record date within
such period, or other similar transaction, the Company Common Share Merger
Consideration or the Preferred Share Merger Consideration, as applicable,
shall be appropriately adjusted so that the aggregate amount payable pursuant
to this Agreement to effect the Merger and the Contemplated Transactions shall
not have increased or decreased as a result of such adjustment.
Section 3.02 Effect on Units of Partnership Interest of the
Operating Partnership.
(a) In connection with the Merger and in accordance with
the procedures set forth in this Section 3.02, Parent and Merger Sub shall
offer (the "Operating Partnership Offer") to each holder (each an "Existing
Unit Holder") of units of limited partnership interest (the "Existing Units")
of the Operating Partnership the opportunity to receive in cash, in exchange
for each issued and outstanding Existing Unit held by such holder, an amount
equal to the sum of (i) $13.35 and (ii) to the extent the Company's regular
dividend with respect to the fiscal quarter in which the Effective Time occurs
has not previously been declared and paid, an amount in cash equal to $0.175
multiplied by the quotient obtained by dividing (x) the number of days between
the last day of the fiscal quarter for which full quarterly dividends on the
Company Common Shares have been declared and paid and the Effective Time
(including the date on which the Effective Time occurs) by (y) the total
number of days in the fiscal quarter in which the Effective Time occurs,
without interest (the "Electing Unit Consideration") as long as the Company
receives an Election Form from such holder (an "Electing Unit Holder") in
accordance with the provisions of this Section 3.02. Any Existing Unit Holder
who elects not to accept the Operating Partnership Offer or does not timely
and properly return an Election Form as set forth in this Section 3.02 (a
"Remaining Unit Holder"), shall remain as a limited partner of the Operating
Partnership and continue to hold Existing Units with the rights, terms and
conditions set forth in the Operating Partnership Agreement, and shall not be
entitled to receive the Electing Unit Consideration. The term "Existing Unit"
shall not include those units of partnership interest issued by the Operating
Partnership to the Company in consideration of the contribution by the Company
to the Operating Partnership of the entire net proceeds received by the
Company from the issuance of the Company Series A Preferred Shares (such
units, "Series A Preferred Partnership Units").
(b) The Company shall prepare a form of election in form
and substance reasonably acceptable to Parent (the "Election Form"),
describing the Operating Partnership Offer and pursuant to which each Existing
Unit Holder will have the right to specify the number, if any, of Existing
Units which it desires to have exchanged for the right to receive an amount
equal to the Electing Unit Consideration. In order for an Existing Unit Holder
to be eligible to
13
elect to have its Existing Units redeemed pursuant to the Operating
Partnership Offer, such Existing Unit Holder shall have submitted an Election
Form in accordance with the procedures and time periods specified in this
Section 3.02 and as shall be described more fully in the Election Form.
(c) The Company shall mail or cause to be mailed an
Election Form to each Existing Unit Holder, together with any other materials
that the Company and Parent determine to be necessary or prudent, no later
than twenty (20) Business Days prior to the Closing Date. An election to
receive the Electing Unit Consideration in the Operating Partnership Offer
shall be effective only if a properly executed Election Form is received by
the Company or its designees prior to 5:00 p.m., Eastern Time on the Business
Day prior to the Closing Date, or such other date as the Company and Parent
shall agree. If an Existing Unit Holder fails to return a duly completed
Election Form within the time period specified in the Election Form, such
holder shall be deemed to have elected to remain as a limited partner of the
Operating Partnership and continue to hold Existing Units. Parent and the
Company agree that (i) the Existing Unit Holders shall have the right to
revoke any election made in connection with the Operating Partnership Offer at
any time prior to the expiration of the time period stated in the Election
Form, and (ii) the Operating Partnership Offer shall be conducted in
accordance with applicable Law and the Operating Partnership Agreement. Parent
and the Company, by mutual agreement, shall have the right to make rules, not
inconsistent with the terms of this Agreement, governing the validity of
Election Forms and the issuance and delivery of the Electing Unit
Consideration, as applicable.
(d) Prior to the Closing Date, the Operating Partnership
shall declare a distribution with respect to each Existing Unit that is not an
Electing Unit in an amount equal to the Additional Company Common Share Merger
Consideration, the record date for such distribution to be the close of
business on the date of the Effective Time or such other date as the Company,
as general partner of the Operating Partnership, and Parent shall agree. Such
distribution shall be paid as promptly as practicable after the Effective Time
(but in any event within five (5) Business Days after the Effective Time).
(e) Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Election Form, (i) Parent or the
Company, as the case may be, shall promptly inform the other of such
occurrence, and (ii) Parent and the Company shall, in cooperation with each
other, prepare any such amendment or supplement to the Election Form, in form
and substance reasonably satisfactory to Parent, the indication of such
satisfaction not to be unreasonably withheld or delayed.
(f) The obligation of the Company and Parent to consummate the Operating
Partnership Offer shall be conditioned upon, and shall be subject to, the
concurrent Closing of the Merger as provided in this Agreement.
Section 3.03 Paying Agent.
(a) Prior to the Effective Time, Parent shall appoint a
bank or trust company reasonably satisfactory to the Company to act as Paying
Agent (the "Paying Agent") for the payment in accordance with this Article III
of the Company Common Share Merger
14
Consideration and the Electing Unit Consideration (collectively, such cash
being referred to as the "Payment Fund"). On or before the Effective Time,
Parent shall deposit with the Paying Agent the Company Common Share Merger
Consideration and the Electing Unit Consideration, for the benefit of the
holders of Company Common Shares and Electing Units, respectively. The Parent
shall cause the Paying Agent to make, and the Paying Agent shall make,
payments of the Company Common Share Merger Consideration and the Electing
Unit Consideration out of the Payment Fund in accordance with this Agreement.
The Payment Fund shall not be used for any other purpose. Any and all interest
earned on cash deposited in the Payment Fund shall be paid to the Surviving
Entity.
(b) At the Effective Time, the share transfer books of the
Company shall be closed and thereafter there shall be no further registration
of transfers of the Company Common Shares. From and after the Effective Time,
persons who held Company Common Shares immediately prior to the Effective Time
shall cease to have rights with respect to such shares, except as otherwise
provided for herein. On or after the Effective Time, any Certificates of the
Company presented to the Paying Agent, the Surviving Entity or the transfer
agent for any reason shall be exchanged for the Company Common Share Merger
Consideration with respect to the Company Common Shares formerly represented
thereby.
(c) Promptly after the Effective Time (but in any event
within two (2) Business Days after the Effective Time), the Surviving Entity
shall cause the Paying Agent to mail to each person who immediately prior to
the Effective Time held of record Company Common Shares: (i) a letter of
transmittal (which shall specify that delivery of Certificates shall be
effected, and risk of loss and title to the Certificates shall pass to the
Paying Agent, only upon delivery of the Certificates to the Paying Agent, and
which letter 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 holder's Certificates in exchange for the Company Common
Share Merger Consideration to which the holder thereof is entitled. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such
other agent or agents reasonably satisfactory to the Company as may be
appointed by Parent, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, and such other
documents as may reasonably be required by the Paying Agent, the holder of
such Certificate shall receive in exchange therefor the Company Common Share
Merger Consideration payable in respect of the Company Common Shares
previously represented by such Certificate pursuant to the provisions of this
Article III, and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Company Common Shares that is not
registered in the transfer records of the Company, payment may be made to a
person other than the person in whose name the Certificate so surrendered is
registered, if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other Taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.03, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive, upon such surrender, the Company Common Share Merger Consideration,
as contemplated by this Section 3.03. No interest shall be paid or accrue on
the Company Common Share Merger Consideration.
15
(d) As of the Effective Time, holders of Company Common
Shares shall cease to be, and shall have no rights as, stockholders of the
Company other than the right to receive the Company Common Share Merger
Consideration provided under this Article III. The Company Common Share Merger
Consideration paid upon the surrender for exchange of Certificates
representing Company Common Shares, in accordance with the terms of this
Article III, shall be deemed to have been paid in full satisfaction of all
rights and privileges pertaining to the Company Common Shares exchanged
therefor and represented by such Certificates. As of the Effective Time, the
holders of Existing Units for which a properly executed Election Form is
timely received (an "Electing Unit") shall cease to be, and shall have no
rights as, limited partners of the Operating Partnership other than the right
to receive the Electing Unit Consideration provided under this Article III.
(e) Any portion of the Payment Fund which remains
undistributed to the holders of Company Common Shares or Electing Units for
twelve (12) months after the Effective Time shall be delivered to the
Surviving Entity and any holders of Company Common Shares and Electing Units
prior to the Merger who have not theretofore complied with this Article III
shall thereafter look only to the Surviving Entity for payment of the Company
Common Share Merger Consideration and the Electing Unit Consideration, as
applicable.
(f) None of Parent, Merger Sub, the Surviving Entity, the
Company, the Operating Partnership or the Paying Agent, or any employee,
officer, director, agent or Affiliate thereof, shall be liable to any person
in respect of the Company Common Share Merger Consideration or the Electing
Unit Consideration, as applicable, if the Payment Fund has been delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar Law.
(g) The Paying Agent shall invest the cash included in the
Payment Fund, as directed by the Surviving Entity, on a daily basis. Any net
profit resulting from, or interest or income produced by, such investments
shall be placed in the Payment Fund. To the extent that there are losses with
respect to such investments or the Payment Fund diminishes for other reasons
below the level required to make prompt payments of the Company Common Share
Merger Consideration or the Electing Unit Consideration as contemplated
hereby, Parent shall promptly replace or restore the portion of the Payment
Fund lost through investments or other events so as to ensure that the Payment
Fund is, at all times, maintained at a level sufficient to make such payments.
(h) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Entity or the Paying Agent, the posting by such person of a bond in
such amount as the Surviving Entity or the Paying Agent reasonably may direct,
the Paying Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Company Common Share Merger Consideration payable in respect
thereof pursuant to this Agreement.
(i) Certificates representing Company Series A Preferred
Shares prior to the Effective Time shall represent Surviving Entity Series A
Preferred Shares after the Effective Time.
16
Section 3.04 Withholding Rights. The Surviving Entity or the
Paying Agent, as applicable, shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Shares or Electing Units such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
and the rules and regulations promulgated thereunder, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Entity or the Paying Agent, as applicable, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of Company Common Shares or Electing Units in respect of which such
deduction and withholding was made by the Surviving Entity or the Paying
Agent, as applicable.
Section 3.05 Further Actions. If at any time after the
Effective Time, the Surviving Entity shall consider or be advised that any
deeds, bills of sale, assignments or assurances or any other acts or things
are necessary, desirable or proper (i) to vest, perfect or confirm, of record
or otherwise, in the Surviving Entity its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets
of any of the Company, its Subsidiaries, the Operating Partnership or Merger
Sub or (ii) otherwise to carry out the purposes of this Agreement, the
Surviving Entity and its proper officers and directors or its designees shall
be authorized to execute and deliver, in the name and on behalf of the
Company, its Subsidiaries, Merger Sub and the Operating Partnership, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of the Company, its Subsidiaries, Merger Sub and the Operating
Partnership all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of any of the
Company, its Subsidiaries, the Operating Partnership or Merger Sub, as
applicable, and otherwise to carry out the purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OPERATING PARTNERSHIP
Except as set forth in the Company's SEC Reports or in the Disclosure
Schedule, the Company and the Operating Partnership hereby represent and
warrant to Parent Parties as follows:
Section 4.01 Organization and Qualification; Subsidiaries;
Authority.
(a) Each of the Company and the Operating Partnership is
duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization or formation and has the requisite corporate,
limited partnership or similar power and authority to own, lease and operate
its properties and to carry on its business as it is now being conducted,
except where the failure to be so organized, existing and in good standing or
to have such corporate, limited partnership, limited liability company or
similar power and authority, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse
Effect. Each of the Company's other Subsidiaries is duly organized, validly
existing and in good standing under the Laws of the jurisdiction of its
organization or formation and has the requisite corporate, limited
partnership, limited liability
17
company or similar power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where
the failure to be so organized, existing and in good standing or to have such
corporate, limited partnership, limited liability company or similar power and
authority, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. The Company
and each of its Subsidiaries are duly qualified or licensed to do business and
in good standing (to the extent applicable), in each jurisdiction in which the
nature of their business or the ownership or leasing of their properties makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(b) A correct and complete list of all of the Company's
Subsidiaries, together with the jurisdiction of organization of each
Subsidiary and the percentage of the outstanding equity of each Subsidiary
owned by the Company, directly or indirectly, is set forth in Section 4.01(b)
of the Disclosure Schedule.
Section 4.02 Organizational Documents. The Company Charter and
the Company Bylaws, the Operating Partnership Agreement, the certificate of
limited partnership of the Operating Partnership and the organizational
documents of the other Subsidiaries of the Company are in full force and
effect, have been made available to the Parent Parties and no dissolution,
revocation or forfeiture proceeding regarding the Company or any of its
Subsidiaries has been commenced. The Company is not in violation of the
Company Charter or the Company Bylaws, the Operating Partnership is not in
violation of the Operating Partnership Agreement or its certificate of limited
partnership, and none of the other Subsidiaries of the Company is in violation
of any of the provisions of its certificate or articles of incorporation or
bylaws or equivalent organizational documents, except, in each case, for such
violations that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect. The Company
has made available to the Parent Parties materially correct and complete
copies of the minute books of the Company of meetings of the Company Board and
committees of the Company Board held since January 1, 2006, except that the
Company shall not be obligated to make available those portions of any minutes
of meetings of the Company Board or committees of the Company Board related to
the deliberations by the Company Board or such committee with respect to the
consideration of strategic alternatives or that would involve issues of
privilege.
Section 4.03 Capitalization.
(a) The authorized shares of stock of the Company consist
of (i) 100,000,000 Company Common Shares and (ii) 10,000,000 shares of
preferred stock, of which 4,000,000 shares are classified as Company Series A
Preferred Shares. At the close of business on April 27, 2007, 18,011,926
Company Common Shares were issued and outstanding and 4,000,000 Company Series
A Preferred Shares were issued and outstanding, 535,114 Company Common Shares
were reserved for issuance pursuant to the Incentive Plan, subject to
adjustment on the terms set forth in such plan, and 5,861,907 Company Common
Shares were reserved for issuance upon the redemption of Existing Units, and
the Company had no Company Common Shares reserved for issuance or required to
be reserved for issuance other than as described above. All such issued and
outstanding shares of the Company are, and all shares subject to
18
issuance as specified above, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable will be, when
issued, duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights under any provisions of the MGCL, the Company Charter or the
Company Bylaws.
(b) Except for the Existing Units owned by limited
partners of the Operating Partnership other than the Company, or as set forth
in Section 4.03(b) of the Disclosure Schedule, there are no existing options,
warrants, calls, subscription rights, convertible securities or other rights,
agreements or commitments (contingent or otherwise) that obligate the Company
to repurchase, redeem or otherwise acquire any shares of stock or equity
interests of the Company or any of its Subsidiaries or to issue, deliver or
sell or create, or cause to be issued, delivered or sold or created,
additional shares of stock or other voting or equity securities or interests
of the Company or of any of its Subsidiaries or obligating the Company or any
of its Subsidiaries to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or
undertaking relating to the voting of stock or equity securities or interests
of the Company or any of its Subsidiaries.
(c) Except as set forth in Section 4.03(c) of the
Disclosure Schedule, there are no agreements or understandings to which the
Company is a party with respect to the voting of any shares of common stock of
the Company, nor, to the Knowledge of the Company, as of the date of this
Agreement, do any third party agreements or understandings exist with respect
to the voting of any such shares. There are no outstanding bonds, debentures,
notes or other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matter on which the Company's stockholders may vote.
(d) Except as set forth in Section 4.03(d) of the
Disclosure Schedule, the Company is under no obligation, contingent or
otherwise, by reason of any agreement to register the offer and sale or resale
of any of its securities under the Securities Act.
(e) (i) As of the date of this Agreement, 23,873,833
Existing Units are validly issued and outstanding and not subject to
preemptive rights, and 5,861,907 Existing Units are owned by limited partners
of the Operating Partnership other than the Company.
(i) The Company is the sole general partner of the
Operating Partnership and, as of the date hereof, owns, directly or
indirectly, 18,011,926 Existing Units and 4,000,000 Series A Preferred
Partnership Units. Except as set forth in Section 4.03(e) of the Disclosure
Schedule, there are no existing options, warrants, calls, subscription rights,
convertible securities or other rights, agreements or commitments (contingent
or otherwise) that obligate the Operating Partnership to issue, transfer or
sell any partnership interests of the Operating Partnership or any investment
that is convertible into or exercisable or exchangeable for any such
partnership interests. The partnership interests in the Operating Partnership
that are owned by the Company are subject only to the restrictions on transfer
set forth in the Operating Partnership Agreement and those imposed by
applicable securities laws.
(ii) Each Existing Unit may, under certain
circumstances set forth in the Operating Partnership Agreement, be redeemed
for cash or for Company
19
Common Shares on a one-for-one basis, subject to adjustment as provided in the
Operating Partnership Agreement.
Section 4.04 Authority Relative to this Agreement; Validity and
Effect of Agreements.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Contemplated Transactions. The execution and
delivery of this Agreement by the Company and the consummation by the Company
of the Contemplated Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or the Merger or to
consummate the Contemplated Transactions (other than (i) the approval of this
Agreement, the Merger and the Contemplated Transactions by the affirmative
vote of the holders of a majority of the total number of shares of capital
stock of the Company outstanding and entitled to vote thereupon voting
together as a single class (the "Required Vote"), and (ii) the filing with,
and acceptance for record by, the SDAT of the Articles of Merger). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by each of the Parent
and Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar Laws of general
applicability relating to or affecting creditors' rights or by general equity
principles. The Required Vote is the only vote of the holders of any class or
series of stock of the Company required to approve this Agreement, the Merger
and the Contemplated Transactions.
(b) The Operating Partnership has all necessary limited
partnership power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Contemplated
Transactions. The execution and delivery of this Agreement by the Operating
Partnership and the consummation by the Operating Partnership of the
Contemplated Transactions have been duly and validly authorized by all
necessary partnership action, and no other partnership proceedings on the part
of the Operating Partnership are necessary to authorize this Agreement or to
consummate the Contemplated Transactions. This Agreement has been duly and
validly executed and delivered by the Operating Partnership and, assuming the
due authorization, execution and delivery by each of Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Operating
Partnership, enforceable against the Operating Partnership in accordance with
its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar Laws
of general applicability relating to or affecting creditors' rights or by
general equity principles.
Section 4.05 No Conflict; Required Filings and Consents.
(a) Except for the Company Stockholder Approval and except
as set forth in Section 4.05(a) of the Disclosure Schedule, the execution and
delivery by the Company and the Operating Partnership of this Agreement do
not, and the performance of their respective obligations hereunder will not,
(i) conflict with or violate (1) the Company Charter or the
20
Company Bylaws, (2) the Operating Partnership Agreement or the certificate of
limited partnership of the Operating Partnership, or (3) the certificate or
articles of incorporation or bylaws or equivalent organizational documents of
any of the Company's other Subsidiaries, (ii) assuming that all consents,
approvals, authorizations and other actions described in subsection (b) have
been obtained and all filings and obligations described in subsection (b) have
been made, conflict with or violate any Law applicable to the Company, the
Operating Partnership or any other Subsidiary of the Company or by which any
property or asset of the Company, the Operating Partnership or any other
Subsidiary of the Company is bound, or (iii) result in any breach of or
constitute a default (or an event which, with notice or lapse of time or both,
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
Lien on any property or asset of the Company, the Operating Partnership or any
other Subsidiary of the Company pursuant to, or give rise to a right of
purchase, first offer or forced sale under any Material Contract, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences that individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect.
(b) Except as set forth in Section 4.05(b) of the
Disclosure Schedule, the execution and delivery by the Company and the
Operating Partnership of this Agreement does not, and the performance of their
respective obligations hereunder and thereunder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except (i) for (A) applicable requirements, if any, of
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover Laws, (B) the pre-merger
notification requirements of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), if required, (C) the filing with the
Securities and Exchange Commission (the "SEC") of a proxy statement relating
to the Merger to be sent to the Company's stockholders (as amended or
supplemented from time to time, the "Proxy Statement"), (D) any filings
required under the rules and regulations of the New York Stock Exchange (the
"NYSE"), and (E) the filing of the Articles of Merger with, and the acceptance
for record thereof by, the SDAT, and (ii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, have or reasonably
be expected to have a Company Material Adverse Effect.
Section 4.06 Permits; Compliance with Laws.
(a) Each of the Company, the Operating Partnership and the
other Subsidiaries of the Company is in possession of all franchises, grants,
authorizations, licenses, permits, consents, certificates, approvals and
orders of any Governmental Authority necessary for each of the Company, the
Operating Partnership or the other Subsidiaries of the Company to own, lease
and operate its properties or to carry on its business as it is now being
conducted (collectively, the "Permits"), and all the Permits are valid and in
full force and effect, except where the failure to obtain and maintain the
Permits, or the suspension or cancellation of any of the Permits, individually
or in the aggregate, has not had or would not reasonably be expected to have a
Company Material Adverse Effect.
21
(b) None of the Company, the Operating Partnership or any
other Subsidiary of the Company is in conflict with, or in default, breach or
violation of, (i) any Laws applicable to the Company, the Operating
Partnership or any other Subsidiary of the Company or by which any property or
asset of the Company, the Operating Partnership or any other Subsidiary of the
Company is bound, (ii) any Permit, or (iii) any Material Contract to which the
Company, the Operating Partnership or any other Subsidiary of the Company is a
party or by which the Company, the Operating Partnership or any other
Subsidiary of the Company or any property or asset of the Company, the
Operating Partnership or any other Subsidiary of the Company is bound, except
in the case of clauses (i), (ii) and (iii) for any such conflicts, defaults,
breaches or violations that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect
or prevent or materially delay the consummation of the Merger.
Section 4.07 SEC Filings; Financial Statements.
(a) The Company has filed with the SEC all forms, reports,
statements, schedules, certifications, and documents (including all exhibits)
required to be filed by it with the SEC since December 31, 2004 (the "SEC
Reports"). The SEC Reports (including any documents or information
incorporated by reference), as of their respective filing dates (i) complied,
and all documents filed by the Company with the SEC under the Securities Act
or the Exchange Act between the date of this Agreement and the date of Closing
will comply, in all material respects as to form with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder each as in effect on the date so filed, and
(ii) at the time filed with the SEC, did not contain any untrue statement of a
material fact, or, in the case of documents filed on or after the date hereof
will not contain any untrue statement of a material fact, and did not omit,
or, in the case of documents filed on or after the date hereof, will not omit
to state a material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(b) The audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company and its
consolidated Subsidiaries included or incorporated by reference into the SEC
Reports (including, in each case, any notes thereto): (i) were prepared in
accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of unaudited statements, as permitted by the
applicable rules and regulations of the SEC) applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto), (ii) complied in all material respects with applicable accounting
requirements and the rules and regulations of the SEC and (iii) fairly
presented, in all material respects, the consolidated financial position,
results of operations and cash flows of the Company and its consolidated
Subsidiaries, as the case may be, as of the dates thereof and for the periods
indicated therein except as otherwise noted therein (subject, in the case of
unaudited statements, to normal year-end adjustments).
(c) The Company has made available to the Parent Parties
correct and complete copies of all material written correspondence between the
SEC, on the one hand, and the Company and any of its Subsidiaries, on the
other hand, occurring since December 31, 2004 and prior to the date hereof and
will, promptly following the receipt thereof, make available to
22
the Parent Parties any such material correspondence sent or received after the
date hereof. To the Knowledge of the Company, as of the date of this
Agreement, the Company has no outstanding and unresolved comments from the SEC
with respect to any SEC Reports.
(d) The Company has (i) implemented and maintains
disclosure controls and procedures (as defined in Rule 13a-15(e) of the
Exchange Act) designed to ensure that material information relating to the
Company, including the consolidated Subsidiaries of the Company, is made known
to the management of the Company, and (ii) has disclosed, based on its most
recent evaluation prior to the date hereof, to the Company's outside auditors
and the audit committee of the Company Board (A) all significant deficiencies
and material weaknesses in the design or operation of internal control over
financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which
are reasonably likely to adversely affect the Company's ability to record,
process, summarize and report financial data and (B) any fraud whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls over financial reporting.
(e) The Company has not identified, based on its most
recent evaluation, any material weaknesses in the design or operation of
internal controls over financial reporting.
Section 4.08 No Unknown Liabilities. As of the date hereof,
neither the Company nor any of its Subsidiaries has any liability or
obligation of any nature (whether accrued, absolute, contingent or otherwise)
which would be required to be reflected, reserved for or disclosed in a
consolidated balance sheet of the Company and its consolidated Subsidiaries,
including the notes thereto, prepared in accordance with GAAP except (a) as
reflected, reserved for or disclosed in the consolidated balance sheet of the
Company and its consolidated Subsidiaries as at December 31, 2006, including
the notes thereto (the "2006 Balance Sheet"), (b) as incurred since December
31, 2006 in the ordinary course of business consistent with past practice, (c)
as incurred or to be incurred by the Company or any Subsidiary of the Company
pursuant to, in connection with, or as a result of, the Merger and the
Contemplated Transactions, (d) as set forth in Section 4.08 of the Disclosure
Schedule or (e) as individually or in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse Effect.
Section 4.09 Absence of Certain Changes or Events. Since
December 31, 2006 through the date hereof, except (a) as contemplated by this
Agreement, (b) as set forth in Section 4.09 of the Disclosure Schedule or (c)
as disclosed in the SEC Reports filed since December 31, 2006 and prior to the
date of this Agreement, there has not been any Company Material Adverse
Effect.
Section 4.10 Absence of Litigation. Except (a) as listed in
Section 4.10 of the Disclosure Schedule or (b) as set forth in the SEC Reports
filed prior to the date hereof, as of the date hereof, there is no Action
pending or, to the Knowledge of the Company, threatened against any of the
Company or any of its Subsidiaries or any of its or their respective
properties or assets or any director, officer or employee of any of the
Company or any of its Subsidiaries, except as would not, individually or in
the aggregate, (i) prevent or materially impair or delay the ability of the
Company or the Operating Partnership to perform its obligations under this
Agreement, the consummation of the Merger or the Contemplated Transactions or
(ii) have or reasonably be
23
expected to have a Company Material Adverse Effect. None of the Company or any
of its Subsidiaries is subject to any order, judgment, writ, injunction or
decree, except as would not, individually or in the aggregate, (x) prevent or
materially impair or delay the ability of the Company or the Operating
Partnership to perform its obligations under this Agreement, the consummation
of the Merger or the Contemplated Transactions or (y) have or reasonably be
expected to have a Company Material Adverse Effect.
Section 4.11 Employee Benefit Plans.
(a) Section 4.11(a) of the Disclosure Schedule lists as of
the date hereof, all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
material bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and
all material employment, termination, severance or other contracts or
agreements to which the Company or any Subsidiary of the Company is a party,
with respect to which the Company or any Subsidiary of the Company has any
obligation or which are maintained, contributed to or sponsored by the Company
or any Subsidiary of the Company for the benefit of any employee, officer or
director of the Company or any Subsidiary of the Company (collectively, the
"Plans"). The Company has made available to Parent copies of the following:
(i) the Plans, (ii) the most recent annual report (Form 5500) filed with the
Internal Revenue Service ("IRS"), if any, (iii) the most recently received IRS
determination letter, if any, relating to a Plan, and (iv) the most recently
prepared actuarial report or financial statement, if any, relating to a Plan.
(b) Except as set forth in Section 4.11(b) of the
Disclosure Schedule, (i) each Plan has been operated in accordance with its
terms and the requirements of all applicable Laws, including ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"), and any such
non-compliance would not, individually or in the aggregate, have or reasonably
be expected to have a Company Material Adverse Effect, (ii) no Action is
pending or, to the Knowledge of the Company, threatened with respect to any
Plan (other than claims for benefits in the ordinary course) that would,
individually or in the aggregate, have or reasonably be expected to have a
Company Material Adverse Effect and (iii) all employer or employee
contributions, premiums and expenses to or in respect of each Plan have been
paid in full or, to the extent not yet due, have been adequately accrued on
the applicable financial statements of the Company included in the SEC Reports
in accordance with GAAP. There is no Person (other than the Company or any of
its Subsidiaries) that together with the Company or any of its Subsidiaries
would be treated as a single employer under Section 414 of the Code or Section
4001(b) of ERISA. None of the Company, any of its Subsidiaries, nor any
employer that would be considered a single employer with the Company under
Sections 414(b), (c), (m) or (o) of the Code has at any time during the
six-year period preceding the date hereof maintained, contributed to or
incurred any liability under any "multiemployer plan" (as defined in Section
3(37) of ERISA) or any Plan that is subject to Title IV of ERISA or Section
412 of the Code.
(c) Each Plan that is intended to be qualified under
Section 401(a) of the Code or Section 401(k) of the Code has received a
favorable determination letter from the IRS, or is entitled to rely on a
favorable opinion letter issued by the IRS, and to the Knowledge of the
Company no fact or event has occurred since the date of such determination
letter or
24
letters from the IRS to adversely affect the qualified status of any such Plan
or the exempt status of any such trust that would, individually or in the
aggregate, have or reasonably be expected to have a Company Material Adverse
Effect.
(d) Except as set forth in Section 4.11(d) of the
Disclosure Schedule, no Plan, either individually or collectively, provides
for any payment by the Company or any Subsidiary of the Company that would
constitute a "parachute payment" within the meaning of Section 280G of the
Code after giving effect to the Contemplated Transactions.
(e) Except as set forth in Section 4.11(e) of the
Disclosure Schedule, neither the execution and delivery of this Agreement by
the Company nor the consummation of the transactions contemplated hereby will
or may (either alone or in connection with the occurrence of any additional or
subsequent events) (i) result in the acceleration or creation of any rights of
any Person to compensation or benefits under any Plan or other compensatory
arrangement, loan forgiveness or result in an obligation to fund benefits with
respect to any Plan or other compensatory arrangement; or (ii) constitute an
event under any Plan or other arrangement that will or may result in any
payment of deferred compensation subject to Section 409A of the Code.
(f) The Company has made available to the Parent Parties
all of the employment agreements, bonus agreements, severance agreements,
severance plans and similar obligations that include amounts that are payable
as a result of consummation transactions contemplated hereby. Section 4.11(f)
of the Disclosure Schedule sets forth a good faith estimate of the amounts
that will become payable to employees of the Company under the terms of any
employment agreements, bonus agreements, severance agreements, severance plans
and similar obligations as a result of the consummation of the transactions
contemplated by this Agreement.
Section 4.12 Labor Matters.
(a) Except as set forth in Section 4.12 of the Disclosure
Schedule, (i) neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor union contract applicable
to persons employed by the Company or any of its Subsidiaries, (ii) except as
would not, individually or in the aggregate, have or reasonably be expected to
have a Company Material Adverse Effect, there is no strike, slowdown, work
stoppage or lockout by or with respect to any employees of the Company or any
of its Subsidiaries, and (iii) no labor organization or group of employees of
the Company or any of its Subsidiaries has made a written demand for
recognition or certification (iv) there are no representation or certification
proceedings or petitions seeking a representation proceeding presently filed
with the National Labor Relations Board or any other labor relations tribunal
or authority concerning any employee of the Company or any of its
Subsidiaries.
(b) There are no unfair labor practice charges, grievances
or complaints filed by or on behalf of any employee or group of employees of
the Company or any of its Subsidiaries that have not been settled or remedied
that would reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries, taken as a whole.
25
Section 4.13 Information Supplied. The information relating to
the Company and its Subsidiaries to be contained in the Proxy Statement
(including information incorporated by reference) or any other document to be
filed with the SEC in connection herewith (the "Other Filings") will not, in
the case of the Proxy Statement, at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting or
at the time of any amendment or supplement thereof, or, in the case of any
Other Filing, at the date it is first mailed to the Company's stockholders or
at the date it is first filed with the SEC, 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, except that no
representation is made by the Company or the Operating Partnership with
respect to statements made or incorporated by reference therein based on
information supplied by Parent or Merger Sub in connection with the
preparation of the Proxy Statement or the Other Filings for inclusion or
incorporation by reference therein. The Proxy Statement and the Other Filings
that are required to be filed by the Company in connection with the Merger or
the other Contemplated Transactions will comply as to form in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act.
Section 4.14 Property and Leases.
(a) Section 4.14(a) of the Disclosure Schedule sets forth
a correct and complete list and address of all real property interests owned
or held by the Company and the Subsidiaries as of the date of this Agreement,
including fee interests, ground leasehold interests and other similar
leasehold interests (all such real property interests, together with all
buildings, structures and other improvements and fixtures located on or under
such real property and all easements, rights and other appurtenances to such
real property, are individually referred to herein as "Company Property" and
collectively referred to herein as the "Company Properties"). The Operating
Partnership or other Subsidiaries of the Company own or, if so indicated in
Section 4.14(a) of the Disclosure Schedule, lease each of the Company
Properties, in each case, free and clear of any Liens, title defects,
covenants or reservations of interests in title (collectively, "Property
Restrictions"), except for (i) Permitted Liens, (ii) Property Restrictions
imposed or promulgated by Law or by any Governmental Authority which are
customary and typical for similar properties that, individually or in the
aggregate, do not interfere materially with the current use or operation of
such property, (iii) Property Restrictions disclosed on existing title reports
or existing surveys or which would be shown on current title reports or
current surveys that, individually or in the aggregate, do not interfere
materially with the current use or operation of such property, (iv)
mechanics', carriers', workmen's or repairmen's liens and other encumbrances
for which there are adequate reserves on the financial statements of the
Company (collectively, "Encumbrances"), (v) Property Restrictions which do not
interfere, individually or in the aggregate, materially with the current use
of such property, and (vi) as set forth in Section 4.14(a) of the Disclosure
Schedule, except in the case of clauses (i) through (vi) above as,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(b) As of the date hereof, except as set forth in Section
4.14(b) of the Disclosure Schedule, the Company has no Knowledge (i) of
written notice that any certificate, permit or license from any Governmental
Authority having jurisdiction over any of the Company Properties or any
agreement, easement or other right of an unlimited duration that is necessary
to
26
permit the lawful use and operation of the buildings and improvements on any
of the Company Properties or that is necessary to permit the lawful use and
operation of all utilities, parking areas, detention ponds, driveways, roads
and other means of egress and ingress to and from any of the Company
Properties is not in full force and effect, except for such failures to have
in full force and effect that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse
Effect, or of any pending written threat of modification or cancellation of
any of same that would have a Company Material Adverse Effect; or (ii) of
written notice of any uncured violation of any Laws affecting any of the
Company Properties or operations which would reasonably be expected to have a
Company Material Adverse Effect.
(c) To the Knowledge of the Company, as of the date
hereof, neither the Company nor any of its Subsidiaries has received any
written notice to the effect that (i) any condemnation or rezoning proceedings
are pending or threatened with respect to any of the Company Properties, or
(ii) any laws including any zoning regulation or ordinance, building or
similar Law have been violated for any Company Property, or will be violated
by the continued maintenance, operation or use of any buildings or other
improvements on any of the Company Properties, that, in the case of clauses
(i) and (ii) above, individually or in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse Effect.
(d) Section 4.14(d) of the Disclosure Schedule sets forth
a correct and complete list as of the date of this Agreement of each ground
lease or other similar lease pursuant to which the Operating Partnership or
any other Subsidiary of the Company is a lessee (individually, a "Ground
Lease" and collectively, "Ground Leases"). To the Knowledge of the Company,
each Ground Lease is in full force and effect and neither the Operating
Partnership nor any other Subsidiary of the Company has received a written
notice that it is in default under any Ground Lease which remains uncured. The
Company has made available to Parent copies of each Ground Lease and all
amendments thereto, which copies are correct and complete in all material
respects.
(e) Except as set forth in Section 4.14(e) of the
Disclosure Schedule, as of the date hereof, neither the Operating Partnership
nor any other Subsidiary has granted or is subject to any unexpired option
agreements or rights of first offer or refusal with respect to the purchase of
a Company Property or any portion thereof or any other unexpired rights in
favor of any party other than the Company or any Subsidiary of the Company (a
"Third Party") to purchase or otherwise acquire a Company Property or any
portion thereof or entered into any contract for sale, ground lease or letter
of intent to sell or ground lease any Company Property or any portion thereof.
Neither the Company nor any other Subsidiary has entered into any agreements
or letters of intent to purchase, lease or otherwise acquire any real
property.
(f) The Company has made available to Parent copies of all
leases that are in effect as of the date hereof and to which the Company or
any of its Subsidiaries is a party as landlord with respect to each of the
applicable Company Properties (such leases, together with all amendments,
modifications, supplements, renewals, extensions, guarantees and other
documents related thereto, the "Company Leases") that relate to in excess of
2,500 square feet of net rentable area, which copies are correct and complete
in all material respects. The Company Leases are in full force and effect and
neither the Company nor any of its Subsidiaries has
27
received written notice that it is in default under any Company Lease, except
for violations or defaults that have been cured. As of the date hereof,
neither the Company nor any of its Subsidiaries has delivered a written notice
to a tenant under a Company Lease that it is in default under such Company
Lease, and, except as set forth in Section 4.14(f) of the Disclosure Schedule,
no such tenant is in monetary or, to the Knowledge of the Company, material
non-monetary default under such Company Lease.
Section 4.15 Personal Property. Except as set forth in Section
4.15 of the Disclosure Schedule, the Company and its Subsidiaries have good
and valid title to, or a valid and enforceable leasehold interest in, all
tangible personal assets owned, used or held for use by them, except as would
not, individually or in the aggregate, have or reasonably be expected to have
a Company Material Adverse Effect. Except as set forth in Section 4.15 of the
Disclosure Schedule, none of the Company's or any of its Subsidiaries'
ownership of or leasehold interest in any such tangible personal property is
subject to any Encumbrances, except for Permitted Liens or Encumbrances that
would not, individually or in the aggregate, have or reasonably be expected to
have a Company Material Adverse Effect.
Section 4.16 Intellectual Property. Except as would not,
individually or in the aggregate, have or reasonably be expected to have a
Company Material Adverse Effect, (a) to the Knowledge of the Company, the
conduct of the business of the Company and the Subsidiaries of the Company as
currently conducted does not infringe upon the material Intellectual Property
rights of any Third Party and (b) with respect to Intellectual Property owned
by or licensed to the Company or any Subsidiary of the Company that is
material to the conduct of the business of the Company and its Subsidiaries,
taken as a whole, as currently conducted ("Company Intellectual Property"),
the Company or such Subsidiary of the Company has the right to use such
Intellectual Property in the operation of its business as currently conducted.
Section 4.17 Taxes. Except as set forth in Section 4.17 of the
Disclosure Schedule:
(a) Each of the Company and the Subsidiaries of the
Company (i) has timely filed (or had filed on their behalf) all material Tax
Returns, as defined below, required to be filed by any of them (after giving
effect to any filing extension granted by a Governmental Authority) and (ii)
has paid (or had paid on their behalf) all material Taxes required to be paid
by it, other than with respect to matters for which appropriate reserves have
been established in accordance with GAAP. The most recent financial statements
contained in the SEC Reports reflect appropriate reserves in accordance with
GAAP for all Taxes payable by the Company and the Subsidiaries of the Company
for all taxable periods and portions thereof through the date of such
financial statements. Copies of all federal Tax Returns for the Company and
the Subsidiaries of the Company with respect to the taxable years ending on or
after December 31, 2004 have been made available to representatives of Parent.
Neither the Company nor any of the Subsidiaries of the Company has executed or
filed with the IRS or any other taxing authority any agreement, waiver or
other document or arrangement extending the period for assessment or
collection of material Taxes (including, but not limited to, any applicable
statute of limitation), and no power of attorney with respect to any Tax
matter is currently in force with respect to the Company or any of its
Subsidiaries. As used here, the term "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority.
28
(b) The Company, (i) for all taxable years commencing with
the Company's taxable year ended December 31, 2004 through December 31, 2006,
has been subject to taxation as a real estate investment trust (a "REIT")
within the meaning of Section 856 of the Code and has satisfied all
requirements to qualify as a REIT for such years, (ii) has operated since
December 31, 2006 to the date hereof in a manner that will permit it to
qualify as a REIT for the taxable year that includes the date hereof, and
(iii) intends to continue to operate in such a manner as to permit it to
continue to qualify as a REIT for the taxable year of the Company that
includes the Closing Date. As of the date hereof, no challenge to the
Company's status as a REIT is pending or has been threatened in writing and
delivered to the Company. No Subsidiary of the Company is taxable as a
corporation for U.S. federal income tax purposes, other than a corporation
that qualifies as a "taxable REIT subsidiary," within the meaning of Section
856(1) of the Code.
(c) Each Subsidiary of the Company that is a partnership,
joint venture, limited liability company or "foreign eligible entity" within
the meaning of Treasury Regulation Section 301.7701-3(b)(2) has been since its
formation treated for U.S. federal income tax purposes as a partnership or
disregarded entity, as the case may be, and not as a corporation or an
association taxable as a corporation or as a "publicly traded partnership"
within the meaning of Section 7704(b) of the Code.
(d) Neither the Company nor any of the Company's
Subsidiaries holds any asset the disposition of which would subject the
Company or any Subsidiary of the Company directly to rules similar to Section
1374 of the Code as a result of (A) an election under IRS Notice 88-19 or
Treasury Regulation Section 1.337(d)-5 or Section 1.337(d)-6 or (B) the
application of Treasury Regulation Section 1.337(d)-7.
(e) Since January 1, 2005, neither the Company nor any
Subsidiary of the Company has recognized taxable gain or loss from the
disposition of any property transferred or received in an exchange that was
reported as a "like kind exchange" under Section 1031 of the Code, except to
the extent of any gain that was required to be recognized under Section
1031(b) of the Code and that was timely reported on the Tax Returns of the
Company.
(f) The Company has not incurred any liability for
material excise taxes under sections 857(b), 860(c) or 4981 of the Code which
have not been previously paid. To the Knowledge of the Company, neither the
Company nor any Subsidiary of the Company (other than a "taxable REIT
subsidiary" or any subsidiary of a "taxable REIT subsidiary") has engaged at
any time in any "prohibited transactions" within the meaning of Section
857(b)(6) of the Code. To the Knowledge of the Company, neither the Company
nor any Subsidiary of the Company has engaged in any transaction that would
give rise to "redetermined rents, redetermined deductions or excess interest"
described in section 857(b)(7) of the Code.
(g) All material deficiencies asserted or assessments made
with respect to the Company or any Subsidiary of the Company as a result of
any examinations by the IRS or any other taxing authority of the Tax Returns
of or covering or including the Company or any Subsidiary of the Company have
been fully paid or are being contested in good faith. There are no audits,
examinations or other proceedings relating to any Taxes of the Company or any
Subsidiary of the Company by any taxing authority pending or, as of the date
hereof, to the
29
Knowledge of the Company, threatened in writing. Neither the Company nor any
Subsidiary of the Company is a party to any litigation or pending litigation
or administrative proceeding relating to Taxes (other than litigation dealing
with appeals of property tax valuations or litigation set forth in the SEC
Reports filed prior to the date of this Agreement).
(h) The Company and the Subsidiaries of the Company have
complied, in all material respects, with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, and 3402 of
the Code or similar provisions under any foreign laws) and have duly and
timely withheld and have paid over to the appropriate taxing authorities all
material amounts required to be so withheld and paid over on or prior to the
due date thereof under all applicable Laws.
(i) As of the date hereof, to the Knowledge of the
Company, no claim has been made in writing by a taxing authority in a
jurisdiction where the Company or any Subsidiary of the Company does not file
Tax Returns that the Company or any such Subsidiary of the Company is or may
be subject to taxation by that jurisdiction.
(j) Neither the Company nor any other Person on behalf of
the Company or any Subsidiary of the Company has requested any extension of
time within which to file any material Tax Return, which material Tax Return
has not yet been filed.
(k) Neither the Company nor any Subsidiary of the Company
is a party to any Tax sharing or similar agreement or arrangement other than
any agreement or arrangement solely between the Company and any Subsidiary of
the Company, pursuant to which it will have any obligation to make any
payments after the Closing.
(l) Neither the Company nor any Subsidiary of the Company has requested a
private letter ruling from the IRS or comparable rulings from other taxing
authorities.
(m) There are no Liens for Taxes (other than Taxes not yet
due and payable) upon any of the assets of the Company or any Subsidiary of
the Company.
(n) There are no Tax Protection Agreements currently in
force and no person has raised in writing, or to the Knowledge of the Company
threatened to raise, a material claim against the Company or any Subsidiary of
the Company for any breach of any Tax Protection Agreement. As used herein,
"Tax Protection Agreements" shall mean any written or oral agreement to which
the Company or any Subsidiary of the Company is a party pursuant to which: (a)
any liability to direct or indirect holders of units of limited partnership
interest in the Operating Partnership ("Units") relating to Taxes may arise,
whether or not as a result of the consummation of the Contemplated
Transactions; (b) in connection with the deferral of income Taxes of a direct
or indirect holder of Units, the Company or the Subsidiaries of the Company
have agreed to (i) maintain a minimum level of debt or continue a particular
debt, (ii) retain or not dispose of assets for a period of time that has not
since expired, (iii) make or refrain from making Tax elections, (iv) permit
holders of Units, including persons related to such holders, to guarantee debt
of the Operating Partnership and/or (v) only dispose of assets in a particular
manner.
30
(o) Neither the Company nor any Subsidiary of the Company
has any liability for Taxes of any Person other than the Company and the
Subsidiaries of the Company under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign Law).
(p) Neither the Company or any Subsidiary of the Company
has participated in a "listed transaction" within the meaning of Treasury
Regulation Section 1.6011-4(b)(2).
(q) No Subsidiary of the Company has been characterized as
a "controlled foreign corporation" within the meaning of Section 957 of the
Code.
(r) As of the date hereof, the Company does not have any
earnings and profits attributable to any non-REIT year of the Company, as
applicable, or any other corporation within the meaning of Section 857 of the
Code and the Treasury Regulations thereunder.
Section 4.18 Environmental Matters. Except as set forth in the
environmental reports previously provided to the Parent Parties or listed in
Section 4.18 of the Disclosure Schedule, or as disclosed in the SEC Reports,
or as would not, individually or in the aggregate, have or be reasonably
likely to have a Company Material Adverse Effect:
(a) to the Knowledge of the Company, the Company and the
Subsidiaries of the Company (i) are and have been in compliance with all
Environmental Laws, (ii) hold all permits, approvals, identification numbers,
licenses and other authorizations required under any Environmental Law to own
or operate their assets as currently owned and operated ("Environmental
Permits") and (iii) are and have been in compliance with their respective
Environmental Permits;
(b) to the Knowledge of the Company, there has been no
release of Hazardous Substances for which the Company may reasonably be
expected to be liable on any real property owned, leased or operated by the
Company or the Subsidiaries of the Company;
(c) neither the Company nor any Subsidiary of the Company
has received any written notice alleging that the Company or any Subsidiary of
the Company may be in violation of, or liable under, or a potentially
responsible party pursuant to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") or any other Environmental
Law.
Notwithstanding any other provision of this Agreement, this Section 4.18 sets
forth the Company's sole and exclusive representations and warranties with
respect to Hazardous Substances, Environmental Laws or other environmental
matters.
Section 4.19 Material Contracts. Except as filed as exhibits to
the SEC Reports filed prior to the date of this Agreement or as set forth in
Section 4.19 of the Disclosure Schedule, none of the Company or any Subsidiary
of the Company is a party to or bound by any contract that, as of the date
hereof:
31
(a) is a "material contract" (as such term is defined in
Item 601(b)(10) of Regulation S-K under the Securities Act);
(b) contains any non-compete or exclusivity provisions
with respect to any line of business or geographic area with respect to the
Company or any Subsidiary of the Company, or that restricts the conduct of any
line of business by the Company or any Subsidiary of the Company or any
geographic area in which the Company or any Subsidiary of the Company may
conduct business (other than licenses with respect to Intellectual Property
entered into in the ordinary course of business);
(c) creates any partnership, limited liability company
agreement, joint venture or other similar agreement entered into with any
Third Party;
(d) provides for the purchase, sale or exchange of, or
option to purchase, sell or exchange any real property;
(e) is a loan agreement, letter of credit, indenture,
note, bond, debenture, mortgage or any other document, agreement or instrument
evidencing a capitalized lease obligation or other indebtedness of, for the
benefit of, or payable to the Company or any Subsidiary of the Company, or any
guaranty thereof in excess of $750,000;
(f) is an interest rate cap, interest rate collar,
interest rate swap, currency hedging transaction or any other similar
agreement to which the Company or any Subsidiary of the Company is a party;
(g) is a contract or agreement pursuant to which the
Company or any of its Subsidiaries agrees to indemnify or hold harmless any
director or executive officer of the Company or any of its Subsidiaries (other
than the organizational documents for the Company or its Subsidiaries);
(h) is a Contract that reflects transactions, other than
in the ordinary course of business, that involve expenditures, in cash or any
other form of consideration, in excess of $1,000,000;
(i) is a Contract (A) relating to the acquisition,
issuance, voting, registration, sale or transfer of any securities, (B)
providing any Person with any preemptive right, right of participation, right
of maintenance or any similar right with respect to any securities or (C)
providing any of the Company Parties with any right of first refusal with
respect to, or right to repurchase or redeem, any securities;
(j) is a Contract relating to the development or
construction of, or additions or expansions to, any real property that would
involve the expenditure by the Company Parties in excess of $250,000;
(k) is a Contract for the acquisition or disposition,
directly or indirectly (by merger or otherwise), of assets or capital stock or
other equity interests of another Person;
32
(l) is a Contract relating to the operations of the
Company Properties, including the management agreements and franchise
agreements;
(m) is a Contract relating to the settlement or proposed
settlement of any legal proceeding, which involves the issuance of equity
securities or the payment by the Company, separate and apart from any amounts
contributed by the Company's insurers, of an amount greater than the amount
set forth in Section 7.11 of the Disclosure Schedule; or
(n) is a material Contract granting a License to or from
the Company or its Subsidiaries in Intellectual Property that is material to
the business of the Company and its Subsidiaries taken as a whole (other than
software that is generally commercially available).
Each contract of the type described in this Section 4.19, whether or
not set forth in Section 4.19 of the Disclosure Schedule, is referred to
herein as a "Material Contract." Notwithstanding anything above, the term
"Material Contract" shall not include any contract that (1) is terminable upon
sixty (60) days notice without penalty or premium or (2) will be fully
performed or satisfied at or prior to Closing. Each Material Contract is valid
and binding, in all material respects, on the Company and/or each of its
Subsidiaries party thereto, and, to the Knowledge of the Company, each other
party thereto. Neither the Company nor any of its Subsidiaries is in default
under any Material Contract and no event or circumstance, with or without
notice or the passage of time, has occurred pursuant to any Material Contract
which would result in a default or acceleration of payment, or forfeiture of
any rights, except as, individually or in the aggregate, (i) would not prevent
or materially delay the consummation of the Merger or the Contemplated
Transactions or (ii) have not had and would not reasonably be expected to have
a Company Material Adverse Effect. To the Knowledge of the Company, no
counterparty of the Company or any of its Subsidiaries, as applicable, under
any Material Contract has failed to perform its material obligations
thereunder when required to be so performed and each is current in its
material obligations to the Company or its Subsidiaries, as applicable,
thereunder.
Section 4.20 Brokers. No broker, finder or investment banker
(other than Xxxxxx Xxxxxxx & Co. Incorporated) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger based upon
arrangements made by or on behalf of the Company. The Company promptly will
make available to the Parent Parties a correct and complete copy of all
agreements between the Company and Xxxxxx Xxxxxxx & Co. Incorporated.
Section 4.21 Opinion of Financial Advisor. The Special
Committee has received an opinion of Xxxxxx Xxxxxxx & Co. Incorporated to the
effect that the consideration to be received by the holders of shares of the
Company Common Shares pursuant to this Agreement is fair from a financial
point of view to such holders. A copy of such opinion shall be provided to
Parent promptly after the date hereof for informational purposes only.
Section 4.22 Insurance. Section 4.22 of the Disclosure Schedule
sets forth, as of the date hereof, a correct and complete list of the
insurance policies held by, or for the benefit of, the Company or any of its
Subsidiaries, including the underwriter of such policies and the amount of
coverage thereunder. The Company and each of its Subsidiaries have paid, or
caused to be paid, all premiums due under such policies and are not in default
with respect to any
33
obligations under such policies other than as would not, individually or in
the aggregate, have or be reasonably likely to have a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has received as of the
date hereof, any written notice of cancellation or termination with respect to
any existing insurance policy set forth in Section 4.22 of the Disclosure
Schedule that is held by, or for the benefit of, any of the Company or its
Subsidiaries, other than as, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse
Effect.
Section 4.23 Special Committee Recommendation; Company Board
Recommendation. Upon the recommendation of the Special Committee, the Company
Board, by resolutions duly adopted at meetings duly called and held, has duly
(a) determined that this Agreement, the Merger and the Contemplated
Transactions are advisable and in the best interests of the Company and its
stockholders, (b) approved this Agreement, the Merger and the Contemplated
Transactions, (c) directed that this Agreement, the Merger and the
Contemplated Transactions be submitted for consideration at the Company
Stockholders' Meeting and (d) recommended that the stockholders of the Company
approve this Agreement, the Merger and the Contemplated Transactions at the
Company Stockholders' Meeting (collectively, the "Company Board
Recommendation").
Section 4.24 Related Party Transactions. Except as set forth in
Section 4.24 of the Disclosure Schedule, there are no material transactions,
agreements, arrangements or understandings between (a) the Company or any of
its Subsidiaries, on the one hand, and (b) any officer, director or Affiliate
of the Company (other than any of its Subsidiaries), on the other hand, of the
type that are required to be disclosed under Item 404 of Regulation S-K under
the Securities Act which have not been so disclosed prior to the date hereof.
Section 4.25 State Takeover Statutes. The Company has taken all
action required to be taken by it in order to exempt this Agreement, the
Merger and the Contemplated Transactions from, and this Agreement, the Merger
and the Contemplated Transactions are exempt from, the requirements of any
"fair price," "moratorium," "control share acquisition" or other similar
antitakeover statute or regulation enacted under state or federal Laws in the
United States, including the Maryland Business Combination Act and the
Maryland Control Share Acquisition Act, or any takeover provision in the
Company Charter or Company Bylaws.
Section 4.26 Outstanding Indebtedness. The Company's
consolidated Scheduled Indebtedness is not more than $265,878,000 as of the
date hereof, and Section 4.26 of the Disclosure Schedule sets forth an
estimate of all such Scheduled Indebtedness as of April 27, 2007.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub, hereby represent and warrant to the Company
Parties as of the date hereof as follows:
34
Section 5.01 Corporate Organization.
(a) Parent is duly organized and is validly existing and
in good standing under the laws of the State of Maryland, and Parent has the
requisite limited liability company power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted and proposed by Parent to be conducted, except where the failure to
be so organized, existing or in good standing or to have such power and
authority, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect. The
certificate of formation of Parent is in effect and no dissolution, revocation
or forfeiture proceedings regarding Parent have been commenced. Parent is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a Parent Material
Adverse Effect.
(b) Merger Sub is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Maryland. The
charter and bylaws of Merger Sub are in effect and no dissolution, revocation
or forfeiture proceedings regarding Merger Sub have been commenced. Merger Sub
is in good standing under the Laws of any other jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary. Merger Sub has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now conducted and proposed by it to be conducted. All the issued
and outstanding shares of common stock of Merger Sub are owned of record and
beneficially by Parent.
Section 5.02 Ownership of Merger Sub; No Prior Activities.
Merger Sub is a wholly owned subsidiary of, and controlled by, Parent. Each of
Parent and Merger Sub was formed solely for the purpose of engaging in the
Merger and the Contemplated Transactions and none of Parent or Merger Sub has
conducted any activities other than in connection with its organization, the
negotiation and execution of this Agreement and the consummation of the
transactions contemplated hereby and thereby. Parent has no Subsidiaries other
than Merger Sub, and Merger Sub has no Subsidiaries.
Section 5.03 Power and Authority.
(a) Each of Parent and Merger Sub has all necessary power
and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger and the Contemplated
Transactions. The execution and delivery of this Agreement by each of Parent
and Merger Sub and the consummation by each of Parent and Merger Sub of the
Merger and the Contemplated Transactions have been duly and validly authorized
by all necessary corporate action, and no other corporate proceedings on the
part of any of Parent or Merger Sub are necessary to authorize this Agreement
or the Merger or to consummate the Contemplated Transactions (other than, with
respect to the Merger, the filing with, and acceptance for record by, the SDAT
of the Articles of Merger). This Agreement has been duly and validly executed
and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery hereof by each of the Company and the
Operating
35
Partnership, constitutes a legal, valid and binding obligation of each of
Parent and Merger Sub, enforceable against each of Parent and Merger Sub in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles.
(b) The execution and delivery of this Agreement by Parent
and the consummation by Parent of the Merger and the Contemplated Transactions
have been duly and validly authorized by all necessary corporate action, and
no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or the Merger or to consummate the Contemplated
Transactions.
(c) The execution and delivery of this Agreement by Merger
Sub and the consummation by Merger Sub of the Merger and the Contemplated
Transactions have been duly and validly authorized by all necessary corporate
action, and no other corporate proceedings on the part of Merger Sub are
necessary to authorize this Agreement or the Merger or to consummate the
Contemplated Transactions.
Section 5.04 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent
and Merger Sub do not, and the performance of Parent and Merger Sub's
obligations hereunder will not, (i) conflict with or violate the certificate
of incorporation of Parent or the charter of Merger Sub, (ii) assuming that
all consents, approvals, authorizations and other actions described in
subsection (b) have been obtained and all filings and obligations described in
subsection (b) have been made, conflict with or violate any Law applicable to
Parent or Merger Sub, or by which any of Parent's or Merger Sub's properties
or assets is bound, or (iii) result in any breach of, or constitute a default
(or an event which, with notice or lapse of time or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien or other
encumbrance on any of Parent's or Merger Sub's properties or assets pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Merger
Sub is a party or by which Parent or Merger Sub or any of Parent's or Merger
Sub's properties or assets is bound, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent
or Merger Sub do not, and the performance of Parent's or Merger Sub's
obligations hereunder and thereunder will not, require any consent, approval,
authorization or permit of, or filing with, or notification to, any
Governmental Authority, except (i) for (A) applicable requirements, if any, of
the Securities Act, the Exchange Act, Blue Sky Laws and state takeover Laws,
(B) the pre-merger notification requirements of the HSR Act, if required, (C)
the filing with the SEC of the Proxy Statement, and (D) the filing of the
Articles of Merger with, and the acceptance for record thereof by, the SDAT,
and (ii) where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, individually or in the
aggregate, has not had or would not reasonably be expected to have a Parent
Material Adverse Effect.
36
Section 5.05 Information Supplied. The information supplied by
Parent or Merger Sub or any affiliate of Parent for inclusion or incorporation
by reference in the Proxy Statement or the Other Filings will not, in the case
of the Proxy Statement, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting or at the
time of any amendment or supplement thereof, or, in the case of any Other
Filing, at the date it is first mailed to the Company's stockholders or at the
date it is first filed with the SEC, 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, except that no
representation is made by Parent with respect to statements made or
incorporated by reference therein based on information supplied by the Company
in connection with the preparation of the Proxy Statement or the Other Filings
for inclusion or incorporation by reference therein. All Other Filings that
are filed by Parent or Merger Sub will comply as to form in all material
respects with the requirements of the Securities Act and the Exchange Act.
Section 5.06 Absence of Litigation. As of the date of this
Agreement, there is no Action pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries or any of its or their
respective properties or assets except as would not, individually or in the
aggregate, have or reasonably be expected to have a Parent Material Adverse
Effect. None of Parent or Merger Sub, or any of their affiliates is subject to
any order, judgment, writ, injunction or decree, except as, individually or in
the aggregate, has not had or would not reasonably be expected to have a
Parent Material Adverse Effect.
Section 5.07 Financing. Parent has a binding commitment (the
"Commitment"), a correct and complete copy of which has been furnished to the
Company (the "Commitment Letter"), from a reputable financial institution to
enable it to borrow up to $639,000,000 in funds (the "Financing"). Parent will
have sufficient funds to permit each of Parent and Merger Sub to pay the
Merger Consideration and to perform all of its other obligations under this
Agreement and to consummate the Merger and the Contemplated Transactions,
including all related expenses. The Commitment, in the form so delivered, is a
legal, valid and binding obligation of Parent and the other parties thereto
and is in full force and effect. There are no conditions precedent or other
contingencies related to the funding of the full amount of the Financing,
other than as set forth in the Commitment Letter. No event has occurred which,
with or without notice, lapse of time or both, would constitute a default or
breach on the part of Parent or Merger Sub under any term or condition of the
Commitment. As of the date hereof, none of Parent and Merger Sub has (x) any
reason to believe that Parent or Merger Sub will be unable to satisfy on a
timely basis any term or condition of closing to be satisfied by it contained
in the Commitment or (y) any knowledge of any facts or circumstances that are
reasonably likely to result in the funding contemplated by the Commitment not
being made available to Parent on a timely basis in order to consummate the
Merger and the Contemplated Transactions. Parent or Merger Sub have fully paid
any and all commitment fees or other fees required by the Commitment to be
paid on or before the date of this Agreement.
Section 5.08 Solvency; Surviving Corporation After the Merger.
Neither Parent nor Merger Sub is entering into the Contemplated Transactions
with the actual intent to hinder, delay or defraud either present or future
creditors. Assuming that the representations and warranties of the Company
contained in this Agreement are true and correct in all material
37
respects, at and immediately after the Effective Time and after giving effect
to the Merger and the Contemplated Transactions, each of the representations
in the following clauses (i)-(iv) will be true and correct with respect to the
Surviving Entity: (i) the sum of the Surviving Entity's debts, including
contingent and unliquidated debts, will not be greater than the Surviving
Entity's property, at a fair valuation; (ii) the present fair salable value of
the Surviving Entity's assets will not be less than the amount required to pay
its probable liability on its existing debts, including contingent and
unliquidated debts, as they become absolute and matured; (iii) the Surviving
Entity will not have unreasonably small capital with which to conduct any
business in which it is or is about to become engaged; and (iv) the Surviving
Entity will not intend to incur, and will not believe and should not
reasonably believe that it will incur, debts beyond its ability to pay as they
mature.
Section 5.09 Guaranty. Concurrently with the execution of this
Agreement, an affiliate of Parent has delivered to the Company the Guaranty.
Section 5.10 No Ownership of Equity Interest. Neither Parent
nor any of its Subsidiaries, including Merger Sub, owns any Company Common
Shares, Existing Units or other securities of the Company, the Operating
Partnership or any of the Company's Subsidiaries.
Section 5.11 Other Agreements or Understandings. Parent has
disclosed to the Company all contracts, arrangements or understandings (and,
with respect to those that are written, Parent has furnished to the Company
correct and complete copies thereof) between or among Parent and Merger Sub,
or any Affiliate of Parent, on the one hand, and any officer, director or
member of the management of the Company.
Section 5.12 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger and the Contemplated Transactions based upon arrangements made
by or on behalf of Parent, Merger Sub or any of their Subsidiaries.
Section 5.13 No Other Representations and Warranties. Parent
and Merger Sub acknowledge that the Company and the Operating Partnership make
no representations or warranties as to any matter whatsoever except as
expressly set forth in this Agreement and specifically (but without limiting
the generality of the foregoing) that the Company and the Operating
Partnership make no representations or warranties with respect to (i) any
projections, estimates or budgets delivered to or made available to Parent or
Merger Sub (or any of their respective Affiliates or representatives) of
future revenues, results of operations (or any component thereof), cash flows
or financial condition (or any component thereof) of the Company, the
Operating Partnership and the Company's other Subsidiaries or (ii) the future
business and operations of the Company, the Operating Partnership and the
Company's other Subsidiaries.
38
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.01 Conduct of Business by the Company Pending the
Merger. The Company agrees that, between the date of this Agreement and the
Effective Time, except as required, permitted or otherwise contemplated by
this Agreement or as set forth in Section 6.01 of the Disclosure Schedule and
except with the prior written consent of Parent, which consent shall not be
unreasonably withheld, conditioned or delayed, the businesses of the Company,
the Operating Partnership and the Company's other Subsidiaries shall be
conducted, and the Company, the Operating Partnership and the Company's other
Subsidiaries shall not take any action except, in the ordinary course of
business consistent with past practice; and the Company shall use its
commercially reasonable efforts to preserve (i) substantially intact the
business organization of the Company, the Operating Partnership and the
Company's other Subsidiaries, to keep available the services of its present
officers, managers and employees and to preserve the current relationships of
the Company, the Operating Partnership and the Company's other Subsidiaries
with lessees and other Persons with which the Company, the Operating
Partnership or any other Subsidiary of the Company has significant business
relations and (ii) the Company's status as a REIT within the meaning of the
Code. Except as required, permitted or otherwise contemplated by this
Agreement or as set forth on Section 6.01 of the Disclosure Schedule, none of
the Company, the Operating Partnership and the Company's other Subsidiaries
shall, between the date of this Agreement and the Effective Time, do any of
the following without the prior written consent of Parent, which consent shall
not be unreasonably withheld, conditioned or delayed; provided, however, that,
with respect to consents required by the Company under this Section 6.01, the
Company shall send to the Parent Consent Addressees identified in Section
10.03 a written request for such consent and if Parent does not object in
writing within two (2) Business Days after delivery of such initial request
for consent, the Company shall send to the Parent Consent Addressees
identified in Section 10.03 a second request for such consent (identified as a
second request for consent) and if Parent does not object in writing to such
second request for consent within two (2) Business Days after such second
request, consent of Parent shall be deemed to have been given:
(a) amend or otherwise change the Company Charter, Company
Bylaws, Operating Partnership Agreement, the certificate of limited
partnership of the Operating Partnership or the organizational documents of
any Subsidiary;
(b) (i) authorize for issuance, issue, sell or pledge or
agree or commit to issue, sell or pledge any shares of any class of capital
stock or other ownership interest (including Existing Units) of the Company,
the Operating Partnership or any other Subsidiary or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
such capital stock, or any other ownership interest (including Existing
Units), of the Company phantom stock awards or any other rights that are
linked to the price of the Company's capital stock, other than the (A)
issuance of Company Common Shares upon exercise of or the vesting of equity
awards under the Incentive Plan, which awards are outstanding on the date of
this Agreement or granted upon consent of Parent as contemplated by this
Section 6.01, (B) issuance of Existing Units to the Company in connection with
any such equity award under the Incentive Plan, and (C) issuance of Company
Common Shares in exchange for Existing Units pursuant to
39
the Operating Partnership Agreement; or (ii) repurchase, redeem or otherwise
acquire any securities or equity equivalents except in connection with the
exercise of, the vesting of or the lapse of restrictions on any equity awards
under the Incentive Plan or the redemption of Existing Units pursuant to the
Operating Partnership Agreement;
(c) (i) reclassify, combine, split, or subdivide any of
its capital stock or (ii) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except for (A) dividends by any of the
Company's direct or indirect Subsidiaries to the Company or any other
Subsidiary of the Company, (B) regular dividends of not more than $0.175 per
quarter on Company Common Shares declared and paid in cash at times consistent
with past practice, (C) corresponding regular quarterly distributions on
Existing Units declared and paid to holders of Existing Units, (D) dividends
on the Company Series A Preferred Shares declared and paid in accordance with
the terms thereof, and (E) corresponding distributions on Series A Preferred
Partnership Units. Notwithstanding the foregoing, the Company and the
Operating Partnership (proportionately to all Existing Unit Holders) shall be
permitted to make distributions, including under Sections 857, 858 or 860 of
the Code, reasonably necessary for the Company to maintain its status as a
REIT under the Code and avoid the imposition of corporate level tax or excise
Tax under Section 4981 of the Code;
(d) acquire, or enter into any option, commitment or
agreement to acquire, any real property, other than acquisitions of, or
options, commitments or agreements to acquire, real properties identified in
Section 6.01(d) of the Disclosure Schedule;
(e) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any person for
borrowed money, except for (i) indebtedness for borrowed money incurred in the
ordinary course of business in accordance with the Company's 2007 Budget
(which shall be deemed to include, without limitation, draws under the
Company's revolving credit facilities or other similar lines of credit in the
ordinary course of business provided that the Company shall not refinance
mortgage indebtedness secured by one or more Company Properties without
Parent's written consent); and (ii) indebtedness for borrowed money incurred
in order for the Company to pay regular quarterly cash dividends to holders of
Company Common Shares and Company Series A Preferred Shares or payments made
to holders of Company Common Shares and Electing Units pursuant to Section
3.01(c) and Section 3.03(a), and for the Operating Partnership to make
corresponding distributions payable to Existing Unit Holders and the Series A
Preferred Partnership Units;
(f) (i) modify or amend any Material Contract other than
in the ordinary course of business consistent with past practice or as
required by Plans or any applicable Law, or (ii) except as otherwise permitted
by Parent pursuant to this Section 6.01, enter into any new contract or
agreement that, if entered into prior to the date of this Agreement, would
have been required to be listed in Section 4.19 of the Disclosure Schedule as
a Material Contract;
(g) except in accordance with the Company's 2007 bonus or
incentive plans for Company Employees listed under the heading 2007 Bonus
Compensation Plans in Section 4.03(b) of the Disclosure Schedule or the
employment agreements with officers of the
40
Company listed in Section 4.03(b) of the Disclosure Schedule, or as may be
required by any Plans in effect on the date hereof or by applicable Law, (i)
increase the compensation or other benefits payable to its directors, officers
or employees, except for increases in the ordinary course of business
consistent with past practice with respect to non-officer or non-director
employees of the Company or any Subsidiary of the Company, or (ii) enter into
any employment or severance agreement with, any director, officer or other
employee of the Company or of any Subsidiary, or establish, adopt, enter into
or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer or
employee;
(h) pre-pay any long-term debt, except in the ordinary
course of business (which shall be deemed to include, without limitation,
pre-payments or repayments of revolving credit facilities or other similar
lines of credit, payments made in respect of any termination or settlement of
any interest rate swap or other similar hedging instrument relating thereto,
or pre-payments of mortgage indebtedness secured by one or more Company
Properties in accordance with their terms, as such loans become due and
payable) or pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), except in the
ordinary course of business consistent with past practice and in accordance
with their terms;
(i) except as required by the SEC or as recommended by the
Company's independent auditors or changes in GAAP which become effective after
the date of this Agreement, take any material action, other than in the
ordinary course of business, with respect to accounting policies or
procedures;
(j) (i) except in connection with a right being exercised
by a tenant under an existing Company Lease, enter into any new lease
(including renewals) for in excess of 5,000 square feet of net rentable area
at a Company Property, (ii) other in the ordinary course of business, and
except in connection with a right being exercised by a tenant under an
existing Company Lease, terminate or materially modify or amend any Company
Lease that relates to in excess of 5,000 square feet of net rentable area, or
(iii) terminate or materially modify or amend any Ground Lease;
(k) authorize, or enter into any commitment for, any new
material capital expenditure (such authorized or committed new material
capital expenditures being referred to hereinafter as the "Capital
Expenditures") relating to the Company Properties other than (i) Capital
Expenditures to be made in connection with Company Leases that the Company is
permitted to enter into pursuant to Section 6.01(j) or as otherwise approved
by Parent, (ii) Capital Expenditures identified in the Company's 2007
operating and capital budget as provided to Parent (the "2007 Budget") and
described in Section 6.01(k) of the Disclosure Schedule, (iii) other Capital
Expenditures not exceeding $250,000, in the aggregate, and (iv) Capital
Expenditures in the ordinary course of business to maintain the physical and
structural integrity of the Company Properties and as reasonably determined by
the Company to be necessary to keep the Company Properties in working order,
to comply with Laws, and to repair and/or prevent damage to any of the Company
Properties as is necessary in the event of an emergency situation;
41
(l) waive, release, assign, settle or compromise any
material litigation other than settlements of, or compromises for, any
litigation where the amounts paid or to be paid are fully covered by insurance
coverage maintained by the Company; provided, in each case that any such
waiver, release, settlement or compromise includes a full release of the
Company with respect to the matters covered by the subject litigation;
provided, further, that no pending or threatened claim brought by or on behalf
of the Company's stockholders or involving any officer, director or Affiliate
of the Company may be settled without the prior written consent of Parent;
provided, however, that no such consent shall be necessary for any settlement
unless the Company must contribute, separate and apart from any amounts
contributed by the Company's insurers, an amount greater than the amount set
forth in Section 7.11 of the Disclosure Schedule;
(m) (i) make any material Tax election or rescission,
unless such election or rescission is required by law or necessary (A) to
preserve the status of the Company as a REIT under the Code, or (B) to qualify
or preserve the status of any Subsidiary as a partnership for federal income
tax purposes or as a qualified REIT subsidiary or a taxable REIT subsidiary
under the applicable provisions of Section 856 of the Code, as the case may be
(provided that in such events the Company shall notify Parent of such
election) or (ii) other than in the ordinary course of business or as set
forth in Section 6.01(m) of the Disclosure Schedule, settle, pay or compromise
any material federal, state, local or foreign income Tax liability;
(n) acquire (by merger, consolidation, purchase of stock
or assets or otherwise), or agree to so acquire, in a single transaction or in
a series of related transactions, any Person, entity or division thereof, or
otherwise acquire or agree to acquire any assets outside the ordinary course
consistent with past practice (it being understood that this clause (n) shall
not apply to capital expenditures by the Company, which shall be covered by
clause (k) above);
(o) dispose of any Company Property or, other than for
transactions that are in the ordinary course of business or pursuant to
Contracts in effect prior to the date of this Agreement, transfer, sell,
lease, license, mortgage, pledge, surrender, encumber, divest, cancel, abandon
or allow to lapse or expire or otherwise dispose of (by merger, consolidation,
sale of stock or assets or otherwise), or agree to transfer, sell, lease,
license, mortgage, pledge, surrender, encumber, divest, cancel, abandon or
allow to lapse or expire or otherwise dispose of, any entity, business or,
other than in the ordinary course of business, assets; provided, however, that
this subsection (o) shall not apply with respect to Intellectual Property that
is licensed, cancelled, abandoned or allowed to lapse, expires or is otherwise
disposed of in the ordinary course of the Company's or its Subsidiaries'
business;
(p) other than as expressly required by Material Contracts
in effect prior to the date of this Agreement, make any loans, advances or
capital contributions to, or investments in, any other Person (other than the
Company or any direct or indirect wholly-owned Subsidiary of the Company);
(q) adopt or enter into a plan of complete or partial
liquidation, dissolution, restructuring or recapitalization of the Company or
any of its Subsidiaries;
(r) fail to maintain in full force and effect the existing
insurance policies covering the Company and its Subsidiaries and their
respective properties, assets and
42
businesses (unless such coverage cannot be maintained on substantially similar
terms, in which case the Company shall consult with Parent);
(s) voluntarily adopt, renew, terminate, change or
increase in any material respect any liability or other obligations of the
Company or any of its Subsidiaries under any operating standards, loyalty
programs or amenity packages with the franchisors of any of the properties of
the Company or its Subsidiaries except as required by Contracts existing as of
the date hereof;
(t) modify or amend in any material respect or terminate
any Contract with an Affiliate of the Company or modify in any material
respect any material relationship between the Company and its Affiliates,
including the manner in which the Company and its Affiliates own or holds
their respective assets;
(u) enter into any Contracts for parking arrangement at
the Company Properties, which cannot be terminated upon 30 days notice at
minimal cost;
(v) modify, amend or change any existing Tax Protection
Agreement in a manner that would adversely affect the Company, any Subsidiary
of the Company or Parent, or enter into any new Tax Protection Agreement; or
(w) announce an intention, enter into any agreement or
otherwise make a commitment, to do any of the foregoing.
Notwithstanding anything to the contrary set forth in this Agreement,
nothing in this Agreement shall prohibit the Company from taking, any action
at any time or from time to time that in the reasonable judgment of the
Company Board, upon advice of counsel, is reasonably necessary for the Company
to maintain its qualification as a REIT under the Code for any period or
portion thereof ending on or prior to the Effective Time, including without
limitation, making dividend or distribution payments to stockholders of the
Company in accordance with this Agreement or otherwise.
Section 6.02 Conduct of Business by Parent Pending the Merger.
Except (a) as otherwise permitted or contemplated by this Agreement, (b) as
required in connection with the Financing or (c) as required by Law, during
the period from the date of this Agreement to the earlier of the termination
of this Agreement or the Effective Time, unless the Company shall otherwise
agree in writing (which agreement shall not be unreasonably withheld,
conditioned or delayed), Parent shall not, and shall cause Merger Sub and each
of Parent's other Subsidiaries not to, (i) take any action that would
reasonably be expected to prevent or materially delay the consummation of the
Merger or the Contemplated Transactions or result in any of the conditions to
the Merger not being satisfied, (ii) merge, consolidate or enter into any
other business combination transaction with any Person, (iii) authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of Parent, Merger Sub or any of Parent's
other Subsidiaries, or (iv) agree to take, make any commitment to take, or
adopt any resolutions in support of, any of the actions prohibited by clauses
(i) through (iii) of this Section 6.02.
43
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.01 Proxy Statement; Other Filings. As promptly as
reasonably practicable following the date of this Agreement, the Company shall
prepare (in consultation with Parent) and file (the Company shall use
commercially reasonable efforts to file within 21 days after the date hereof)
with the SEC the preliminary Proxy Statement, and each of the Company and
Parent shall, or shall cause their respective affiliates to, prepare and file
with the SEC all Other Filings that are required to be filed by such party in
connection with the Merger and the Contemplated Transactions. Each of the
Company and Parent shall furnish all information concerning itself and its
affiliates that is required to be included in the Proxy Statement or, to the
extent applicable, the Other Filings, or that is customarily included in proxy
statements prepared in connection with transactions of the type contemplated
by this Agreement. Each of the Company and Parent shall use commercially
reasonable efforts to respond as promptly as practicable to any comments of
the SEC with respect to the Proxy Statement or the Other Filings, and the
Company shall use commercially reasonable efforts to cause the definitive
Proxy Statement to be cleared by the SEC and mailed to the Company's
stockholders as promptly as reasonably practicable. The Company shall notify
Parent upon the receipt of any comments from the SEC or its staff or any
request from the SEC or its staff for amendments or supplements to the Proxy
Statement or the Other Filings and shall provide Parent with copies of all
correspondence between the Company and its representatives, on the one hand,
and the SEC and its staff, on the other hand, relating to the Proxy Statement
or the Other Filings. If at any time prior to the Company Stockholders'
Meeting, any information relating to the Company, Parent, Merger Sub or any of
their respective affiliates, officers or directors, shall be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
the Proxy Statement or the Other Filings, so that the Proxy Statement or the
Other Filings shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they are made, not misleading, the party which discovers such
information shall promptly notify the other parties, and an appropriate
amendment or supplement describing such information shall be filed with the
SEC and, to the extent required by applicable Law, disseminated to the
stockholders of the Company. Notwithstanding anything to the contrary stated
above, prior to filing or mailing the Proxy Statement or filing the Other
Filings (or any amendment or supplement thereto) or responding to any comments
of the SEC with respect thereto, the Company shall provide Parent a reasonable
opportunity to review and comment on such document or response and, to the
extent practicable, the Company will provide Parent with the opportunity to
participate in any substantive calls between the Company or any of its
Representatives and the SEC concerning the Proxy Statement.
Section 7.02 Company Stockholders' Meeting. The Company shall,
in accordance with applicable Law and the Company Charter and Company Bylaws,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders' Meeting"), as promptly as practicable after the date
that the Proxy Statement is cleared by the SEC (and shall use commercially
reasonable efforts such that the Company Stockholders' Meeting shall initially
be set on a date no more than 50 days after the Proxy Statement is so
cleared), for the purpose of voting upon the approval of this Agreement, the
Merger and the
44
Contemplated Transactions (the "Company Stockholder Approval"). Except in
accordance with Section 7.04(c), none of the Company Board, the Special
Committee nor any committee thereof shall (A) withdraw, qualify or modify in a
manner adverse to the Parent Parties, or publicly propose to withdraw the
Company Board Recommendation (B) authorize, adopt or propose any resolution to
withdraw, qualify or modify the Company Board Recommendation in a manner
adverse to the Parent Parties, (C) fail to include the Company Board
Recommendation in the Proxy Statement or (D) knowingly take any other action
or knowingly make any other public statement that is knowingly inconsistent in
any material respect with such Company Board Recommendation (any action
described in clauses (A) through (D) above, a "Recommendation Withdrawal").
Subject to Section 7.04(c), the Company will use commercially reasonable
efforts to solicit from its stockholders proxies in favor of the approval of
this Agreement, the Merger and the Contemplated Transactions and will take all
other action reasonably necessary or advisable to secure the vote or consent
of its stockholders required by the rules of the NYSE or applicable Legal
Requirements to obtain such approval. The Company shall keep the Parent
Parties updated with respect to proxy solicitation results as reasonably
requested by Parent.
Section 7.03 Access to Information; Confidentiality.
(a) Subject to applicable Law and confidentiality
agreements, from the date hereof until the Effective Time, promptly following
notice from Parent to the Company, the Company shall, and shall cause its
Subsidiaries and the officers, directors, employees, auditors and agents of
the Company and its Subsidiaries to, afford Parent reasonable access during
normal business hours to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary of the Company. Notwithstanding the foregoing, neither Parent nor
any of its representatives shall (i) contact or have any discussions with any
of the Company's or any of its Subsidiaries' employees, agents, or
representatives, unless in each case Parent obtains the prior written consent
of the Company, which shall not be unreasonably withheld, conditioned or
delayed, (ii) contact or have any discussions with any of the property
managers, landlords/sublandlords, tenants/subtenants, or licensees or
franchisees of the Company or its Subsidiaries, unless in each case Parent
obtains the prior written consent of the Company, which shall not be
unreasonably withheld, conditioned or delayed, (iii) damage any property or
any portion thereof, or (iv) perform any onsite inspection, procedure or
investigation (including any onsite environmental investigation or study)
without the prior written consent of the Company; provided, however, Parent
agrees to indemnify and hold the Company and its Subsidiaries and Affiliates
harmless for any damages, claims, or losses that Parent or its representatives
cause in the course of or result directly or indirectly from any inspection,
procedure or investigation that Parent or its representatives perform pursuant
hereto. Subject to the foregoing, Parent shall schedule and coordinate all
inspections with the Company and shall give the Company at least three (3)
Business Days prior written notice thereof, setting forth the inspection or
materials that Parent or its representatives intend to conduct. The Company
shall be entitled to have representatives present at all times during any such
inspection. Notwithstanding the foregoing, neither the Company nor any of its
Subsidiaries shall be required to provide access or to disclose information
where such access or disclosure would jeopardize the attorney-client privilege
of the Company or its Subsidiaries or contravene any Law or binding agreement.
The Company shall use commercially reasonable efforts to request each company
which manages any Company Property to provide information to the Parent
Parties concerning such properties, the management thereof and all other
matters related thereto.
45
(b) All information obtained by Parent pursuant to this
Section 7.03 and pursuant to the confidentiality agreement, dated February 27,
2007 (the "Confidentiality Agreement"), between Parent and the Company, shall
be kept confidential in accordance with the Confidentiality Agreement.
(c) No investigation pursuant to this Section 7.03 or
otherwise shall affect any representation or warranty in this Agreement of any
party hereto or any condition to the obligations of the parties hereto.
Section 7.04 No Solicitation of Transactions.
(a) The Company and its Subsidiaries shall not, directly
or indirectly, and shall instruct their respective officers, directors,
financial advisors, attorneys and agents ("Company Representatives") not to
directly or indirectly, (i) solicit, initiate, encourage, induce or facilitate
any inquiries regarding, or the making, submission, reaffirmation or
announcement of any Acquisition Proposal or take any action that could
reasonably be expected to lead to an Acquisition Proposal, (ii) furnish any
nonpublic information regarding any of the Company Parties, or provide any
access to the books, records or personnel of any of the Company Parties, to
any Person in connection with or in response to an Acquisition Proposal or an
inquiry or indication of interest that could reasonably be expected to lead to
an Acquisition Proposal, (iii) engage in, continue or otherwise participate in
any discussions or negotiations with any Person in respect of, or otherwise
cooperate with respect to, any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent,
arrangement, understanding, agreement, agreement in principle or similar
document or any Contract contemplating or otherwise relating to any
Acquisition Transaction. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in this Section 7.04(a) by any Company
Representative (other than any director of the Company whose Affiliate is, as
of the date hereof, a party to a confidentiality agreement with the Company
containing terms (including "standstill provisions") materially consistent
with the Confidentiality Agreement), whether or not such Person is purporting
to act on behalf of any of the Company Parties or otherwise, shall be deemed
to be a breach of this Section 7.04(a) by the Company. Notwithstanding the
foregoing, from the date hereof and prior to the approval of this Agreement,
the Merger and the Contemplated Transactions by the Required Vote, nothing in
this Agreement (including this Section 7.04(a)) shall, subject to Section
7.04(b), prohibit the Company from furnishing any information regarding the
Company Parties to, or entering into or conducting discussions or negotiations
with, any Person in response to a bona fide written Acquisition Proposal that
is submitted to the Company by such Person during such period (and not
withdrawn) if (A) neither the Company nor any Company Representative shall
have breached or violated this Section 7.04(a) in any respect that results in
such Acquisition Proposal, (B) the Company Board or its Special Committee
concludes in good faith, after consultation with the Company's or the Special
Committee's outside legal counsel, that failure to take such action would be
inconsistent with the duties of the members of the Company Board under
applicable Legal Requirements, (C) the Company Board or its Special Committee
concludes in good faith, after consultation with its legal counsel and
financial advisor, that such Acquisition Proposal constitutes or is reasonably
likely to lead to a Superior Proposal and (D) prior to furnishing any such
nonpublic information to such Person, the Company receives from such Person an
executed confidentiality agreement containing terms (including "standstill
provisions") materially
46
consistent with the Confidentiality Agreement. As promptly as reasonably
practicable following the furnishing of information pursuant to this Section
7.04(a), the Company shall provide to Parent any information concerning any of
the Company Parties that is furnished to any third Person or its
Representatives which was not previously provided to Parent. Notwithstanding
anything to the contrary in this Agreement, the provisions of any standstill
agreement to which the Company is a party are hereby waived to permit any
actions by the parties thereto permitted by the terms of this Section 7.04.
(b) From and after the execution of this Agreement, except
to the extent that doing so would result in a breach of the duties of the
directors of the Company, each of the Company Parties shall promptly, and in
any event within forty-eight (48) hours following the initial receipt by it of
any Acquisition Proposal, any indication by any Person considering making an
Acquisition Proposal, any request for information relating to any of the
Company Parties (other than requests for information in the ordinary course of
business and unrelated to an Acquisition Proposal) or any inquiry or request
for discussions or negotiations regarding any Acquisition Proposal which any
of the Company Parties or any of their respective Company Representatives may
receive after the date hereof, advise Parent orally and in writing of (i) the
receipt, directly or indirectly, of any such inquiries, negotiations or
proposals relating to any Acquisition Proposal by the Company, (ii) the
material terms and conditions of such Acquisition Proposal, indication,
inquiry or request, together with a copy thereof (if available) or if not in
writing, a written description thereof, (iii) the identity of the Person
making such Acquisition Proposal and (iv) the Company's intention to furnish
information to, or enter into discussions or negotiations with, such Person.
The Company shall keep Parent reasonably informed on a prompt basis as to any
material developments regarding any such Acquisition Proposal, indication,
inquiry or request. None of the Company Parties shall, after the date hereof,
enter into any confidentiality agreement that would prohibit them from
providing such information to Parent.
(c) The Company Board and the Special Committee may not
(i) withdraw, qualify or modify, in a manner adverse to the Parent Parties, or
fail to make, the Company Board Recommendation, (ii) approve, authorize or
recommend, or propose publicly or approve, authorize or recommend, an
Acquisition Proposal, (iii) authorize or permit the Company to enter into any
agreement (an "Acquisition Agreement") contemplating an Acquisition Proposal
(other than the confidentiality agreement referred to above) or (iv) permit
the Company Parties to take any action to exempt or make not subject to any
"moratorium," "control share," "fair price," "affiliate transaction,"
"business combination" or other anti-takeover Legal Requirements or any
"excess share" or similar ownership limitation provisions (including the
Ownership Limitation) applicable to the Company, any Person (other than the
Parent Parties and their respective Affiliates) or any action taken by any
such Person, which Person or action would have otherwise have been subject to
the restrictive provisions thereof and/or not exempt therefrom.
Notwithstanding anything to the contrary herein, at any time prior to the
earlier of the Required Vote and the termination of this Agreement pursuant to
Article IX, the Company Board or its Special Committee may take one or more of
the actions described in the preceding clauses (i) - (iv) in response to a
Superior Proposal if the Company Board or its Special Committee concludes in
good faith, after consultation with the Company's (or the Special Committee's,
as applicable) outside legal counsel, that failure to take such action would
be inconsistent with the duties of the members of the Company Board to the
Company's
47
stockholders under applicable Legal Requirements, but only after following the
Superior Proposal Termination Procedures.
(d) Until the earlier of the Effective Time and the
termination of this Agreement pursuant to Article IX, the Company shall
immediately (i) request that all confidential information previously furnished
to any third party be returned promptly and (ii) deny access to any data room
containing any such information to any third party (other than the Parent
Parties and their respective Representatives), in each case, subject to the
Company's rights and obligations in Section 7.04(a).
(e) Nothing contained in this Agreement shall prevent the Company or the
Company Board from making any "stop-look-and-listen" communication or from
taking and disclosing to its stockholders a position contemplated by Rule
14d-9 and Rule 14e-2(a) promulgated under the Exchange Act (or any similar
communication to stockholders) or from making any legally required disclosure
to stockholders.
Section 7.05 Employee Benefits Matters.
(a) From and after the Effective Time, the Surviving
Entity shall assume in accordance with their terms the Company's obligations
under all employment, severance and termination plans, arrangements, programs,
policies, and agreements (including change-in-control provisions) of employees
or independent contractors of the Company and its Subsidiaries, in each case
existing immediately prior to the execution of this Agreement. Copies of
agreements with the Company's President, Chief Financial Officer and Senior
Vice President - Acquisitions (the "Executive Officers") setting forth certain
of such obligations are attached to Section 7.05 of the Disclosure Schedule.
As of the Effective Time, the Company will enter into escrow agreements,
substantially in the form attached to Section 7.05 of the Disclosure Schedule,
with an escrow agent and with each such Executive Officer, which shall be used
to fund payments which become due to the Executive Officers as the result of a
change in control, and the Company shall deposit all such amounts set forth in
Section 7.05 of the Disclosure Schedule to the escrow funds established
pursuant to such escrow agreements, subject to the terms thereof. Such escrow
agreements shall be binding upon the Surviving Entity.
(b) For a period of not less than eighteen (18) months
after the Closing Date, for each employee of the Company or any of its
Subsidiaries (collectively, the "Company Employees") who remains an employee
of the Surviving Entity or its successors or assigns or any of their
subsidiaries (collectively, the "Continuing Employees"), Parent shall or shall
cause the Surviving Entity to provide terms and conditions, compensation and
benefits (including group health, life, disability, bonus and severance plans)
that are not less favorable in the aggregate to such employee and the
employee's dependents and beneficiaries, as appropriate, as the Company or
such Subsidiary of the Company provided to such employee immediately prior to
the Closing Date. To the extent a Continuing Employee becomes eligible to
participate in an employee benefit plan, program, or arrangement maintained by
Parent or its Subsidiaries (each, a "Parent Plan"), such Continuing Employee
will be credited with his or her years of service with the Company and its
Subsidiaries (and any predecessor entities thereof) before the Closing Date
under such Parent Plan to the same extent as such employee was entitled,
before the Closing Date, to credit for such service under the respective Plan
(except to the extent such credit would
48
result in the duplication of benefits). In addition, with respect to each
Parent Plan providing medical or health benefits in which Continuing Employees
become eligible to participate, during the calendar year that includes the
Closing Date, each Continuing Employee shall be given credit for amounts paid
by the employee under the respective Plan for purposes of applying
deductibles, co-payments and out of pocket maximums as though such amounts had
been paid in accordance with the terms and conditions of such Parent Plan. To
the extent applicable, nothing in this section shall modify any Continuing
Employee's status as an at-will employee.
(c) Prior to the Effective Time, the Company Board, or an
appropriate committee of non-employee directors thereof, shall adopt a
resolution consistent with the interpretive guidance of the SEC so that the
disposition by any officer or director of the Company who is a covered person
of the Company for purposes of Section 16 of the Exchange Act and the rules
and regulations thereunder ("Section 16") of Company Common Shares pursuant to
this Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.
(d) Prior to the Effective Time, the Company Board shall
take such actions as are necessary to terminate the Company's 2005 Deferred
Compensation Plan for Non-Employee Directors. Such action shall be contingent
upon, and effective as of, the Effective Time.
(e) The provisions of this Section 7.05 shall survive the
Closing and are for the sole benefit of the parties to this Agreement and
nothing herein, expressed or implied, is intended or shall be construed to
confer upon or to give to any Person other than the parties hereto and their
respective permitted successors and assigns any legal or equitable or other
rights or remedies (with respect to the matters provided for in this Section
7.05) under or by reason of any provision of this Agreement. Nothing in this
Section 7.05 is intended as or shall be construed to be an amendment to any
Plan.
Section 7.06 Directors' and Officers' Indemnification and
Insurance.
(a) Without limiting any additional rights that any
director or officer may have under any employment or indemnification agreement
or under the Company Charter, the Company Bylaws, the Operating Partnership
Agreement or this Agreement or, if applicable, similar organizational
documents or agreements of any of the Company's Subsidiaries, from and after
the Effective Time through the sixth anniversary of the date on which the
Effective Time occurs, Parent and the Surviving Entity, jointly and severally,
shall: (i) indemnify and hold harmless each person who is at the date hereof
or during the period from the date hereof through the date of the Effective
Time serving as a director or officer of the Company or any of its
Subsidiaries (collectively, the "Indemnified Parties") to the fullest extent
authorized or permitted by applicable law, as now or hereafter in effect, in
connection with any Claim and any losses, claims, damages, liabilities, costs,
Expenses, judgments, fines, penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of any thereof) resulting therefrom; and (ii)
promptly pay on behalf of or, within ten (10) days after any request for
advancement, advance to each of the Indemnified Parties, to the fullest extent
authorized or permitted by applicable Law, as now or hereafter in effect, any
Expenses incurred in defending, serving as a witness with respect to or
otherwise
49
participating with respect to any Claim in advance of the final disposition of
such Claim, including payment on behalf of or advancement to the Indemnified
Party of any Expenses incurred by such Indemnified Party in connection with
enforcing any rights with respect to such indemnification and/or advancement,
in each case without the requirement of any bond or other security). The
indemnification and advancement obligations of Parent and the Surviving Entity
pursuant to this Section 7.06(a) shall extend to acts or omissions occurring
at or before the Effective Time and any Claim relating thereto (including with
respect to any acts or omissions occurring in connection with the approval of
this Agreement and the consummation of the Merger and the Contemplated
Transactions, including the consideration and approval thereof and the process
undertaken in connection therewith and any Claim relating thereto), and all
rights to indemnification and advancement conferred hereunder shall continue
as to a person who has ceased to be a director or officer of the Company or
any of its Subsidiaries after the date hereof and shall inure to the benefit
of such person's heirs, executors and personal and legal representatives. As
used in this Section 7.06(a): (x) the term "Claim" means any threatened,
asserted, pending or completed Action, whether instituted by any party hereto,
any Governmental Authority or any other person, that any Indemnified Party in
good faith believes might lead to the institution of any Action, whether
civil, criminal, administrative, investigative or other, including any
arbitration or other alternative dispute resolution mechanism, arising out of
or pertaining to matters that relate to such Indemnified Party's duties or
service as a director or officer of the Company, or any of its Subsidiaries at
or prior to the Effective Time; and (y) the term "Expenses" means reasonable
attorneys' fees and all other reasonable costs, expenses and obligations
(including experts' fees, travel expenses, court costs, retainers, transcript
fees, duplicating, printing and binding costs, as well as telecommunications,
postage and courier charges) paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to investigate, defend, be a witness in or participate
in, any Claim for which indemnification is authorized pursuant to this Section
7.06(a), including any Action relating to a claim for indemnification or
advancement brought by an Indemnified Party. Neither Parent nor the Surviving
Entity shall settle, compromise or consent to the entry of any judgment in any
actual or threatened Action in respect of which indemnification has been or
could be sought by such Indemnified Party hereunder unless such settlement,
compromise or judgment includes an unconditional release of such Indemnified
Party from all liability arising out of such Action without admission or
finding of wrongdoing, or such Indemnified Party otherwise consents thereto.
(b) Without limiting the foregoing, Parent and Merger Sub
agree that all rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of the Company or any of
its Subsidiaries as provided in the Company Charter and Company Bylaws (or, as
applicable, the charter, bylaws, partnership agreement, limited liability
company agreement, or other organizational documents of any of the Company's
Subsidiaries) and indemnification agreements of the Company or any of its
Subsidiaries shall be assumed by the Surviving Entity in the Merger, without
further action, at the Effective Time and shall survive the Merger and shall
continue in full force and effect in accordance with their terms.
(c) For a period of six (6) years from the Effective Time,
the charter and bylaws of the Surviving Entity shall contain provisions no
less favorable with respect to indemnification and limitations on liability of
directors and officers than are set forth in the
50
Company Charter and Company Bylaws, which provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who, at or prior to the Effective Time, were Indemnified
Parties, unless such modification shall be required by Law and then only to
the minimum extent required by Law.
(d) Parent shall, or shall cause the Surviving Entity to,
maintain for a period of six (6) years following the Effective Time policies
of directors' and officers' liability insurance with coverage substantially
equivalent to the current policies of directors' and officers' liability
insurance maintained by the Company and its Subsidiaries (provided that the
Surviving Entity may substitute therefor policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous to the insured from carriers with the same or better rating as
the carrier of such insurances as of the date of this Agreement, provided that
such substitution shall not result in gaps or lapses of coverage with respect
to matters occurring before the Effective Time) with respect to claims arising
from facts or events that occurred on or before the Effective Time, including,
in respect of the Merger and the Contemplated Transactions. The provisions of
this Section 7.06(d) shall be deemed to have been satisfied if prepaid "tail"
policies have been obtained by the Surviving Entity for purposes of this
Section 7.06 from carriers with the same or better rating as the carrier of
such insurances as of the date of this Agreement, which policies provide such
directors and officers with the coverage described in this Section 7.06(d) for
an aggregate period of not less than six (6) years with respect to claims
arising from facts or events that occurred on or before the Effective Time,
including, in respect of the Merger and the Contemplated Transactions.
Notwithstanding anything in this Agreement to the contrary, in no event shall
Parent or the Surviving Entity be required under this Section 7.06(d) to
expend annually in excess of two hundred and fifty percent (250%) of the
annual premium currently paid by the Company under the Company's current
directors' and officers' insurance policy (the "Insurance Amount"); provided,
further, however, that if the premium of such insurance coverage exceeds the
Insurance Amount, the Company shall be obligated to obtain, and Parent or the
Surviving Entity shall be obligated to maintain, a policy with the greatest
coverage available for a cost not exceeding the Insurance Amount. Parent shall
pay or cause Surviving Entity to pay for all premiums under the tail or
run-off insurance policies and directors' and officers' insurance and
indemnification policies contemplated by this Section 7.06(d) not exceeding
the Insurance Amount.
(e) If the Surviving Entity or any of its respective
successors or assigns (i) consolidates with or merges with or into any other
person and shall not be the continuing or surviving corporation, partnership
or other 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 Surviving Entity assume the obligations set forth in this
Section 7.06.
(f) Parent shall cause the Surviving Entity to perform all
of the obligations of the Surviving Entity under this Section 7.06.
(g) This Section 7.06 shall survive the consummation of
the Merger and is intended to be for the benefit of, and shall be enforceable
by, the Indemnified Parties and their respective heirs and personal
representatives, and shall be binding on the Surviving Entity and its
51
successors and assigns. In the event that the Surviving Entity or any of its
successors or assigns (i) consolidates with or merges into any other Person
and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all
its properties and assets to any Person (including by dissolution), then, and
in each such case, Parent shall cause proper provision to be made so that the
successors and assigns of the Surviving Entity assume and honor the
obligations set forth in this Section 7.06.
Section 7.07 Further Action; Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions of this
Agreement, each of the parties hereto shall (i) make promptly its respective
filings, and thereafter make any other required submissions, under the HSR Act
with respect to this Agreement and the Merger, if required, and (ii) use its
commercially reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws to consummate and make effective the Merger,
including using its commercially reasonable efforts to obtain all Permits,
consents, approvals, authorizations, qualifications and orders of Governmental
Authorities and parties to contracts with the Company and its Subsidiaries as
are necessary for the consummation of the Merger and the Contemplated
Transactions and to fulfill the conditions to the Merger, including (x)
consents set forth in Section 4.05(a) of the Disclosure Schedule, and (y)
consents required to prevent, individually or in the aggregate, a Company
Material Adverse Effect from occurring prior to the Effective Time. Any costs
or expenses in connection with obtaining any consent referred to in the prior
sentence shall be the responsibility of the Parent Parties, except for costs
or expenses in connection with a consent referred to in clause (y), which
shall be the responsibility of the Company.
(b) The parties hereto agree to cooperate and assist one
another in connection with all actions to be taken pursuant to Section
7.07(a), including the preparation and making of the filings referred to
therein and, if requested, amending or furnishing additional information
thereunder, including, subject to applicable Law and the Confidentiality
Agreement, providing copies of all related documents to the non-filing party
and their advisors prior to filing, and, to the extent practicable, neither of
the parties will file any such document or have any communication with any
Governmental Authority without prior consultation with the other party. Each
party shall keep the other apprised of the content and status of any
communications with, and communications from, any Governmental Authority with
respect to the Merger and the Contemplated Transactions. To the extent
practicable and permitted by a Governmental Authority, each party hereto shall
permit representatives of the other party to participate in meetings and calls
with such Governmental Authority.
(c) Each of the parties hereto agrees to cooperate and use
its reasonable best efforts to defend through litigation on the merits any
Action, including administrative or judicial Action, asserted by any party in
order to avoid the entry of, or to have vacated, lifted, reversed, terminated
or overturned any decree, judgment, injunction or other order (whether
temporary, preliminary or permanent) that in whole or in part restricts,
delays, prevents or prohibits consummation of the Merger, including, without
limitation, by vigorously pursuing all available avenues of administrative and
judicial appeal.
52
(d) The Company Parties, at the expense of the Parent
Parties (which shall be paid or reimbursed promptly upon request by the
Company Parties), shall assist (i) with the defeasance by the Parent Parties
of existing loans of the Company Parties (to the extent defeasance is
permitted thereunder), (ii) the Parent Parties in the assumption of any of
loans of the Company Parties which are not subject to defeasance, and (iii)
with the assignment of permits and licenses and obtaining estoppels with
respect to real property of the Company Parties.
Section 7.08 Transfer Taxes. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer or stamp
taxes, any transfer, recording, registration and other fees and any similar
taxes that become payable in connection with the Merger and the Contemplated
Transactions (together with any related interests, penalties or additions to
Tax, "Transfer Taxes"), and shall cooperate in attempting to minimize the
amount of Transfer Taxes. From and after the Effective Time, the Surviving
Entity shall pay or cause to be paid, without deduction or withholding from
any consideration or amounts payable to holders of the Company Common Shares
and holders of Existing Units, all Transfer Taxes.
Section 7.09 Public Announcements. The parties hereto agree
that no public release or announcement concerning the Merger or the
Contemplated Transactions shall be issued by a party without the prior consent
of the other parties (which consent shall not be unreasonably withheld,
conditioned or delayed), except as such release or announcement may be
required by Law or the rules or regulations of any securities exchange, in
which case the party required to make the release or announcement shall use
its reasonable best efforts to allow the other parties reasonable time to
comment on such release or announcement in advance of such issuance. The
parties have agreed upon the form of a joint press release announcing the
Merger and the execution of this Agreement.
Section 7.10 Financing.
(a) Parent shall use its reasonable best efforts to
arrange and consummate the Financing on the terms and conditions described in
the Commitment Letter (provided that the Parent Parties may replace or amend
the Commitment Letter to add lenders, lead arrangers, bookrunners, syndication
agents or similar entities which had not executed the Commitment Letter as of
the date hereof, or otherwise so long as the terms would not reasonably be
expected to adversely impact the ability of the Parent Parties to consummate
the Merger and the Contemplated Transactions or the likelihood of consummation
of the Merger and the Contemplated Transactions or delay the Closing),
including (i) satisfying on a timely basis all terms, covenants and conditions
set forth in the Commitment Letter; (ii) entering into definitive agreements
with respect thereto on the terms and conditions contemplated by the
Commitment Letter; (iii) enforcing its rights under the Commitment Letter; and
(iv) consummating the Financing at or prior to Closing. Parent will furnish
correct and complete copies of all such definitive agreements to the Company
promptly upon their execution.
(b) Parent shall keep the Company informed with respect to
all material activity concerning the status of the Financing contemplated by
the Commitment Letter and shall give the Company prompt notice of any material
change with respect to such Financing. Without
53
limiting the foregoing, Parent agrees to notify the Company promptly, and in
any event within two (2) Business Days, if at any time prior to the Closing
Date (i) the Commitment Letter shall expire or be terminated for any reason,
or (ii) any financing source that is a party to the Commitment Letter notifies
Parent that such source no longer intends to provide financing to Parent on
the terms set forth therein. Parent shall not amend or alter, or agree to
amend or alter, the Commitment Letter in any manner that would materially
impair, delay or prevent the Merger or the Contemplated Transactions without
the prior written consent of the Company, and shall provide the Company
promptly (and in any event within 24 hours) with any amendments or alterations
to the Commitment Letter.
(c) If any portion of the Financing becomes unavailable on
the terms and conditions contemplated in the Commitment Letter or the
Commitment Letter shall be terminated for any reason, Parent shall use its
commercially reasonable efforts to arrange to obtain alternative financing
from alternative sources in an amount sufficient to consummate the Merger and
the Contemplated Transactions and shall use its commercially reasonable
efforts to obtain, and will provide the Company with a copy of, a new
financing commitment that provides for at least the same amount of financing
as such Commitment Letter as originally issued and on terms and conditions
(including termination rights and funding conditions) no less favorable to
Parent or Merger Sub than those included in such Commitment Letter.
Section 7.11 Stockholder and Limited Partner Litigation. In
case of any stockholder litigation against the Company and/or its directors or
limited partner litigation against the Operating Partnership and/or the
Company, as its general partner, in each case, relating to the Merger or the
Contemplated Transactions, the Company Parties and/or counsel(s) selected by
such directors or the Company will control the defense of any such litigation;
provided that the Company Parties shall (a) promptly notify (and thereafter
keep apprised of any material development relating thereto) the Parent Parties
of any such stockholder or limited partner litigation, (b) provide the Parent
Parties and their outside counsel with the opportunity to participate in the
defense of any such stockholder or limited partner litigation, including by
providing copies of any pleadings or motions to be filed by the Company
Parties and/or the directors of the Company reasonably in advance of any
planned filing thereof, and considering in good faith any comments or
recommendations with respect thereto by the Parent Parties and their outside
counsel and by otherwise consulting with and considering in good faith any
comments or recommendations of the Parent Parties and their outside counsel in
connection therewith; provided, however, that counsel to the Company or such
directors shall make any ultimate decision based on the best interests of the
Company or such directors as applicable, and (c) not settle, compromise or
otherwise resolve any such stockholder or limited partner litigation brought
prior to Closing without the consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed; provided, that it shall not be
unreasonable for Parent to withhold such consent if such settlement,
compromise or resolution does not include a release of the Company Parties and
the Parent Parties and their respective Representatives and Affiliates, in a
form reasonably satisfactory to Parent, in the event the Company must
contribute to such settlement, separate and apart from any amounts contributed
by the Company's insurers, an amount greater than the amount set forth in
Section 7.11 of the Disclosure Schedule; provided, however, that no Person
shall be required to provide access to or to disclose information where such
access or disclosure would reasonably be expected to jeopardize the
attorney-client privilege of any such Person.
54
Section 7.12 Fees and Expenses. The Surviving Entity shall pay
all charges and expenses, including those of the Paying Agent, in connection
with the transactions contemplated in Article III, and Parent shall, to the
extent necessary, reimburse the Surviving Entity for such charges and
expenses. Except as otherwise expressly provided herein, all fees and expenses
incurred in connection with the Merger, this Agreement and the Contemplated
Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated. The filing fees for the premerger
notification and report forms under the HSR Act, if any, shall be shared 50%
by the Parent Parties and 50% by the Company Parties.
Section 7.13 State Takeover Laws. If any "fair price,"
"moratorium" or "control share acquisition" statute or other similar
anti-takeover statute or regulation enacted under state Laws in the United
States is or shall become applicable to the Merger or the Contemplated
Transactions, the Parent Parties and the Company and their respective boards
of directors shall, subject to Section 7.04, use commercially reasonable
efforts to grant such approvals and take such actions as are necessary so that
the Merger and the Contemplated Transactions may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to minimize the
effects of any such statute or regulation on the Merger and the Contemplated
Transactions.
Section 7.14 Notification of Certain Matters. Subject to
applicable Laws and the instructions of any Governmental Entity, each of the
Company Parties and the Parent Parties shall keep the other apprised of the
status of matters relating to completion of the Merger and the Contemplated
Transactions, including promptly furnishing the other with copies of notices
or other communications received by the Parent Parties or the Company, as the
case may be, or any of its Subsidiaries, from any third Person and/or any
Governmental Entity with respect to the Merger and the other transactions
contemplated by this Agreement. Subject to applicable Laws and the
instructions of any Governmental Entity, neither the Company nor any Parent
Party shall permit any of its officers or any other Representatives to
participate in any meeting with any Governmental Entity in respect of any
filings, investigation or other inquiry unless it consults with the other
party in advance and, to the extent permitted by such Governmental Entity,
gives the other party the opportunity to attend and participate thereat.
Section 7.15 Resignations. The Company shall use commercially
reasonable efforts to obtain and deliver to Parent at the Closing evidence
reasonably satisfactory to Parent of the resignation, effective as of the
Effective Time, of those directors of the Company or any Subsidiary designated
by Parent to the Company in writing at least five Business Days prior to the
Closing.
Section 7.16 Puerto Rico Casino. The Company shall implement
its undertakings set forth in Section 6.01 of Disclosure Schedule with respect
to the casino in the Company Property located in Puerto Rico.
55
ARTICLE VIII
CONDITIONS TO THE MERGER
Section 8.01 Conditions to the Obligations of Each Party. The
obligations of the Company, the Operating Partnership, Parent and Merger Sub
to consummate the Merger are subject to the satisfaction or waiver in writing
of the following conditions:
(a) The Required Vote shall have been obtained.
(b) Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, and any approval of a Governmental Authority
required thereunder shall have been obtained.
(c) No Governmental Authority in the United States or
Puerto Rico shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling (whether temporary, preliminary or
permanent) which is then in effect and makes consummation of the Merger
illegal or prohibits consummation of the Merger; provided, however, that the
party claiming such failure of condition shall have used its reasonable best
efforts to prevent the entry of any such injunction or order, including taking
such action as is required to comply with Section 7.07, and to appeal as
promptly as possible any injunction or other order that may be entered.
Section 8.02 Conditions to the Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver in writing of the following additional
conditions:
(a) (i) Other than with respect to Sections 4.03, 4.04 and
4.23, each of the representations and warranties of the Company contained in
this Agreement that is qualified as to materiality or Company Material Adverse
Effect shall be true and correct in all respects (taking into account such
qualifications as to materiality or Company Material Adverse Effect), and
those not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date, as
though made on and as of the Closing Date (except that those representations
and warranties which address matters only as of a particular date shall be
true and correct as of such date) and (ii) the representations and warranties
set forth in Sections 4.03, 4.04 and 4.23 shall be true and correct in all
respects as of the date of this Agreement and as of the Closing Date as though
made as of the Closing Date (except to the extent that any such representation
or warranty relates to any earlier date, in which case such representation or
warranty shall be true and correct as of such date).
(b) The Company shall have performed, in all material
respects, all obligations and complied with, in all material respects, its
agreements and covenants to be performed or complied with by it under this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to Parent a
certificate, dated the date of the Effective Time, signed by an officer of the
Company and certifying as to the satisfaction of the conditions specified in
Section 8.02(a) and 8.02(b).
56
(d) Since the date of this Agreement, there shall not have
been any Company Material Adverse Effect that has occurred and is continuing.
Parent shall have received a certificate signed on behalf of the Company by a
duly authorized officer of the Company certifying as to the satisfaction of
the conditions specified in the preceding sentence.
(e) Parent shall have received a tax opinion of DLA Piper
US LLP, or other counsel to the Company reasonably satisfactory to Parent,
dated as of the Closing Date, in form and substance reasonably satisfactory to
Parent, opining that the Company has been organized and has operated in
conformity with the requirements for qualification as a REIT under the Code
commencing with the Company's taxable year ended December 31, 2004 through and
including the taxable year ending on the Closing Date. Such opinion shall be
based, in part, on the customary assumptions and customary factual
representations of the Company and its Subsidiaries.
Section 8.03 Conditions to the Obligations of the Company. The obligations of
the Company to consummate the Merger are subject to the satisfaction or waiver
in writing (where permissible) of the following additional conditions:
(a) Each of the representations and warranties of Parent
and Merger Sub contained in this Agreement that is qualified as to materiality
or Parent Material Adverse Effect shall be true and correct in all respects
(taking into account such qualifications as to materiality or Parent Material
Adverse Effect), and those not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of the
Closing Date, as though made on and as of the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall be true and correct as of such date).
(b) Parent shall have performed, in all material respects,
all obligations and complied with, in all material respects, its agreements
and covenants to be performed or complied with by it under this Agreement on
or prior to the Effective Time.
(c) Parent shall have delivered to the Company a
certificate, dated the date of the Effective Time, signed by an officer of the
Parent and certifying as to the satisfaction of the conditions specified in
Sections 8.03(a) and 8.03(b).
ARTICLE IX
TERMINATION AND WAIVER
Section 9.01 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time by action
taken or authorized by the Company Board and the board of directors of Parent,
and whether before or after the Company Stockholder Approval, as follows (the
date of any such termination, the "Termination Date"):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Effective Time
shall not have occurred on or before October 1, 2007 (the "Outside Date");
provided, however, that the right to terminate this Agreement under this
Section 9.01(b) shall not be available to a party whose
57
failure to fulfill any obligation under this Agreement or other breach under
this Agreement materially contributed to the failure of the Effective Time to
occur on or before such date;
(c) by either Parent or the Company if any Governmental
Authority shall have enacted, issued, promulgated, enforced or entered any
injunction, order, decree or ruling or taken any other action (including the
failure to have taken an action) which, in either such case, has become final
and non-appealable and makes consummation of the Merger illegal or otherwise
prohibits consummation of the Merger ("Governmental Order"); provided,
however, that the terms of this Section 9.01(c) shall not be available to any
party unless such party shall have used its reasonable best efforts to oppose
any such Governmental Order and to have such Governmental Order vacated or
made inapplicable to the Merger, as applicable;
(d) by Parent if each of it and Merger Sub is not in
material breach of its obligations under this Agreement, (i) if any of the
representations and warranties of the Company Parties herein shall have been
inaccurate as of the date of this Agreement, such that the condition set forth
in Section 8.02(a) would be incapable of being satisfied, (ii) if any of the
Company Parties' representations and warranties herein become inaccurate as of
a date subsequent to the date of this Agreement (as if made on such subsequent
date), such that the condition set forth in Section 8.02(a) would be incapable
of being satisfied or (iii) any of the covenants of the Company Parties
contained in this Agreement shall have been breached by any of the Company
Parties, such that the condition set forth in Section 8.02(b) would be
incapable of being satisfied, and, in each case, to the extent curable, the
inaccuracy or breach shall not have been cured within thirty (30) days after
notice by Parent to the Company pursuant to this Section 9.01(d);
(e) by the Company if each of the Company and the
Operating Partnership is not in material breach of its obligations under this
Agreement, (i) if any of the representations and warranties of the Parent
Parties herein shall have been inaccurate as of the date of this Agreement,
such that the condition set forth in Section 8.03(a) would be incapable of
being satisfied, (ii) if any of the representations and warranties of the
Parent Parties herein shall have become inaccurate as of a date subsequent to
the date of this Agreement (as if made on such subsequent date), such that the
condition set forth in Section 8.03(a) would be incapable of being satisfied
or (iii) if any of the covenants of the Parent Parties herein contained in
this Agreement shall have been breached by any of the Parent Parties such that
the condition set forth in Section 8.03(b) would be incapable of being
satisfied, and, in each case, to the extent curable, the inaccuracy or breach
shall not have been cured within thirty (30) days after notice by the Company
to Parent pursuant to this Section 9.01(e);
(f) by either Parent or the Company, by notice to the
other if (i) the Company Stockholders' Meeting (including any adjournments and
postponements thereof) shall have been held and completed and the Company's
stockholders shall have voted on a proposal to adopt this Agreement, and
approve the Merger and the Contemplated Transactions and (ii) this Agreement
shall not have been adopted and the Merger and the Contemplated Transactions
shall not have been approved at such Company Stockholders' Meeting (and shall
not have been adopted and approved at any adjournment or postponement thereof)
by the Required Vote;
(g) by Parent, by notice to the Company if a Company
Triggering Event shall have occurred; or
58
(h) by the Company, prior to the adoption and approval of
this Agreement, the Merger and the Contemplated Transactions by the Required
Vote and if the Company has not breached or violated Section 7.04 in any
material respect, if the Company Board and the Special Committee have
concluded in good faith, after consultation with the Company's (or the Special
Committee's, as applicable) outside legal and financial advisors, that an
unsolicited Acquisition Proposal is a Superior Proposal and a Recommendation
Withdrawal has been made and the Company Board and the Special Committee have
authorized, approved or recommended, subject to the Superior Proposal
Termination Procedures, the entering into of an Acquisition Agreement for a
Superior Proposal but only if (i) after providing a written Superior Proposal
Notice to Parent, (ii) in light of such Superior Proposal a majority of the
disinterested directors of the Company Board and the Special Committee shall
have determined in good faith, after consultation with outside counsel, that
the failure to withdraw, qualify or modify the Company Board Recommendation
would be inconsistent with the duties of the members of the Company Board to
the Company's shareholders under applicable Legal Requirements, (iii) the
Company shall have promptly notified Parent in writing of the determinations
described in clause (ii) above, (iv) at least three (3) Business Days
following receipt by Parent of the Superior Proposal Notice, and taking into
account any revised proposal made by Parent following receipt of the Superior
Proposal Notice, a majority of the disinterested directors of the Company
Board and the Special Committee has concluded such Superior Proposal remains a
Superior Proposal and has again made the determinations referred to in clause
(ii) above (the steps in clauses (i) through (iv) above, the "Superior
Proposal Termination Procedures"), and (v) the Company has paid the Company
Termination Fee pursuant to Section 9.03(a)(i) simultaneously with such
termination (any purported termination pursuant to this Section 9.01(h) shall
be void and of no force or effect unless the Company shall have made such
payment).
Section 9.02 Effect of Termination. In the event of the
termination of this Agreement as provided in Article IX, this Agreement shall
forthwith become void and be of no further force or effect and the Merger and
the Contemplated Transactions shall be abandoned without further action by any
of the parties hereto without any further liability or obligation on the part
of any party hereto or its respective Affiliates; provided, however, that (i)
this Section 9.02, Section 9.03 and Article X shall survive the termination of
this Agreement and shall remain in full force and effect, and (ii) the
termination of this Agreement shall not relieve any party from any liability
for any willful breach of any of its representations or warranties or any
willful breach of any of its covenants or other provision agreements contained
in this Agreement prior to such termination.
Section 9.03 Fees and Expenses.
(a) Except as set forth in Section 7.12 and in this
Section 9.03, all fees and expenses incurred in connection with this
Agreement, the Merger and any of the Contemplated Transactions (including fees
and expenses payable to Representatives) shall be paid by the party hereto
incurring such fees and expenses, whether or not the Contemplated Transactions
are consummated; provided, however, that:
(i) if this Agreement is terminated by (A) Parent
pursuant to Section 9.01(d)(i), Section 9.01(d)(iii) or Section 9.01(g) or (B)
the Company pursuant to Section 9.01(h), then the Company shall pay to Parent
in accordance with Section 9.03(b), in the
59
case of a termination pursuant to clause (A) above, as promptly as practicable
following such termination (and, in any event, within two (2) Business Days
following such termination), and in the case of a termination pursuant to
clause (B) above, at or prior to the time of, and as a condition to the
effectiveness of, such termination, in each case, an amount equal to the
Company Termination Fee;
(ii) if this Agreement is terminated by (A) Parent
pursuant to Section 9.01(f) or (B) the Company pursuant to Section 9.01(f),
then the Company shall pay to Parent in accordance with Section 9.03(b) the
Parent Expenses promptly following receipt of an invoice therefor, together
with a documented itemization setting forth in reasonable detail all of the
Parent Expenses for which the Buyer Parties are seeking reimbursement,
provided that if (A) prior to such termination, an Acquisition Proposal shall
have been made to the Company Parties or publicly announced prior to such
termination date, and for purposes of this Section 9.03(a)(ii), "50%" shall be
substituted for "20%" in the definition of Acquisition Proposal, and (B)
concurrently with the termination of this Agreement or within twelve (12)
months thereafter, the Company enters into an Acquisition Agreement with
respect to an Acquisition Proposal or an Acquisition Proposal is consummated,
then the Company shall pay to Parent in accordance with Section 9.03(b), on
the earlier of the date that the Company enters into the Acquisition Agreement
or such Acquisition Proposal is consummated, an amount equal to the Company
Termination Fee less all Parent Expenses previously paid;
(iii) if this Agreement is terminated by Parent or
the Company pursuant to Section 9.01(b), and (A) an Acquisition Proposal shall
have been made to the Company Parties or publicly announced prior to such
termination date, and for purposes of this Section 9.03(a)(iii), "50%" shall
be substituted for "20%" in the definition of Acquisition Proposal, and (B)
concurrently with the termination of this Agreement or within twelve (12)
months thereafter, the Company enters into an Acquisition Agreement with
respect to an Acquisition Proposal or an Acquisition Proposal is consummated,
then the Company shall pay to Parent in accordance with Section 9.03(b), on
the earlier of the date that the Company enters into the Acquisition Agreement
or such Acquisition Proposal is consummated, an amount equal to the Company
Termination Fee; and
(iv) if this Agreement is terminated by Parent
pursuant to Section 9.01(d)(ii), then (A) Parent and Merger Sub shall
collectively pay the Company the Company Expenses promptly following receipt
of an invoice therefor, together with a documented itemization setting forth
in reasonable detail all of the Company Expenses for which the Company Parties
are seeking reimbursement and (B) the Company shall pay to Parent in
accordance with Section 9.03(b) the Parent Expenses promptly following receipt
of an invoice therefor, together with a documented itemization setting forth
in reasonable detail all of the Parent Expenses for which the Buyer Parties
are seeking reimbursement, provided that if (A) prior to such termination, an
Acquisition Proposal shall have been made to the Company Parties or publicly
announced prior to such termination date, and for purposes of this Section
9.03(a)(iv), "50%" shall be substituted for "20%" in the definition of
Acquisition Proposal, and (B) concurrently with the termination of this
Agreement or within twelve (12) months thereafter, the Company enters into an
Acquisition Agreement with respect to an Acquisition Proposal or an
Acquisition Proposal is consummated, then the Company shall pay to Parent in
accordance with Section 9.03(b), on the earlier of the date that the Company
enters into the Acquisition
60
Agreement or such Acquisition Proposal is consummated, an amount equal to the
Company Termination Fee less the Net Parent Expenses; provided however that if
this Agreement is terminated by Parent pursuant to Section 9.01(d)(ii) and the
Company has taken any action, or failed to take any commercially reasonable
action, that has caused any representations or warranties of either of the
Company Parties to become inaccurate such that the condition set forth in
Section 8.02(a) is incapable of being satisfied, then Parent shall not be
required to pay the Company Expenses to the Company and the Company shall pay
to Parent in accordance with Section 9.03(b), as promptly as practicable
following the termination of this Agreement (and, in any event, within two (2)
Business Days following such termination), the Company Termination Fee.
(v) if this Agreement is terminated by the Company
pursuant to Section 9.01(e), including as a result of a breach by either
Parent or Merger Sub of its respective obligations to effect the Closing
pursuant to Section 2.04 and satisfy its obligations under Article III,
including depositing (or causing to be deposited) with the Paying Agent
sufficient funds to make all payments necessary pursuant to Section 3.03, then
Parent and Merger Sub shall collectively pay to the Company or as directed by
the Company (A) the Company Expenses promptly following receipt of an invoice
therefor, together with a documented itemization setting forth in reasonable
detail all of the Company Expenses for which the Company Parties are seeking
reimbursement and (B) the Reverse Termination Fee as promptly as possible (but
in any event within three Business Days) following termination of this
Agreement.
(b) In the event that the Company is required to pay the
Company Termination Fee or the Parent Expenses, in each case, such amount
shall be paid by the Company by wire transfer of cash in immediately available
funds to a bank account of Parent or its designee(s) as directed at least one
(1) Business Day prior to the relevant date of such payment by Parent in
writing to the Company.
(c) The parties hereto agree and understand that in no
event shall the Company be required to pay the Company Termination Fee and the
Parent Expenses on more than one occasion and that the Parent and Merger Sub
shall not be required to pay the Reverse Termination Fee and the Company
Expenses on more than one occasion. The parties hereto acknowledge that the
agreements contained in this Section 9.03 are an integral part of the
Contemplated Transactions, and that, without these agreements, the parties
hereto would not enter into this Agreement. In the event any party hereto is
required to file suit to seek all or portion of the amounts payable under this
Section 9.03, and such party hereto prevails in such litigation, such party
hereto shall be awarded to all reasonable expenses, including reasonable
attorneys' fees and expenses, that it has incurred in enforcing its rights
under this Section 9.03.
(d) For purposes of this Agreement, the term "Parent
Expenses" shall mean the aggregate amount of the fees and expenses (including
all reasonable attorneys' fees, accountants' fees, financial advisory fees,
investment banking fees, commitment fees, costs and expenses related to
interest rate xxxxxx, filing fees and printing and mailing expenses, filing
fees under the HSR Act, expenses incurred by Parent Parties in connection with
any application, filing, consents relating directly or indirectly to the
closing of the Merger and the Contemplated Transactions, including consents,
waivers and approvals relating to franchisors, defeasance
61
or assumption of indebtedness or approvals of any Governmental Authority) that
have been paid or that become payable by or on behalf of the Parent Parties in
connection with the preparation, negotiation and enforcement of this Agreement
and otherwise in connection with the Merger and the Contemplated Transactions,
provided that the amount of Parent Expenses payable by the Company shall not
exceed $10,000,000 in the aggregate. For purposes of this Agreement, the term
"Company Expenses" shall mean the aggregate amount of money expended by the
Company at the direction of Parent (i) in connection with the Company's
obligations under Section 7.16 and (ii) pursuant to Section 7.07(d). For
purposes of this Agreement, the term "Net Parent Expenses" shall mean the
Parent Expenses less the Company Expenses; provided that to the extent such
calculation results in a negative amount, Net Parent Expenses shall be zero.
(e) The Company shall be entitled to deduct and withhold
from the amounts otherwise payable pursuant to this Agreement to Parent, or
its assignee hereunder, such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, and the rules and
regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Company,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Parent, or its assignee hereunder, in respect of which
such deduction and withholding was made by the Company.
Section 9.04 Waiver. At any time prior to the Effective Time,
the Company (by action of the Special Committee or, if the Special Committee
no longer exists, the Company Board) on the one hand, and Parent, on the other
hand, may (a) extend the time for the performance of any obligation or other
act of the Parent Parties or the Company Parties, as the case may be, (b)
waive any inaccuracy in the representations and warranties of the Parent
Parties or the Company Parties, as the case may be, contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any agreement
of the Parent Parties or the Company Parties, as the case may be, or any
condition to its own obligations contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
Company or Parent. The failure of any party to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
Section 9.05 Payment by Parent. In the event that Parent and
Merger Sub are obligated to pay any payments to the Company pursuant to this
Agreement (the "Parent Payment"), Parent and Merger Sub shall pay to the
Company, from the Parent Payment deposited into escrow in accordance with the
next sentence, an amount equal to the lesser of (i) the Parent Payment and
(ii) the sum of (A) the maximum amount that can be paid to the Company without
causing the Company to fail to meet the requirements of Sections 856(c)(2) and
(3) of the Code determined as if the payment of such amount did not constitute
income described in Sections 856(c)(2)(H) or 856(c)(3)(I) of the Code
("Qualifying Income"), as determined by the Company's independent public
accountants, plus (B) in the event the Company receives either (x) a letter
from the Company's counsel indicating that the Company has received a ruling
from the IRS described below in this Section 9.05 (but in any case not to
increase the amount of the Parent Payment) or (y) an opinion from the
Company's outside counsel as described below in this Section 9.05, an amount
equal to the Parent Payment less the amount payable under clause (A) above. To
secure Parent's and Merger Sub's obligation to pay these amounts, Parent and
Merger Sub shall deposit into escrow an amount in cash equal to the Parent
Payment with an
62
escrow agent selected by Parent and on such terms (subject to this Section
9.05) as shall be mutually agreed upon by the Company, Parent and the escrow
agent. The payment or deposit into escrow of the Parent Payment pursuant to
this Section 9.05 shall be made at the time Parent and Merger Sub are
obligated to pay the Company such amount by wire transfer. The escrow
agreement shall provide that the Parent Payment in escrow or any portion
thereof shall not be released to the Company unless the escrow agent receives
any one or combination of the following: (i) a letter from the Company's
independent public accountants indicating the maximum amount that can be paid
by the escrow agent to the Company without causing the Company to fail to meet
the requirements of Sections 856(c)(2) and (3) of the Code determined as if
the payment of such amount did not constitute Qualifying Income or a
subsequent letter from the Company's accountants revising that amount, in
which case the escrow agent shall release such amount to the Company, or (ii)
a letter from the Company's counsel indicating that the Company received a
ruling from the IRS holding that the receipt by the Company of the Parent
Payment would either constitute Qualifying Income or would be excluded from
gross income within the meaning of Sections 856(c)(2) and (3) of the Code (or
alternatively, the Company's outside counsel has rendered a legal opinion to
the effect that the receipt by the Company of the Parent Payment would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code), in which case the escrow
agent shall release the remainder of the Parent Payment to the Company. Parent
agrees to amend this Section 9.05 at the reasonable request of the Company in
order to (i) maximize the portion of the Parent Payment that may be
distributed to the Company hereunder without causing the Company to fail to
meet the requirements of Sections 856(c)(2) and (3) of the Code, (ii) improve
the Company's chances of securing a favorable ruling described in this Section
9.05 or (iii) assist the Company in obtaining a favorable legal opinion from
its outside counsel as described in this Section 9.05. The escrow agreement
shall also provide that any portion of the Parent Payment held in escrow for
five (5) years shall be released by the escrow agent to Parent. Parent and
Merger Sub shall not be a party to such escrow agreement and shall not bear
any cost of or have liability resulting from the escrow agreement. In the
event that Parent or Merger Sub is required to pay the Parent Payment pursuant
to a termination of this Agreement, such amount shall be paid into escrow as
provided in this Section 9.05 as promptly as practicable following such
termination, but in no event more than two (2) Business Days following such
termination.
ARTICLE X
GENERAL PROVISIONS
Section 10.01 Non-Survival of Representations and Warranties.
The representations and warranties in this Agreement and in any certificate
delivered pursuant hereto shall terminate at the Effective Time.
Section 10.02 Non-Survival of Certain Covenants. The covenants
to be performed prior to or at the Closing shall terminate at the Closing.
Section 10.03 Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person,
by overnight courier, by facsimile or by
63
registered or certified mail (postage prepaid, return receipt requested) to
the respective parties at the addresses listed below (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 10.03); provided, if notice shall be delivered by facsimile on a day
other than a Business Day, such notice shall be effective as of the first
Business Day following delivery of such notice:
if to Parent or Merger Sub:
Apollo Real Estate Investment Fund V, L.P.
0 Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxx Xxxxxx
and
Apollo Real Estate Investment Fund V, L.P.
Time Warner Center,
00 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxx Xxxxxx
and
AIMCAP
c/o JF Capital Advisors, LLC
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, X.X. 00000
Facsimile No.: (000) 000-0000
Attention: E. Xxxxxxxx Xxxxx
with a copy (which shall not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx LLP
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, P.C.
and
Akin, Gump, Strauss, Xxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxx X. Xxx
64
for purposes of requests, for consent by the Company under Section
6.01 (addressees listed below, the "Parent Consent Addressees"):
Apollo Real Estate Investment Fund V, L.P.
0 Xxxxxxxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Facsimile No.: 000-000-0000
Attention: Xxxxxx Xxxxxx
and
Apollo Real Estate Investment Fund V, L.P.
Time Warner Center,
00 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile No.: 000-000-0000
Attention: Xxxxx Xxxxxx
and
AIMCAP
c/o JF Capital Advisors, LLC
000 Xxxx Xxxxxx, 00xx xxxxx
Xxx Xxxx, X.X. 00000
Facsimile No.: (000) 000-0000
Attention: E. Xxxxxxxx Xxxxx
and
Akin, Gump, Strauss, Xxxxx & Xxxx LLP
0000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, P.C.
and
Akin, Gump, Strauss, Xxxxx & Xxxx LLP
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxx X. Xxx, Esq.
if to the Company or the Operating Partnership:
Eagle Hospitality Properties Trust, Inc.
65
000 X. XxxxxXxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: J. Xxxxxxx Xxxxxxxx
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
and
Xxxxxxxx & Shohl LLP
000 Xxxx 0xx Xxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Facsimile No: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Section 10.04 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the Merger or the Contemplated 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 a mutually acceptable manner in order that the Merger and the
Contemplated Transactions be consummated as originally contemplated to the
fullest extent possible.
Section 10.05 Amendment. This Agreement may be amended by the
parties hereto by action taken by their respective board of directors (or
similar governing body or entity) or, as to the Company, by the Special
Committee, or, if the Special Committee no longer exists, by the Company Board
at any time prior to the Effective Time; provided, however, that, after
Company Stockholder Approval, no amendment may be made without further
stockholder approval which, by Law or in accordance with the rules of the
NYSE, requires further approval by such stockholders. This Agreement may not
be amended except by an instrument in writing signed by the parties hereto.
Section 10.06 Entire Agreement; Assignment. This Agreement, the
Guaranty and the Confidentiality Agreement constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This Agreement
shall not be assigned (whether pursuant to a merger, by operation of Law or
66
otherwise), except that each of the Parent Parties may assign all or any of
its rights and obligations hereunder to any of their respective Affiliates;
provided, that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations or
delay the Closing and provided, further, that such assignment would not
reasonably be expected to adversely impact the ability of the Parent Parties
to consummate the Merger and the Contemplated Transactions or the likelihood
of consummation of the Merger and the Contemplated Transactions or delay the
Closing.
Section 10.07 Enforcement of Agreement.
(a) Notwithstanding any other provision of this Agreement,
the Company's right to terminate and receive payment of the Reverse
Termination Fee and the Company Expenses pursuant to Section 9.03(a)(v) and
the amounts payable pursuant to Section 9.03(c), Section 9.03(a)(iv), Section
7.03(a) and Section 7.07(d) shall be the sole and exclusive remedy against
Parent, Merger Sub and any of their respective Affiliates, stockholders,
partners, members, directors, officer or agents. The parties acknowledge that
the Company shall not be entitled to an injunction or injunctions to prevent
breaches of this Agreement or to enforce specifically the terms and provisions
of this Agreement and that the Company's sole and exclusive remedy with
respect to any such breach shall be the remedy set forth in Section 10.07(a);
provided, however, that the Company shall be entitled to seek specific
performance to prevent any breach by the Parent Parties of or enforce their
compliance with Section 7.03(b) and Section 7.09. The Company agrees that, to
the extent it or its Subsidiaries have incurred losses or damages in
connection with this Agreement, prior to the Effective Time, (i) the maximum
aggregate liability of the Parent Parties and the Guarantor for such losses or
damages shall be limited to the amount set forth in the Guaranty and (ii) the
maximum liability of the Guarantor, directly or indirectly, shall be limited
to the obligations of such Guarantor under the Guaranty. Upon payment of the
Reverse Termination Fee and the Company Expense pursuant to Section 9.03(a)(v)
and the amounts payable pursuant to Section 9.03(c), Section 9.03(a)(iv),
Section 7.03(a) and Section 7.07(d), none of Parent and Merger Sub or any of
their respective Affiliates, stockholders, partners, members, directors,
officer or agents shall have any further liability or obligation relating to
or arising out of this Agreement or the transactions contemplated by this
Agreement.
(b) Notwithstanding any other provision of this Agreement,
Parent's and Merger Sub's right to terminate this Agreement and receive, as
applicable, the payment of the Company Termination Fee, Parent Expense and/or
Net Parent Expenses pursuant to Section 9.01(h), Section 9.03(a)(i), Section
9.03(a)(ii), Section 9.03(a)(iii) and Section 9.03(a)(iv) and the amounts
payable pursuant to Section 9.03(c), shall be the sole and exclusive remedy of
Parent and Merger Sub against the Company and its Subsidiaries and any of
their respective Affiliates, stockholders, partners, members, directors,
officer or agents; provided, that the parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed by the Company or in accordance with the terms hereof or were
otherwise breached and that, prior to the termination of this Agreement
pursuant to Section 9.01, the Parent Parties shall be entitled to specific
performance of the terms and provisions of this Agreement or an injunction to
prevent any breach of this Agreement, in addition to any other remedy at law
or equity. Whether or not Parent or Merger Sub seeks specific performance
pursuant to the foregoing provisions or otherwise, in no event shall Parent or
Merger Sub be entitled to damages
67
in excess of the Company Termination Fee. Upon payment, as applicable, of the
Company Termination. Parent Expenses and/or Net Parent Expenses pursuant to
Section 9.01(h), Section 9.03(a)(i), Section 9.03(a)(ii), Section 9.03(a)(iii)
and Section 9.03(a)(iv) and the amounts payable pursuant to Section 9.03(c),
none of the Company and its Subsidiaries or any of their respective
Affiliates, stockholders, partners, members, directors, officer or agents
shall have any further liability or obligation relating to or arising out of
this Agreement or the transactions contemplated by this Agreement. The parties
acknowledge that the Company shall not be entitled to an injunction or
injunctions to prevent breaches of this Agreement or to enforce specifically
the terms and provisions of this Agreement and that the Company's sole and
exclusive remedy with respect to any such breach shall be the remedy set forth
in Section 10.07(a); provided, however, that the Company shall be entitled to
seek specific performance to prevent any breach by the Parent Parties of or
enforce their compliance with Section 7.03(b) and Section 7.09.
Section 10.08 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than the provisions of Section 7.06 (which are
intended to be for the benefit of the persons covered thereby or the persons
entitled to payment thereunder and may be enforced by such persons).
Section 10.09 Governing Law; Forum. This Agreement shall be
governed by and construed in accordance with the laws of the State of Maryland
applicable to contracts between residents of that State and executed in and to
be performed in that State. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any
Maryland state or federal court. The parties hereto hereby irrevocably waive,
and agree not to assert by way of motion, defense, or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of any
federal or state court within Baltimore County, Maryland, that its property is
exempt or immune from attachment or execution, that the Action is brought in
an inconvenient forum, that the venue of the Action is improper, or that this
Agreement or the Merger or the Contemplated Transactions may not be enforced
in or by any federal or state court within Baltimore County, Maryland.
Section 10.10 Headings. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
Section 10.11 Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in two or more counterparts,
and by the different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 10.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE
MERGER OR THE CONTEMPLATED TRANSACTIONS. EACH OF THE PARTIES HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT
68
OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE MERGER AND THE
CONTEMPLATED TRANSACTIONS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.12.
69
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first
written above by their respective officers thereunto duly authorized.
AP AIMCAP HOLDINGS LLC
By: /s/ Xxxxxx Xxxxxx
------------------------------------------------
Title: Xxxxxx Xxxxxx, Authorized Representative
AP AIMCAP CORPORATION
By: /s/ Xxxxxx Xxxxxx
------------------------------------------------
Title: Xxxxxx Xxxxxx, President
EAGLE HOSPITALITY PROPERTIES TRUST, INC.
By: /s/ J. Xxxxxxx Xxxxxxxx
------------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------
EHP OPERATING PARTNERSHIP, L.P.
By: EAGLE HOSPITALITY PROPERTIES TRUST, INC.
Its sole general partner
By: /s/ J. Xxxxxxx Xxxxxxxx
------------------------------------------------
Title: President and Chief Executive Officer
---------------------------------------------
70
