EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
among
ARCHSTONE COMMUNITIES TRUST,
NEW GARDEN RESIDENTIAL TRUST,
XXXXXXX X. XXXXX RESIDENTIAL REALTY, INC.
and
XXXXXXX X. XXXXX RESIDENTIAL REALTY, L.P.
Dated as of May 3, 2001
TABLE OF CONTENTS
Page
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ARTICLE 1 THE ARCHSTONE MERGER AND THE MERGERS.................... 4
1.1 The Primary Archstone Merger.............................. 4
1.2 Alternative Structure of the Archstone Merger............. 6
1.3 The Merger................................................ 10
1.4 The Partnership Merger.................................... 10
1.5 Closings.................................................. 11
1.6 Effective Time............................................ 11
1.7 Effect of Partnership Merger on Xxxxx Agreement
of Limited Partnership and Archstone Surviving Subsidiary
Declaration of Trust and Bylaws........................... 12
1.8 Effect of Merger on Xxxxx Articles of Incorporation and
Bylaws and New Archstone Declaration of Trust
and Bylaws................................................ 12
1.9 Trustees of New Archstone................................. 13
1.10 Effect of Archstone Merger and Merger on Capital Stock
and Shares of Beneficial Interest......................... 13
1.11 Effect of Partnership Merger on Partnership Interests
and Shares of Beneficial Interest......................... 13
1.12 Partnership Merger Consideration; Merger Consideration.... 13
1.13 Partner Approval.......................................... 17
1.14 Appraisal or Dissenters Rights............................ 17
1.15 Exchange of Certificates in Merger; Pre-Closing
Dividends; Fractional Shares.............................. 17
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF XXXXX
AND XXXXX PARTNERSHIP ......................................... 22
2.1 Organization, Standing and Power.......................... 23
2.2 Xxxxx Subsidiaries........................................ 23
2.3 Capital Structure......................................... 24
2.4 Other Interests........................................... 27
2.5 Authority; Noncontravention; Consents..................... 27
2.6 SEC Documents; Financial Statements, Undisclosed
Liabilities............................................... 29
2.7 Absence of Certain Changes or Events...................... 30
2.8 Litigation................................................ 30
2.9 Properties................................................ 31
2.10 Environmental Matters..................................... 33
2.11 Related Party Transactions................................ 35
2.12 Employee Benefits......................................... 35
2.13 Employee Policies......................................... 37
2.14 Taxes..................................................... 37
2.15 No Payments to Employees, Officers or Directors........... 39
2.16 Broker; Schedule of Fees and Expenses..................... 40
2.17 Compliance with Laws...................................... 40
2.18 Contracts; Debt Instruments............................... 40
2.19 Opinion of Financial Advisor.............................. 42
2.20 State Takeover Statutes................................... 42
2.21 Stockholder Rights Plan................................... 42
2.22 Investment Company Act of 1940............................ 42
2.23 Definition of "Knowledge of Xxxxx"........................ 42
2.24 Required Stockholder Approvals and Partner Approvals...... 42
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF ARCHSTONE
AND NEW ARCHSTONE ............................................. 43
3.1 Organization, Standing and Power of Archstone............. 43
3.2 Archstone Subsidiaries.................................... 44
3.3 Capital Structure......................................... 45
3.4 Other Interests........................................... 46
3.5 Authority; Noncontravention; Consents..................... 47
3.6 SEC Documents; Financial Statements;
Undisclosed Liabilities................................... 48
3.7 Absence of Certain Changes or Events...................... 49
3.8 Litigation................................................ 49
3.9 Properties................................................ 50
3.10 Environmental Matters..................................... 52
3.11 Taxes..................................................... 52
3.12 Brokers, Schedule of Fees and Expenses.................... 54
3.13 Compliance with Laws...................................... 55
3.14 Contracts; Debt Instruments............................... 55
3.15 Opinion of Financial Advisor.............................. 55
3.16 State Takeover Statutes................................... 55
3.17 Investment Company Act of 1940............................ 55
3.18 Definition of "Knowledge of Archstone".................... 55
3.19 Required Shareholder Approvals............................ 55
ARTICLE 4 COVENANTS ............................................... 56
4.1 Conduct of Xxxxx'x and Xxxxx Partnership's Business
Pending Merger............................................ 56
4.2 Conduct of Archstone's Business Pending Merger............ 60
4.3 No Solicitation........................................... 62
4.4 Affiliates................................................ 65
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4.5 Other Actions............................................. 66
ARTICLE 5 ADDITIONAL COVENANTS .................................... 66
5.1 Preparation of the Form S-4 and the Proxy Statement;
Xxxxx Stockholders Meeting, Xxxxx Partnership Consent
Solicitation and Archstone Shareholders Meeting........... 66
5.2 Access to Information; Confidentiality.................... 69
5.3 Notification.............................................. 69
5.4 Tax Matters............................................... 71
5.5 Public Announcements...................................... 71
5.6 Listing................................................... 71
5.7 Transfer and Gains Taxes.................................. 72
5.8 Benefit Plans and Other Employee Arrangements............. 72
5.9 Indemnification........................................... 74
5.10 Declaration of Dividends and Distributions................ 76
5.11 Transfer or Recapitalization of Xxxxx Non-Controlled
Subsidiaries.............................................. 77
5.12 Notices................................................... 77
5.13 Resignations.............................................. 77
5.14 Assumption of Existing Tax Protection Agreements.......... 77
5.15 Registration Rights Agreements............................ 78
5.16 Exemption from Liability Under Section 16(b).............. 78
5.17 Restructuring of Assets of Archstone...................... 78
5.18 Stockholder Rights Plan................................... 78
ARTICLE 6 CONDITIONS .............................................. 79
6.1 Conditions to Each Party's Obligation to Effect the
Mergers................................................... 79
6.2 Conditions to Obligations of Archstone and New Archstone.. 80
6.3 Conditions to Obligations of Xxxxx and Xxxxx Partnership.. 82
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER ....................... 84
7.1 Termination............................................... 84
7.2 Certain Fees and Expenses................................. 86
7.3 Effect of Termination..................................... 88
7.4 Amendment................................................. 89
7.5 Extension; Waiver......................................... 89
ARTICLE 8 GENERAL PROVISIONS ...................................... 89
8.1 Nonsurvival of Representations and Warranties.............. 89
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8.2 Notices................................................... 89
8.3 Interpretation............................................ 90
8.4 Counterparts.............................................. 90
8.5 Entire Agreement; No Third-Party Beneficiaries............ 91
8.6 Governing Law............................................. 91
8.7 Assignment................................................ 91
8.8 Enforcement............................................... 91
8.9 Severability.............................................. 92
8.10 Exculpation............................................... 92
8.11 Joint and Several Obligations............................. 92
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Exhibit A Form of Shareholders Agreement
Exhibit B Form of Amended and Restated Declaration of Trust of Archstone
Surviving Subsidiary
Exhibit C Form of Amended and Restated Bylaws of Archstone Surviving Subsidiary
Exhibit D Form of Amended and Restated Declaration of Trust of New Archstone
Exhibit E Form of Amended and Restated Bylaws of New Archstone
Exhibit F Form of Proposed Charter Amendments
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INDEX OF DEFINED TERMS
1940 Act .................................................. Section 2.22
ACS Common Shares .................................... Section 1.2(c)(i)
ACS Merger .................................................... Recitals
ACS Preferred Shares .................................... Section 1.2(c)
ACS Series A Preferred Shares ....................... Section 1.2(c)(ii)
ACS Series C Preferred Shares ...................... Section 1.2(c)(iii)
ACS Series D Preferred Shares ....................... Section 1.2(c)(iv)
ACS Series E Preferred Shares ........................ Section 1.2(c)(v)
ACS Series F Preferred Shares ....................... Section 1.2(c)(vi)
ACS Series G Preferred Shares ...................... Section 1.2(c)(vii)
Acquisition Proposal ................................. Section 4.3(a)(i)
Agreement ..................................................... Preamble
AICPA Statement ......................................... Section 5.1(b)
Alternative Archstone Merger .................................. Recitals
Archstone ..................................................... Preamble
Archstone Bylaws ........................................ Section 3.1(a)
Archstone Closing .......................................... Section 1.5
Archstone Closing Date ..................................... Section 1.5
Archstone Common Shares .............................. Section 1.1(a)(i)
Archstone Corporate Subsidiary ................................ Recitals
Archstone Declaration of Trust ...........................Section 1.1(c)
Archstone Disclosure Letter .................................. Article 3
Archstone Existing Preferred Shares ..................... Section 1.1(b)
Archstone Financial Statement Date ......................... Section 3.7
Archstone Material Adverse Effect ........................Section 3.1(a)
Archstone Merger Sub. ......................................... Recitals
Archstone Merger .............................................. Recitals
Archstone Non-Controlled Subsidiaries ................... Section 3.2(a)
Archstone Options ....................................... Section 3.3(b)
Archstone Other Interests .................................. Section 3.4
Archstone Participating Preferred Shares .................Section 3.3(a)
Archstone Parties ....................................... Section 3.5(a)
Archstone Properties .....................................Section 3.9(a)
Archstone REIT ................................................ Recitals
Archstone REIT Merger ......................................... Recitals
Archstone SEC Documents .................................... Section 3.6
Archstone Series A Preferred Shares ................. Section 1.1(a)(ii)
Archstone Series C Preferred Shares ................ Section 1.1(a)(iii)
Archstone Series D Preferred Shares ................. Section 1.1(a)(iv)
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Archstone Series E Preferred Shares ................. Section 1.1(a)(iv)
Archstone Series E Preferred Units ................... Section 1.1(b)(i)
Archstone Series F Preferred Shares ................. Section 1.1(a)(vi)
Archstone Series F Preferred Units .................. Section 1.1(b)(ii)
Archstone Series G Preferred Shares ................ Section 1.1(a)(vii)
Archstone Series G Preferred Units ................. Section 1.1(b)(iii)
Archstone Shareholder Approvals ......................... Section 3.5(a)
Archstone Shareholders Meeting .......................... Section 5.1(c)
Archstone Subsidiaries .................................. Section 3.1(a)
Archstone Surviving Subsidiary ................................ Recitals
Archstone Surviving Subsidiary Bylaws ...................... Section 1.7
Archstone Surviving Subsidiary Class A Shares ....... Section 1.12(a)(i)
Archstone Surviving Subsidiary Class A-1 Shares ..... Section 1.12(a)(i)
Archstone Surviving Subsidiary Class B Shares ...... Section 1.12(a)(ii)
Archstone Surviving Subsidiary Common Shares ......... Section 1.2(e)(1)
Archstone Surviving Subsidiary Declaration of Trust......... Section 1.7
Archstone Surviving Subsidiary Series A Preferred
Shares ................................ Section 1.2(e)(ii)
Archstone Surviving Subsidiary Series C Preferred
Shares ............................... Section 1.2(e)(iii)
Archstone Surviving Subsidiary Series D Preferred
Shares ................................ Section 1.2(e)(iv)
Archstone Surviving Subsidiary Series E Preferred
Shares ................................. Section 1.2(e)(v)
Archstone Surviving Subsidiary Series F Preferred
Shares ................................ Section 1.2(e)(vi)
Archstone Surviving Subsidiary Series G Preferred
Shares ............................... Section 1.2(e)(vii)
Archstone Surviving Subsidiary Series H Preferred
Shares .............................. Section 1.12(a)(iii)
Archstone Surviving Subsidiary Series I Preferred
Shares ............................... Section 1.12(a)(iv)
Archstone Surviving Subsidiary Series J Preferred
Shares ................................ Section 1.12(a)(v)
Archstone Surviving Subsidiary Series K Preferred
Shares ............................... Section 1.12(a)(vi)
Archstone Surviving Subsidiary Series L Preferred
Shares .............................. Section 1.12(a)(vii)
Archstone Surviving Subsidiary Series M Preferred
Shares ..............................Section 1.12(a)(viii)
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Archstone Voting Agreement .................................... Recitals
Archstone-Xxxxx Trust ...................................... Section 1.2
Asset Restructuring ....................................... Section 5.17
Base Amount ................................................ Section 7.2
Break-Up Fee Payment ....................................... Section 7.2
Break-Up Fee ............................................... Section 7.2
Certificate .......................................Section 1.12(b)(viii)
CESI Voting Stock Owner ....................................... Recitals
CESI .......................................................... Recitals
CERCLA......................................................Section 2.10
Class A Xxxxx OP Units .............................. Section 1.12(a)(i)
Class B Xxxxx OP Units ............................. Section 1.12(a)(ii)
Code .......................................................... Recitals
Commitment .............................................. Section 4.1(j)
Confidentiality Agreement ............................... Section 4.3(b)
Corresponding New Archstone Dividends .............. Section 1.15(e)(ii)
Counter Proposal ........................................ Section 4.3(c)
Delaware Certificate of Merger ................................ Recitals
Department ................................................. Section 1.6
DRULPA .................................................. Section 1.4(a)
EBI ........................................................ Section 7.2
Effective Time ............................................. Section 1.6
Election ...................................................... Recitals
Employee Plan ............................................. Section 2.12
Encumbrances ............................................ Section 2.9(b)
Environmental Law ...................................... Section 2.10(a)
Environmental Mitigation ................................ Section 2.9(h)
Environmental Permits .............................. Section 2.10(b)(iv)
ERISA ..................................................... Section 2.12
Exchange Act ............................................... Section 2.6
Exchange Agent ......................................... Section 1.15(b)
Exchange Fund .......................................... Section 1.15(c)
Executive Committee ........................................ Section 1.9
Form S-4 ................................................ Section 5.1(a)
Former Xxxxx Properties ............................ Section 2.10(b)(ii)
GAAP ....................................................... Section 2.6
Governmental Entity ..................................... Section 2.5(c)
Hazardous Materials .................................... Section 2.10(a)
HSR Act ................................................. Section 2.5(c)
Indebtedness ........................................... Section 2.18(b)
Indemnification Parties ................................. Section 5.9(b)
Indemnified Parties ..................................... Section 5.9(a)
Indemnifying Parties .................................... Section 5.9(a)
IRS .................................................... Section 2.14(b)
Joint Proxy Statement ................................... Section 5.1(a)
Knowledge of Archstone .................................... Section 3.18
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Knowledge of Xxxxx ........................................ Section 2.23
Laws .................................................... Section 2.5(c)
Liens ................................................... Section 2.2(b)
Maximum Amount ............................................. Section 7.2
Merger ........................................................ Recitals
Merger Closing ............................................. Section 1.5
Merger Closing Date ........................................ Section 1.5
Merger Consideration ................................... Section 1.12(b)
Mergers ....................................................... Recitals
NCS Agreements ................................................ Recitals
NCS Voting Stock Owners ....................................... Recitals
New Archstone ................................................. Preamble
New Archstone Bylaws ....................................... Section 1.8
New Archstone Common Shares .......................... Section 1.1(a)(i)
New Archstone Declaration of Trust ......................... Section 1.8
New Archstone Existing Preferred Shares.................. Section 1.1(b)
New Archstone Preferred Shares .................... Section 1.12(b)(vii)
New Archstone Rights Agreement ....................... Section 1.1(a)(i)
New Archstone Series A Preferred Shares ............. Section 1.1(a)(ii)
New Archstone Series C Preferred Shares ............ Section 1.1(a)(iii)
New Archstone Series D Preferred Shares ............. Section 1.1(a)(iv)
New Archstone Series E Preferred Shares .............. Section 1.1(a)(v)
New Archstone Series F Preferred Shares ............. Section 1.1(a)(vi)
New Archstone Series G Preferred Shares ............ Section 1.1(a)(vii)
New Archstone Series H Preferred Share ............. Section 1.12(b)(ii)
New Archstone Series I Preferred Share ............ Section 1.12(b)(iii)
New Archstone Series J Preferred Share ............. Section 1.12(b)(iv)
New Archstone Series K Preferred Share .............. Section 1.12(b)(v)
New Archstone Series L Preferred Share ............. Section 1.12(b)(vi)
New Archstone Series M Preferred Share ............ Section 1.12(b)(vii)
NYSE ....................................................... Section 5.6
Original Agreement............................................. Recitals
Partnership Articles of Merger ................................ Recitals
Partnership Merger Consideration ....................... Section 1.12(a)
Partnership Merger ............................................ Recitals
Payor ...................................................... Section 7.2
Pension Plan .............................................. Section 2.12
Person .................................................. Section 2.2(a)
Primary Archstone Merger ...................................... Recitals
Property Restrictions ................................... Section 2.9(b)
Proposed Archstone Charter Amendments ..................... Section 3.19
Qualifying Income .......................................... Section 7.2
Recapitalization Agreement .................................... Recitals
Recipient .................................................. Section 7.2
REIT ................................................... Section 2.14(b)
REIT Articles of Merger ....................................... Recitals
Release ................................................ Section 2.10(a)
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Representative ...................................... Section 4.3(a)(ii)
Right ................................................ Section 1.1(a)(i)
Rule 145 Affiliates ........................................ Section 4.4
SEC ..................................................... Section 2.5(c)
Section 16 Information ................................. Section 5.16(b)
Securities Act .......................................... Section 2.3(g)
Share Exchange ................................................ Recitals
Shareholder Approvals ................................... Section 3.5(a)
Shareholders Agreement ........................................ Recitals
SMCI .......................................................... Recitals
SMCI Voting Stock Owner ....................................... Recitals
Xxxxx ......................................................... Preamble
Xxxxx Acquisition Agreement ................................ Section 7.2
Xxxxx Articles of Incorporation ............................ Section 1.8
Xxxxx Bylaws ............................................... Section 1.8
Xxxxx Common Stock .................................. Section 1.12(b)(i)
Xxxxx Disclosure Letter ...................................... Article 2
Xxxxx Dividend ...................................... Section 1.15(e)(i)
Xxxxx Financial Statement Date ............................. Section 2.7
Xxxxx Insiders ......................................... Section 5.16(c)
Xxxxx Material Adverse Effect .............................. Section 2.1
Xxxxx Non-Controlled Subsidiary ......................... Section 2.2(a)
Xxxxx OP Units ..................................... Section 1.12(a)(ii)
Xxxxx Other Interests ...................................... Section 2.4
Xxxxx Partner Approvals ................................... Section 1.13
Xxxxx Partnership ............................................. Preamble
Xxxxx Partnership Agreement ................................ Section 1.7
Xxxxx Partnership Distribution ...................... Section 1.15(e)(i)
Xxxxx Preferred OP Units .................................. Section 1.12
Xxxxx Preferred Stock ............................. Section 1.12(b)(vii)
Xxxxx Properties ........................................ Section 2.9(a)
Xxxxx Rights .............................................. Section 2.21
Xxxxx Rights Agreement .................................... Section 2.21
Xxxxx SEC Documents ........................................ Section 2.6
Xxxxx Series A Preferred OP Unit .................. Section 1.12(a)(iii)
Xxxxx Series A Preferred Share ..................... Section 1.12(b)(ii)
Xxxxx Series C Preferred OP Unit ................... Section 1.12(a)(iv)
Xxxxx Series C Preferred Share .................... Section 1.12(b)(iii)
Xxxxx Series E Preferred OP Unit .................... Section 1.12(a)(v)
Xxxxx Series E Preferred Share ..................... Section 1.12(b)(iv)
Xxxxx Series F Preferred OP Units .................. Section 1.12(a)(vi)
Xxxxx Series F Preferred Shares ..................... Section 1.12(b)(v)
Xxxxx Series G Preferred OP Unit .................. Section 1.12(a)(vii)
Xxxxx Series G Preferred Share ..................... Section 1.12(b)(vi)
Xxxxx Series H Preferred OP Unit ..................Section 1.12(a)(viii)
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Xxxxx Series H Preferred Share .................... Section 1.12(b)(vii)
Xxxxx Stockholders Meeting .............................. Section 5.1(d)
Xxxxx Stock Options ..................................... Section 2.3(b)
Xxxxx Stock Rights ...................................... Section 2.3(b)
Xxxxx Stockholder Approvals ............................. Section 2.5(a)
Xxxxx Subsidiary ....................................... Sectioin 2.2(a)
Xxxxx Trustees ............................................. Section 1.9
Xxxxx Voting Agreement ........................................ Recitals
Stock Purchase Agreement ...................................... Recitals
Subsidiary .............................................. Section 2.2(a)
Substituted Option ...................................... Section 5.8(c)
Superior Acquisition Proposal ........................... Section 4.3(d)
Surviving Entity ........................................ Section 1.4(a)
Surviving Trust ............................................ Section 1.3
Survivor Plans .......................................... Section 5.8(a)
Takeover Statute .......................................... Section 2.20
Tax Protection Agreements .............................. Section 2.18(i)
Taxes .................................................. Section 2.14(a)
Title 3 ................................................. Section 1.2(c)
Title 8 ................................................. Section 1.1(a)
Transfer ............................................. Section 4.3(a)(i)
Transfer and Gains Taxes ................................... Section 5.7
Welfare Plan .............................................. Section 2.12
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AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"),
dated as of May 3, 2001, by and among ARCHSTONE COMMUNITIES TRUST, a Maryland
real estate investment trust ("Archstone"), NEW GARDEN RESIDENTIAL TRUST, a
Maryland real estate investment trust ("New Archstone"), XXXXXXX X. XXXXX
RESIDENTIAL REALTY, INC., a Maryland corporation ("Xxxxx"), and XXXXXXX X. XXXXX
RESIDENTIAL REALTY, L.P., a Delaware limited partnership ("Xxxxx Partnership").
WHEREAS, Archstone, New Archstone, Xxxxx and Xxxxx Partnership are parties
to that certain Agreement and Plan of Merger, dated as of May 3, 2001 (the
"Original Agreement"), and desire to amend and restate the Original Agreement;
WHEREAS, in order to advance the long-term strategic business interests of
Archstone and Xxxxx, the Board of Trustees of Archstone and the Board of
Directors of Xxxxx xxxx it advisable and in the best interests of their
respective shareholders, upon the terms and subject to the conditions contained
herein, that Xxxxx shall merge with and into New Archstone with New Archstone as
the surviving entity (the "Merger");
WHEREAS, in order to advance the long-term strategic business interests of
Xxxxx Partnership, Xxxxx, as the sole general partner of Xxxxx Partnership,
deems it advisable and in the best interests of Xxxxx Partnership limited
partners, subject to the conditions and other provisions contained herein, that,
immediately after the Merger, Xxxxx Partnership shall merge with and into
Archstone Surviving Subsidiary (as defined herein) with Archstone Surviving
Subsidiary as the surviving entity (the "Partnership Merger" and, together with
the Merger, the "Mergers");
WHEREAS, New Archstone is a wholly owned subsidiary of Archstone;
WHEREAS, upon the terms and subject to the conditions set forth herein,
prior to the Mergers, New Archstone shall create a wholly owned subsidiary
("Archstone Merger Sub"), and Archstone shall merge with Archstone Merger Sub,
with Archstone as the surviving entity, with the shareholders of Archstone
becoming the shareholders of New Archstone, and with Archstone becoming a
direct, wholly owned subsidiary of New Archstone (the "Primary Archstone
Merger");
WHEREAS, upon the terms and subject to the conditions set forth herein,
prior to the Mergers, Archstone shall implement an alternative structure rather
than the Primary Archstone Merger pursuant to which (a) Archstone would create a
wholly owned Maryland corporate subsidiary ("Archstone Corporate Subsidiary"),
(b) New Archstone would create a wholly owned Maryland real estate investment
trust subsidiary ("Archstone REIT"), (c) Archstone would merge with and into
Archstone Corporate Subsidiary with Archstone Corporate Subsidiary as the
surviving entity and with the shareholders of Archstone becoming the
shareholders of Archstone Corporate Subsidiary (the "ACS Merger"), (d) New
Archstone would exchange common shares
of beneficial interest and preferred shares of beneficial interest for all of
the issued and outstanding shares of common stock and preferred stock of
Archstone Corporate Subsidiary with the result being that Archstone Corporate
Subsidiary becomes a subsidiary of New Archstone (the "Share Exchange") and (e)
Archstone Corporate Subsidiary would merge with and into Archstone REIT with
Archstone REIT as the surviving entity and with the shares of stock of Archstone
Corporate Subsidiary being extinguished and Archstone REIT issuing shares of
beneficial interest to New Archstone (the "Archstone REIT Merger" and, together
with the ACS Merger and the Share Exchange, the "Alternative Archstone Merger"),
as further described in Section 1.2;
WHEREAS, the term "Archstone Merger" as used in this Agreement shall mean
(a) the Primary Archstone Merger in the case of a merger effectuated pursuant to
Section 1.1 or (b) the Alternative Archstone Merger in the case of the
transactions effectuated pursuant to Section 1.2;
WHEREAS, the term "Archstone Surviving Subsidiary" shall mean (a) Archstone
in the case of a merger effectuated pursuant to Section 1.1 or (b) Archstone
REIT in the case of the transactions effectuated pursuant to Section 1.2;
WHEREAS, on the business day after the Archstone Merger or as soon
thereafter as practicable, it is contemplated that Archstone Surviving
Subsidiary shall make a "check-the-box" election pursuant to Treasury Regulation
(S) 301.7701-3(c) (the "Election") to be treated for federal income tax purposes
as either a domestic eligible entity with a single owner electing to be
disregarded as a separate entity or as a partnership, as applicable;
WHEREAS, upon the terms and subject to the conditions set forth herein, on
the business day after Archstone Surviving Subsidiary makes the Election or as
soon thereafter as practicable, New Archstone and Xxxxx shall execute Articles
of Merger (the "REIT Articles of Merger") in such form as the parties shall
mutually agree and shall file the REIT Articles of Merger in accordance with
Maryland law to effectuate the Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
immediately following the effectiveness of the Merger, Archstone Surviving
Subsidiary and Xxxxx Partnership shall execute a Certificate of Merger (the
"Delaware Certificate of Merger") in such form as the parties shall mutually
agree and shall file such Delaware Certificate of Merger in accordance with
Delaware law to effectuate the Partnership Merger;
WHEREAS, upon the terms and subject to the conditions set forth herein,
immediately following the effectiveness of the Merger, Archstone Surviving
Subsidiary and Xxxxx Partnership shall execute Articles of Merger (the
"Partnership Articles of Merger") in such form as the parties shall mutually
agree and shall file the Partnership Articles of Merger in accordance with
Maryland law to effectuate the Partnership Merger;
WHEREAS, for federal income tax purposes, it is intended that each of the
Merger and the Archstone Merger shall qualify as a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement shall constitute separate plans of reorganization under Section
368(a) of the Code;
2
WHEREAS, for federal income tax purposes the following characterization is
intended for the Partnership Merger: (a) following the Archstone Merger and the
Election and prior to the Partnership Merger, New Archstone will be the owner of
all of the assets previously owned by Archstone, subject to all of its
liabilities, (b) Xxxxx Partnership will be deemed to have terminated under
Section 708(b)(1)(B) of the Code upon consummation of the Merger, and (c) the
Partnership Merger will result in a continuation of the "new partnership" deemed
to result upon the termination of Xxxxx Partnership and the contribution by New
Archstone to this "new partnership" of all of New Archstone's assets (other than
the interests of Xxxxx in this "new partnership" acquired in the Merger),
subject to all of its liabilities, with this "new partnership" thereafter
operating under the name Archstone-Xxxxx Operating Trust;
WHEREAS, Archstone, New Archstone, Xxxxx and Xxxxx Partnership desire to
make certain representations, warranties, covenants and agreements in connection
with the Archstone Merger and the Mergers;
WHEREAS, as an inducement to Archstone and New Archstone to enter into this
Agreement, (a) Xxxxx Management Construction Partnership (the "SMCI Voting Stock
Owner"), as owner of all of the voting capital stock of Xxxxx Management
Construction, Inc. ("SMCI"), and Archstone have entered into a Stock Purchase
Agreement relating to the voting capital stock of SMCI (the "Stock Purchase
Agreement"), pursuant to which the SMCI Voting Stock Owner has agreed to sell to
a designee of Archstone, and a designee of Archstone has agreed to acquire from
the SMCI Voting Stock Owner, all of the shares of outstanding voting stock of
SMCI, and (b) Consolidated Engineering Services Partnership (the "CESI Voting
Stock Owner," and together with the SMCI Voting Stock Owner, the "NCS Voting
Stock Owners"), Consolidated Engineering Services, Inc. ("CESI") and the various
parties named therein have entered into a Recapitalization Agreement relating to
a recapitalization of CESI (the "Recapitalization Agreement," and, together with
Stock Purchase Agreement, the "NCS Agreements"), pursuant to which the CESI
Voting Stock Owner has agreed to vote all of the shares of outstanding voting
stock of CESI in favor of a recapitalization of CESI that will vest voting
control of CESI in Xxxxx Partnership prior to or upon consummation of the
Partnership Merger;
WHEREAS, prior to the Merger Closing (as defined herein) and as an
inducement to Xxxxx, Archstone and New Archstone to enter into this Agreement
and consummate the transactions herein, Archstone, New Archstone and Messrs.
Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx, will enter into a Shareholders Agreement in
the form attached hereto as Exhibit A (the "Shareholders Agreement"), pursuant
to which Messrs. Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxx will have certain rights
with respect to the continued business and operation of the Surviving Trust and
the Surviving Entity (each as defined herein);
WHEREAS, as an inducement to Archstone and New Archstone to enter into this
Agreement, each director of Xxxxx has entered into a voting agreement (each, a
"Xxxxx Voting Agreement"), pursuant to which such person has agreed, among other
things, to vote his or her shares of Xxxxx Common Stock and Xxxxx OP Units (each
as defined herein) to approve this Agreement, the Mergers and any other matter
which requires his or her vote in connection with the transactions contemplated
by this Agreement; and
3
WHEREAS, as an inducement to Xxxxx to enter into this Agreement, each
trustee of Archstone has entered into a voting agreement (each, an "Archstone
Voting Agreement"), pursuant to which such person has agreed, among other
things, to vote his or her Archstone Common Shares (as defined herein) to
approve this Agreement, the Archstone Merger, the Mergers and any other matter
which requires his or her vote in connection with the transactions contemplated
by this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE ARCHSTONE MERGER AND THE MERGERS
1.1 The Primary Archstone Merger.
(a) Subject to Section 1.2, upon the terms and subject to the
conditions of this Agreement, and in accordance with Title 8 of the Corporations
and Associations Article of the Annotated Code of Maryland, as amended ("Title
8"), and other applicable state law, on the Archstone Closing Date (as defined
herein), Archstone Merger Sub shall be merged with Archstone with Archstone as
the surviving entity and with New Archstone acquiring all outstanding shares of
beneficial interest of Archstone and the holders of shares of beneficial
interest in Archstone receiving shares of beneficial interest in New Archstone,
as follows:
(i) Each common share of beneficial interest, par value $1.00 per
share, of Archstone, together with the associated Right (as defined in the
Rights Agreement between Archstone and Chemical Bank, dated as of July 21, 1994,
as amended) (collectively, the "Archstone Common Shares") issued and outstanding
immediately prior to the effective time of the Archstone Merger shall be
automatically converted into the right to receive one common share of beneficial
interest, par value $.01 per share, of New Archstone, together with a right
under the New Archstone Rights Agreement to be adopted by New Archstone prior to
the Archstone Closing (collectively, the "New Archstone Common Shares"). The
"New Archstone Rights Agreement" shall mean the rights agreement to be adopted
by the New Archstone Board of Trustees prior to the Archstone Closing, the form
and substance of which is subject to Xxxxx'x approval, which approval shall not
be unreasonably withheld or delayed.
(ii) Each Cumulative Convertible Series A Preferred Share of
Beneficial Interest of Archstone ("Archstone Series A Preferred Shares") issued
and outstanding immediately prior to the effective time of the Archstone Merger
shall be automatically converted into the right to receive one Cumulative
Convertible Series A Preferred Share of Beneficial Interest of New Archstone
("New Archstone Series A Preferred Shares").
(iii) Each Series C Cumulative Redeemable Preferred Share of
Beneficial Interest of Archstone ("Archstone Series C Preferred Shares") issued
and outstanding immediately prior to the effective time of the Archstone Merger
shall be automatically converted into the right to receive one Series C
Cumulative Redeemable Preferred Share of Beneficial
4
Interest of New Archstone ("New Archstone Series C Preferred Shares").
(iv) Each Series D Cumulative Redeemable Preferred Share of
Beneficial Interest of Archstone ("Archstone Series D Preferred Shares") issued
and outstanding immediately prior to the effective time of the Archstone Merger
shall be automatically converted into the right to receive one Series D
Cumulative Redeemable Preferred Share of Beneficial Interest of New Archstone
("New Archstone Series D Preferred Shares").
(v) Each Cumulative Redeemable Perpetual Series E Preferred Share
of Beneficial Interest of Archstone ("Archstone Series E Preferred Shares")
issued and outstanding immediately prior to the effective time of the Archstone
Merger, if any, shall be automatically converted into the right to receive one
Cumulative Redeemable Perpetual Series E Preferred Share of Beneficial Interest
of New Archstone ("New Archstone Series E Preferred Shares").
(vi) Each Cumulative Redeemable Perpetual Series F Preferred Share
of Beneficial Interest of Archstone ("Archstone Series F Preferred Shares")
issued and outstanding immediately prior to the effective time of the Archstone
Merger, if any, shall be automatically converted into the right to receive one
Cumulative Redeemable Perpetual Series F Preferred Share of Beneficial Interest
of New Archstone ("New Archstone Series F Preferred Shares").
(vii) Each Cumulative Redeemable Perpetual Series G Preferred
Share of Beneficial Interest of Archstone ("Archstone Series G Preferred
Shares") issued and outstanding immediately prior to the effective time of the
Archstone Merger, if any, shall be automatically converted into the right to
receive one Cumulative Redeemable Perpetual Series G Preferred Share of
Beneficial Interest of New Archstone ("New Archstone Series G Preferred
Shares").
(b) In addition, pursuant to the Archstone Surviving Subsidiary
Declaration of Trust and the New Archstone Declaration of Trust (each as defined
herein):
(i) Each 8.375% Cumulative Redeemable Perpetual Series E Preferred
Unit of Archstone Communities Limited Partnership ("Archstone Series E Preferred
Units") issued and outstanding immediately prior to the effective time of the
Primary Archstone Merger, if any, shall continue to be convertible into one
Archstone Series E Preferred Share and each Archstone Series E Preferred Share
(whether or not outstanding) shall become convertible into one New Archstone
Series E Preferred Share.
(ii) Each 8.125% Cumulative Redeemable Perpetual Series F
Preferred Unit of Archstone Communities Limited Partnership II ("Archstone
Series F Preferred Units") issued and outstanding immediately prior to the
effective time of the Primary Archstone Merger, if any, shall continue to be
convertible into one Archstone Series F Preferred Share and each Archstone
Series F Preferred Share (whether or not outstanding) shall become convertible
into one New Archstone Series F Preferred Share.
(iii) Each 8.625% Cumulative Redeemable Series G Preferred Unit of
5
Archstone Communities Limited Partnership II ("Archstone Series G Preferred
Units") issued and outstanding immediately prior to the effective time of the
Primary Archstone Merger, if any, shall continue to be convertible into one
Archstone Series G Preferred Share and each Archstone Series G Preferred Share
(whether or not outstanding) shall become convertible into one New Archstone
Series G Preferred Share.
As used herein, "Archstone Existing Preferred Shares" means,
collectively, Archstone Series A Preferred Shares, Archstone Series C Preferred
Shares, Archstone Series D Preferred Shares, Archstone Series E Preferred
Shares, Archstone Series F Preferred Shares and Archstone Series G Preferred
Shares and "New Archstone Existing Preferred Shares" means, collectively, New
Archstone Series A Preferred Shares, New Archstone Series C Preferred Shares,
New Archstone Series D Preferred Shares, New Archstone Series E Preferred
Shares, New Archstone Series F Preferred Shares and New Archstone Series G
Preferred Shares.
(c) Upon the terms and subject to the conditions of this Agreement,
and in accordance with Title 8 and other applicable state law, upon the Primary
Archstone Merger, New Archstone shall receive securities in Archstone in the
same number and of the same class or series as the securities of Archstone
outstanding immediately prior to the effective time of the Archstone Merger,
with the rights, privileges, and preferences set forth in the Archstone
Declaration of Trust in effect on the date hereof (the "Archstone Declaration of
Trust").
(d) For federal income tax purposes, it is intended that the Primary
Archstone Merger shall qualify as reorganization under Section 368 (a)(1)(F) of
the Code.
1.2 Alternative Structure of the Archstone Merger.
(a) In the event that (i) (A) the Proposed Archstone Charter
Amendments (as defined herein) are disapproved at the duly convened Archstone
Shareholders Meeting (as defined herein), or otherwise are not approved by
holders of a majority of the Archstone Common Shares entitled to vote within 110
days after the matter is submitted for their approval (but in no event later
than March 1, 2002) or (B) the holders of a majority of the Archstone Common
Shares entitled to vote approve the Proposed Archstone Charter Amendments but
the Primary Archstone Merger shall not have been consummated within sixty (60)
days after the receipt of such approval, and (ii) the holders of a majority of
the Archstone Common Shares entitled to vote approve the Archstone Merger, then
the Archstone Merger shall be effectuated through the Alternative Archstone
Merger as set forth in this Section 1.2.
(b) Archstone shall form Archstone Corporate Subsidiary and New
Archstone shall form Archstone REIT.
(c) Upon the terms and subject to the conditions of this Agreement and
in accordance with Title 3 of the Corporations and Associations Article of the
Annotated Code of Maryland, as amended ("Title 3"), and Title 8, on the
Archstone Closing Date, Archstone shall merge with and into Archstone Corporate
Subsidiary with Archstone Corporate Subsidiary as the surviving entity and the
holders of shares of beneficial interest in Archstone receiving shares of stock
in Archstone Corporate Subsidiary, as follows:
6
(i) Each Archstone Common Share issued and outstanding immediately
prior to the effective time of the ACS Merger shall be automatically converted
into the right to receive one share of common stock, par value $.01 per share,
of Archstone Corporate Subsidiary ("ACS Common Shares"). The ACS Common Shares
shall have preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to those of the Archstone Common
Shares outstanding on the date hereof except that the ACS Common Shares shall
not have an associated right similar to the Right.
(ii) Each Archstone Series A Preferred Share issued and
outstanding immediately prior to the effective time of the ACS Merger shall be
automatically converted into the right to receive one share of Cumulative
Convertible Series A Preferred Stock of Archstone Corporate Subsidiary ("ACS
Series A Preferred Shares"). The ACS Series A Preferred Shares shall have
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof identical to those of the Archstone Series A Preferred Shares
outstanding on the date hereof.
(iii) Each Archstone Series C Preferred Share issued and
outstanding immediately prior to the effective time of the ACS Merger shall be
automatically converted into the right to receive one share of Series C
Cumulative Redeemable Preferred Stock of Archstone Corporate Subsidiary ("ACS
Series C Preferred Shares"). The ACS Series C Preferred Shares shall have
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof identical to those of the Archstone Series C Preferred Shares
outstanding on the date hereof.
(iv) Each Archstone Series D Preferred Share issued and
outstanding immediately prior to the effective time of the ACS Merger shall be
automatically converted into the right to receive one share of Series D
Cumulative Redeemable Preferred Stock of Archstone Corporate Subsidiary ("ACS
Series D Preferred Shares"). The ACS Series D Preferred Shares shall have
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof identical to those of the Archstone Series D Preferred Shares
outstanding on the date hereof.
(v) Each Archstone Series E Preferred Share issued and outstanding
immediately prior to the effective time of the ACS Merger, if any, shall be
automatically converted into the right to receive one share of Cumulative
Redeemable Perpetual Series E Preferred Stock of Archstone Corporate Subsidiary
("ACS Series E Preferred Shares"). The ACS Series E Preferred Shares shall have
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption thereof identical to those of the Archstone Series E Preferred Shares
outstanding on the date hereof. Each Archstone Series E Preferred Unit issued
and outstanding immediately prior to the effective time of the ACS Merger shall
become convertible into one ACS Series E Preferred Share.
(vi) Each Archstone Series F Preferred Share issued and
outstanding immediately prior to the effective time of the ACS Merger, if any,
shall be automatically
7
converted into the right to receive one share of Cumulative Redeemable Perpetual
Series F Preferred Stock of Archstone Corporate Subsidiary ("ACS Series F
Preferred Shares"). The ACS Series F Preferred Shares shall have preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms or conditions of redemption thereof
identical to those of the Archstone Series F Preferred Shares outstanding on the
date hereof. Each Archstone Series F Preferred Unit issued and outstanding
immediately prior to the effective time of the ACS Merger shall become
convertible into one ACS Series F Preferred Share.
(vii) Each Archstone Series G Preferred Share issued and
outstanding immediately prior to the effective time of the ACS Merger, if any,
shall be automatically converted into the right to receive one share of
Cumulative Redeemable Perpetual Series G Preferred Stock of Archstone Corporate
Subsidiary ("ACS Series G Preferred Shares"). The ACS Series G Preferred Shares
shall have preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to those of the Archstone Series G
Preferred Shares outstanding on the date hereof. Each Archstone Series G
Preferred Unit issued and outstanding immediately prior to the effective time of
the ACS Merger shall become convertible into one ACS Series G Preferred Share.
As used herein, "ACS Preferred Shares" means, collectively, ACS
Series A Preferred Shares, ACS Series C Preferred Shares, ACS Series D Preferred
Shares, ACS Series E Preferred Shares, ACS Series F Preferred Shares and ACS
Series G Preferred Shares.
(d) Upon the terms and subject to the conditions of this Agreement,
and in accordance with applicable state laws, Archstone Corporate Subsidiary and
New Archstone shall then enter into a share exchange in accordance with Title 3
and other applicable state law, pursuant to which New Archstone shall issue
shares of beneficial interest in New Archstone to the holders of ACS Common
Shares and ACS Preferred Shares, as follows:
(i) Each ACS Common Share issued and outstanding immediately prior
to the effective time of the Share Exchange shall be exchanged for one New
Archstone Common Share.
(ii) Each ACS Series A Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange, if any, shall be
exchanged for one New Archstone Series A Preferred Share.
(iii) Each ACS Series C Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange shall be exchanged
for one New Archstone Series C Preferred Share.
(iv) Each ACS Series D Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange shall be exchanged
for one New Archstone Series D Preferred Share.
8
(v) Each ACS Series E Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange, if any, shall be
exchanged for one New Archstone Series E Preferred Share.
(vi) Each ACS Series F Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange shall be exchanged
for one New Archstone Series F Preferred Share.
(vii) Each ACS Series G Preferred Share issued and outstanding
immediately prior to the effective time of the Share Exchange shall be exchanged
for one New Archstone Series G Preferred Share.
(e) Upon the terms and subject to the conditions of this Agreement,
and in accordance with Title 3 and Title 8, Archstone Corporate Subsidiary shall
then merge with and into Archstone REIT, with Archstone REIT as the surviving
entity, with the ACS Common Shares and the ACS Preferred Shares being
extinguished and with Archstone REIT issuing the following shares of beneficial
interest to New Archstone:
(i) a number of Common Shares of Beneficial Interest, par value
$0.01 per share, of Archstone REIT ("Archstone Surviving Subsidiary Common
Shares") so that the number of Archstone Surviving Subsidiary Common Shares
issued and outstanding immediately after the Archstone REIT Merger is equal the
number of ACS Common Shares issued and outstanding immediately prior to the
Archstone REIT Merger;
(ii) a number of Cumulative Convertible Series A Preferred Shares
of Beneficial Interest of Archstone REIT ("Archstone Surviving Subsidiary Series
A Preferred Shares") equal to the number of ACS Series A Preferred Shares being
cancelled;
(iii) a number of Series C Cumulative Redeemable Preferred Shares
of Beneficial Interest of Archstone REIT ("Archstone Surviving Subsidiary Series
C Preferred Shares") equal to the number of ACS Series C Preferred Shares being
cancelled;
(iv) a number of Series D Cumulative Redeemable Preferred Shares
of Beneficial Interest of Archstone REIT ("Archstone Surviving Subsidiary Series
D Preferred Shares") equal to the number of ACS Series D Preferred Shares being
cancelled;
(v) a number of Cumulative Redeemable Perpetual Series E Preferred
Shares of Beneficial Interest of Archstone REIT ("Archstone Surviving Subsidiary
Series E Preferred Shares") equal to the number of ACS Series E Preferred Shares
being cancelled, if any;
(vi) a number of Cumulative Redeemable Perpetual Series F
Preferred Shares of Beneficial Interest of Archstone REIT ("Archstone Surviving
Subsidiary Series F Preferred Shares") equal to the number of ACS Series F
Preferred Shares being cancelled, if any; and
(vii) a number of Cumulative Redeemable Perpetual Series G
Preferred Shares of Beneficial Interest of Archstone REIT ("Archstone Surviving
Subsidiary Series G
9
Preferred Shares") equal to the number of ACS Series G Preferred Shares being
cancelled, if any;
(f) In addition, pursuant to the Archstone Surviving Subsidiary
Declaration of Trust and the New Archstone Declaration of Trust:
(i) Each Archstone Series E Preferred Unit issued and outstanding
immediately prior to the effective time of the Archstone REIT Merger shall
become convertible into one Archstone Surviving Subsidiary Series E Preferred
Share and each Archstone Series E Preferred Share (whether or not outstanding)
shall become convertible into one New Archstone Series E Preferred Share.
(ii) Each Archstone Series F Preferred Unit issued and outstanding
immediately prior to the effective time of the Archstone REIT Merger shall
become convertible into one Archstone Surviving Subsidiary Series F Preferred
Share and each Archstone Series F Preferred Share (whether or not outstanding)
shall become convertible into one New Archstone Series F Preferred Share.
(iii) Each Archstone Series G Preferred Unit issued and
outstanding immediately prior to the effective time of the Archstone REIT Merger
shall become convertible into one Archstone Surviving Subsidiary Series G
Preferred Share and each Archstone Series G Preferred Share (whether or not
outstanding) shall become convertible into one New Archstone Series G Preferred
Share.
(g) For federal income tax purposes, it is intended that the
Alternative Archstone Merger (including the ACS Merger, the Share Exchange and
the Archstone REIT Merger) shall qualify as one or more reorganizations under
Section 368 (a)(1)(F) of the Code.
1.3 The Merger. (a) Upon the terms and subject to the conditions set forth
in this Agreement, and in accordance with Title 3 and Title 8, on the business
day after Archstone Surviving Subsidiary makes the Election, or as soon
thereafter as practicable, Xxxxx shall be merged with and into New Archstone,
with New Archstone surviving as a Maryland real estate investment trust (the
"Surviving Trust") and the holders of shares of stock in Xxxxx receiving shares
of beneficial interest in New Archstone, as set forth in Section 1.12(b). The
name of the Surviving Trust shall be "Archstone-Xxxxx Trust."
(b) For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under Section 368 (a)(1)(A) of the Code.
1.4 The Partnership Merger.
(a) Upon the terms and subject to the conditions of this Agreement,
and in accordance with Title 8 and Title 6, Section 17-211 of the Delaware
Revised Uniform Limited Partnership Act, as amended (the "DRULPA"), immediately
after the effectiveness of the Merger, Xxxxx Partnership shall be merged with
and into Archstone Surviving Subsidiary with Archstone Surviving Subsidiary as
the surviving entity (the "Surviving Entity"), and with holders of partnership
interests in Xxxxx receiving shares of beneficial interest in Archstone
10
Surviving Subsidiary, as set forth in Section 1.12(a). The name of the
Surviving Entity shall be "Archstone-Xxxxx Operating Trust."
(b) For federal income tax purposes, it is intended that the
Partnership Merger have the characterization set forth in the fourteenth
"WHEREAS" clause above. If, notwithstanding such intended characterization, the
Partnership Merger is treated as a merger of two partnerships within the meaning
of the regulation under Section 708(b)(1)(A) of the Code, pursuant to Treasury
Regulation (S) 1.708-1(c)(3), Xxxxx Partnership and Archstone intend that the
Partnership Merger be treated as an "assets over" form of merger, with the
consequences set forth in Treasury Regulation (S) 1.708-1(c)(3)(i). In addition,
if and to the extent that any transaction entered into pursuant to this
Agreement or otherwise deemed undertaken in connection with the transactions
contemplated by this Agreement is treated for federal income tax purposes as a
direct or indirect transfer of cash from Archstone Surviving Subsidiary to a
holder of Xxxxx OP Units or Xxxxx Preferred OP Units (as defined herein) that
would be characterized as a sale for federal income tax purposes, pursuant to
Treasury Regulation (S) 1.708-1(c)(4) such sale shall be treated by all parties
as a sale by the former holder of Xxxxx OP Units or Xxxxx Preferred OP Units
receiving (or deemed to receive) such cash of Xxxxx OP Units or Xxxxx Preferred
OP Units to Archstone Surviving Subsidiary and as a direct purchase by Archstone
Surviving Subsidiary of such Xxxxx OP Units or Xxxxx Preferred OP Units from
such former holder of Xxxxx OP Units or Xxxxx Preferred OP Units immediately
prior to the Partnership Merger (and not as a transfer of cash from Archstone
Surviving Subsidiary to Xxxxx Partnership as part of the Partnership Merger).
Each holder of Xxxxx OP Units or Xxxxx Preferred OP Units who receives, directly
or indirectly, any cash in connection with the Partnership Merger shall be
deemed by such holder's act of receiving and accepting such cash, to have agreed
to the characterization of such transaction set forth in the immediately
preceding sentence for purposes of Treasury Regulation (S) 1.708-1 (c)(4).
1.5 Closings. The closing of the Archstone Merger (the "Archstone Closing")
will take place commencing at 9:00 a.m., local time, on the date to be specified
by the parties, which (subject to satisfaction or waiver of the conditions set
forth in Article 6) shall be no later than the third business day after
satisfaction or waiver of each of the conditions set forth in Section 6.1 (the
"Archstone Closing Date"), at the offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx
XxXxxxx, Xxxxxxx, Xxxxxxxx 00000, unless another date or place is agreed to in
writing by the parties. The closing of the Mergers (the "Merger Closing") will
take place commencing at 9:00 a.m., local time, on the second business day after
the Archstone Merger or as soon thereafter as practicable after satisfaction or
waiver of the conditions set forth in Sections 6.1, 6.2 and 6.3 (the "Merger
Closing Date"), at the offices of Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx XxXxxxx,
Xxxxxxx, Xxxxxxxx 00000, unless another date or place is agreed to in writing by
the parties.
1.6 Effective Time. On the Archstone Closing Date, (a) in the case of an
Archstone Merger effectuated in the form of the Primary Archstone Merger,
Archstone and Archstone Merger Sub shall execute and file all necessary
certificates or articles of merger in connection with the Primary Archstone
Merger in accordance with Title 8 and other applicable state law and shall make
all other filings and recordings required under Title 8 and other applicable
state law or (b) in the case of an Archstone Merger effectuated in the form of
the Alternative Archstone Merger, (i) Archstone and Archstone Corporate
Subsidiary shall execute and file all necessary
11
certificates or articles of merger in connection with the ACS Merger in
accordance with Title 3 and Title 8 and shall make all other filings and
recordings required under Title 3 and Title 8; (ii) Archstone Corporate
Subsidiary and New Archstone shall make all filings and recordings required
under Title 3 and Title 8 in connection with the Share Exchange; and (iii)
Archstone Corporate Subsidiary and Archstone REIT shall execute and file all
necessary certificates or articles of merger in connection with the Archstone
REIT Merger in accordance with Title 3 and Title 8 and shall make all other
filings and recordings required under Title 3 and Title 8. On the Merger Closing
Date, (a) New Archstone and Xxxxx shall execute and file the REIT Articles of
Merger, executed in accordance with Title 3 and Title 8 with the State
Department of Assessments and Taxation of Maryland (the "Department"), and shall
make all other filings and recordings required under Title 3 or Title 8 and (b)
Archstone Surviving Subsidiary and Xxxxx Partnership shall then execute and file
the Delaware Certificate of Merger, executed in accordance with the DRULPA, with
the Office of the Secretary of State of the State of Delaware and execute and
file the Partnership Articles of Merger, executed in accordance with Title 8,
with the Department, and shall make all other filings and recordings required
under the DRULPA or Title 8. The Merger shall become effective upon the
acceptance for record by the Department of the REIT Articles of Merger or, if
later, the date and time specified in the REIT Articles of Merger. The
Partnership Merger shall become effective upon the latest of (i) the filing of
the Delaware Certificate of Merger with the Office of the Secretary of State of
the State of Delaware, (ii) the acceptance for record by the Department of the
Partnership Articles of Merger or (iii) the date and time specified in the
Delaware Certificate of Merger or the Partnership Articles of Merger. The time
that the Merger and the Partnership Merger shall become effective shall each be
referred to as an "Effective Time" and collectively as the "Effective Times."
Unless otherwise agreed, the parties shall cause the Effective Times to occur on
the Merger Closing Date, with not less than one hour between the Effective Time
of the Merger and the Effective Time of the Partnership Merger.
1.7 Effect of Partnership Merger on Xxxxx Agreement of Limited Partnership
and Archstone Surviving Subsidiary Declaration of Trust and Bylaws. The Amended
and Restated Agreement of Limited Partnership, as amended, of Xxxxx Partnership,
as in effect immediately prior to the Effective Time of the Partnership Merger
(the "Xxxxx Partnership Agreement"), shall terminate at the Effective Time of
the Partnership Merger. The Amended and Restated Declaration of Trust of
Archstone Surviving Subsidiary in the form attached hereto as Exhibit B (the
"Archstone Surviving Subsidiary Declaration of Trust") and the Amended and
Restated Bylaws of Archstone Surviving Subsidiary in the form attached hereto as
Exhibit C (the "Archstone Surviving Subsidiary Bylaws"), shall be in effect as
of the Effective Time of the Partnership Merger and shall continue in full force
and effect after the Partnership Merger until further amended in accordance with
applicable Maryland law and the terms thereof.
1.8 Effect of Merger on Xxxxx Articles of Incorporation and Bylaws and New
Archstone Declaration of Trust and Bylaws. The Amended and Restated Articles of
Incorporation, as amended, of Xxxxx, as in effect immediately prior to the
Effective Time of the Merger (the "Xxxxx Articles of Incorporation"), and the
Amended and Restated Bylaws, as amended, of Xxxxx, as in effect immediately
prior to the Effective Time of the Merger (the "Xxxxx Bylaws"), shall terminate
at the Effective Time of the Merger. The Amended and
12
Restated Declaration of Trust of New Archstone in the form attached hereto as
Exhibit D (the "New Archstone Declaration of Trust") and the Amended and
Restated Bylaws of New Archstone in the form attached hereto as Exhibit E (the
"New Archstone Bylaws"), shall be in effect as of the Effective Time of the
Merger and shall continue in full force and effect after the Merger until
further amended in accordance with applicable Maryland law and the terms
thereof.
1.9 Trustees of New Archstone. The trustees of New Archstone following the
Merger shall consist of the trustees of New Archstone immediately prior to the
Effective Time of the Merger, who shall continue to serve for the balance of
their unexpired terms or their earlier death, resignation or removal, together
with Xxxxxx X. Xxxxx, Xxxxxx X. Xxxxx and Xxxxxx X. Xxxxxxx (collectively, the
"Xxxxx Trustees"), each of whom shall, as of the Effective Time of the Merger,
become a trustee of New Archstone. Xx. Xxxxxx X. Xxxxx'x term shall expire in
2003. Xx. Xxxxxx X. Xxxxx'x term shall expire in 2002. Xx. Xxxxxx X. Xxxxxxx'x
term shall expire in 2004. Following their election as trustees, the Xxxxx
Trustees shall serve for their designated terms and such subsequent terms as set
forth in the Shareholders Agreement, subject to their earlier death, resignation
or removal and subject to the rights of the Xxxxx Trustees as set forth in the
Shareholders Agreement. As of the Effective Time of the Merger, the number of
trustees constituting the executive committee of New Archstone's Board of
Trustees (the "Executive Committee") shall be increased in accordance with the
terms of the Shareholders Agreement and each of Messrs. Xxxxxx X. Xxxxx and
Xxxxxx X. Xxxxx shall be appointed as members of the Executive Committee as
provided for in the Shareholders Agreement.
1.10 Effect of Archstone Merger and Merger on Capital Stock and Shares of
Beneficial Interest.
(a) The effect of the Archstone Merger shall be as provided in the
applicable certificate or articles of merger in such form as the parties hereto
shall mutually agree and as set forth in Section 1.1 (in the case of a merger
effectuated in the form of the Primary Archstone Merger) or Section 1.2 (in the
case of a merger effectuated in the form of the Alternative Archstone Merger).
(b) The effect of the Merger on the shares of stock of Xxxxx shall be
as provided in the REIT Articles of Merger and in Section 1.12(b). The Merger
shall not change the shares of beneficial interest of New Archstone outstanding
immediately prior to the Merger.
1.11 Effect of Partnership Merger on Partnership Interests and Shares of
Beneficial Interest. The effect of the Partnership Merger on the partnership
interests of Xxxxx Partnership shall be as provided in the Delaware Certificate
of Merger, the Partnership Articles of Merger and in Section 1.12(a). The
Partnership Merger shall not change the shares of beneficial interest of
Archstone Surviving Subsidiary outstanding immediately prior to the Partnership
Merger.
1.12 Partnership Merger Consideration; Merger Consideration.
(a) Partnership Merger Consideration. The consideration to be paid to
holders of Partnership Units (as defined in the Xxxxx Partnership Agreement) and
Partnership Interests (as defined in the Xxxxx Partnership Agreement) of Xxxxx
Partnership in the Partnership Merger
13
(collectively, the "Partnership Merger Consideration") is as follows:
(i) Each Class A Partnership Unit of Xxxxx Partnership ("Class A
Xxxxx OP Units"), outstanding immediately prior to the Effective Time of the
Partnership Merger shall be converted into the right to receive 1.975 Class A
Shares of Beneficial Interest of Archstone Surviving Subsidiary ("Archstone
Surviving Subsidiary Class A Shares"). The Archstone Surviving Subsidiary Class
A Shares issued to the holders of Class A Xxxxx OP Units (other than New
Archstone, as the successor to Xxxxx in the Merger) will be in the Partnership
Merger denominated as Class A-1 Shares of Beneficial Interest of Archstone
Surviving Subsidiary ("Archstone Surviving Subsidiary Class A-1 Shares"). The
Archstone Surviving Subsidiary Class A Shares issued to New Archstone (as the
successor to Xxxxx in the Merger) will be denominated as Class A-2 Shares of
Beneficial Interest of Archstone Surviving Subsidiary. The holders of the
Archstone Surviving Subsidiary Class A-1 Shares issued in the Partnership Merger
shall be entitled to redeem such Archstone Surviving Subsidiary Class A-1 Shares
immediately following the consummation of the Partnership Merger (and
thereafter) pursuant to the terms of the Archstone Surviving Subsidiary
Declaration of Trust, except that for purposes of the exchange provisions
thereof such Archstone Surviving Subsidiary Class A-1 Shares shall be deemed to
have been issued as of the date the related Class A Xxxxx OP Units were issued
by Xxxxx Partnership (or if earlier, one year prior to the Effective Time of the
Partnership Merger);
(ii) Each Class B Partnership Unit of Xxxxx Partnership, if any
("Class B Xxxxx OP Units" and together with the Class A Xxxxx OP Units, the
"Xxxxx OP Units"), outstanding immediately prior to the Effective Time of the
Partnership Merger shall be converted into the right to receive 1.975 Class B
Shares of Beneficial Interest of Archstone Surviving Subsidiary ("Archstone
Surviving Subsidiary Class B Shares");
(iii) Each Series A Cumulative Convertible Redeemable Preferred
Unit (as defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership
("Xxxxx Series A Preferred OP Unit") outstanding immediately prior to the
Effective Time of the Partnership Merger, if any, shall be converted into the
right to receive one Series H Cumulative Convertible Redeemable Preferred Share
of Beneficial Interest (as defined in the Archstone Surviving Subsidiary
Declaration of Trust) of Archstone Surviving Subsidiary ("Archstone Surviving
Subsidiary Series H Preferred Shares");
(iv) Each Series C Cumulative Redeemable Preferred Unit (as
defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership ("Xxxxx Series
C Preferred OP Unit") outstanding immediately prior to the Effective Time of the
Partnership Merger, if any, shall be converted into the right to receive one
Series I Cumulative Redeemable Preferred Share of Beneficial Interest (as
defined in the Archstone Surviving Subsidiary Declaration of Trust) of Archstone
Surviving Subsidiary ("Archstone Surviving Subsidiary Series I Preferred
Shares");
(v) Each Series E Cumulative Convertible Redeemable Preferred Unit
(as defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership ("Xxxxx
Series E Preferred OP Unit") outstanding immediately prior to the Effective Time
of the Partnership Merger, if any, shall be converted into the right to receive
one Series J Cumulative Convertible Redeemable
14
Preferred Share of Beneficial Interest (as defined in the Archstone Surviving
Subsidiary Declaration of Trust) of Archstone Surviving Subsidiary ("Archstone
Surviving Subsidiary Series J Preferred Shares");
(vi) Each Series F Cumulative Redeemable Preferred Unit (as
defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership ("Xxxxx Series
F Preferred OP Unit") outstanding immediately prior to the Effective Time of the
Partnership Merger, if any, shall be converted into the right to receive one
Series K Cumulative Redeemable Preferred Share of Beneficial Interest (as
defined in the Archstone Surviving Subsidiary Declaration of Trust) of Archstone
Surviving Subsidiary ("Archstone Surviving Subsidiary Series K Preferred
Shares");
(vii) Each Series G Cumulative Convertible Redeemable Preferred
Unit (as defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership
("Xxxxx Series G Preferred OP Unit") outstanding immediately prior to the
Effective Time of the Partnership Merger, if any, shall be converted into the
right to receive one Series L Cumulative Convertible Redeemable Preferred Share
of Beneficial Interest (as defined in the Archstone Surviving Subsidiary
Declaration of Trust) of Archstone Surviving Subsidiary ("Archstone Surviving
Subsidiary Series L Preferred Shares"); and
(viii) Each Series H Cumulative Redeemable Preferred Unit (as
defined in the Xxxxx Partnership Agreement) of Xxxxx Partnership ("Xxxxx Series
H Preferred OP Unit") outstanding immediately prior to the Effective Time of the
Partnership Merger, if any, shall be converted into the right to receive one
Series M Cumulative Redeemable Preferred Share of Beneficial Interest (as
defined in the Archstone Surviving Subsidiary Declaration of Trust) of Archstone
Surviving Subsidiary ("Archstone Surviving Subsidiary Series M Preferred
Shares").
As used herein, "Xxxxx Preferred OP Units" means, collectively, Xxxxx
Series A Preferred OP Units, Xxxxx Series C Preferred OP Units, Xxxxx Series E
Preferred OP Units, Xxxxx Series F Preferred OP Units, Xxxxx Series G Preferred
OP Units and Xxxxx Series H Preferred OP Units.
(b) Merger Consideration. The consideration to be paid to holders of
stock of Xxxxx in the Merger (collectively, the "Merger Consideration") is as
follows:
(i) Each share of common stock, par value $0.01 per share,
together with the associated preferred stock purchase right of Xxxxx ("Xxxxx
Common Stock"), issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into the right to receive 1.975 validly issued,
fully paid and nonassessable New Archstone Common Shares together with a right
under the New Archstone Rights Agreement.
(ii) Each share of Series A Cumulative Convertible Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $27.08 per
share, of Xxxxx ("Xxxxx Series A Preferred Share") issued and outstanding
immediately prior to the Effective Time of the Merger, if any, shall be
converted into the right to receive one Series H Cumulative Convertible
Redeemable Preferred Share of Beneficial Interest, $0.01 par value per share,
liquidation preference $27.08 per share, of New Archstone ("New Archstone Series
H Preferred Share").
15
(iii) Each share of Series C Convertible Cumulative Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $100,000 per
share, of Xxxxx ("Xxxxx Series C Preferred Share") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive one Series I Cumulative Convertible Redeemable Preferred
Share of Beneficial Interest, $0.01 par value per share, liquidation preference
$100,000 per share, of New Archstone ("New Archstone Series I Preferred Share").
(iv) Each share of Series E Cumulative Convertible Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $36.50 per
share, of Xxxxx ("Xxxxx Series E Preferred Share") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive one Series J Cumulative Convertible Redeemable Preferred
Share of Beneficial Interest, $0.01 par value per share, liquidation preference
$36.50 per share, of New Archstone ("New Archstone Series J Preferred Share").
(v) Each share of Series F Cumulative Convertible Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $37.50 per
share, of Xxxxx ("Xxxxx Series F Preferred Shares") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive one Series K Cumulative Convertible Redeemable Preferred
Share of Beneficial Interest, $0.01 par value per share, liquidation preference
$37.50 per share, of New Archstone ("New Archstone Series K Preferred Share").
(vi) Each share of Series G Cumulative Convertible Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $39.00 per
share, of Xxxxx ("Xxxxx Series G Preferred Share") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive one Series L Cumulative Convertible Redeemable Preferred
Share of Beneficial Interest, $0.01 par value per share, liquidation preference
$39.00 per share, of New Archstone ("New Archstone Series L Preferred Share").
(vii) Each share of Series H Cumulative Convertible Redeemable
Preferred Stock, par value $0.01 per share, liquidation preference $25.00 per
share, of Xxxxx ("Xxxxx Series H Preferred Share") issued and outstanding
immediately prior to the Effective Time of the Merger shall be converted into
the right to receive one Series M Preferred Share of Beneficial Interest, $0.01
par value per share, liquidation preference $25.00, of New Archstone ("New
Archstone Series M Preferred Share"). As used herein, (i) "Xxxxx Preferred
Stock" means, collectively, Xxxxx Series A Preferred Shares, Xxxxx Series C
Preferred Shares, Xxxxx Series E Preferred Shares, Xxxxx Series F Preferred
Shares, Xxxxx Series G Preferred Shares and Xxxxx Series H Preferred Shares and
(ii) "New Archstone Preferred Shares" means, collectively, New Archstone Series
H Preferred Shares, New Archstone Series I Preferred Shares, New Archstone
Series J Preferred Shares, New Archstone Series K Preferred Shares, New
Archstone Series L Preferred Shares and New Archstone Series M Preferred Shares.
16
(viii) All shares of Xxxxx Common Stock, together with the
associated Xxxxx Right, when so converted as provided in Section 1.12(b)(i), and
all shares of Xxxxx Preferred Stock, when so converted as provided in Sections
1.12(b)(ii)- (vii), shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
(a "Certificate") theretofore representing any such shares shall cease to have
any rights with respect thereto, except the right to receive, upon the surrender
of such Certificate in accordance with Section 1.15(c), as applicable, (A) any
dividends and other distributions in accordance with Section 1.15(d), (B)
certificates representing the New Archstone Common Shares into which such shares
of Xxxxx Common Stock are converted pursuant to Section 1.12(b)(i), (C)
certificates representing the New Archstone Series H Preferred Shares into which
Xxxxx Series A Preferred Shares are converted pursuant to Section 1.12(b)(ii),
if any, (D) certificates representing the New Archstone Series I Preferred
Shares into which Xxxxx Series C Preferred Shares are converted pursuant to
Section 1.12(b)(iii), (E) certificates representing the New Archstone Series J
Preferred Shares into which Xxxxx Series E Preferred Shares are converted
pursuant to Section 1.12(b)(iv), (F) certificates representing the New Archstone
Series K Preferred Shares into which Xxxxx Series F Preferred Shares are
converted pursuant to Section 1.2(b)(v), (G) certificates representing the New
Archstone Series L Preferred Shares into which Xxxxx Series G Preferred Shares
are converted pursuant to Section 1.12(b)(vi), (H) certificates representing the
New Archstone Series M Preferred Shares into which Xxxxx Series H Preferred
Shares are converted pursuant to Section 1.12(b)(vii), and (I) any cash, without
interest, in lieu of fractional New Archstone Common Shares to be issued or paid
in consideration for Xxxxx Common Stock upon the surrender of such Certificate
in accordance with Sections 1.15(d) and 1.15(h).
1.13 Partner Approval. Xxxxx shall (a) seek the requisite approval of the
partners of Xxxxx Partnership of this Agreement, the Merger, the withdrawal of
Xxxxx as general partner, and the Partnership Merger to the extent required by
the Xxxxx Partnership Agreement or applicable law and (b) seek an amendment to
Section 11.2 of the Xxxxx Partnership Agreement and any other provisions thereof
necessary to effectuate the transactions contemplated by this Agreement
(collectively, the "Xxxxx Partner Approvals").
1.14 Appraisal or Dissenters Rights. The holders of Xxxxx Common Stock,
Xxxxx Preferred Stock, Xxxxx OP Units, Xxxxx Preferred OP Units, Archstone
Common Shares, Archstone Existing Preferred Shares, New Archstone Common Shares,
New Archstone Existing Preferred Shares, ACS Common Shares, ACS Preferred
Shares, Archstone Surviving Subsidiary Common Shares or Archstone Surviving
Subsidiary Preferred Shares are not entitled under applicable law to appraisal,
dissenters or similar rights as a result of the Archstone Merger or the Mergers.
1.15 Exchange of Certificates in Merger; Pre-Closing Dividends; Fractional
Shares.
(a) Archstone Merger. Each of the shares of beneficial interest of New
Archstone issued and outstanding immediately prior to the Effective Time of the
Merger shall remain outstanding. Each certificate previously representing shares
of beneficial interest of Archstone shall, after the Archstone Merger, represent
shares of beneficial interest of New Archstone.
17
(b) Exchange Agent. Prior to the Effective Time of the Merger, New
Archstone shall appoint Xxxxx Xxxxxx Shareholder Services, LLC as the exchange
agent, or another bank or trust company reasonably acceptable to Xxxxx, to act
as exchange agent (the "Exchange Agent") for the exchange of the Merger
Consideration upon surrender of certificates representing issued and outstanding
shares of Xxxxx Common Stock and each series of Xxxxx Preferred Stock.
(c) New Archstone to Provide Merger Consideration; Xxxxx to Provide
Funds for Xxxxx Dividend. New Archstone shall provide to the Exchange Agent on
or before the Effective Time of the Merger, for the benefit of the holders of
Xxxxx Common Stock and each series of Xxxxx Preferred Stock, the Merger
Consideration issuable in exchange for the issued and outstanding Xxxxx Common
Stock and each series of Xxxxx Preferred Stock pursuant to Section 1.12,
together with any cash required to make payments in lieu of any fractional
shares pursuant to Section 1.15(h) (the "Exchange Fund"). The Exchange Agent (or
other depository acting for the benefit of the Exchange Agent) shall invest any
cash included in the Exchange Fund as directed by New Archstone, on a daily
basis. Any interest or other income resulting from such investments shall be
paid to New Archstone. Xxxxx shall provide to the Exchange Agent not later than
one business day prior to the Effective Time of the Merger, for the benefit of
the holders of Xxxxx Common Stock and each series of Xxxxx Preferred Stock, cash
payable in respect of any dividends required pursuant to Section 1.15(e)(i).
Such cash shall be invested in accordance with written directions delivered by
Xxxxx to the Exchange Agent or other depository not later than one business day
prior to the Effective Time of the Merger, with any interest or other income
earned on such investments to be paid to New Archstone as the successor to Xxxxx
in the Merger.
(d) Exchange Procedure. New Archstone shall use commercially
reasonable efforts to cause the Exchange Agent, no later than the fifth business
day after the Merger Closing Date, to mail to each holder of record of a
Certificate or Certificates which immediately prior to the Effective Time of the
Merger represented outstanding shares of Xxxxx Common Stock or any series of
Xxxxx Preferred Stock whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.12(b), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in a form and have such other provisions as
Archstone may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration together
with any dividends or distributions to which such holder is entitled pursuant to
Section 1.15(e) and cash, if any, payable in lieu of fractional shares pursuant
to Section 1.15(h). Upon surrender of a Certificate for cancellation to the
Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, (i)
the holder of such Certificate shall be entitled to receive in exchange therefor
the Merger Consideration into which the shares of Xxxxx Common Stock or a series
of Xxxxx Preferred Stock, as applicable, theretofore represented by such
Certificate shall have been converted pursuant to Section 1.12(b), together with
any dividends or other distributions to which such holder is entitled pursuant
to Section 1.15(e) and cash, if any, payable in lieu of fractional shares
pursuant to Section 1.15(h), (ii) New Archstone shall use commercially
reasonable efforts to
18
cause the Exchange Agent to mail (or make available for collection by hand if so
elected by the surrendering holder) such amount to such holder within five
business days after receipt thereof, and (iii) the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of shares
of Xxxxx Common Stock or any series of Xxxxx Preferred Stock which is not
registered in the transfer records of Xxxxx, payment may be made to a Person
other than the Person in whose name the Certificate so surrendered is registered
if such Certificate shall be properly endorsed or otherwise be in proper form
for transfer and the Person requesting such payment either shall pay any
transfer or other taxes required by reason of such payment being made to a
Person other than the registered holder of such Certificate or establish to the
satisfaction of New Archstone that such tax or taxes have been paid or are not
applicable. Until surrendered as contemplated by this Section 1.15, each
Certificate shall be deemed at any time after the Effective Time of the Merger
to represent only the right to receive upon such surrender the Merger
Consideration, without interest, into which the shares of Xxxxx Common Stock or
any series of Xxxxx Preferred Stock heretofore represented by such Certificate
shall have been converted pursuant to Section 1.12, and any dividends or other
distributions to which such holder is entitled pursuant to Section 1.15(e) and
any cash payable in lieu of fractional shares pursuant to Section 1.15(h). No
interest will be paid or will accrue on the Merger Consideration upon the
surrender of any Certificate or on any cash payable pursuant to Section 1.15(e)
or Section 1.15(h). New Archstone or the Exchange Agent, as applicable, shall be
entitled, in its sole and absolute discretion, to deduct and withhold from the
cash, New Archstone Common Shares or New Archstone Preferred Shares, or any
combination thereof, that otherwise is payable pursuant to this Agreement to any
holder of shares of Xxxxx Common Stock or any series of Xxxxx Preferred Stock
such amounts as New Archstone or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code or under any
provision of state, local or foreign tax law. For this purpose, any New
Archstone Common Shares or New Archstone Preferred Shares deducted and withheld
by New Archstone shall be valued at the last trading price of the New Archstone
Common Shares or the New Archstone Preferred Shares, as applicable, on the New
York Stock Exchange on the effective date of the Merger (or in the event that a
series of New Archstone Preferred Shares does not trade on the New York Stock
Exchange, at the liquidation preference (excluding unpaid dividends) per New
Archstone Preferred Share). To the extent that amounts are so withheld by New
Archstone or the Exchange Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Xxxxx Common Stock or a series of Xxxxx Preferred Stock, as applicable, in
respect of which such deduction and withholding was made by New Archstone or the
Exchange Agent.
(e) Record Dates for Final Dividends; Distributions with Respect to
Unexchanged Shares.
(i) If and to the extent necessary for Xxxxx to satisfy the
requirements of Section 857(a)(1) of the Code for the taxable year of Xxxxx
ending at the Effective Time of the Merger (and to avoid the payment of any tax
with respect to undistributed income or gain), Xxxxx shall declare a dividend
(the "Xxxxx Dividend") to holders of shares of Xxxxx Common Stock and each
series of Xxxxx Preferred Stock, if and to the extent required by the terms
thereof, the record date for which shall be the close of business on the last
business day prior to the Effective
19
Time of the Merger, in an amount equal to the minimum dividend sufficient to
permit Xxxxx to satisfy such requirements. Any dividends payable hereunder to
holders of Xxxxx Common Stock and, if applicable, each series of Xxxxx Preferred
Stock shall be paid on the last business day immediately preceding the Closing
Date. In the event that Xxxxx is required to declare a Xxxxx Dividend with
respect to the Xxxxx Common Stock, Xxxxx Partnership shall simultaneously
declare a distribution (the "Xxxxx Partnership Distribution") to holders of
Xxxxx OP Units in an amount per unit equal to the Xxxxx Dividend payable per
share of Xxxxx Common Stock, together with any distributions required to be paid
to holders of Xxxxx Preferred OP Units by reason of the payment of either the
Xxxxx Dividend or the Xxxxx Partnership Distribution with respect to Xxxxx OP
Units, the record date for which shall be the close of business on the last
business day prior to the Effective Time of the Partnership Merger. The
distribution payable hereunder to holders of Xxxxx OP Units and, if applicable,
Xxxxx Preferred OP Units, shall be paid on the last business day immediately
preceding the Closing Date.
(ii) If Xxxxx determines that it is necessary to declare the Xxxxx
Dividend, Xxxxx shall notify Archstone and New Archstone at least 20 days prior
to the date for the Xxxxx Stockholders Meeting (as defined herein), and New
Archstone shall be entitled to declare a dividend per share payable to holders
of New Archstone Common Shares, the record date for which shall be the close of
business on the last business day prior to the Effective Time of the Merger, in
an amount per New Archstone Common Share equal to the quotient obtained by
dividing (x) the Xxxxx Dividend paid by Xxxxx with respect to each share of
Xxxxx Common Stock by (y) 1.975 (the "Corresponding New Archstone Dividends").
If, and to the extent, the terms of any series of New Archstone Existing
Preferred Shares require the payment of a dividend by reason of the payment of
the Corresponding New Archstone Dividends, New Archstone shall declare and pay
any such required dividends and distributions. The Corresponding New Archstone
Dividends (and any dividends payable to holders of New Archstone Existing
Preferred Shares) shall be in addition to any Additional Corresponding New
Archstone Dividends (and any dividends payable to holders of New Archstone
Existing Preferred Shares) payable pursuant to Section 5.10.
(iii) No dividends or other distributions with respect to New
Archstone Common Shares or any series of New Archstone Preferred Shares with a
record date after the Effective Time of the Merger shall be paid to the holder
of any unsurrendered Certificate with respect to the New Archstone Common Shares
or such series of New Archstone Preferred Shares represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 1.15(h), in each case until the surrender of such
Certificate in accordance with this Section 1.15. Subject to the effect of
applicable escheat laws, following surrender of any such Certificate (A) with
respect to Certificates that represent the right to receive New Archstone Common
Shares, there shall be paid to the holder of such Certificate, without interest,
(i) at the time of such surrender, the amount of any cash payable in lieu of any
fractional New Archstone Common Shares to which such holder is entitled pursuant
to Section 1.15(h) and (ii) (x) at the time of such surrender the amount of
dividends or other distributions with a record date after the Effective Time of
the Merger theretofore paid with respect to such whole New Archstone Common
Shares, without interest, and (y) at the appropriate payment date, the amount of
dividends or other distributions with a record date after
20
the Effective Time of the Merger but prior to such surrender and with a payment
date subsequent to such surrender payable with respect to such whole New
Archstone Common Shares and (B) with respect to Certificates that represent the
right to receive any series of New Archstone Preferred Shares, there shall be
paid to the holder of such Certificate, without interest, (x) at the time of
such surrender the amount of dividends or other distributions with a record date
after the Effective Time of the Merger theretofore paid with respect to such New
Archstone Preferred Shares and (y) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
of the Merger but prior to such surrender and with a payment date subsequent to
such surrender payable with respect to such New Archstone Preferred Shares.
(f) No Further Ownership Rights in Xxxxx Common Stock and Xxxxx
Preferred Stock. All Merger Consideration paid upon the surrender of
Certificates in accordance with the terms of this Section 1.15 (including any
cash paid pursuant to Section 1.15(h)) shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Xxxxx Common Stock and each series
of Xxxxx Preferred Stock, as applicable, theretofore represented by such
Certificates; provided, however, that Xxxxx shall transfer to the Exchange Agent
cash sufficient to pay any dividends or make any other distributions with a
record date prior to the Effective Time of the Merger which may have been
declared or made by Xxxxx on such Xxxxx Common Stock or any such series of Xxxxx
Preferred Stock in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Effective Time of the
Merger and have not been paid prior to such surrender, and following the
Effective Time of the Merger there shall be no further registration of transfers
on the stock transfer books of Xxxxx of the Xxxxx Common Stock or any series of
Xxxxx Preferred Stock which were outstanding immediately prior to the Effective
Time of the Merger. If, after the Effective Time of the Merger, Certificates are
presented to New Archstone for any reason, they shall be canceled and exchanged
as provided in this Section 1.15.
(g) No Liability. None of Xxxxx, Archstone, New Archstone or the
Exchange Agent shall be liable to any Person in respect of any Merger
Consideration or dividends delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. Any portion of the
Exchange Fund delivered to the Exchange Agent pursuant to this Agreement that
remains unclaimed for 12 months after the Effective Time of the Merger shall be
redelivered by the Exchange Agent to New Archstone, upon demand, and any holders
of Certificates who have not theretofore complied with Section 1.15(d) shall
thereafter look only to New Archstone for delivery of the Merger Consideration,
any cash payable in lieu of fractional shares pursuant to Section 1.15(h) and
any unpaid dividends, subject to applicable escheat and other similar laws.
(h) No Fractional New Archstone Shares, No Fractional Archstone
Surviving Subsidiary Shares of Beneficial Interest.
(i) No certificates or scrip representing fractional New Archstone
Common Shares shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote,
to receive dividends or to any other rights of a shareholder of New Archstone.
21
(ii) No fractional New Archstone Common Shares shall be issued
pursuant to this Agreement. In lieu of the issuance of any fractional New
Archstone Common Shares pursuant to this Agreement, each holder of Xxxxx Common
Stock and each holder of Archstone Common Shares (in the case of the Primary
Archstone Merger) or ACS Common Shares (in the case of the Alternative Archstone
Merger) shall be paid an amount in cash (without interest), rounded to the
nearest cent (with .5 of a cent rounded up), determined by multiplying (i) the
average closing price of one Archstone Common Share on the New York Stock
Exchange on the twenty trading days immediately preceding the Closing Date by
(ii) the fraction of a New Archstone Common Share which such holder would
otherwise be entitled to receive under this Section 1.15.
(iii) No fractional Archstone Surviving Subsidiary Shares of
Beneficial Interest shall be issued pursuant to this Agreement. In lieu of the
issuance of any fractional Archstone Surviving Subsidiary Shares of Beneficial
Interest pursuant to this Agreement, each holder of Xxxxx OP Units who would
receive, based on the exchange ratio specified in Section 1.12(a)(i), a number
of Archstone Surviving Subsidiary Shares of Beneficial Interest that is not a
whole number shall receive instead a number of Archstone Surviving Subsidiary
Shares of Beneficial Interest equal to the whole number that is nearest to the
number of Archstone Surviving Subsidiary Shares of Beneficial Interest that
otherwise would be paid to such holder of Xxxxx OP Units based on Section
1.12(a)(i) (with .5 of an Archstone Surviving Subsidiary Share of Beneficial
Interest rounded up).
(i) Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
New Archstone or the Exchange Agent, the posting by such Person of a bond in
such reasonable amount as New Archstone or the Exchange Agent reasonably may
direct (but consistent with the practices New Archstone applies to its own
shareholders) as indemnity against any claim that may be made against them with
respect to such Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the cash, New Archstone Common Shares or
New Archstone Preferred Shares to which the holders thereof are entitled
pursuant to Section 1.12, any cash payable pursuant to Section 1.15(h) to which
the holders thereof are entitled and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 1.15(e).
(j) Applicability to Partnership Merger. Except for the provisions
relating to the Exchange Agent, certificates, the exchange procedure and
fractional New Archstone Common Shares (which shall not be applicable), all
other provisions of this Section 1.15 shall apply to Xxxxx Partnership,
Archstone Surviving Subsidiary, the Xxxxx OP Units and the Xxxxx OP Preferred
Units with respect to the Partnership Merger.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF XXXXX AND XXXXX PARTNERSHIP
Except as specifically set forth in the Xxxxx SEC Documents (as defined
herein) or in the schedule delivered to Archstone prior to the execution hereof
and identified by any of the
22
Chairman of the Board, the President and Chief Executive Officer or an Executive
Vice President of Xxxxx as the disclosure letter to this Agreement (the "Xxxxx
Disclosure Letter"), Xxxxx and Xxxxx Partnership represent and warrant to
Archstone and New Archstone as follows:
2.1 Organization, Standing and Power. Xxxxx is a corporation duly
incorporated, validly existing and in good standing under the laws of Maryland.
Xxxxx has all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as now being conducted. The
Xxxxx Articles of Incorporation are in effect, and no dissolution, revocation or
forfeiture proceedings regarding Xxxxx have been commenced. Xxxxx is duly
qualified or licensed to do business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not reasonably be expected
to have a Xxxxx Material Adverse Effect (as defined herein). As used in this
Agreement, a "Xxxxx Material Adverse Effect" means any circumstance, event,
occurrence, change or effect that is materially adverse to the business,
properties, assets (tangible or intangible), financial condition or results of
operations of Xxxxx, Xxxxx Partnership, the Xxxxx Subsidiaries (as defined
herein) and the Xxxxx Non-Controlled Subsidiaries (as defined herein), taken as
a whole, except, in each case, as a result of (i) changes in general economic
conditions nationally or regionally, (ii) changes affecting the real estate
industry generally which do not affect Xxxxx or Xxxxx Partnership, as the case
may be, materially disproportionately relative to other participants in the real
estate industry similarly situated, or (iii) in and of itself and without the
occurrence of any other Xxxxx Material Adverse Effect, changes in the trading
prices of Xxxxx Common Stock or any series of Xxxxx Preferred Stock. Xxxxx has
delivered to Archstone complete and correct copies of the Xxxxx Articles and the
Xxxxx Bylaws, in each case, as amended or supplemented to the date of this
Agreement.
2.2 Xxxxx Subsidiaries.
(a) Schedule 2.2 to the Xxxxx Disclosure Letter sets forth (i) each
Xxxxx Subsidiary and each Xxxxx Non-Controlled Subsidiary, (ii) the ownership
interest therein of Xxxxx, (iii) if not directly or indirectly wholly owned by
Xxxxx, the identity and ownership interest of each of the other owners of such
Xxxxx Subsidiary, (iv) each property owned by such Xxxxx Subsidiary, and (v) if
such property is not wholly owned by such Xxxxx Subsidiary, the identity and
ownership interest of each of the other owners of such property. As used in this
Agreement, (i) "Subsidiary" of any Person (as defined herein) means any
corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person owns (either directly or through or
together with another Subsidiary or Subsidiaries of such Person) either (A) a
general partner, managing member or other similar interest, or (B)(1) 10% or
more of the voting power of the voting capital stock or other voting equity
interests, or (2) 10% or more of the outstanding voting capital stock or other
voting equity interests of such corporation, partnership, limited liability
company, joint venture or other legal entity; (ii) "Xxxxx Subsidiary" means each
Subsidiary of Xxxxx, except for (x) any Xxxxx Non-Controlled Subsidiary, (y) any
Subsidiary of any Xxxxx Non-Controlled Subsidiary and (z) any Xxxxx Other
Interests (as defined herein); (iii) "Xxxxx Non-Controlled Subsidiary" means
either SMCI or CESI; and (iv) "Person" means an individual, corporation,
partnership, limited liability company,
23
joint venture, association, trust, unincorporated organization or other entity.
Schedule 2.2 of the Xxxxx Disclosure Letter sets forth a true and complete list
of the equity securities owned by Xxxxx or any Xxxxx Subsidiary in any
corporation, partnership, limited liability company, joint venture or other
legal entity, excluding Xxxxx Subsidiaries.
(b) Except as set forth in Schedule 2.2 to the Xxxxx Disclosure
Letter, (i) all of the outstanding shares of capital stock owned by Xxxxx or any
Xxxxx Subsidiary of each Xxxxx Subsidiary and each Xxxxx Non-Controlled
Subsidiary that is a corporation have been duly authorized, validly issued and
are (A) fully paid and nonassessable and not subject to preemptive or similar
rights, and (B) owned free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each Xxxxx Subsidiary
and each Xxxxx Non-Controlled Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Xxxxx, by another Xxxxx
Subsidiary or by Xxxxx and another Xxxxx Subsidiary are owned free and clear of
all Liens. Each Xxxxx Subsidiary and each Xxxxx Non-Controlled Subsidiary that
is a corporation is duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has the requisite
corporate power and authority to own, operate, lease and encumber its properties
and carry on its business as now being conducted, and each Xxxxx Subsidiary and
each Xxxxx Non-Controlled Subsidiary that is a partnership, limited liability
company or trust is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and has the requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted. Each Xxxxx Subsidiary and each Xxxxx Non-
Controlled Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed, individually or in the aggregate, would not reasonably be expected
to have a Xxxxx Material Adverse Effect. Complete and correct copies of the
forms of the charters, articles of incorporation, bylaws, organization documents
and partnership, joint venture and operating agreements of each Xxxxx Subsidiary
and each Xxxxx Non-Controlled Subsidiary, as amended to the date of this
Agreement, have been previously delivered or made available to Archstone and
such forms fairly represent the organizational documents of the Xxxxx
Subsidiaries and each Xxxxx Non-Controlled Subsidiary. No effective amendment
has been made to the Xxxxx Partnership Agreement since April 7, 2001.
2.3 Capital Structure.
(a) The authorized shares of stock of Xxxxx consist of 145,000,000
shares of stock, par value $0.01 per share, 80,000,000 of which are classified
as Xxxxx Common Stock, 2,640,325 of which are classified as Series A Preferred
Shares, 500 of which are classified as Series C Preferred Shares, 684,931 of
which are classified as Series E Preferred Shares, 666,667 of which are
classified as Series F Preferred Shares, 641,026 of which are classified as
Series G Preferred Shares, 2,200,000 of which are classified as Xxxxx Series H
Preferred Shares and 45,000,000 of which are classified as Excess Stock.
22,774,096 Shares of Xxxxx Common Stock are issued and outstanding on April 30,
2001; 2,640,325 Xxxxx Series A Preferred Shares are issued and outstanding on
the date of this Agreement; 500 Xxxxx Series C Preferred Shares are issued and
outstanding on the date of this Agreement; 684,931 Xxxxx Series E Preferred
Shares
24
are issued and outstanding on the date of this Agreement; 666,667 shares of
Xxxxx Series F Preferred Shares are issued and outstanding on the date of this
Agreement; 641,026 Xxxxx Series G Preferred Shares are issued and outstanding on
the date of this Agreement; 2,200,000 Xxxxx Series H Preferred Shares are issued
and outstanding on the date of this Agreement; 72,980 shares of Xxxxx
Participating Preferred Stock (par value $0.01 per share) have been reserved for
issuance pursuant to the Xxxxx Rights Plan and none are outstanding. Since April
30, 2001, no other shares of capital stock of Xxxxx have been issued, except as
a result of the conversion of Xxxxx Stock Rights, Xxxxx Preferred Stock or Xxxxx
OP Units into Xxxxx Common Stock.
(b) Set forth in Schedule 2.3(b) to the Xxxxx Disclosure Letter is a
true and complete list of the following: (i) each qualified or nonqualified
option to purchase shares of Xxxxx Common Stock or Xxxxx OP Units granted under
Xxxxx First Amended and Restated Employee Stock and Unit Option Plan and Xxxxx
Directors Stock Option Plan or any other formal or informal arrangement
(collectively, the "Xxxxx Stock Options"); and (ii) except for the Xxxxx Rights
and the Xxxxx OP Units, all other warrants or other rights to acquire Xxxxx
Common Stock, all stock appreciation rights, restricted stock, dividend
equivalents, deferred compensation accounts, performance awards, restricted
stock unit awards and other awards which are outstanding on May 2, 2001 ("Xxxxx
Stock Rights"). Schedule 2.3(b) to the Xxxxx Disclosure Letter sets forth for
each Xxxxx Stock Option and Xxxxx Stock Right as of May 2, 2001, the name of the
grantee, the date of the grant, the type of grant, the number of shares of Xxxxx
Common Stock subject to each option or other award, the number and type of
shares subject to options or awards that are currently exercisable, and the
exercise price per share; provided, however, that with respect to such deferred
compensation accounts, Schedule 2.3(b) sets forth only the name, the type of
grant, and the number of shares of Xxxxx Common Stock subject to such account.
Since May 2, 2001, no Xxxxx Stock Rights have been issued. All the option grants
are nonqualified under Section 422 of the Code. On the date of this Agreement,
except as set forth, as appropriate in this Section 2.3 or excepted therefrom or
as set forth in Schedule 2.3(b) or 2.3(d) to the Xxxxx Disclosure Letter, and
except for shares reserved for issuance on the exercise of options or upon
conversion of Xxxxx OP Units, as described in clause (ii) of Section 2.3(d), no
shares of Xxxxx Common Stock or Xxxxx Preferred Stock were outstanding or
reserved for issuance.
(c) All outstanding shares of Xxxxx Common Stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive or
similar rights under law or the Xxxxx Articles or Xxxxx Bylaws, or any contract
or instrument to which Xxxxx is a party or by which it is bound. There are no
bonds, debentures, notes or other indebtedness of Xxxxx having the right to vote
(or convertible into, or exchangeable or exercisable for, securities having the
right to vote) on any matters on which shareholders of Xxxxx may vote.
(d) Except (i) as set forth in this Section 2.3 or in Schedule 2.3(b)
or 2.3(d) to the Xxxxx Disclosure Letter, (ii) Xxxxx OP Units, which may be
redeemed for cash or, at the election of Xxxxx, converted into shares of Xxxxx
Common Stock at a rate of one share of Xxxxx Common Stock for each Xxxxx OP
Unit, and (iii) Xxxxx Convertible Preferred Units, as of April 30, 2001 there
are no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary is a party or by which such
entity is bound, obligating
25
Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non- Controlled Subsidiary to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock, voting securities or other ownership interests of Xxxxx, any
Xxxxx Subsidiary or any Xxxxx Non- Controlled Subsidiary or obligating Xxxxx,
any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking (other than to Xxxxx, a Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary).
(e) As of April 30, 2001, (i) 35,981,900 Xxxxx OP Units are validly
issued and outstanding, fully paid and nonassessable (except and only to the
extent set forth in (A) Section 10.5 of the Xxxxx Partnership Agreement with
respect to all Xxxxx OP Units, and (B) Section 4.2 and Section 7.5 of the Xxxxx
Partnership Agreement with respect to Xxxxx OP Units owned by Xxxxx) and not
subject to preemptive or similar rights under law or the Xxxxx Partnership
Agreement, or any contract or instrument to which Xxxxx or Xxxxx Partnership is
a party or by which either is bound, of which 22,774,096 Xxxxx OP Units are
owned by Xxxxx, (ii) the 2,640,325 Xxxxx Series A Preferred OP Units are validly
issued and outstanding, fully paid and nonassessable and not subject to
preemptive or similar rights, and are owned by Xxxxx, (iii) the 500 Xxxxx Series
C Preferred OP Units are validly issued and outstanding, fully paid and
nonassessable and not subject to preemptive or similar rights and are owned by
Xxxxx, (iv) the 684,931 Xxxxx Series E Preferred OP Unit are validly issued and
outstanding, fully paid and nonassessable and not subject to preemptive or
similar rights, and are owned by Xxxxx, (v) the 666,667 Xxxxx Series F Preferred
OP Units are validly issued and outstanding, fully paid and nonassessable and
not subject to preemptive or similar rights, and are owned by Xxxxx, (vi) the
641,026 Xxxxx Series G Preferred OP Units are validly issued and outstanding,
fully paid and nonassessable and not subject to preemptive or similar rights,
and are owned by Xxxxx, and (vii) the 4,000,000 Xxxxx Series H Preferred OP
Units are validly issued and outstanding, fully paid and nonassessable and not
subject to preemptive or similar rights, of which 2,200,000 are owned by Xxxxx.
Since April 30, 2001, no Xxxxx OP Units and no Xxxxx Preferred OP Units have
been issued other than in connection with the exercise of any Xxxxx Stock
Options or conversion of any Xxxxx Preferred Stock. Within ten (10) business
days of the date of this Agreement, Xxxxx shall provide Archstone a list setting
forth the name of each holder of Xxxxx OP Units and each holder of Xxxxx
Preferred OP Units and the number of Xxxxx OP Units or Xxxxx Preferred OP Units
owned by each such holder as of the date of this Agreement. Except as provided
in the Xxxxx Partnership Agreement or as contemplated by this Agreement, the
Xxxxx OP Units are not subject to any restrictions imposed by Xxxxx or Xxxxx
Partnership on the transfer, assignment, pledge, distribution, encumbrance or
other disposition thereof (either voluntarily or involuntarily and with or
without consideration) or on the exercise of the voting rights thereof provided
in the Xxxxx Partnership Agreement. Except as provided in the Xxxxx Partnership
Agreement, Xxxxx Partnership has not issued or granted and is not a party to any
outstanding commitments of any kind relating to, or any presently effective
agreements or understandings with respect to, the issuance or sale of interests
in Xxxxx Partnership, whether issued or unissued, or securities convertible into
or exchangeable or exercisable for interests in Xxxxx Partnership.
(f) All dividends on Xxxxx Common Stock and each series of Xxxxx
Preferred Stock and all distributions on Xxxxx OP Units and Xxxxx Preferred OP
Units, which have been
26
declared and are payable prior to the date of this Agreement, have been paid in
full.
(g) Set forth on Schedule 2.3(g) to the Xxxxx Disclosure Letter is a
list of each registration rights agreement or other agreement with respect to
the registration of securities between Xxxxx and/or Xxxxx Partnership, on the
one hand, and one or more other parties, on the other hand, which sets forth the
rights of any such other party or parties to cause the registration of any
securities of Xxxxx and/or Xxxxx Partnership pursuant to the Securities Act of
1933, as amended (the "Securities Act"), except for registration rights
agreements or other agreements pursuant to which a registration statement has
been filed with the SEC and declared effective by the SEC on or prior to the
date hereof.
2.4 Other Interests. Except for interests in the Xxxxx Subsidiaries, the
Xxxxx Non-Controlled Subsidiaries and certain other entities which are set forth
in Schedule 2.4 to the Xxxxx Disclosure Letter (the "Xxxxx Other Interests"),
none of Xxxxx, Xxxxx Partnership, any Xxxxx Subsidiary or any Xxxxx Non-
Controlled Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in excess of $1,000,000 individually, or $10,000,000 in
the aggregate, in any corporation, partnership, joint venture, business, trust,
limited liability company or other entity (other than investments in short-term
investment securities). With respect to the Xxxxx Other Interests, Xxxxx
Partnership or a Xxxxx Subsidiary or a Xxxxx Non-Controlled Subsidiary is a
partner, member or shareholder in good standing, and except as set forth on
Schedule 2.4 owns such interests free and clear of all Liens. None of Xxxxx,
Xxxxx Partnership, any Xxxxx Subsidiary is in material breach of any agreement,
document or contract which is of a material nature governing its rights in or to
the Xxxxx Other Interests, all of which agreements, documents and contracts are
(a) listed in Schedule 2.4 to the Xxxxx Disclosure Letter, (b) unmodified except
as described therein and (c) to the Knowledge of Xxxxx (as defined herein), in
full force and effect. To the Knowledge of Xxxxx, no Xxxxx Non-Controlled
Subsidiary is in material breach of any agreement, document or contract which
breach is reasonably expected to have a material adverse effect on such Xxxxx
Non-Controlled Subsidiary. To the Knowledge of Xxxxx, the other parties to any
such agreement, document or contract which is of a material nature are not in
material breach of any of their respective obligations under such agreements,
documents or contracts.
2.5 Authority; Noncontravention; Consents.
(a) Xxxxx has the requisite corporate power and authority to enter
into this Agreement and, subject to the requisite Xxxxx stockholder approval of
the Merger (collectively, the "Xxxxx Stockholder Approvals") and the Xxxxx
Partner Approvals (as defined herein), to consummate the transactions
contemplated by this Agreement to which Xxxxx is a party. The execution and
delivery of this Agreement by Xxxxx and the consummation by Xxxxx of the
transactions contemplated by this Agreement to which Xxxxx is a party have been
duly authorized by all necessary action on the part of Xxxxx, except for and
subject to the Xxxxx Stockholder Approvals and the Xxxxx Partner Approvals. This
Agreement has been duly executed and delivered by Xxxxx and constitutes a valid
and binding obligation of Xxxxx, enforceable against Xxxxx in accordance with
and subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
27
(b) Xxxxx Partnership has the requisite partnership power and
authority to enter into this Agreement and, subject to the requisite Xxxxx
Partner Approvals, to consummate the transactions contemplated by this Agreement
to which Xxxxx Partnership is a party. The execution and delivery of this
Agreement by Xxxxx Partnership and the consummation by Xxxxx Partnership of the
transactions contemplated by this Agreement to which Xxxxx Partnership is a
party have been duly authorized by all necessary action on the part of Xxxxx
Partnership, except for and subject to the Xxxxx Stockholder Approvals and the
Xxxxx Partner Approvals. This Agreement has been duly executed and delivered by
Xxxxx Partnership and constitutes a valid and binding obligation of Xxxxx
Partnership, enforceable against Xxxxx Partnership in accordance with and
subject to its terms, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general principles of
equity.
(c) Except as set forth in Schedule 2.5(c)(1) to the Xxxxx Disclosure
Letter and subject to receipt of the Xxxxx Stockholder Approvals and the Xxxxx
Partner Approvals, the execution and delivery of this Agreement by Xxxxx or
Xxxxx Partnership do not, and the consummation of the transactions contemplated
by this Agreement to which Xxxxx or Xxxxx Partnership is a party and compliance
by Xxxxx or Xxxxx Partnership with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary under, (i)
the Xxxxx Articles or Xxxxx Bylaws or the comparable charter or organizational
documents or partnership, operating, or similar agreement (as the case may be)
of any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary, each as amended
or supplemented, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, merger or other acquisition agreement, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation (collectively,
"Laws") applicable to Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary, or their respective properties or assets, other than, in the case of
clause (ii) or (iii), any such conflicts, violations, defaults, rights, loss or
Liens that individually or in the aggregate would not reasonably be expected to
(x) have a Xxxxx Material Adverse Effect or (y) prevent or materially impair the
ability of Xxxxx or Xxxxx Partnership to perform any of its obligations
hereunder or prevent or materially threaten or impede the consummation of the
transactions contemplated by this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local government or any court, administrative or regulatory agency or
commission or other governmental authority or agency, domestic or foreign (a
"Governmental Entity"), is required by or with respect to Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary in connection with the
execution and delivery of this Agreement by Xxxxx and Xxxxx Partnership or the
consummation by Xxxxx or any Xxxxx Subsidiary of the transactions contemplated
by this Agreement, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") of (x) the Joint Proxy Statement (as defined herein), and
(y) such reports and filings under the Securities Act and Section 13(a) of the
Exchange Act as may be required in connection with this
28
Agreement and the transactions contemplated by this Agreement, (ii) the filing
and acceptance for record of the Articles of Merger by the Department, (iii) the
filing of the Delaware Certificate of Merger with the Office of the Secretary of
State of the State of Delaware, and (iv) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (A) as are set forth in
Schedule 2.5(c)(2) to the Xxxxx Disclosure Letter, (B) as may be required under
(w) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (x) laws requiring transfer, recordation or gains tax filings, (y)
federal, state or local environmental laws or (z) the "blue sky" laws of various
states, to the extent applicable, or (C) which, if not obtained or made, would
not prevent or delay in any material respect the consummation of any of the
transactions contemplated by this Agreement or otherwise prevent Xxxxx or Xxxxx
Partnership from performing its obligations under this Agreement in any material
respect or reasonably be expected to have, individually or in the aggregate, a
Xxxxx Material Adverse Effect.
2.6 SEC Documents; Financial Statements, Undisclosed Liabilities. Xxxxx and
Xxxxx Partnership have filed all reports, schedules, forms, statements and other
documents required to be filed with the SEC since December 31, 1997 through the
date hereof (collectively, including all exhibits thereto and any registration
statement filed since such date, the "Xxxxx SEC Documents"). All of the Xxxxx
SEC Documents (other than preliminary material), as of their respective filing
dates, complied in all material respects with all applicable requirements of the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and, in each case, the rules and regulations promulgated
thereunder applicable to such Xxxxx SEC Documents. None of the Xxxxx SEC
Documents at the time of filing contained, nor will any report, schedule, form,
statement or other document filed by Xxxxx or Xxxxx Partnership after the date
hereof and prior to the Effective Time of the Merger contain, any untrue
statement of a material fact or omitted or will omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of Xxxxx included in the Xxxxx
SEC Documents or of Xxxxx Partnership included in the Xxxxx SEC Documents
complied, or will comply, as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been or will be 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 during the periods involved (except as
may be indicated in the notes thereto) and fairly presented, or will fairly
present, in all material respects in accordance with the applicable requirements
of GAAP and the applicable rules and regulations of the SEC, the consolidated
financial position of Xxxxx and its Subsidiaries or Xxxxx Partnership and its
Subsidiaries, as the case may be, in each case, taken as a whole, as of the
dates thereof and the consolidated results of operations and cash flows for the
periods then ended (except, in the case of unaudited statements, as permitted by
Form 10-Q under the Exchange Act). Except as set forth in Schedule 2.6(b) to the
Xxxxx Disclosure Letter, Xxxxx has no Subsidiaries which are not consolidated
for accounting purposes. Except for liabilities and obligations set forth in the
Xxxxx SEC Documents or in Schedule 2.6(c) to the Xxxxx Disclosure Letter, none
of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non- Controlled Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of Xxxxx or in the notes thereto and which, individually or in the
29
aggregate, would reasonably be expected to have a Xxxxx Material Adverse Effect.
2.7 Absence of Certain Changes or Events. Except as disclosed in the Xxxxx
SEC Documents or in Schedule 2.7 to the Xxxxx Disclosure Letter, since December
31, 2000 (the "Xxxxx Financial Statement Date"), Xxxxx, the Xxxxx Subsidiaries
and the Xxxxx Non-Controlled Subsidiaries have conducted their business only in
the ordinary course (taking into account prior practices, including the
acquisition and disposition of properties and issuance of securities) and there
has not been (a) any circumstance, event, occurrence, change or effect that has
had a Xxxxx Material Adverse Effect, nor has there been any circumstance, event,
occurrence, change or effect that with the passage of time would reasonably be
expected to result in a Xxxxx Material Adverse Effect, (b) except for regular
quarterly distributions not in excess of $0.585 per share of Xxxxx Common Stock
or Xxxxx OP Unit (subject to changes pursuant to Section 5.10 and to any Final
Xxxxx Dividend payable pursuant to Section 1.15(e)(i)), and dividends on Xxxxx
Preferred Shares in accordance with the terms of the Xxxxx Articles (or, in each
case, with respect to the period commencing on the date hereof and ending on the
Closing Date, distributions as necessary to maintain REIT (as defined herein)
status), in each case with customary record and payment dates, any
authorization, declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the Xxxxx
Common Stock, the Xxxxx OP Units or any series of the Xxxxx Preferred OP Units
or the Xxxxx Preferred Stock, (c) any split, combination or reclassification of
the Xxxxx Common Stock, the Xxxxx OP Units or any series of the Xxxxx Preferred
OP Units or the Xxxxx Preferred Stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or in
substitution for, or giving the right to acquire by exchange or exercise, shares
of stock of Xxxxx or partnership interests in Xxxxx Partnership or any issuance
of an ownership interest in, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary, (d) any damage, destruction or loss, whether or not covered by
insurance, that has had or would reasonably be expected to have a Xxxxx Material
Adverse Effect, (e) any change in accounting methods, principles or practices by
Xxxxx or any of its Subsidiaries, Xxxxx Partnership or any of its Subsidiaries
or its Non-Controlled Subsidiaries materially affecting its assets, liabilities
or business, except insofar as may have been disclosed in Xxxxx SEC Documents or
required by a change in GAAP, (f) any amendment in any material respect of any
employment, consulting, severance, retention or any other agreement between
Xxxxx and any officer or director of Xxxxx, except as otherwise permitted by the
terms of this Agreement, or (g) to the Knowledge of Xxxxx, any circumstance,
event, occurrence, change or effect that has had a material adverse effect on
the Xxxxx Non-Controlled Subsidiaries taken as a whole.
2.8 Litigation. Except as disclosed in the Xxxxx SEC Documents or in
Schedule 2.8 to the Xxxxx Disclosure Letter, and other than personal injury and
other routine tort litigation arising from the ordinary course of operations of
Xxxxx, the Xxxxx Subsidiaries and the Xxxxx Non-Controlled Subsidiaries (a)
which are covered by insurance, subject to a reasonable deductible or retention
limit or (b) for which all material costs and liabilities arising therefrom are
reimbursable pursuant to common area maintenance or similar agreements, there is
no suit, action or proceeding pending (in which service of process has been
received by an employee of Xxxxx, a Xxxxx Subsidiary or a Xxxxx Non-Controlled
Subsidiary) or, to the Knowledge of Xxxxx (as defined herein), threatened in
writing against or affecting Xxxxx, any Xxxxx Subsidiary or any
30
Xxxxx Non-Controlled Subsidiary that, individually or in the aggregate, would
reasonably be expected to (i) have a Xxxxx Material Adverse Effect or (ii)
prevent or materially impair the ability of Xxxxx or Xxxxx Partnership to
perform any of its obligations hereunder or prevent or materially threaten or
impair the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
court or Governmental Entity or arbitrator outstanding against Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary having, or which, insofar as
reasonably can be foreseen, in the future would have, any such effect.
Notwithstanding the foregoing, (y) Schedule 2.8 to the Xxxxx Disclosure Letter
sets forth each and every material uninsured claim, equal employment opportunity
claim and claim relating to sexual harassment and/or discrimination pending or,
to the Knowledge of Xxxxx, threatened as of the date hereof, in each case with a
brief summary of such claim or threatened claim, and (z) no claim has been made
under any directors' and officers' liability insurance policy maintained at any
time by Xxxxx, any of the Xxxxx Subsidiaries or any of the Xxxxx Non-Controlled
Subsidiaries.
2.9 Properties.
(a) Except as provided in Schedule 2.2 or Schedule 2.9(a) to the Xxxxx
Disclosure Letter, Xxxxx, the Xxxxx Subsidiary or the Xxxxx Non-Controlled
Subsidiary set forth on Schedule 2.2 to the Xxxxx Disclosure Letter owns fee
simple title to or holds a leasehold interest in each of the real properties
identified in Schedule 2.9(a) to the Xxxxx Disclosure Letter (the "Xxxxx
Properties"), which are all of the real estate properties owned or leased by
them. Schedule 2.9(a) to the Xxxxx Disclosure Letter further identifies which of
the Xxxxx Properties are owned in fee simple by Xxxxx or the Xxxxx Non-
Controlled Subsidiary and which of the Xxxxx Properties are subject to a ground
lease. Except as set forth in Schedule 2.2 or Schedule 2.9(a) to the Xxxxx
Disclosure Letter, no other Person has any ownership interest in any of the
Xxxxx Properties and any such ownership interest so scheduled could not
reasonably be expected to have a Xxxxx Material Adverse Effect. Except as set
forth in Schedule 2.9(a) and Schedule 2.18(i) to the Xxxxx Disclosure Letter,
none of the Xxxxx Properties is subject to any restriction on the sale or other
disposition thereof or on the financing or release of financing thereon.
(b) The Xxxxx Properties are not subject to any liens, mortgages or
deeds of trust, claims against title, charges which are liens, security
interests or other encumbrances on title ("Encumbrances"), or to any rights of
way, agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions"), which reasonably could be expected to cause a Xxxxx Material
Adverse Effect.
(c) Schedule 2.9(c) to the Xxxxx Disclosure Letter lists each of the
Xxxxx Properties which are under development as of the date of this Agreement
(including development properties partially owned through joint ventures) and
describes the status of such development as of the date hereof.
(d) Valid policies of title insurance have been issued insuring the
applicable Xxxxx Subsidiary's or Xxxxx Non-Controlled Subsidiary's (as the case
may be) fee simple title or leasehold estate, as the case may be, to the Xxxxx
Properties owned by it in amounts approximately equal to the purchase price
therefor paid by such Xxxxx Subsidiary or such
31
Xxxxx Non-Controlled Subsidiary, except where the failure to obtain such
policies of title insurance would not reasonably be expected to have a Xxxxx
Material Adverse Effect. Such policies are, at the date hereof, in full force
and effect. No material claim has been made against any such policy.
(e) With respect to any Xxxxx Property with Five Hundred (500) units
or more, Xxxxx has no Knowledge:
(i) that it has failed to obtain a certificate, permit or license
from any governmental authority having jurisdiction over such Xxxxx Property
where such failure would reasonably be expected to have a material adverse
effect on such Xxxxx Property or of any pending threat of modification or
cancellation of any of the same which would reasonably be expected to have a
material adverse effect on such Xxxxx Property;
(ii) of any written notice of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting such
Xxxxx Property issued by any governmental authority which would reasonably be
expected to have a material adverse effect on such Xxxxx Property; or
(iii) that it has received written or published notice to the
effect that (a) any condemnation or involuntary rezoning proceedings are pending
or threatened with respect to such Xxxxx Property or (b) any zoning, building or
similar law, code, ordinance, order or regulation is or will be violated by the
continued maintenance, operation or use of any buildings or other improvements
on any of such Xxxxx Property or by the continued maintenance, operation or use
of the parking areas other than such notices, which, in the aggregate, would not
reasonably be expected to have a material adverse effect on such Xxxxx Property.
(f) With respect to Xxxxx Properties with less than Five Hundred (500)
units, Xxxxx has no Knowledge:
(i) that it has failed to obtain certificates, permits or licenses
from any governmental authority having jurisdiction over any such Xxxxx
Properties, the absence of which, in the aggregate, would reasonably be expected
to have a Xxxxx Material Adverse Effect or of any pending threat of modification
or cancellation of any of the same which, in the aggregate, would reasonably be
expected to have a Xxxxx Material Adverse Effect;
(ii) of any written notices of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting such
Xxxxx Properties issued by any governmental authority which, in the aggregate,
would reasonably be expected to have a Xxxxx Material Adverse Effect; or
(iii) that it has received written or published notice to the
effect that (a) any condemnation or involuntary rezoning proceedings are pending
or threatened with respect to any of such Xxxxx Property or (b) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of such Xxxxx Properties or by the continued
maintenance,
32
operation or use of the parking areas other than such notices, which, in the
aggregate, would not reasonably be expected to have a Xxxxx Material Adverse
Effect.
(g) Except as set forth in Schedule 2.9(g) to the Xxxxx Disclosure
Letter, Xxxxx has no Knowledge (i) of any structural defects relating to Xxxxx
Properties, Xxxxx Properties whose building systems are not in working order,
physical damage to any Xxxxx Property for which there is not insurance in effect
covering the cost of the restoration and the loss of revenue (subject to a
reasonable deduction or retention limit), except such structural defects,
building systems not in working order and physical damage, which, in the
aggregate, would not reasonably be expected to have a Xxxxx Material Adverse
Effect.
(h) Except as set forth in Schedule 2.9(h) to the Xxxxx Disclosure
Letter, (i) all work required to be performed, payments required to be made and
actions required to be taken prior to the date hereof pursuant to any agreement
entered into with a governmental body or authority in connection with a site
approval, zoning reclassification or other similar action relating to any Xxxxx
Property (e.g., Local Improvement District, Road Improvement District,
Environmental Mitigation (as defined herein)) have been performed, paid or
taken, as the case may be, and (ii) Xxxxx has no Knowledge of any planned or
proposed work, payments or actions that may be required after the date hereof
pursuant to such agreements, in each of case (i) and (ii) except as set forth in
development or operating budgets for such Xxxxx Properties delivered to
Archstone prior to the date hereof and other than those which would not
reasonably be expected to have a Xxxxx Material Adverse Effect. As used in this
Agreement, "Environmental Mitigation" means investigation, clean-up, removal
action, remedial action, restoration, repair, response action, corrective
action, monitoring, sampling and analysis, installation, reclamation, closure or
post-closure in response to any actual or suspected environmental condition or
Hazardous Materials.
(i) Insurance summaries previously provided by Xxxxx to Archstone
contain a true and complete list, by type of insurance, carrier, coverages
(including limits) and term, of all material policies of casualty, liability,
group health, workers compensation, directors and officers and other types of
insurance (except title insurance) carried by Xxxxx, any Xxxxx Subsidiary or any
Xxxxx Non-Controlled Subsidiary. All such policies are in full force and effect
and none of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary
has received from any insurance company notice of any material defects or
deficiencies affecting the insurability of Xxxxx, any Xxxxx Subsidiary or any
Xxxxx Non-Controlled Subsidiary, or any of their respective assets thereunder.
2.10 Environmental Matters.
(a) "Environmental Law" shall mean all applicable Laws, including any
plans, other criteria, or guidelines promulgated pursuant to such Laws, relating
to noise control, or the protection of human health, safety and natural
resources, animal health or welfare or the environment, including, without
limitation, Laws relating to the use, manufacturing, production, generation,
installation, recycling, reuse, sale, storage, handling, transport, treatment,
release, threatened release or disposal of any Hazardous Materials (including
the Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, 42 U.S.C. (S)9601 et seq.
33
("CERCLA")). "Hazardous Materials" shall mean substances, wastes, radiation or
materials (whether solids, liquids or gases) (i) which are hazardous, toxic,
infectious, explosive, radioactive, carcinogenic, or mutagenic, (ii) which are
listed, regulated or defined under any Environmental Law, and shall include
"hazardous wastes," "hazardous substances," "hazardous materials," "pollutants,"
"contaminants," "toxic substances" "radioactive materials" or "solid wastes,"
(iii) the presence of which on property cause or threaten to cause a nuisance
pursuant to applicable statutory or common law upon the property or to adjacent
properties, (iv) which contain without limitation polychlorinated biphenyls
(PCBs), asbestos or asbestos-containing materials, lead-based paints,
urea-formaldehyde foam insulation, or petroleum or petroleum products
(including, without limitation, crude oil or any fraction thereof) or (v) which
pose a hazard to human health, safety, natural resources, industrial hygiene, or
the environment, or an impediment to working conditions. "Release" shall have
the meaning set forth in Section 101 of CERCLA, without regard to the exclusions
set forth therein.
(b) Except as disclosed in the Xxxxx SEC Documents and except as set
forth on Schedule 2.10 to the Xxxxx Disclosure Letter,
(i) none of Xxxxx, any of the Xxxxx Subsidiaries or any of the
Xxxxx Non-Controlled Subsidiaries or, to Xxxxx'x Knowledge, any other Person has
caused or permitted the presence of any Hazardous Materials at, on or under any
of the Xxxxx Properties and none of Xxxxx, any of the Xxxxx Subsidiaries or any
of the Xxxxx Non-Controlled Subsidiaries has any Knowledge of the presence of
any Hazardous Materials at, on or under any of the Xxxxx Properties, in each of
the foregoing cases, such that the presence of such Hazardous Materials
(including the presence of asbestos in any buildings or improvements at the
Xxxxx Properties) would, individually or in the aggregate, reasonably be
expected to have a Xxxxx Material Adverse Effect;
(ii) except as authorized by the Environmental Permits, there have
been no Releases of Hazardous Materials at, on, under or from (A) the Xxxxx
Properties or (B) any real property previously owned, operated or leased by
Xxxxx, the Xxxxx Subsidiaries, or the Xxxxx Non-Controlled Subsidiaries (the
"Former Xxxxx Properties") during the period of such ownership, operation or
tenancy which would, individually or in the aggregate, reasonably be expected to
have a Xxxxx Material Adverse Effect;
(iii) (y) Xxxxx, the Xxxxx Subsidiaries and the Xxxxx
Non-Controlled Subsidiaries have not failed to comply with any Environmental
Law, and (z) none of Xxxxx, any of the Xxxxx Subsidiaries or any of the Xxxxx
Non-Controlled Subsidiaries has any liability under the Environmental Laws,
except in each of cases (y) and (z) to the extent that any such failure to
comply or any such liability, individually or in the aggregate, would not
reasonably be expected to have a Xxxxx Material Adverse Effect; and
(iv) Xxxxx, the Xxxxx Subsidiaries and the Xxxxx Non-Controlled
Subsidiaries have been duly issued, and currently have and will maintain through
the Closing Date, all permits, licenses, certificates and approvals required
under any Environmental Law (collectively, the "Environmental Permits")
necessary to operate their businesses as currently operated except where the
failure to obtain and maintain such Environmental Permit would not,
34
individually or in the aggregate, reasonably be expected to have a Xxxxx
Material Adverse Effect. Xxxxx, the Xxxxx Subsidiaries and the Xxxxx
Non-Controlled Subsidiaries have timely filed applications for all Environmental
Permits.
2.11 Related Party Transactions. Set forth in Schedule 2.11 to the Xxxxx
Disclosure Letter is a list of all material arrangements, agreements and
contracts entered into by Xxxxx, any Xxxxx Subsidiary and any Xxxxx Non-
Controlled Subsidiary which are in effect and which are with any Person who is
an officer, director or Affiliate (as defined herein) of Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary, any relative of any of the
foregoing or any entity of which any of the foregoing is an Affiliate. True,
correct and complete copies of such documents have previously been delivered or
made available to Archstone. As used in this Agreement, the term "Affiliate"
shall have the same meaning as such term is defined in Rule 405 promulgated
under the Securities Act.
2.12 Employee Benefits. As used herein, the term "Employee Plan" includes
any pension, retirement, savings, disability, medical, dental, health, life,
death benefit, group insurance, profit sharing, deferred compensation, stock
option, bonus, incentive, vacation pay, tuition reimbursement, severance pay, or
other employee benefit plan, trust, agreement, contract, agreement, policy or
commitment (including, without limitation, any pension plan, as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA") ("Pension Plan"),
and any welfare plan as defined in Section 3(l) of ERISA ("Welfare Plan")),
whether any of the foregoing is funded, insured or self-funded, written or oral,
(i) sponsored or maintained by Xxxxx or any of its Controlled Group Members (as
defined below), (ii) to which Xxxxx or any of its Controlled Group Members is a
party or by which Xxxxx or any of its Controlled Group Members (or any of the
rights, properties or assets thereof) is bound, or (iii) with respect to which
Xxxxx or any of its Controlled Group Members may otherwise have any liability or
contingent liability (whether or not Xxxxx or any of its Controlled Group
Members still maintains such Employee Plan). Each Employee Plan is listed on
Schedule 2.12 to the Xxxxx Disclosure Letter. For purposes of this Agreement,
"Controlled Group Member" means, with respect to any Person, any corporation or
trade or business which, together with such Person, is a member of a controlled
group of corporations or a group of trades or businesses under common control
within the meaning of Section 414 of the Code. Except as disclosed in Schedule
2.12 to the Xxxxx Disclosure Letter, with respect to the Employee Plans:
(a) None of Xxxxx or any of its Controlled Group Members has any
continuing liability under any Welfare Plan which provides for continuing
benefits or coverage for any employee, former employee or any beneficiary of an
employee or former employee after such employee's or former employee's
termination of employment, except as may be required by Section 4980B of the
Code or Section 601 (et seq.) of ERISA, or under any applicable state law, and
at the expense of the employee, former employee or beneficiary.
(b) Each Employee Plan complies in all material respects with the
applicable requirements of the Code, ERISA and any other applicable law
governing such Employee Plan, and each Employee Plan has at all times been
properly administered in all material respects in accordance with all such
requirements of law, and in accordance with its terms and the terms of
35
any applicable collective bargaining agreement to the extent consistent with all
such requirements of law. Each Pension Plan which is intended to be qualified is
qualified under Section 401(a) of the Code, has received a favorable
determination letter from the IRS stating that such Plan meets the requirements
of Section 401(a) of the Code and that the trust associated with such Plan is
tax-exempt under Section 501(a) of the Code and which covers all material
amendments to such plan for which the remedial amendment period (within the
meaning of Section 401(b) of the Code and applicable regulations) has expired
and, to the Knowledge of Xxxxx, no event has occurred which would jeopardize the
qualified status of any such plan or the tax exempt status of any such trust
under Sections 401(a) and Section 501(a) of the Code, respectively. No lawsuits,
claims (other than routine claims for benefits) or formal complaints to, or by,
any Person or governmental entity have been filed, are pending or, to the
Knowledge of Xxxxx, threatened with respect to any Employee Plan and, to the
Knowledge of Xxxxx, there is no fact or contemplated event which would
reasonably be expected to give rise to any such lawsuit, claim (other than
routine claims for benefits) or complaint with respect thereto. Without limiting
the foregoing, the following are true with respect to each Employee Plan:
(i) Xxxxx and all of its Controlled Group Members have complied in
all material respects with the reporting and disclosure requirements of ERISA,
the Code, or both, with respect to each Employee Plan and none of Xxxxx or any
of its Controlled Group Members has incurred any material liability in
connection with such reporting or disclosure;
(ii) all contributions and payments with respect to Employee Plans
that are required to be made by Xxxxx or any of its Controlled Group Members
with respect to periods ending on or before the Closing Date (including periods
from the first day of the current plan or policy year to the Closing Date) have
been, or will be, made or accrued before the Closing Date in accordance with the
appropriate plan document, actuarial report, collective bargaining agreements or
insurance contracts or arrangements or as otherwise required by ERISA or the
Code or other applicable law; and
(iii) with respect to each such Employee Plan, to the extent
applicable, Xxxxx has delivered to or has made available to Archstone true and
complete copies of (A) plan documents, or any and all other documents that
establish the existence of the plan, trust, arrangement, contract, policy or
commitment and all amendments thereto, (B) the most recent determination letter
received from the IRS, (C) the three most recent Form 5500 Annual Reports (and
all schedules and reports relating thereto) and actuarial reports and (D) all
related trust agreements, insurance contract or other funding agreements that
implement each such Employee Plan.
(c) With respect to each Employee Plan, to the Knowledge of Xxxxx,
there has not occurred, and no Person is contractually bound to enter into, any
"prohibited transaction" within the meaning of Section 4975(c) of the Code or
Section 406 of ERISA, which transaction is not exempt under Section 4975(d) of
the Code or Section 408 of ERISA and which could subject Xxxxx or any Controlled
Group Member to material liability.
(d) None of Xxxxx or any Controlled Group Member has maintained or
been obligated to contribute to any Employee Plan subject to Code Section 412 or
Title IV of ERISA
36
and, except for multiemployer plans (within the meaning of section 3(37) of
ERISA), none of the Employee Plans is subject to Title IV of ERISA. With respect
to each Employee Plan which is a multiemployer plan, all contributions have been
made as required by the terms of the plan, the terms of any collective
bargaining agreement and applicable law, none of Xxxxx or any of its Controlled
Group Members has withdrawn, partially withdrawn or received any notice of any
claim or demand for withdrawal liability or partial withdrawal liability, and
none of Xxxxx or any of its Controlled Group Members has received any notice
that any such plan is in reorganization, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of any excess
tax, that any such plan is or has been funded at a rate less than required under
Section 412 of the Code or that any such plan is or may become insolvent.
(e) With respect to each Pension Plan maintained by Xxxxx or any
Controlled Group Member, such Plan provides the Plan Sponsor with the authority
to amend or terminate the Plan at any time, subject to applicable requirements
of ERISA and the Code and other requirements of applicable law.
(f) There have been no acts or omissions by Xxxxx or any of its
Controlled Group Members which have given rise to or are reasonably likely to
give rise to fines, penalties, taxes or related charges under Section 502 of
ERISA or Chapters 43, 47, 68 or 100 of the Code for which Xxxxx or any of its
Controlled Group Members may be liable.
(g) None of the assets of any Employee Plan are invested in employer
securities or employer real property.
2.13 Employee Policies. Except as set forth in Schedule 2.13 to the Xxxxx
Disclosure Letter, the employee handbooks of Xxxxx, the Xxxxx Subsidiaries and
the Xxxxx Non-Controlled Entities currently in effect have been delivered or
made available to Archstone and fairly and accurately summarize in all material
respects all material employee policies, vacation policies and payroll policies.
2.14 Taxes.
(a) Each of Xxxxx, the Xxxxx Subsidiaries and the Xxxxx Non-Controlled
Subsidiaries (A) has filed all Tax returns and reports required to be filed by
it (after giving effect to any filing extension properly granted by a
Governmental Entity having authority to do so) and all such returns and reports
are accurate and complete in all material respects, (B) has paid (or Xxxxx has
paid on its behalf) all Taxes (as defined herein) shown on such returns and
reports as required to be paid by it, and (C) has complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441, 1442, 1445, 1446, 3121, and 3402 of the Code or
similar provisions under any foreign laws) and has, within the time period
prescribed by law, withheld and paid over to the proper governmental entities
all amounts required to be so withheld and paid over under applicable laws and
regulations, except, with respect to all of the foregoing, where the failure to
file such tax returns and reports or failure to pay such Taxes or failure to
comply with such withholding requirements would not reasonably be expected to
have a Xxxxx Material Adverse Effect. The most recent audited financial
statements contained in the
37
Xxxxx SEC Documents reflect an adequate reserve for all material Taxes payable
by Xxxxx, the Xxxxx Subsidiaries and the Xxxxx Non- Controlled Subsidiaries for
all taxable periods and portions thereof through the date of such financial
statements. Since the Xxxxx Financial Statement Date, to Xxxxx'x Knowledge,
Xxxxx has incurred no liability for Taxes under Sections 857(b), 860(c) or 4981
of the Code, including without limitation any Tax arising from a prohibited
transaction described in Section 857(b)(6) of the Code, and none of Xxxxx, any
Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary has incurred any
material liability for Taxes other than in the ordinary course of business.
Except as set forth on Schedule 2.14(a) of the Xxxxx Disclosure Letter, no event
has occurred, and no condition or circumstance exists, which presents a material
risk that any material Tax described in the preceding sentences will be imposed
upon Xxxxx, any Xxxxx Subsidiary, or any Xxxxx Non- Controlled Subsidiary. None
of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non- Controlled Subsidiary is the
subject of any audit, examination, or other proceeding in respect of federal
income Taxes; to Xxxxx'x Knowledge, no audit, examination or other proceeding in
respect of federal income Taxes involving any of Xxxxx, any Xxxxx Subsidiary, or
Xxxxx Non-Controlled Subsidiary is being considered by any Tax authority; and
except as set forth on Schedule 2.14(a) of the Xxxxx Disclosure Letter, no
audit, examination or other proceeding in respect of federal income taxes
involving any of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary has occurred since December 31, 1995. To the Knowledge of Xxxxx, no
deficiencies for any Taxes have been proposed, asserted or assessed against
Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non- Controlled Subsidiary, and no
requests for waivers of the time to assess any such Taxes are pending. As used
in this Agreement, "Taxes" shall include all taxes, charges, fees, levies and
other assessments, including, without limitation, income, gross receipts,
excise, property, sales, withholding (including, without limitation, dividend
withholding and withholding required pursuant to Sections 1445 and 1446 of the
Code), social security, occupation, use, service, license, payroll, franchise,
transfer and recording taxes, fees and charges, including estimated taxes,
imposed by the United States or any taxing authority (domestic or foreign),
whether computed on a separate, consolidated, unitary, combined or any other
basis, and any interest, fines, penalties or additional amounts attributable to,
or imposed upon, or with respect to any such taxes, charges, fees, levies or
other assessments.
(b) Xxxxx (i) for all taxable years for which the Internal Revenue
Service ("IRS") could assert a tax liability, 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 all such years,
(ii) has operated since December 31, 2000 to the date of this representation,
and intends to continue to operate, in such a manner as to qualify as a REIT for
the taxable year ending on the earlier of December 31, 2001 or the Closing Date
and, if later, for the taxable year of Xxxxx ending on the Closing Date, and
(iii) has not taken or omitted to take any action which would reasonably be
expected to result in a challenge to its status as a REIT and, to Xxxxx'x
Knowledge, no such challenge is pending or threatened. Each Xxxxx Subsidiary
which is a partnership, joint venture or limited liability company, at all times
since it became a Xxxxx Subsidiary, (A) (i) has been treated for federal income
tax purposes as a partnership or as an entity that is disregarded for federal
income tax purposes and not as a corporation or as an association taxable as a
corporation and (ii) has not owned any assets (including, without limitation,
securities) that would cause Xxxxx to violate Section 856(c)(4) of the Code or
(B)(i)
38
has been treated for federal income tax purposes as a corporation and that
qualifies as a REIT within the meaning of Section 856 of the Code, a qualified
REIT subsidiary under Section 856(i) of the Code, or a taxable REIT subsidiary
under Section 856(l) of the Code. Xxxxx Partnership is not a publicly traded
partnership within the meaning of Section 7704(b) of the Code that is taxable as
a corporation pursuant to Section 7704(a) of the Code. Each Xxxxx Subsidiary
which is a corporation has been since it became a Xxxxx Subsidiary and each
other issuer of securities in which Xxxxx holds securities (within the meaning
of Section 856(c) of the Code but excluding "straight debt" of issuers described
in Section 856(c)(7)) having a value of more than 10 percent of the total value
of the outstanding securities of such issuer is a REIT within the meaning of
Section 856 of the Code, a qualified REIT subsidiary under Section 856(i) of the
Code or a taxable REIT subsidiary under Section 856(l) of the Code. Except as
set forth in Schedule 2.14(b) of the Xxxxx Disclosure Letter, neither Xxxxx nor
any Xxxxx Subsidiary holds any asset (x) the disposition of which would be
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19 or Temporary Treas. Reg. (S)1.337(d)-5T or (y) which is
subject to a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder.
(c) To Xxxxx'x knowledge, as of the date hereof, Xxxxx is a
"domestically-controlled" REIT within the meaning of Section 897(h) of the Code.
(d) There are no liens for Taxes upon the assets of Xxxxx, the Xxxxx
Subsidiaries or the Xxxxx Non-Controlled Subsidiaries, other than liens for
Taxes not yet due and payable.
(e) Neither Xxxxx nor any Xxxxx Subsidiary is a party to any Tax
allocation or sharing agreement.
(f) Except as set forth in Section 2.18(i), Xxxxx does not have any
liability for the Taxes of any person other than Xxxxx, the Xxxxx Subsidiaries
and the Xxxxx Non-Controlled Subsidiaries, and the Xxxxx Subsidiaries do not
have any liability for the Taxes of any person other than Xxxxx, the Xxxxx
Subsidiaries, the Xxxxx Non-Controlled Subsidiaries and the Subsidiaries thereof
(A) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law), (B) as a transferee or successor, (C) by contract,
or (D) otherwise.
(g) Xxxxx and the Xxxxx Subsidiaries have disclosed to the IRS all
positions taken on its federal income Tax returns which could reasonably be
expected to give rise to a substantial understatement of Tax under Section 6662
of the Code.
2.15 No Payments to Employees, Officers or Directors. Schedule 2.15 to the
Xxxxx Disclosure Letter contains a true and complete list of all arrangements,
agreements or plans pursuant to which cash and non-cash payments which will
become payable to each employee, officer or director of Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary as a result of the Merger or a
termination of service subsequent to the consummation of the Merger. Except as
described in Schedule 2.15 to the Xxxxx Disclosure Letter, or as otherwise
provided for in this Agreement, there is no employment or severance contract, or
other agreement requiring payments, cancellation of indebtedness or other
obligation to be made on a change of control or
39
otherwise as a result of the consummation of any of the transactions
contemplated by this Agreement or as a result of a termination of service
subsequent to the consummation of any of the transactions contemplated by this
Agreement, with respect to any employee, officer or director of Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary. Except as described in
Schedule 2.15 of the Xxxxx Disclosure Letter, there is no agreement or
arrangement with any employee, officer, director or other service provider under
which Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary has
agreed to pay any tax that might be owed under Section 4999 of the Code with
respect to payments to such individuals.
2.16 Broker; Schedule of Fees and Expenses. No broker, investment banker,
financial advisor or other Person, other than Xxxxxxx, Xxxxx & Co., the fees and
expenses of which are described in the engagement letter dated April 5, 2001,
between Xxxxxxx, Sachs & Co. and Xxxxx, a true, correct and complete copy of
which has previously been given to Archstone, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Xxxxx or any Xxxxx Subsidiary.
2.17 Compliance with Laws. None of Xxxxx, any Xxxxx Subsidiary or any Xxxxx
Non-Controlled Subsidiary has violated or failed to comply with any statute,
law, ordinance, regulation, rule, judgment, decree or order of any Governmental
Entity applicable to its business, properties or operations, except in each case
to the extent that such violation or failure would not reasonably be expected to
have a Xxxxx Material Adverse Effect.
2.18 Contracts; Debt Instruments.
(a) None of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary is in violation of or in default under (nor does there exist any
condition which upon the passage of time or the giving of notice or both would
cause such a violation of or default under) any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or any other material contract, agreement, arrangement or
understanding, to which it is a party or by which it or any of its properties or
assets is bound, nor to the Knowledge of Xxxxx does such a violation or default
exist, except in each case to the extent that such violation or default,
individually or in the aggregate, would not reasonably be expected to have a
Xxxxx Material Adverse Effect.
(b) Schedule 2.l8(b) to the Xxxxx Disclosure Letter sets forth a list
of each material loan or credit agreement, note, bond, mortgage, indenture and
any other agreement or instrument pursuant to which any Indebtedness (as defined
herein) of Xxxxx, the Xxxxx Subsidiaries and any Xxxxx Non-Controlled
Subsidiary, other than Indebtedness payable to Xxxxx, a Xxxxx Subsidiary or a
Xxxxx Non-Controlled Subsidiary, is outstanding or may be incurred. For purposes
of this Section 2.18, "Indebtedness" shall mean (i) indebtedness for borrowed
money, whether secured or unsecured, (ii) obligations under conditional sale or
other title retention agreements relating to property purchased by such Person,
(iii) capitalized lease obligations, (iv) obligations under interest rate cap,
swap, collar or similar transaction or currency hedging transactions (valued at
the termination value thereof) and (v) guarantees of any such indebtedness of
any other Person. Except as set forth in Schedule 2.18(c), none of Xxxxx, any
40
Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary has any
derivative instruments outstanding.
(c) To the extent not set forth in response to the requirements of
Section 2.18(b), Schedule 2.18(c) to the Xxxxx Disclosure Letter sets forth each
interest rate cap, interest rate collar, interest rate swap, currency hedging
transaction, and any other agreement relating to a similar transaction to which
Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary is a party or
an obligor with respect thereto.
(d) Except with respect to the agreements set forth in Schedule
2.18(b) or Schedule 2.18(i) of the Xxxxx Disclosure Letter, none of Xxxxx, any
Xxxxx Subsidiary or any Xxxxx Non-Controlled Subsidiary is a party to any
agreement which would restrict any of them from prepaying any of their
Indebtedness without penalty or premium at any time or which requires any of
them to maintain any amount of Indebtedness with respect to any of the Xxxxx
Properties.
(e) Except as set forth in Schedule 2.18(e) of the Xxxxx Disclosure
Letter, none of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary is a party to any agreement relating to the management of any Xxxxx
Property by any Person other than Xxxxx, a Xxxxx Subsidiary or a Xxxxx Non-
Controlled Subsidiary.
(f) Xxxxx has delivered to Archstone prior to the date of this
Agreement a true and complete capital budget for the year 2001 relating to
budgeted capital improvements and development and the operating budget for the
year 2001, each of which was prepared based on assumptions which management
believed were reasonable.
(g) Schedule 2.18(g) to the Xxxxx Disclosure Letter lists all
agreements entered into by Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-
Controlled Subsidiary providing for the sale of, or option to sell, any Xxxxx
Properties or the purchase of, or option to purchase, by Xxxxx, any Xxxxx
Subsidiary or any Xxxxx Non-Controlled Subsidiary, on the one hand, or the other
party thereto, on the other hand, any real estate not yet consummated as of the
date hereof.
(h) Except as set forth in Schedule 2.18(h) to the Xxxxx Disclosure
Letter, none of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary has any pending claims or, to the knowledge of Xxxxx, any threatened
claims regarding material continuing contractual liability (A) for
indemnification under any agreement relating to the sale of real estate
previously owned, whether directly or indirectly, by Xxxxx, any Xxxxx Subsidiary
or any Xxxxx Non-Controlled Subsidiary or (B) to pay any additional purchase
price for any of the Xxxxx Properties.
(i) None of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary has entered into or is subject, directly or indirectly, to any "Tax
Protection Agreements," except as set forth in Schedule 2.18(i) to the Xxxxx
Disclosure Letter (true and correct copies of which have been made available to
Archstone). As used herein, a Tax Protection Agreement is an agreement, oral or
written, (A) that has as one of its purposes to permit a Person to take the
position that such Person could defer federal taxable income that
41
otherwise might have been recognized upon a transfer of property to the Xxxxx
Partnership or any other Xxxxx Subsidiary that is treated as a partnership for
federal income tax purposes, and that (i) prohibits or restricts in any manner
the disposition of any assets of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-
Controlled Subsidiary, (ii) requires that Xxxxx, any Xxxxx Subsidiary or any
Xxxxx Non-Controlled Subsidiary maintain, put in place, or replace,
indebtedness, whether or not secured by one or more of the Xxxxx Properties, or
(iii) requires that Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary offer to any Person at any time the opportunity to guarantee or
otherwise assume, directly or indirectly (including, without limitation, through
a "deficit restoration obligation," guarantee (including, without limitation, a
"bottom" guarantee), indemnification agreement or other similar arrangement),
the risk of loss for federal income tax purposes for indebtedness or other
liabilities of Xxxxx, any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary, (B) that specifies or relates to a method of taking into account
book-tax disparities under Section 704(c) of the Code with respect to one or
more assets of Xxxxx or a Xxxxx Subsidiary, or (C) that requires a particular
method for allocating one or more liabilities of Xxxxx or any Xxxxx Subsidiary
under Section 752 of the Code. None of Xxxxx, any Xxxxx Subsidiary or any Xxxxx
Non-Controlled Subsidiary is in violation of or in default under any Tax
Protection Agreement.
2.19 Opinion of Financial Advisor. Xxxxx has received the written opinion
of Xxxxxxx, Sachs & Co., Xxxxx'x financial advisor, dated as of the date of this
Agreement, to the effect that, as of such date, the 1.975 New Archstone Common
Shares to be received by the holders of Xxxxx Common Stock for each share of
Xxxxx Common Stock pursuant to the Merger is fair to such holders from a
financial point of view.
2.20 State Takeover Statutes. Xxxxx has taken all action necessary to
exempt the transactions contemplated by this Agreement between Archstone and
Xxxxx and its Affiliates from the operation of the Maryland Business Combination
Act, the Maryland Control Shares Acquisition Act and any other "fair price,"
"moratorium," "control share acquisition" or any other takeover statute or
similar statute enacted under any laws of any state or federal laws of the
United States or similar statute or regulation (a "Takeover Statute").
2.21 Stockholder Rights Plan. The Board of Directors of Xxxxx has resolved
to, and Xxxxx shall prior to the Merger, take all action necessary to render the
rights (the "Xxxxx Rights") issued pursuant to the terms of that certain Rights
Agreement, dated as of December 2, 1998, between Xxxxx and First Union National
Bank, as rights agent (the "Xxxxx Rights Agreement"), inapplicable to the
Mergers, this Agreement, and the other transactions contemplated hereby.
2.22 Investment Company Act of 1940. None of Xxxxx, any Xxxxx Subsidiary or
any Xxxxx Non-Controlled Subsidiary is, or at the Effective Time of the Merger
will be, required to be registered under the Investment Company Act of 1940, as
amended (the " 1940 Act").
2.23 Definition of "Knowledge of Xxxxx". As used in this Agreement, the
phrase "Knowledge of Xxxxx" (or words of similar import) means the actual
knowledge of those individuals identified in Schedule 2.23 to the Xxxxx
Disclosure Letter.
2.24 Required Stockholder Approvals and Partner Approvals. The
affirmative vote of
42
the holders of at least two-thirds of the Xxxxx Common Stock outstanding and
entitled to vote and voting together as a single class is the only vote of the
holders of any class or series of Xxxxx stock necessary or required under this
Agreement or under applicable law to approve the Merger and this Agreement. The
approval of Xxxxx and the affirmative vote of (a) holders of a majority of the
outstanding Xxxxx OP Units and (b) holders of a majority of Xxxxx OP Units held
by limited partners other than Xxxxx, voting in accordance with the Xxxxx
Partnership Agreement, are the only votes of the holders of any class or series
of Xxxxx Partnership's partnership interests necessary or required under this
Agreement or under applicable law to approve this Agreement, the Merger, the
withdrawal of Xxxxx as general partner and the Partnership Merger (including,
without limitation, termination of the Xxxxx Partnership Agreement).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ARCHSTONE AND NEW ARCHSTONE
Except as specifically set forth in the Archstone SEC Documents (as defined
herein) or in the schedule delivered to Xxxxx prior to the execution hereof and
identified by any of the Chairman and Chief Executive Officer, Chief Financial
Officer or a Senior Vice President of Archstone as the disclosure letter to this
Agreement (the "Archstone Disclosure Letter"), Archstone and New Archstone
represent and warrant to Xxxxx and Xxxxx Partnership as follows:
3.1 Organization, Standing and Power of Archstone. (a) Archstone is a real
estate investment trust duly organized, validly existing and in good standing
under the laws of Maryland. Archstone has all requisite power and authority to
own, operate, lease and encumber its properties and carry on its business as now
being conducted. Archstone is duly qualified or licensed to do business as a
foreign entity and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where the
failure to be so qualified or licensed, individually or in the aggregate, would
not reasonably be expected to have an Archstone Material Adverse Effect (as
defined herein). As used in this Agreement, an "Archstone Material Adverse
Effect" means any circumstance, event, occurrence, change or effect that is
materially adverse to the business, properties, assets (tangible or intangible),
financial condition or results of operations of Archstone, New Archstone and the
Subsidiaries of Archstone (collectively, "Archstone Subsidiaries"), taken as a
whole, except, in each case, as a result of (i) changes in general economic
conditions nationally or regionally, (ii) changes affecting the real estate
industry generally which do not affect Archstone materially disproportionately
relative to other participants in the real estate industry similarly situated,
or (iii) in and of itself and without the occurrence of any other Archstone
Material Adverse Effect, changes in the trading prices of Archstone Common
Shares or any series of Archstone Preferred Shares. Archstone has delivered to
Xxxxx complete and correct copies of the Archstone Declaration of Trust and the
bylaws of Archstone, as amended or supplemented to the date of this Agreement
(the "Archstone Bylaws").
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(b) New Archstone is a real estate investment trust duly organized,
validly existing and in good standing under the laws of Maryland. New Archstone
has all requisite power and authority to own, operate, lease and encumber its
properties and carry on its business as now being conducted. New Archstone is
duly qualified or licensed to do business as a foreign entity and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary.
3.2 Archstone Subsidiaries.
(a) Schedule 3.2(a) to the Archstone Disclosure Letter sets forth (i)
each Archstone Subsidiary and each entity in which Archstone holds non-voting
equity securities (but no voting equity securities) (collectively, the
"Archstone Non-Controlled Subsidiaries"), (ii) the ownership interest therein of
Archstone, (iii) if not directly or indirectly wholly owned by Archstone, the
identity and ownership interest of each of the other owners of such Archstone
Subsidiary, (iv) each property owned by such Archstone Subsidiary, and (v) if
not wholly owned by such Archstone Subsidiary, the identity and ownership
interest of each of the other owners of such property.
(b) Except as set forth in Schedule 3.2(b) to the Archstone Disclosure
Letter, (i) all of the outstanding shares of capital stock owned by Archstone or
an Archstone Subsidiary of each Archstone Subsidiary and each Archstone Non-
Controlled Subsidiary that is a corporation have been duly authorized, validly
issued and are (A) fully paid and nonassessable and not subject to preemptive or
similar rights and (B) owned free and clear of all Liens and (ii) all equity
interests in each Archstone Subsidiary that is a partnership, joint venture,
limited liability company or trust which are owned by Archstone, by another
Archstone Subsidiary or by Archstone and another Archstone Subsidiary are owned
free and clear of all Liens. Each Archstone Subsidiary that is a corporation is
duly incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has the requisite corporate power and
authority to own, operate, lease and encumber its properties and carry on its
business as now being conducted, and each Archstone Subsidiary that is a
partnership, limited liability company or trust is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and has the requisite power and authority to own, operate, lease and encumber
its properties and carry on its business as now being conducted. Each Archstone
Subsidiary is duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not reasonably be expected to have an
Archstone Material Adverse Effect. Complete and correct copies of the articles
of incorporation, bylaws, organization documents and partnership, joint venture
and operating agreements of each Archstone Subsidiary, as amended to the date of
this Agreement, have been previously delivered or made available to Xxxxx.
44
3.3 Capital Structure.
(a) The authorized shares of beneficial interest of Archstone consist
of 250,000,000 shares of beneficial interest, consisting of 232,100,000
Archstone Common Shares, 9,200,000 Archstone Series A Preferred Shares,
4,200,000 Archstone Series B Preferred Shares, 2,000,000 Archstone Series C
Preferred Shares, 2,300,000 Archstone Series D Preferred Shares, 1,600,000
Archstone Series E Preferred Shares, 800,000 Archstone Series F Preferred
Shares, 600,000 Archstone Series G Preferred Shares and 2,500,000 Junior
Participating Preferred Shares of Beneficial Interest, $1.00 par value per share
("Archstone Participating Preferred Shares"), of Archstone. As of May 2, 2001,
120,864,151 Archstone Common Shares were issued and outstanding, 3,237,435
Archstone Series A Preferred Shares were issued and outstanding, 4,200,000
Archstone Series B Preferred Shares were issued and outstanding (all of which
will be redeemed prior to May 11, 2001), 2,000,000 Archstone Series C Preferred
Shares were issued and outstanding, 2,300,000 Archstone Series D Preferred
Shares were issued and outstanding, no Archstone Series E Preferred Shares were
issued and outstanding, no Archstone Series F Preferred Shares were issued and
outstanding, no Archstone Series G Preferred Shares were issued and outstanding,
and no Archstone Participating Preferred Shares were issued and outstanding.
(b) Set forth in Schedule 3.3(b) to the Archstone Disclosure Letter is
a true and complete list of the following: (i) each qualified or nonqualified
option to purchase Archstone's shares of beneficial interest granted under the
Archstone 1997 Long-Term Incentive Plan, Archstone 1996 Share Option Plan for
Trustees, Archstone 1987 Share Option Plan for Outside Trustees and Archstone
Communities Trust Employee Stock Purchase Plan or any other formal or informal
arrangement (collectively, the "Archstone Options"); and (ii) except for the
Archstone Series A Preferred Shares, Archstone Series E Preferred Units,
Archstone Series F Preferred Units, Archstone Series G Preferred Units and the
Archstone Participating Preferred Shares, all other warrants or other rights to
acquire Archstone's shares of beneficial interest, all share appreciation
rights, phantom shares, dividend equivalents, performance units and performance
shares which are outstanding on the date of this Agreement. Schedule 3.3(b) to
the Archstone Disclosure Letter sets forth the Archstone Options granted to
Archstone's Chief Executive Officer and four other most highly compensated
officers, the date of each grant, the status of each Archstone Option as
qualified or nonqualified under Section 422 of the Code, the number of Archstone
Common Shares subject to each Archstone Option, the number and type of
Archstone's Common Shares subject to Archstone Options that are currently
exercisable, the exercise price per share, and the number and type of such
shares subject to share appreciation rights. On the date of this Agreement,
except as set forth in this Section 3.3 or excepted therefrom or as set forth in
Schedule 3.3(b) or 3.3 (d) to the Archstone Disclosure Letter, no shares of
beneficial interest of Archstone were outstanding or reserved for issuance.
(c) All outstanding shares of beneficial interest of Archstone are
duly authorized, validly issued, fully paid and nonassessable and not subject to
preemptive or similar rights under law or the Archstone Declaration of Trust or
Archstone Bylaws, or any contract or instrument to which Archstone is a party or
by which it is bound. There are no bonds, debentures, notes or other
indebtedness of Archstone having the right to vote (or convertible into,
45
or exchangeable for, securities having the right to vote) on any matters on
which shareholders of Archstone may vote.
(d) Except as set forth in this Section 3.3 or in Schedule 3.3(b) or
3.3(d) to the Archstone Disclosure Letter, as of the date of this Agreement,
there are no outstanding securities, options, warrants, calls, rights,
commitments, agreements (other than this Agreement), arrangements or
undertakings of any kind to which Archstone or any Archstone Subsidiary is a
party or by which such entity is bound, obligating Archstone or any Archstone
Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of beneficial interest, voting securities or other ownership
interests of Archstone or any Archstone Subsidiary or obligating Archstone or
any Archstone Subsidiary to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement or
undertaking (other than to Archstone or an Archstone Subsidiary).
(e) All dividends on Archstone Common Shares and Archstone Existing
Preferred Shares, which have been declared prior to the date of this Agreement
have been paid in full.
(f) The New Archstone Common Shares and the New Archstone Preferred
Shares to be issued by New Archstone pursuant to this Agreement have been duly
authorized for issuance, and upon issuance will be duly and validly issued,
fully paid, nonassessable and not subject to preemptive or similar rights under
law. The Archstone Common Shares and Archstone Preferred Shares to be issued by
Archstone to holders of Xxxxx OP Units and Xxxxx Preferred Units (other than New
Archstone, as the successor to Xxxxx in the Merger) in the Partnership Merger
pursuant to this Agreement have been duly authorized for issuance, and upon
issuance will be duly and validly issued, fully paid and nonassessable (except
and only to the extent set forth in Section 8.5 of Annex A to the Archstone
Declaration of Trust and, only in the case of a recipient of Archstone Common
Shares who has undertaken a "deficit restoration obligation" pursuant to Section
13.3.B of Annex A of the Archstone Declaration of Trust, to the extent provided
in Section 13.3.B, Section 13.3.C and Section 13.3.D thereof) and not subject to
preemptive or similar rights under law. The Archstone Common Shares and
Archstone Preferred Shares to be issued by Archstone to New Archstone in the
Archstone Merger and in the Partnership Merger pursuant to this Agreement have
been duly authorized for issuance, and upon issuance will be duly and validly
issued, fully paid and nonassessable (except and only to the extent set forth in
Sections 2.2, 5.5, 8.5 and 11.3 of Annex A to the Archstone Declaration of
Trust) and not subject to preemptive or similar rights under law.
3.4 Other Interests. Except for interests in the Archstone Subsidiaries,
Archstone Non-Controlled Subsidiaries and certain other entities as set forth in
Schedule 3.2(a), 3.2(b) or 3.4 to the Archstone Disclosure Letter (the
"Archstone Other Interests"), neither Archstone nor any of its Subsidiaries owns
directly or indirectly any interest or investment (whether equity or debt) in
excess of $1,000,000 individually, or $10,000,000 in the aggregate, in any
corporation, partnership, joint venture, business, trust or other entity (other
than investments in short-term investment securities). With respect to the
Archstone Other Interests, Archstone is a partner or shareholder in good
standing, and owns such interests free and clear of all Liens. Neither
46
Archstone nor any of the Archstone Subsidiaries is in material breach of any
agreement, document or contract which is of a material nature governing its
rights in or to the Archstone Other Interests, all of which agreements,
documents and contracts are (a) listed in Schedule 3.4 to the Archstone
Disclosure Letter, (b) unmodified except as described therein and (c) to the
Knowledge of Archstone (as defined herein), in full force and effect. To the
Knowledge of Archstone, the other parties to any such agreement, document or
contract which is of a material nature are not in breach of any of their
respective obligations under such agreements, documents or contracts.
3.5 Authority; Noncontravention; Consents.
(a) Each of Archstone and New Archstone (collectively the "Archstone
Parties") has the requisite power and authority to enter into this Agreement
and, subject to the requisite shareholder approval by the holders of Archstone
Common Shares of the Merger, the Archstone Merger, the Proposed Archstone
Charter Amendments (as defined herein) and the amendment or adoption of any
stock option plan as necessary to satisfy Archstone's and New Archstone's
obligations under Section 5.8(c) (the "Archstone Shareholder Approvals" and,
together with the Xxxxx Stockholder Approvals, the "Shareholder Approvals"), to
consummate the transactions contemplated by this Agreement to which each
Archstone Party is a party. The execution and delivery of this Agreement by
Archstone and New Archstone and the consummation by the Archstone Parties of the
transactions contemplated by this Agreement to which each Archstone Party is a
party have been duly authorized by all necessary action on the part of such
Archstone Party, except for and subject to the Archstone Shareholder Approvals.
This Agreement has been duly executed and delivered by Archstone and New
Archstone and constitutes a valid and binding obligation of Archstone and New
Archstone, enforceable against Archstone and New Archstone in accordance with
and subject to its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity.
(b) Except as set forth in Schedule 3.5(b)(1) to the Archstone
Disclosure Letter and subject to receipt of the Archstone Shareholder Approvals,
the execution and delivery of this Agreement by Archstone or New Archstone do
not, and the consummation of the transactions contemplated by this Agreement to
which any Archstone Party is a party and compliance by Archstone or New
Archstone with the provisions of this Agreement will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to loss of a material benefit under,
or result in the creation of any Lien upon any of the properties or assets of
any Archstone Party or any Archstone Subsidiary under, (i) the Archstone
Declaration of Trust or the Archstone Bylaws or the comparable charter or
organizational documents or partnership, operating or similar agreement (as the
case may be) of any other Archstone Party or Archstone Subsidiary, each as
amended or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement, lease
or other agreement, instrument, permit, concession, franchise or license
applicable to Archstone or any Archstone Subsidiary or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following
47
sentence, any Laws applicable to Archstone or any Archstone Subsidiary or their
respective properties or assets, other than, in the case of clause (ii) or
(iii), any such conflicts, violations, defaults, rights, loss or Liens that
individually or in the aggregate would not reasonably be expected to (x) have an
Archstone Material Adverse Effect or (y) prevent or materially impair the
ability of Archstone to perform any of its obligations hereunder or prevent or
materially threaten or impede the consummation of the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to any Archstone Party or any Archstone Subsidiary in connection
with the execution and delivery of this Agreement by Archstone or the
consummation by Archstone or any Archstone Subsidiary of any of the transactions
contemplated by this Agreement, except for (i) the filing with the SEC of (x)
the Form S-4 (as defined herein) and (y) such reports and filings under the
Securities Act and under Sections 13(a) and 13(d) of the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated by
this Agreement, (ii) the filing and acceptance for record of the REIT Articles
of Merger and the Partnership Articles of Merger by the Department, (iii) the
filing of the Delaware Certificate of Merger with the Office of the Secretary of
State of the State of Delaware, (iv) such filings as may be required in
connection with the payment of any transfer and gains taxes and (v) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings (A) as are set forth in Schedule 3.5(b)(2) to the Archstone Disclosure
Letter or (B) as may be required under (w) the HSR Act, (x) federal, state or
local environmental laws or (y) the "blue sky" laws of various states, to the
extent applicable, or (C) which, if not obtained or made, would not prevent or
delay in any material respect the consummation of any of the transactions
contemplated by this Agreement or otherwise prevent Archstone from performing
its obligations under this Agreement in any material respect or reasonably be
expected to have, individually or in the aggregate, an Archstone Material
Adverse Effect.
3.6 SEC Documents; Financial Statements; Undisclosed Liabilities. Archstone
has filed all reports, schedules, forms, statements and other documents required
to be filed with the SEC since December 31, 1997 through the date hereof (the
"Archstone SEC Documents"). All of the Archstone SEC Documents (other than
preliminary material), as of their respective filing dates, complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act and, in each case, the rules and regulations promulgated thereunder
applicable to such Archstone SEC Documents. None of the Archstone SEC Documents
at the time of filing contained, nor will any report, schedule, form, statement
or other document filed by Archstone after the date hereof and prior to the
Effective Time of the Merger contain, any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of Archstone and the Archstone Subsidiaries included in the Archstone
SEC Documents complied, or will comply, as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been or will be prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by the
applicable rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly presented, or will fairly present, in all material respects in
accordance with the applicable requirements of GAAP and the applicable rules and
48
regulations of the SEC, the consolidated financial position of Archstone and the
Archstone Subsidiaries, taken as a whole, as of the dates thereof and the
consolidated results of operations and cash flows for the periods then ended
(except, in the case of unaudited statements, as permitted by Form 10-Q under
the Exchange Act). Except for liabilities and obligations set forth in the
Archstone SEC Documents or in Schedule 3.6 to the Archstone Disclosure Letter,
neither Archstone nor any Archstone Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Archstone or
in the notes thereto and which, individually or in the aggregate, would
reasonably be expected to have an Archstone Material Adverse Effect.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
Archstone SEC Documents or in Schedule 3.7 to the Archstone Disclosure Letter,
since December 31, 2000 (the "Archstone Financial Statement Date"), Archstone
and the Archstone Subsidiaries have conducted their business only in the
ordinary course (taking into account prior practices, including the acquisition
of properties and issuance of securities) and there has not been (a) any
circumstance, event, occurrence, change or effect that has had an Archstone
Material Adverse Effect, nor has there been any circumstance, event, occurrence,
change or effect that with the passage of time would reasonably be expected to
result in an Archstone Material Adverse Effect, (b) except for regular quarterly
distributions not in excess of $0.41 per Archstone Common Share or the stated
distribution rate for each Archstone Existing Preferred Share, subject to
changes pursuant to Section 5.10 and to any Corresponding Archstone Dividends
and Distributions paid pursuant to Section 1.15(e)(ii) and to rounding
adjustments as necessary and with customary record and payment dates, any
authorization, declaration, setting aside or payment of any dividend or other
distribution (whether in cash, shares or property) with respect to Archstone
Common Shares or Archstone Existing Preferred Shares, (c) any split, combination
or reclassification of any of Archstone's shares of beneficial interest, (d) any
damage, destruction or loss, whether or not covered by insurance, that has had
or would reasonably be expected to have an Archstone Material Adverse Effect or
(e) any change made prior to the date of this Agreement in accounting methods,
principles or practices by Archstone or any Archstone Subsidiary materially
affecting its assets, liabilities or business, except insofar as may have been
disclosed in the Archstone SEC Documents or required by a change in GAAP.
3.8 Litigation. Except as disclosed in the Archstone SEC Documents or in
Schedule 3.8 to the Archstone Disclosure Letter, and other than personal injury
and other routine tort litigation arising from the ordinary course of operations
of Archstone and the Archstone Subsidiaries (a) which are covered by insurance,
subject to a reasonable deductible or retention limit or (b) for which all
material costs and liabilities arising therefrom are reimbursable pursuant to
common area maintenance or similar agreements, there is no suit, action or
proceeding pending (in which service of process has been received by an employee
of Archstone or an Archstone Subsidiary) or, to the Knowledge of Archstone,
threatened in writing against or affecting Archstone or any Archstone Subsidiary
that, individually or in the aggregate, would reasonably be expected to (i) have
an Archstone Material Adverse Effect or (ii) prevent or materially impair the
ability of Archstone to perform any of its obligations hereunder or prevent or
materially threaten or impair the consummation of any of the transactions
contemplated by this Agreement, nor is there any judgment, decree, injunction,
rule or order of any Governmental
49
Entity or arbitrator outstanding against Archstone or any Archstone Subsidiary
having, or which, insofar as reasonably can be foreseen, in the future would
have, any such effect.
3.9 Properties.
(a) Except as set forth in Schedule 3.9(a) to the Archstone Disclosure
Letter, Archstone or one of the Archstone Subsidiaries owns fee simple title to
each of the real properties listed in the Archstone SEC Filings as owned by it
(the "Archstone Properties").
(b) The Archstone Properties are not subject to any Encumbrances or
Property Restrictions which reasonably could be expected to cause an Archstone
Material Adverse Effect.
(c) Valid policies of title insurance (or fully paid and enforceable
commitments therefor) have been issued insuring Archstone's or the applicable
Archstone Subsidiary's fee simple title or leasehold estate, as the case may be,
to the Archstone Properties in amounts which are approximately equal to the
purchase price thereof paid by Archstone or the applicable Archstone
Subsidiaries therefor, except where the failure to obtain such title insurance
would not reasonably be expected to have an Archstone Material Adverse Effect.
Such policies are, at the date hereof, in full force and effect. No material
claim has been made against any policy.
(d) With respect to any Archstone Property with Five Hundred (500)
units or more, Archstone has no Knowledge:
(i) that it has failed to obtain a certificate, permit or license
from any governmental authority having jurisdiction over such Archstone Property
where such failure would reasonably be expected to have a material adverse
effect on such Archstone Property or of any pending threat of modification or
cancellation of any of the same which would reasonably be expected to have a
material adverse effect on such Archstone Property;
(ii) of any written notice of any violation of any federal, state
or municipal law, ordinance, order, rule, regulation or requirement affecting
such Archstone Property issued by any governmental authority which would
reasonably be expected to have a material adverse effect on such Archstone
Property; or
(iii) that it has received written or published notice to the
effect that (a) any condemnation or involuntary rezoning proceedings are pending
or threatened with respect to such Archstone Property or (b) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of such Archstone Property or by the continued
maintenance, operation or use of the parking areas other than such notices,
which, in the aggregate, would not reasonably be expected to have a material
adverse effect on such Archstone Property.
(e) With respect to Archstone Properties with less than Five Hundred
(500) units, Archstone has no Knowledge:
50
(i) that it has failed to obtain certificates, permits or licenses
from any governmental authority having jurisdiction over any such Archstone
Properties, the absence of which, in the aggregate , would reasonably be
expected to have an Archstone Material Adverse Effect or of any pending threat
of modification or cancellation of any of the same which, in the aggregate,
would reasonably be expected to have an Archstone Material Adverse Effect;
(ii) of any written notices of any violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting such
Archstone Properties issued by any governmental authority which, in the
aggregate, would reasonably be expected to have an Archstone Material Adverse
Effect; or
(iii) that it has received written or published notice to the
effect that (a) any condemnation or involuntary rezoning proceedings are pending
or threatened with respect to any of such Archstone Property or (b) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of such Archstone Properties or by the continued
maintenance, operation or use of the parking areas other than such notices,
which, in the aggregate, would not reasonably be expected to have an Archstone
Material Adverse Effect.
(f) Archstone has no Knowledge (i) of any structural defects relating
to Archstone Properties, Archstone Properties whose building systems are not in
working order, physical damage to any Archstone Property for which there is not
insurance in effect covering the cost of the restoration and the loss of revenue
(subject to a reasonable deduction or retention limit), except such structural
defects, building systems not in working order and physical damage, which, in
the aggregate, would not reasonably be expected to have an Archstone Material
Adverse Effect.
(g) Except as set forth in Schedule 3.9(g) to the Archstone Disclosure
Letter, (i) all work to be performed, payments to be made and actions to be
taken by Archstone or the Archstone Subsidiaries prior to the date hereof
pursuant to any agreement entered into with a governmental body or authority in
connection with a site approval, zoning reclassification or similar action
relating to any Archstone Properties (e.g., Local Improvement District, Road
Improvement District, Environmental Mitigation), have been performed, paid or
taken, as the case may be, and (ii) Archstone has no Knowledge of any planned or
proposed work, payments or actions that may be required after the date hereof
pursuant to such agreements, in each of cases (i) and (ii) except where the
failure to do so would, in the aggregate, not reasonably be expected to have an
Archstone Material Adverse Effect.
(h) Insurance summaries previously provided by Archstone to Xxxxx
contain a true and complete list, by type of insurance, carrier, coverages
(including limits) and term, of all material policies of casualty, liability and
other types of insurance (except title insurance) carried by Archstone or any
Archstone Subsidiary. All such policies are in full force and effect and neither
Archstone nor any Archstone Subsidiary has received from any insurance company
notice of any material defects or deficiencies affecting the insurability of
Archstone or any Archstone Subsidiary or any of their respective assets
thereunder.
51
3.10 Environmental Matters.
Except as disclosed in the Archstone SEC Documents,
(i) none of Archstone, any of the Archstone Subsidiaries or, to
Archstone's Knowledge, any other Person has caused or permitted the presence of
any Hazardous Materials at, on or under any of the Archstone Properties, such
that the presence of such Hazardous Materials (including the presence of
asbestos in any buildings or improvements at the Archstone Properties) would,
individually or in the aggregate, reasonably be expected to have an Archstone
Material Adverse Effect;
(ii) except as authorized by the Environmental Permits, there have
been no Releases of Hazardous Materials at, on, under or from (A) the Archstone
Properties, or (B) any real property formerly owned, operated or leased by
Archstone or the Archstone Subsidiaries during the period of such ownership,
operation or tenancy, which would, individually or in the aggregate, reasonably
be expected to have an Archstone Material Adverse Effect;
(iii) (y) Archstone and the Archstone Subsidiaries have not failed
to comply with all Environmental Laws, and (z) neither Archstone nor any of the
Archstone Subsidiaries has any liability under the Environmental Laws, except in
each of cases (y) and (z) to the extent such failure to comply or any such
liability, individually or in the aggregate, would not reasonably be expected to
have an Archstone Material Adverse Effect; and
(iv) Archstone and the Archstone Subsidiaries have been duly
issued, and currently have and will maintain through the Merger Closing Date,
all Environmental Permits necessary to operate their businesses as currently
operated except where the failure to obtain and maintain such Environmental
Permits would not, individually or in the aggregate, reasonably be expected to
have an Archstone Material Adverse Effect. Archstone and the Archstone
Subsidiaries have timely filed applications for all Environmental permits.
3.11 Taxes.
(a) Each of Archstone, the Archstone Subsidiaries and the Archstone
Non-Controlled Subsidiaries (i) has filed all Tax returns and reports required
to be filed by it (after giving effect to any filing extension properly granted
by a Governmental Entity having authority to do so), and all such returns and
reports are accurate and complete in all material respects, (ii) has paid (or
Archstone has paid on its behalf) all Taxes shown on such returns and reports as
required to be paid by it and (iii) has complied in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of Taxes (including, without limitation, withholding of Taxes
pursuant to Sections 1441, 1442, 1445, 1446, 3121, and 3402 of the Code or
similar provisions under any foreign laws) and has, within the time period
prescribed by law, withheld and paid over to the proper governmental entities
all amounts required to be so withheld and paid over under applicable laws and
regulations, except, with respect to all of the foregoing, where the failure to
file such tax returns or reports or failure to pay such Taxes or failure to
comply with such requirements would not reasonably be expected
52
to have an Archstone Material Adverse Effect. The most recent audited financial
statements contained in the Archstone SEC Documents reflect an adequate reserve
for all material Taxes payable by Archstone, the Archstone Subsidiaries and the
Archstone Non-Controlled Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements. Since the Archstone
Financial Statement Date, to Archstone's Knowledge, Archstone has incurred no
liability for Taxes under Sections 857(b), 860(c) or 4981 of the Code, including
without limitation any Tax arising from a prohibited transaction described in
Section 857(b)(6) of the Code, and none of Archstone, any Archstone Subsidiary
or any Archstone Non-Controlled Subsidiary has incurred any material liability
for Taxes other than in the ordinary course of business. No event has occurred,
and no condition or circumstance exists, which presents a material risk that any
material Tax described in the preceding sentence will be imposed upon Archstone,
any Archstone Subsidiary or any Archstone Non-Controlled Subsidiary. None of
Archstone, any Archstone Subsidiary or any Archstone Non-Controlled Subsidiary
is the subject of any audit, examination, or other proceeding in respect of
federal income Taxes, and to Archstone's Knowledge, no audit, examination or
other proceeding in respect of federal income Taxes involving Archstone, any
Archstone Subsidiary or any Archstone Non-Controlled Subsidiary is being
considered by any Tax authority; and except as set forth on Schedule 3.11(a) to
the Archstone Disclosure Letter, no audit, examination or other proceeding in
respect of federal income Taxes involving Archstone, any Archstone Subsidiary or
any Archstone Non-Controlled Subsidiary has occurred. To the Knowledge of
Archstone, no deficiencies for any Taxes have been proposed, asserted or
assessed against Archstone, any of the Archstone Subsidiaries or any Archstone
Non-Controlled Subsidiary, and no requests for waivers of the time to assess any
such Taxes are pending.
(b) Archstone (i) for all taxable years for which the IRS could assert
a tax liability, has been subject to taxation as a REIT within the meaning of
Section 856 of the Code and has qualified as a REIT for all such years, (ii) has
operated since December 31, 2000 to the date of this representation, and intends
to continue to operate, in such a manner as to qualify as a REIT for its taxable
year that and (iii) has not taken or omitted to take any action which would
reasonably be expected to result in a challenge to its status as a REIT and, to
Archstone's Knowledge, no such challenge is pending or threatened. New Archstone
(i) has operated since its formation to the date of this representation, and
intends to continue to operate, in such a manner as to qualify as a REIT for the
taxable year that includes the Closing Date and (ii) has not taken or omitted to
take any action which would reasonably be expected to result in a challenge to
its status as a REIT and, to Archstone's Knowledge, no such challenge is pending
or threatened. Each Archstone Subsidiary which is a partnership, joint venture
or limited liability company, at all times since it became an Archstone
Subsidiary, (A)(i) has been treated for federal income tax purposes as a
partnership or as an entity that is disregarded for federal income tax purposes
and not as a corporation or as an association taxable as a corporation and (ii)
has not owned any assets (including, without limitation, securities) that would
cause Archstone to violate Section 856(c)(4) of the Code or (B)(i) has been
treated for federal income tax purposes as a corporation and that qualifies as a
REIT within the meaning of Section 856 of the Code, a qualified REIT subsidiary
under Section 856(i) of the Code, or a taxable REIT Subsidiary under Section
856(l) of the Code. Archstone Partnership is not a publicly traded partnership
within the meaning of Section 7704(b) of the Code that is taxable as a
corporation pursuant to Section
53
7704(a) of the Code. Each Archstone Subsidiary which is a corporation has been
since it became an Archstone Subsidiary, and each other issuer of securities in
which Archstone holds securities (within the meaning of Section 856(c) of the
Code but excluding "straight debt" of issuers described in Section 856(c)(7))
having a value of more than 10 percent of the total value of the outstanding
securities of such issuer is a qualified REIT subsidiary under Section 856(i) of
the Code or a taxable REIT subsidiary under Section 856(l) of the Code. Except
as set forth in Schedule 3.11(b) to the Archstone Disclosure Letter, neither
Archstone nor any Archstone Subsidiary holds any asset (x) the disposition of
which would be subject to rules similar to Section 1374 of the Code as a result
of an election under IRS Notice 88-19 or Temporary Treas. Reg. (S)1.337(d)-5T or
(y) which is subject to a consent filed pursuant to Section 341(f) of the Code
and the regulations thereunder.
(c) To Archstone's knowledge, as of the date hereof, Archstone is a
"domestically-controlled REIT" within the meaning of Section 897(h)(4)(B) of the
Code.
(d) There are no liens for Taxes upon the assets of Archstone, the
Archstone Subsidiaries or the Archstone Non-Controlled Subsidiaries.
(e) Neither Archstone nor any Archstone Subsidiary is a party to any
Tax allocation or sharing agreement.
(f) Archstone does not have any liability for the Taxes of any person
other than Archstone, the Archstone Subsidiaries and Archstone Non-Controlled
Subsidiaries, the Archstone Subsidiaries and the Archstone Non-Controlled
Subsidiaries do not have any liability for the Taxes of any person other than
Archstone, the Archstone Subsidiaries and the Archstone Non-Controlled
Subsidiaries (A) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), (B) as a transferee or successor, (C)
by contract, or (D) otherwise.
(g) Since Archstone's taxable year which ended December 31, 1996,
Archstone has qualified as a REIT, and commencing on January 1, 1997, and all
times thereafter, Archstone qualified as an association described in Treasury
Regulation (S)301.7701-2(b)(2) pursuant to Treasury Regulation (S)301.7701-
3(b)(3)(i), and Archstone has not made any election pursuant to Treasury
Regulation (S)301.7701-3(c)(1)(i) to change its classification from that of an
association. Archstone is currently eligible to change its classification from
that of an association to that of a partnership or an entity that is classified
as an entity disregarded as separate from its owner, without being subject to
the limitations imposed by Treasury Regulation (S)301.7701-3(c)(1)(iv).
(h) Archstone and the Archstone Subsidiaries have disclosed to the IRS
all positions taken on its federal income Tax returns which could reasonably be
expected to give rise to a substantial understatement of Tax under Section 6662
of the Code.
3.12 Brokers, Schedule of Fees and Expenses. No broker, investment banker,
financial advisor or other Person, other than Xxxxxx Xxxxxxx & Co. Incorporated,
the fees and expenses of
54
which will be paid by Archstone and are described in the engagement letter dated
April 23, 2001, between Xxxxxx Xxxxxxx & Co. Incorporated and Archstone, a true,
correct and complete copy of which has previously been given to Xxxxx, is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Archstone or any Archstone Subsidiary.
3.13 Compliance with Laws. Neither Archstone nor any of the Archstone
Subsidiaries has violated or failed to comply with any statute, law, ordinance,
regulation, rule, judgment, decree or order of any Governmental Entity
applicable to its business, properties or operations, except in each case to the
extent that such violation or failure would not reasonably be expected to have
an Archstone Material Adverse Effect.
3.14 Contracts; Debt Instruments. Neither Archstone nor any Archstone
Subsidiary has received a written notice that Archstone or any Archstone
Subsidiary is in violation of or in default under (nor to the Knowledge of
Archstone does there exist any condition which upon the passage of time or the
giving of notice or both would cause such a violation of or default under) any
material loan or credit agreement, note, bond, mortgage, indenture, lease,
permit, concession, franchise, license or any other material contract,
agreement, arrangement or understanding, to which it is a party or by which it
or any of its properties or assets is bound, nor to the Knowledge of Archstone
does such a violation or default exist, except as set forth on Schedule 3.14 to
the Archstone Disclosure Letter or to the extent such violation or default,
individually or in the aggregate, would not reasonably be expected to have an
Archstone Material Adverse Effect.
3.15 Opinion of Financial Advisor. Archstone has received the opinion of
Xxxxxx Xxxxxxx & Co. Incorporated, Archstone's financial advisor, to the effect
that the consideration to be paid by Archstone and New Archstone in connection
with the Mergers is fair, from a financial point of view, to Archstone.
3.16 State Takeover Statutes. Archstone has taken and New Archstone will
take all action necessary to exempt the transactions contemplated by this
Agreement between Archstone and Xxxxx and its Affiliates from the operation of
Takeover Statutes.
3.17 Investment Company Act of 1940. Neither Archstone, New Archstone nor
any of the Archstone Subsidiaries is, or at the Effective Time of the Merger
will be, required to be registered under the 0000 Xxx.
3.18 Definition of "Knowledge of Archstone". As used in this Agreement, the
phrase "Knowledge of Archstone" (or words of similar import) means the actual
knowledge of those individuals identified in Schedule 3.18 to the Archstone
Disclosure Letter.
3.19 Required Shareholder Approvals. The affirmative vote of the holders of
not less than a majority of all votes entitled to be cast by holders of
Archstone Common Shares outstanding and entitled to vote and voting together as
a single class is the only vote of the holders of any class or series of
Archstone capital shares or New Archstone capital shares of or on behalf of
Archstone or New Archstone necessary or required under this Agreement or under
55
applicable law to approve the Merger, the Archstone Merger, this Agreement, the
proposed amendments to the Archstone Declaration of Trust, substantially in the
form of Exhibit F, which have been approved by the Board of Trustees of
Archstone (the "Proposed Archstone Charter Amendments"), the amendment or
adoption of any stock option plan as necessary to satisfy Archstone's and New
Archstone's obligations under Section 5.8(c) and the other matters contemplated
hereby.
ARTICLE 4
COVENANTS
4.1 Conduct of Xxxxx'x and Xxxxx Partnership's Business Pending Merger.
During the period from the date of this Agreement to the Effective Times, except
as consented to in writing by Archstone or as contemplated in this Agreement,
Xxxxx and Xxxxx Partnership shall, and shall cause (or, in the case of Xxxxx
Subsidiaries and Xxxxx Non-Controlled Subsidiaries that Xxxxx or Xxxxx
Partnership do not control, shall use commercially reasonable efforts to cause)
each of the Xxxxx Subsidiaries and each of the Xxxxx Non-Controlled Subsidiaries
to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted, except for
such changes as are expressly required by this Agreement;
(b) use commercially reasonable efforts to preserve intact its
business organizations and goodwill and, provided it does not require additional
compensation, keep available the services of its officers and employees;
(c) confer on a regular basis with one or more representatives of
Archstone to report operational matters of materiality and, subject to Section
4.3, any proposals to engage in material transactions;
(d) promptly notify Archstone of the occurrence or existence of any
circumstance, event, occurrence, change or effect that has had or would
reasonably be expected to have a Xxxxx Material Adverse Effect;
(e) promptly deliver to Archstone true and correct copies of any
report, statement, schedule or other document filed with the SEC subsequent to
the date of this Agreement;
(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in effect at the Xxxxx Financial Statement
Date, except as may be required by the SEC, applicable law or GAAP;
(g) duly and timely file all reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
to extensions permitted by law, provided Xxxxx notifies Archstone that it is
availing itself of such extensions and provided such
56
extensions do not adversely affect Xxxxx'x status as a qualified REIT under the
Code;
(h) except as set forth in Schedule 4.1(h) to the Xxxxx Disclosure
Letter, maintain in full force and effect insurance coverage substantially
similar to insurance coverage maintained on the date hereof;
(i) unless required by law or necessary to either (1) preserve Xxxxx'x
status as a REIT, or (2) qualify or preserve the status of any Xxxxx Subsidiary
as a partnership for federal income tax purposes, as a qualified REIT subsidiary
under Section 856(i) of the Code, or as a taxable REIT subsidiary under Section
856(l) of the Code, as the case may be (in which event Xxxxx or the applicable
Xxxxx Subsidiary shall not fail to make such election in a timely manner)
neither (A) make or rescind any express or deemed election relative to Taxes
(except for the Election), (B) settle or compromise any material claim, action,
suit, litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, except where such settlement or compromise will not
materially and adversely affect Xxxxx, the Xxxxx Subsidiaries or the Xxxxx Non-
Controlled Subsidiaries, nor (C) change in any material respect any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income tax returns that have
been filed for prior taxable years, except as may be required by applicable law
or except for changes that are reasonably expected not to have a Xxxxx Material
Adverse Effect.
(j) except as set forth in Schedule 4.1(j) to the Xxxxx Disclosure
Letter, not (1) acquire, enter into any option to acquire, or exercise an option
or other right or election or enter into any other commitment or contractual
obligation (each, a "Commitment") for the acquisition of any real property
except (A) as permitted in a property capital budget approved in writing by
Archstone or delivered to Archstone as provided for in Section 2.18(f) or (B)
other transactions involving consideration of less than $10,000,000 in the
aggregate for all such transactions, (2) encumber assets or commence
construction of, or enter into any Commitment to develop or construct other real
estate projects, except (A) ongoing renovations or capital repair projects as
described on Schedule 4.1(j) or (B) in the ordinary course of its leasing
activities consistent with past practice, (3) incur or enter into any Commitment
to incur additional indebtedness (secured or unsecured) except for (A)
refinancing or replacement of any existing indebtedness in the ordinary course
of business consistent with past practices on commercially reasonable terms for
the matters set forth on Schedule 4.1(j), (B) working capital under its
revolving line(s) of credit or other indebtedness which is secured by a second
mortgage on any Xxxxx Property and (C) Commitments for indebtedness in
connection with the matters described on Schedule 4.1(j); provided, however, the
aggregate indebtedness outstanding of Xxxxx, the Xxxxx Subsidiaries and the
Xxxxx Non-Controlled Subsidiaries (including any additional indebtedness
permitted pursuant to Section 4.1(j)(3)(B) and Section 4.1(j)(3)(C)) shall at no
time prior to September 30, 2001 exceed $1,600,000,000 and at no time prior to
March 30, 2002 exceed $1,750,000,000, or (4) materially modify, amend or
terminate or enter into any Commitment to materially modify, amend or terminate,
any indebtedness (secured or unsecured) in existence as of the date hereof
except as provided in this Section 4.1(j).
(k) not amend the Xxxxx Articles or the Xxxxx Bylaws, or the articles
or
57
certificate of incorporation, bylaws, code of regulations, partnership
agreement, operating agreement or joint venture agreement or comparable charter
or organization document of any Xxxxx Subsidiary or any Xxxxx Non-Controlled
Subsidiary except to the extent necessary to reflect the admission of additional
limited partners in connection with transfers or conversions of interests as
required by any contract or agreement of Xxxxx, any Xxxxx Subsidiary or any
Xxxxx Non-Controlled Subsidiaries in effect as of the date hereof and except as
permitted by this Agreement;
(l) except in connection with, and as permitted by the
Recapitalization Agreement, not classify or re-classify any unissued shares of
stock; make no change in the number of shares of stock, membership interests or
units of limited partnership interest issued and outstanding, other than
pursuant to (i) the exercise of options disclosed in Schedule 2.3 to the Xxxxx
Disclosure Letter; (ii) the redemption of Xxxxx OP Units under the Xxxxx
Partnership Agreement solely for shares of Xxxxx Common Stock unless, and only
to the extent that, such redemption solely for shares of Xxxxx Common Stock
would reasonably be expected to cause Xxxxx not to qualify as a REIT for federal
income tax purposes; (iii) the conversion of Xxxxx Preferred Shares or Xxxxx
Preferred Units; (iv) the issuance of up to 350,000 shares of Xxxxx in
connection with acquisitions of property by CESI or its Subsidiaries (and the
corresponding issuance of OP Units); or (v) except as permitted by this
Agreement;
(m) except as set forth in Schedule 4.1(m) to the Xxxxx Disclosure
Letter, grant no options or other right or commitment relating to its shares of
capital stock, membership interests or units of limited partnership interest or
any security convertible into its shares of capital stock, membership interests
or units of limited partnership interest, or any security the value of which is
measured by shares of beneficial interest, or any security subordinated to the
claim of its general creditors and not amend or waive any rights under any of
the Xxxxx Stock Options or Xxxxx Stock Rights;
(n) except as provided in Section 5.10 and in connection with the use
of Xxxxx Common Stock to pay the exercise price or tax withholding in connection
with equity-based employee benefit plans by the participants therein, not (i)
authorize, declare, set aside or pay any dividend or make any other distribution
or payment with respect to any Xxxxx Common Stock, Xxxxx Preferred Stock, Xxxxx
OP Unit or Xxxxx Preferred OP Unit or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of stock, membership interests or units
of partnership interest or any option, warrant or right to acquire, or security
convertible into, shares of stock, membership interests or units of partnership
interest of Xxxxx or any Xxxxx Subsidiary, except for redemptions of Xxxxx OP
Units, whether or not outstanding on the date of this Agreement, under the Xxxxx
Partnership Agreement in which solely Xxxxx Common Stock is utilized;
(o) not sell, lease, mortgage, subject to Lien (or, in the case of an
involuntary Lien, fail to have such Lien removed within 30 days of the creation
thereof) or otherwise dispose of any of the Xxxxx Properties, except in
connection with (i) a transaction that is permitted by Section 4.1(j), (ii) a
transaction that is made in the ordinary course of business and is the subject
of a binding contract in existence on the date of this Agreement and disclosed
in Schedule 2.18 to
58
the Xxxxx Disclosure Letter or (iii) in connection with leasing activities
consistent with past practice or good business judgment;
(p) not sell, lease, mortgage, subject to Lien or otherwise dispose of
any of its personal property or intangible property, except in the ordinary
course of business and is not material, individually or in the aggregate;
(q) except as set forth in Schedule 4.1(q) to the Xxxxx Disclosure
Letter, not (i) make any loans, advances or capital contributions to, or
investments in, any other Person, other than loans, advances and capital
contributions to those Xxxxx Subsidiaries or Xxxxx or Xxxxx Non-Controlled
Subsidiaries or its partners that are in existence or are contractually
committed on the date hereof and ordinary course expense advances to employees
and except in connection with a transaction permitted by Section 4.1(j), or (ii)
enter into any new, or amend or supplement any existing, contract, lease or
other agreement with any Xxxxx Non-Controlled Subsidiary other than in the
ordinary course of business consistent with past practice;
(r) not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of claims, in the
ordinary course of business consistent with past practice or in accordance with
their terms, of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the notes thereto)
furnished to Archstone or incurred in the ordinary course of business consistent
with past practice or as otherwise permitted under the terms of this Agreement;
(s) except in connection with the transactions that are permitted by
Section 4.1(j), not guarantee the indebtedness of another Person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic effect of any
of the foregoing;
(t) except as set forth in Schedule 4.1(t) to the Xxxxx Disclosure
Letter, not enter into any Commitment with any officer, director or Affiliate of
Xxxxx or any of the Xxxxx Subsidiaries or Xxxxx Non-Controlled Subsidiaries,
which, if entered into prior to the date hereof, would have been required to be
disclosed on Schedule 2.11 to the Xxxxx Disclosure Letter, or is with a
consultant;
(u) not increase any compensation, pay any bonuses or enter into or
amend any employment, severance or other similar arrangement with any of its
officers, directors or employees earning more than $100,000 per annum, other
than as required by any contract or Employee Plan;
(v) except as set forth in Schedule 4.1(v) to the Xxxxx Disclosure
Letter, not adopt any new employee benefit plan, policy, program or arrangement
or amend any existing Employee Plans or rights;
(w) not settle any stockholder derivative or class action claims
arising out of
59
or in connection with any of the transactions contemplated by this Agreement;
(x) not change the ownership of any of its Subsidiaries or any of its
Non-Controlled Subsidiaries, except (i) changes contemplated by this Agreement,
(ii) changes which arise as a result of the acquisition of Xxxxx OP Units in
exchange for Xxxxx Common Stock pursuant to exercise of the Xxxxx OP Unit
redemption right under the Xxxxx Partnership Agreement or (iii) changes by
parties other than Xxxxx, any of the Xxxxx Subsidiaries or any of the Xxxxx Non-
Controlled Subsidiaries;
(y) not accept a promissory note in payment of the exercise price
payable under any option to purchase shares of Xxxxx Common Stock;
(z) not enter into any Tax Protection Agreement;
(aa) not settle or compromise any material federal, state, local or
foreign tax liability; and
(bb) not authorize or publicly announce an intention to do any of the
foregoing prohibited actions, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing prohibited actions.
4.2 Conduct of Archstone's Business Pending Merger. During the period from
the date of this Agreement to the Effective Times, except as consented to in
writing by Xxxxx or as contemplated in this Agreement, Archstone shall, and
shall cause (or, in the case of Archstone Subsidiaries and Archstone Non-
Controlled Subsidiaries that Archstone does not control, shall use commercially
reasonable efforts to cause) each of the Archstone Subsidiaries and Archstone
Non-Controlled Subsidiaries to:
(a) conduct its business only in the usual, regular and ordinary
course and in substantially the same manner as heretofore conducted, except for
such changes as are expressly required by this Agreement;
(b) use commercially reasonable efforts to preserve intact its
business organizations and goodwill and keep available the services of its
officers and employees;
(c) confer on a regular basis with one or more representatives of
Xxxxx to report operational matters of materiality and, subject to Section 4.3,
any proposals to engage in material transactions;
(d) promptly notify Xxxxx of the occurrence or existence of any
circumstance, event, occurrence, change or effect that has had or would
reasonably be expected to have an Archstone Material Adverse Effect;
(e) promptly deliver to Xxxxx true and correct copies of any report,
statement, schedule or other document filed with the SEC subsequent to the date
of this Agreement;
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(f) maintain its books and records in accordance with GAAP
consistently applied and not change in any material manner any of its methods,
principles or practices of accounting in effect at the Archstone Financial
Statement Date, except as may be required by the SEC, applicable law or GAAP;
(g) duly and timely file all reports, tax returns and other documents
required to be filed with federal, state, local and other authorities, subject
to extensions permitted by law, provided such extensions do not adversely affect
Archstone's status as a qualified REIT under the Code;
(h) except as set forth in Schedule 4.2(h) to the Archstone Disclosure
Letter, maintain in full force and effect insurance coverage substantially
similar to insurance coverage maintained on the date hereof,
(i) unless required by law or necessary to either (1) preserve
Archstone's status as a REIT, or (2) qualify or preserve the status or any
Archstone Subsidiary as a partnership for federal income tax purposes, as a
qualified REIT subsidiary under Section 856(i) of the Code, or as a taxable REIT
subsidiary under Section 856(l) of the Code, as the case may be (in which event
Archstone or the applicable Archstone Subsidiary shall not fail to make such
election in a timely manner), neither (A) make or rescind any express or deemed
election relative to Taxes (except for the Election) nor (B) change in any
material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax returns that have been filed for prior taxable years, except
as may be required by applicable law or except for changes that are reasonably
expected not to have an Archstone Materially Adverse Effect;
(j) except as contemplated by this Agreement and except as set forth
in Schedule 4.2(j) to the Archstone Disclosure Letter, not classify or re-
classify any unissued shares of beneficial interest; make no change in the
number of shares of beneficial interest issued and outstanding, (i) other than
pursuant to the exercise of options disclosed in Schedule 3.3 to the Archstone
Disclosure Letter or (ii) except as permitted by this Agreement;
(k) except as provided in Section 5.10 hereof and in connection with
the use of Archstone Common Shares to pay the exercise price or tax withholding
in connection with equity-based employee benefit plans by the participants
therein or as set forth in Schedule 4.2(l), not (i) authorize, declare, set
aside or pay any dividend or make any other distribution or payment with respect
to any Archstone Common Shares or (ii) directly or indirectly redeem, purchase
or otherwise acquire any shares of beneficial interest, membership interests or
units of partnership interest or any option, warrant or right to acquire, or
security convertible into, shares of beneficial interest, membership interests,
or units of partnership interest of Archstone or any Archstone Subsidiary,
except for redemptions of Archstone Common Shares required under the Archstone
Declaration of Trust in order to preserve the status of Archstone as a REIT
under the Code;
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(l) except as contemplated by this Agreement and except as set forth
on Schedule 4.2(l) to the Archstone Disclosure Letter, not adopt any new
employee benefit plan, policy, program or arrangement or amend any existing
plans or rights;
(m) not settle any stockholder derivative or class action claims
arising out of or in connection with any of the transactions contemplated by
this Agreement;
(n) not (A) enter into or agree to effect any merger, acquisition,
consolidation, reorganization, or other business combination with any third
party in which Archstone is not the surviving party thereto or (B) enter into or
agree to effect any merger, acquisition, exchange offer or other business
combination with a third party in which Archstone is the surviving party that
would result in the issuance of equity securities representing in excess of 15%
of the outstanding Archstone Common Shares on the date any such business
combination is entered into or agreed to unless, in either such case, such
business combination is approved by Xxxxx, which approval shall not be
unreasonably withheld or delayed;
(o) except for the Archstone Declaration of Trust, the Archstone
Bylaws, the New Archstone Declaration of Trust, the New Archstone Bylaws,
the Proposed Archstone Charter Amendments or as set forth on Schedule 4.2(o) to
the Archstone Disclosure Letter, not amend the respective declaration
of trust or bylaws of Archstone or New Archstone; or
(p) not authorize or publicly announce an intention to do any of the
foregoing prohibited actions, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing prohibited actions.
4.3 No Solicitation.
(a) On and after the date hereof and prior to the Effective Time of
the Mergers, Xxxxx (for itself and in its capacity as the sole general partner
of Xxxxx Partnership) agrees that:
(i) none of it, any of its Subsidiaries (including Xxxxx
Partnership) or any of its Non-Controlled Subsidiaries shall invite, initiate,
solicit or encourage, directly or indirectly, any inquiries, proposals,
discussions or negotiations or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its stockholders)
with respect to any direct or indirect (A) merger, consolidation, business
combination, reorganization, recapitalization, liquidation, dissolution or
similar transaction, (B) sale, acquisition, tender offer, exchange offer (or the
filing of a registration statement under the Securities Act in connection with
such an exchange offer), share exchange or other transaction or series of
related transactions that, if consummated, would result in the issuance of
securities representing, or the sale, exchange or transfer of, 15% or more of
the outstanding voting equity securities of Xxxxx or outstanding partnership
interests of Xxxxx Partnership (including, without limitation, partnership
interests and units), except an underwritten public offering of Xxxxx Common
Stock, for cash, or (C) sale, lease, exchange, mortgage, pledge, transfer or
other disposition ("Transfer") of any assets of Xxxxx or Xxxxx Partnership in
one or a series of related transactions that, if consummated, would result in
the Transfer of more than 15% of the assets of
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Xxxxx or Xxxxx Partnership, other than the Mergers (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"), or engage in any
discussions or negotiations with or provide any confidential or non-public
information or data to, or afford access to properties, books or records to, any
Person relating to, or that may reasonably be expected to lead to, an
Acquisition Proposal, or enter into any letter of intent, agreement in principle
or agreement relating to an Acquisition Proposal, or propose publicly to agree
to do any of the foregoing, or otherwise facilitate any effort or attempt to
make or implement an Acquisition Proposal (including, without limitation, by
amending or granting any waiver under, the Xxxxx Rights Agreement);
(ii) Xxxxx will use its best efforts to cause any officer,
director, employee, affiliate, agent, investment banker, financial advisor,
attorney, accountant, broker, finder, consultant or other agent or
representative of itself or any of its Subsidiaries (including Xxxxx
Partnership) or any of its Non-Controlled Subsidiaries (each, a
"Representative") not to engage in any of the activities described in Section
4.3(a)(i);
(iii) (A) it, any of its Subsidiaries (including Xxxxx
Partnership) and any of its Non-Controlled Subsidiaries will immediately cease
and cause to be terminated any existing activities, discussions or negotiations
with any Persons conducted heretofore with respect to any of the foregoing
(including, without limitation, any Acquisition Proposal) and will take
commercially reasonable actions to inform each of its Representatives, and each
of the Persons referred to in Section 4.3(b), of the obligations undertaken in
this Section 4.3 and to cause each of its Representatives to comply with such
obligations, and (B) it shall promptly request each Person, if any, that has
executed a confidentiality agreement within the twenty-four months prior to the
date hereof in connection with its consideration of any Acquisition Proposal to
return or destroy all confidential information heretofore furnished to such
Person by or on behalf of it, any of its Subsidiaries (including Xxxxx
Partnership), and any of its Non-Controlled Subsidiaries; and
(iv) it will (A) notify Archstone promptly (but in any event
within 24 hours), orally and in writing, if it, any of its Subsidiaries
(including Xxxxx Partnership), any of its Non-Controlled Subsidiaries or any of
its Representatives receive (1) an Acquisition Proposal or any amendment or
change in any previously received Acquisition Proposal, (2) any request for
confidential or nonpublic information or data relating to, or for access to the
properties, books or records of, any of its Subsidiaries (including Xxxxx
Partnership), or any of its Non-Controlled Subsidiaries by any Person that has
made, or to Xxxxx'x knowledge may be considering making, an Acquisition
Proposal, or (3) any oral or written expression that any such activities,
discussions or negotiations are sought to be initiated or continued with it,
and, as applicable, include in such notice the identity of the Person making
such Acquisition Proposal, indication or request, the material terms of such
Acquisition Proposal, indication or request and, if in writing, shall promptly
deliver to Archstone copies of any proposals, indications of interest,
indication or request along with all other related documentation and
correspondence; and (B) will keep Archstone informed of the status and material
terms of (including all changes to the status or material terms of) any such
Acquisition Proposal, indication or request.
63
(b) Notwithstanding Section 4.3(a), the Board of Directors of Xxxxx
(including with respect to Xxxxx'x capacity as the sole general partner of Xxxxx
Partnership) shall not be prohibited from furnishing information to or entering
into discussions or negotiations with, any Person that makes a bona fide written
Acquisition Proposal to the Board of Directors of Xxxxx after the date hereof
which was not invited, initiated, solicited or encouraged, directly or
indirectly, by it, any of its Subsidiaries (including Xxxxx Partnership), any of
its Non-Controlled Subsidiaries or any of its Representatives on or after the
date hereof, if, and only to the extent that (i) a majority of the Board of
Directors of Xxxxx determines in good faith, after consultation with its
financial advisors of nationally recognized reputation and outside legal
counsel, that such Acquisition Proposal is reasonably likely to result in a
Superior Acquisition Proposal (as defined herein), (ii) Xxxxx (including Xxxxx
Partnership) complies with all of its obligations under this Agreement, (iii)
prior to furnishing such information to, or entering into discussions or
negotiations with, such Person, Xxxxx provides written notice to Archstone to
the effect that it is furnishing information to, or entering into discussions
with such Person and (iv) Xxxxx enters into a confidentiality agreement with
such Person the material terms of which are (without regard to the terms of such
Acquisition Proposal) in all material respects no less favorable to such party,
and no less restrictive to the Person making such Acquisition Proposal, than
those contained in the Confidentiality Agreement, dated April 19, 2001, between
Xxxxx and Archstone (the "Confidentiality Agreement").
(c) Notwithstanding anything to the contrary set forth in Section
4.3(a) or 4.3(b), in the event that an Acquisition Proposal constitutes a
Superior Acquisition Proposal (as defined herein), nothing contained in this
Agreement shall prohibit the Board of Directors of Xxxxx from withdrawing,
modifying, amending or qualifying its recommendation of this Agreement and the
Merger as required under Section 5.1(d) hereof and recommending such Superior
Acquisition Proposal to its stockholders: (i) if but only if, Xxxxx: (A)
complies fully with this Section 4.3 and (B) provides Archstone with at least
three (3) business days' prior written notice of its intent to withdraw, modify,
amend or qualify its recommendation of this Agreement or the Merger, (ii) if, in
the event that during such three (3) business days Archstone makes a counter
proposal to such Superior Acquisition Proposal (any such counter proposal being
referred to in this Agreement as a "Counter Proposal"), Xxxxx'x Board of
Directors in good faith, taking into account the advice of its outside financial
advisors of nationally recognized reputation, determines (A) that the Counter
Proposal is not at least as favorable to Xxxxx'x stockholders as the Superior
Acquisition Proposal, from a financial point of view, or (B) the Counter
Proposal is not at least as favorable generally to Xxxxx'x stockholders (taking
into account all financial and strategic considerations and other relevant
factors, including relevant legal, financial, regulatory and other aspects of
such proposals, and the conditions, prospects and time required for completion
of such proposal) as the Superior Acquisition Proposal, and (iii) Xxxxx shall
have terminated this Agreement in accordance with Section 7.1(h).
(d) For all purposes of this Agreement, "Superior Acquisition
Proposal" means a bona fide written proposal made by a third party to acquire,
directly or indirectly, Xxxxx (and/or Xxxxx Partnership) pursuant to a tender or
exchange offer, merger, share exchange, consolidation or sale of all or
substantially all of the assets of itself and its Subsidiaries (including Xxxxx
Partnership) or otherwise (i) on terms which a majority of Xxxxx'x Board of
64
Directors determines in good faith, (A) after consultation with its financial
advisors of nationally recognized reputation, are superior, from a financial
point of view, to Xxxxx'x stockholders to those provided for in the Merger and
(B) to be more favorable generally to Xxxxx'x stockholders (taking into account
all financial and strategic considerations and other relevant factors, including
relevant legal, financial, regulatory and other aspects of such proposals, and
the conditions, prospects and time required for completion of such proposal)
than the Merger, (ii) for which financing, to the extent required, in the
reasonable judgment of Xxxxx'x Board of Directors is capable of being obtained
and (iii) which Xxxxx'x Board of Directors determines in good faith is
reasonably capable of being consummated.
(e) Any disclosure that the Board of Directors of Xxxxx may be
compelled to make with respect to the receipt of an Acquisition Proposal in
order to comply with its duties to shareholders imposed by applicable law or
Rule 14d-9 or 14e-2 of the Exchange Act will not constitute a violation of this
Section 4.3.
(f) Nothing in this Section 4.3 shall (i) permit Xxxxx to terminate
this Agreement (except as expressly provided in Article 7) or (ii) affect any
other obligations of Xxxxx under this Agreement.
4.4 Affiliates. Prior to the Effective Time of the Merger, Xxxxx shall
cause to be prepared and delivered to Archstone a list (reasonably satisfactory
to counsel for Archstone) identifying all Persons who, at the time of the Xxxxx
Stockholders Meeting and the Archstone Shareholders Meeting, may be deemed to be
"affiliates" of Xxxxx or Xxxxx Partnership as that term is used in paragraphs
(c) and (d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates").
Xxxxx shall use its commercially reasonable efforts to cause each Person who is
identified as a Rule 145 Affiliate in such list to deliver to Archstone on or
prior to the Effective Time of the Merger a written agreement, in the form
previously approved by the parties hereto, that such Rule 145 Affiliate will not
sell, pledge, transfer or otherwise dispose of any New Archstone Common Shares
issued to such Rule 145 Affiliate pursuant to the Merger, except pursuant to an
effective registration statement under the Securities Act or in compliance with
paragraph (d) of Rule 145 or as otherwise permitted by the Securities Act and
except for or pursuant to pledges which are in effect as of the Merger Closing
Date or pledges which are otherwise permitted under the Shareholders Agreement.
New Archstone shall be entitled to place legends as specified in such written
agreements on the certificates representing any New Archstone Common Shares to
be received pursuant to the terms of this Agreement by such Rule 145 Affiliates
who have executed such agreements and to issue appropriate stop transfer
instructions to the transfer agent for the New Archstone Common Shares or
Archstone Surviving Subsidiary Common Shares, issued to such Rule 145
Affiliates, consistent with the terms of such agreements. Each of Archstone
Surviving Subsidiary and New Archstone shall timely file the reports required to
be filed by it under the Exchange Act and the rules and regulations adopted by
the SEC thereunder, and it will take such further action as any Rule 145
Affiliate of Xxxxx or Archstone may reasonably request, all to the extent
required from time to time to enable such Rule 145 Affiliate to sell shares of
beneficial interest of New Archstone received by such Rule 145 Affiliate in the
Merger without registration under the Securities Act pursuant to (i) Rule
145(d)(1) under the Securities Act, as such rule may be amended from to time, or
(ii) any successor rule or regulation hereafter adopted by the SEC.
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4.5 Other Actions. Each of Xxxxx and Xxxxx Partnership, on the one hand,
and Archstone and New Archstone, on the other hand, shall not take, and shall
use commercially reasonable efforts to cause their respective Subsidiaries not
to take, any action that would result in (i) any of the representations and
warranties of such party (without giving effect to any "knowledge"
qualification) set forth in this Agreement becoming untrue such that any of the
conditions to the Merger set forth in Section 6.2(a) or Section 6.3(a), as the
case may be, are incapable of being satisfied or (ii) except as expressly
required by Section 4.3, any of the conditions to the Merger set forth in
Article 6 not being satisfied.
ARTICLE 5
ADDITIONAL COVENANTS
5.1 Preparation of the Form S-4 and the Proxy Statement; Xxxxx Stockholders
Meeting, Xxxxx Partnership Consent Solicitation and Archstone Shareholders
Meeting.
(a) As promptly as practicable after execution of this Agreement, (i)
each of Xxxxx and Archstone shall prepare and file with the SEC (with
appropriate requests for confidential treatment, unless the parties hereto
otherwise agree) under the Exchange Act, one or more joint proxy
statements/prospectuses, forms of proxies and information statements (such joint
proxy statement(s)/prospectus(es) and information statements together with any
amendments or supplements thereto, the "Joint Proxy Statement") relating to the
shareholder meeting of Xxxxx and the shareholder meeting of Archstone, the vote
of the stockholders of Xxxxx with respect to the Merger and the shareholders of
Archstone with respect to the Merger and the Archstone Merger (which shall
include a vote for both the Primary Archstone Merger and the Alternative
Archstone Merger), and the consent, if any, of partners of Xxxxx Partnership in
connection with any required Xxxxx Partner Approval and (ii) in connection with
the clearance by the SEC of the Joint Proxy Statement, each of Archstone, New
Archstone and Xxxxx, if applicable, shall prepare and file with the SEC under
the Securities Act one or more registration statements on Form S-4 (such
registration statements, together with any amendments or supplements thereto,
the "Form S-4"), in which the Joint Proxy Statement will be included, as one or
more prospectuses in connection with the registration under the Securities Act
of (A) the New Archstone Common Shares and New Archstone Preferred Shares to be
distributed to the holders of Xxxxx Common Stock and Xxxxx Preferred Shares in
the Merger and to the holders of Archstone Shares of Beneficial Interest in the
Archstone Merger and (B) the Archstone Surviving Subsidiary Class A Shares to be
distributed to the holders of Xxxxx OP Units in the Partnership Merger and the
corresponding New Archstone Common Shares that may be issued upon the redemption
of such Archstone Surviving Subsidiary Class A Shares pursuant to the New
Archstone Declaration of Trust. The respective parties will cause the Proxy
Statement and the Form
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S-4 to comply as to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and regulations
thereunder. Each of Xxxxx, Xxxxx Partnership, Archstone and New Archstone shall
furnish all information about itself and its business and operations and all
necessary financial information to the other as the other may reasonably request
in connection with the preparation of the Joint Proxy Statement and the Form
S-4. Each of Archstone, New Archstone and Xxxxx, if applicable, shall use its
commercially reasonable efforts, and Xxxxx will cooperate with Archstone, to
have the Form S-4 declared effective by the SEC as promptly as practicable
(including clearing the Proxy Statement with the SEC). Each of Xxxxx and Xxxxx
Partnership, on the one hand, and Archstone and New Archstone, on the other
hand, agree promptly to correct any information provided by it for use in the
Joint Proxy Statement and the Form S-4 if and to the extent that such
information shall have become false or misleading in any material respect, and
each of the parties hereto further agrees to take all steps necessary to amend
or supplement the Joint Proxy Statement and the Form S-4 and to cause the Joint
Proxy Statement and the Form S-4 as amended or supplemented to be filed with the
SEC and to be disseminated to their respective stockholders and shareholders and
partners, in each case as and to the extent required by applicable federal and
state securities laws. Each of Xxxxx, Xxxxx Partnership, Archstone and New
Archstone agrees that the information provided by it for inclusion in the Joint
Proxy Statement or the Form S-4 and each amendment or supplement thereto, at the
time of mailing thereof and at the time of the respective meetings of
stockholders and shareholders of Xxxxx and Archstone and at the time of the
respective taking of consents, if any, of partners of Xxxxx Partnership, will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Archstone and New Archstone will advise and deliver copies (if any) to Xxxxx,
promptly after it receives notice thereof, of any request by the SEC for
amendment of the Joint Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information (regardless
of whether such requests relate to Archstone or New Archstone, on the one hand,
or Xxxxx or Xxxxx Partnership, on the other hand), and Archstone and New
Archstone shall promptly notify Xxxxx, and Xxxxx shall promptly notify
Archstone, if applicable, of (i) the time when the Form S-4 has become
effective, (ii) the filing of any supplement or amendment thereto, (iii) the
issuance of any stop order, and (iv) the suspension of the qualification and
registration of the New Archstone Common Shares, New Archstone Preferred Shares
and Archstone Surviving Subsidiary Shares of Beneficial Interest issuable in
connection with the Mergers or the Archstone Merger.
(b) Each of Xxxxx, Xxxxx Partnership, Archstone and New Archstone
shall use its commercially reasonable efforts to timely mail the joint proxy
statement/prospectus contained in the Form S-4 to its shareholders. It shall be
a condition to the mailing of the joint proxy statement/prospectus that (i)
Archstone shall have received a "comfort" letter from Xxxxxx Xxxxxxxx LLP,
independent public accountants for Xxxxx and Xxxxx Partnership, of the kind
contemplated by the Statement of Auditing Standards with respect to Letters to
Underwriters promulgated by the American Institute of Certified Public
Accountants (the "AICPA Statement"), dated as of the date on which the Form S-4
shall become effective and as of the Effective Time of the Merger, addressed to
Archstone, in form and substance reasonably satisfactory to Archstone,
concerning the procedures undertaken by Xxxxxx Xxxxxxxx LLP with respect to the
financial statements and information of Xxxxx, Xxxxx Partnership and their
Subsidiaries and Non-Controlled Subsidiaries contained in the Form S-4 and the
other matters contemplated by the AICPA Statement and otherwise customary in
scope and substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement and
(ii) Xxxxx shall have received a "comfort" letter from
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KPMG LLP, independent public accountants for Archstone, of the kind contemplated
by the AICPA Statement, dated as of the date on which the Form S-4 shall become
effective and as of the Effective Time of the Merger, addressed to Xxxxx and
Xxxxx Partnership, in form and substance reasonably satisfactory to Xxxxx,
concerning the procedures undertaken by KPMG LLP with respect to the financial
statements and information of Archstone, New Archstone and their Subsidiaries
contained in the Form S-4 and the other matters contemplated by the AICPA
Statement and otherwise customary in scope and substance for letters delivered
by independent public accountants in connection with transactions such as those
contemplated by this Agreement. Each of Xxxxx and Xxxxx Partnership also shall
use commercially reasonable efforts to cause Xxxxx & Xxxxxxx L.L.P. or other
counsel reasonably satisfactory to Archstone to have delivered an opinion, which
opinion shall be filed as an exhibit to the Form S-4, as to the federal income
tax matters described in clause (i) of Section 6.2(d) and Section 6.3(e) and
such other federal income tax matters as are required to be addressed in the
Form S-4 and the Joint Proxy Statement under the applicable rules of the SEC.
Archstone shall use commercially reasonable efforts to cause Xxxxx, Xxxxx &
Xxxxx or other counsel reasonably satisfactory to Xxxxx to have delivered an
opinion, which opinion shall be filed with the SEC as an exhibit to the Form
S-4, as to the federal income tax matters described in clause (ii) of Section
6.2(d), Section 6.2(e) and Section 6.3(d) and such other federal income tax
matters as are required to be addressed in the Form S-4 and the Joint Proxy
Statement under the applicable rules of the SEC. Such opinions shall contain
customary exceptions, assumptions and qualifications and be based upon customary
representations.
(c) Archstone will duly call and give notice of and, as soon as
practicable following the date of this Agreement (but in no event sooner than 20
business days following the date the Joint Proxy Statement is mailed to the
shareholders of Archstone), convene and hold a meeting of its shareholders (the
"Archstone Shareholders Meeting") for the purpose of obtaining the Archstone
Shareholder Approvals. Archstone shall, through its Board of Trustees, recommend
to its shareholders approval of this Agreement, the Merger, the Archstone
Merger, the Proposed Archstone Charter Amendments and the transactions
contemplated by this Agreement.
(d) Xxxxx will duly call and give notice of and, as soon as
practicable following the date of this Agreement (but in no event sooner than 20
business days following the date the Joint Proxy Statement is mailed to the
shareholders of Xxxxx), convene and hold a meeting of its shareholders (the
"Xxxxx Stockholders Meeting") for the purpose of obtaining the Xxxxx Stockholder
Approvals. Xxxxx shall, through its Board of Directors, recommend to its
shareholders approval of this Agreement, the Merger and the transactions
contemplated by this Agreement and include such recommendation in the Proxy
Statement; provided, however, that prior to the Xxxxx Stockholders Meeting, such
recommendation may be withdrawn, modified, amended or qualified if and only to
the extent permitted by Section 4.3(c) hereof.
(e) Archstone and Xxxxx shall use their commercially reasonable
efforts to convene their respective shareholder meetings on the same day, which
day, subject to the provisions of Sections 5.1(c), 5.1(d) and 5.3, shall be a
day not later than 60 days after the date the Joint Proxy Statement is mailed.
68
(f) If on the date for the Archstone Shareholders Meeting and Xxxxx
Stockholders Meeting established pursuant to Section 5.1(e) of this Agreement,
either Archstone or Xxxxx has not received duly executed proxies for a
sufficient number of votes to approve the Merger, then both parties shall
recommend the adjournment of their respective shareholders meetings until one or
more dates not later than the date 10 days after the originally scheduled date
of the shareholders meetings.
(g) Xxxxx shall request written consents for approval by the limited
partners of Xxxxx Partnership of each of the matters described in the definition
of Xxxxx Partner Approvals. Xxxxx shall vote in favor of or consent to, as
applicable, each of the matters described in the definition of Xxxxx Partner
Approvals, to the extent approval thereof is required by the Xxxxx Partnership
Agreement. Xxxxx shall recommend to the limited partners of Xxxxx Partnership
that they approve such matters. Xxxxx shall execute its written consent to each
of the matters described in the definition of Xxxxx Partner Approvals, on the
20th business day after mailing of the Joint Proxy Statement to holders of the
Xxxxx OP Units and Xxxxx Preferred OP Units.
5.2 Access to Information; Confidentiality. Subject to the requirements of
confidentiality agreements with third parties in existence on the date hereof,
each of the parties shall, and shall cause each of its Subsidiaries and its
Non-Controlled Subsidiaries to, afford to the other parties and to the officers,
employees, accountants, counsel, financial advisors and other representatives of
such other parties, reasonable access during normal business hours prior to the
Effective Time of the Merger to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, each of
the parties shall, and shall cause each of its Subsidiaries and its
Non-Controlled Subsidiaries to, furnish promptly to the other parties (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as such other party may reasonably request. Within fifteen (15)
business days after the end of each calendar month, Xxxxx shall furnish to
Archstone a copy of a regularly prepared financial report which sets forth the
aggregate indebtedness outstanding of Xxxxx, the Xxxxx Subsidiaries and the
Xxxxx Non-Controlled Subsidiaries (including any additional indebtedness) as of
such month end. Each of the parties shall, and shall cause its Subsidiaries and
its Non-Controlled Subsidiaries to, use commercially reasonable efforts to cause
its officers, employees, accountants, counsel, financial advisors and other
representatives and affiliates to, hold any nonpublic information in confidence
in accordance with the Confidentiality Agreement, which shall remain in full
force and effect pursuant to the terms thereof, notwithstanding the execution
and delivery of this Agreement or the termination hereof.
5.3 Notification.
(a) Subject to the terms and conditions herein provided, Xxxxx and
Xxxxx Partnership shall: (i) use commercially reasonable efforts to cooperate
with Archstone (or following the Archstone Merger, New Archstone) in (A)
determining which filings are required to be made prior to the Effective Time of
the Merger with, and which consents, approvals,
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permits or authorizations are required to be obtained prior to the Effective
Time of the Merger from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions and any third parties in
connection with the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, any filing under the HSR Act, and (B) timely making all such filings
and timely seeking all such consents, approvals, permits and authorizations;
(ii) use commercially reasonable efforts (other than the payment of money which
is not contractually required to be paid) to obtain in writing any consents
required from third parties to effectuate the Mergers, such consents to be in
form reasonably satisfactory to each of the parties; (iii) use best efforts to
obtain the Xxxxx Stockholder Approvals and the Xxxxx Partner Approvals; and (iv)
use commercially reasonable efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Effective Time of the Merger any
further action is necessary or desirable to carry out the purpose of this
Agreement, Xxxxx and Xxxxx Partnership shall take all such necessary action.
(b) Subject to the terms and conditions herein provided, Archstone and
New Archstone shall: (i) use commercially reasonable efforts to cooperate with
Xxxxx and Xxxxx Partnership in (A) determining which filings are required to be
made prior to the Effective Time of the Merger with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time of the Merger from, governmental or regulatory authorities of the
United States, the several states and foreign jurisdictions and any third
parties in connection with the execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, including, without
limitation, any filing under the HSR Act, and (B) timely making all such filings
and timely seeking all such consents, approvals, permits and authorizations;
(ii) use commercially reasonable efforts (other than the payment of money which
is not contractually required to be paid) to obtain in writing any consents
required from third parties to effectuate the Archstone Merger and the Mergers,
such consents to be in form reasonably satisfactory to each of the parties;
(iii) use best efforts to obtain the Archstone Shareholder Approvals; and (iv)
use commercially reasonable efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary, proper or
appropriate to consummate and make effective the transactions contemplated by
this Agreement. If at any time after the Effective Time of the Merger any
further action is necessary or desirable to carry out the purpose of this
Agreement, Archstone and New Archstone shall take all such necessary action.
(c) Xxxxx and Xxxxx Partnership shall use commercially reasonable
efforts to obtain from Xxxxxx Xxxxxxxx LLP access to all work papers relating to
audits of Xxxxx and Xxxxx Partnership performed by Xxxxxx Xxxxxxxx LLP, and the
continued cooperation of Xxxxxx Xxxxxxxx LLP with regard to the preparation of
consolidated financial statements for the Surviving Trust and the Surviving
Entity.
(d) Xxxxx and Xxxxx Partnership shall give prompt notice to Archstone
and New Archstone, and Archstone and New Archstone shall give prompt notice to
Xxxxx and Xxxxx Partnership, (i) if such party becomes aware that any
representation or warranty made by it
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contained in this Agreement that is qualified as to materiality becomes untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becomes untrue or inaccurate in any material respect or (ii) of the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.4 Tax Matters.
(a) Each of Archstone and New Archstone shall use its commercially
reasonable efforts before the effective time of the Archstone Merger to cause
the Archstone Merger to qualify as one or more reorganizations under the
provisions of Section 368(a)(1)(F) of the Code and to obtain the opinions of
counsel referred to in Sections 6.2(e) and 6.3(e).
(b) Each of Archstone, New Archstone and Xxxxx shall use its
commercially reasonable efforts before and after the Effective Time of the
Merger to cause the Merger to qualify as a reorganization under the provisions
of Sections 368(a) of the Code and the Partnership Merger to be treated as
described in Section 1.4(b) and Sections 6.2(e) and 6.3(e) and to obtain with
respect to the Mergers the opinions of counsel referred to in Sections 6.2(e)
and 6.3(e).
(c) Archstone Surviving Subsidiary shall elect pursuant to Treasury
Regulation (S) 301.7701-3(c)(1)(i) to be treated either as a domestic eligible
entity with a single owner electing to be disregarded as a separate entity or as
a partnership, as applicable, effective not later than one day prior to the
Merger Closing Date and shall file not later than one day prior to the Merger
Closing Date, a properly completed and executed Form 8832 with the Internal
Revenue Service to effect such election.
5.5 Public Announcements. The initial press release to be issued with
respect to the transactions contemplated by this Agreement will be in the form
agreed to by the parties prior to the execution of this Agreement. Xxxxx will
consult with Archstone before issuing, and provide Archstone the opportunity to
review and comment upon, any material press release or other written public
statement, including, without limitation, any press release or other written
public statement which addresses in any manner the transactions contemplated by
this Agreement (except for releases which are consistent with prior written
public statements), and shall not issue any such press release or make any such
written public statement prior to such consultation, except as may be required
by applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
5.6 Listing. New Archstone shall use commercially reasonable efforts to
cause the New Archstone Common Shares, New Archstone Series A Preferred Shares,
New Archstone Series C Preferred Shares and New Archstone Series D Preferred
Shares to be issued in the Merger (or upon redemption of Archstone Common Shares
pursuant to the Archstone Declaration of Trust) to be approved for listing on
the New York Stock Exchange (the "NYSE"),
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subject to official notice of issuance, prior to the Effective Time of the
Merger.
5.7 Transfer and Gains Taxes. Each party shall cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement (together with
any related interests, penalties or additions to tax, "Transfer and Gains
Taxes"). From and after the Effective Time of the Merger, the Surviving Trust
and the Surviving Entity shall pay or cause to be paid, without deduction or
withholding from any amounts payable to the holders of New Archstone Common
Shares or Archstone Surviving Subsidiary Class B Shares, all Transfer and Gains
Taxes (which term shall not in any event be construed to include for these
purposes any Tax imposed under the Code).
5.8 Benefit Plans and Other Employee Arrangements.
(a) Benefit Plans. After the Effective Time of the Merger, all
employees of Xxxxx, the Xxxxx Subsidiaries, any Xxxxx Non-Controlled
Subsidiaries and any Subsidiary thereof who are employed by the Surviving Entity
or any of the Surviving Entity's Subsidiaries shall be eligible to participate
in substantially the same manner as other similarly situated employees of the
Surviving Entity or any of the Surviving Entity's Subsidiaries who were formerly
employees of Archstone in any Pension Plan or Welfare Plan sponsored or
maintained by the Surviving Entity or the Surviving Trust after the Effective
Time of the Merger (the "Survivor Plans") or, if Archstone determines it is not
practicable for such employees to do so immediately after the Effective Time of
the Merger, then such employees shall continue to be eligible to participate in
Employee Plans which constitute Pension Plans or Welfare Plans which are
continued by the Surviving Entity or the Surviving Trust until such time as
Archstone determines it is practicable to include them in the Survivor Plans as
contemplated above. With respect to each Survivor Plan, service with Xxxxx or
any Xxxxx Subsidiary (as applicable) and the predecessor of any of them shall be
included for purposes of determining eligibility to participate, vesting (if
applicable) and determination of the level of entitlement to (other than benefit
accrual under a defined benefit plan), benefits under such Survivor Plans to the
extent such service was taken into account for similar purposes under a
corresponding Employee Plan. Archstone shall, or shall cause its Subsidiaries
to, (i) waive all limitations as to preexisting conditions, exclusions and
waiting periods with respect to participation and coverage requirements of the
Survivor Plan which is applicable to all employees of Xxxxx, the Xxxxx
Subsidiaries, any Xxxxx Non-Controlled Subsidiaries or any Subsidiary thereof
who are employed by the Surviving Entity under any Welfare Plan that such
employees may be eligible to participate in after the Effective Time of the
Merger, other than limitations or waiting periods that are in effect with
respect to such employees as of the Effective Time of the Merger under a
Corresponding Employee Plan and that have not been satisfied as of the Effective
Time of the Merger, and (ii) provide each such employee of Xxxxx, the Xxxxx
Subsidiaries, any Xxxxx Non-Controlled Subsidiaries or any Subsidiary thereof
who is employed by the Surviving Entity or any of the Surviving Entity's
Subsidiaries with credit for any co-payments and deductibles paid during the
plan year prior to the Effective Time of the Merger under a corresponding
Employer Plan for purposes of satisfying any applicable
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deductible or out-of- pocket requirements under any Survivor Plan which is a
Welfare Plan that such employees are eligible to participate in after the
Effective Time of the Merger.
(b) Stock Option and Restricted Stock Plans. The stock option plans or
programs of Xxxxx and the restricted stock plans or programs of Xxxxx shall be
discontinued as of the Effective Time of the Merger.
(c) Xxxxx Stock Options. Immediately prior to the date on which the
Xxxxx stockholders approve the Merger, each outstanding Xxxxx Stock Option
shall, effective as of such time, become fully vested and exercisable to the
extent not already so vested and exercisable and, to the extent not otherwise
provided in the applicable option agreement as permitted by applicable law, each
such Xxxxx Stock Option shall be automatically converted at the Effective Time
of the Merger into an option (a "Substituted Option") to purchase a number of
New Archstone Common Shares equal to the number of shares of Xxxxx Common Stock
that could have been purchased (assuming full vesting) under such Xxxxx Stock
Option multiplied by 1.975 (rounded down to the nearest whole number of shares
of Xxxxx Common Stock) at an exercise price per New Archstone Common Share equal
to the per-share option exercise price specified in the Xxxxx Stock Option
divided by 1.975 (rounded up to the nearest whole cent). Such Substituted Option
shall otherwise be subject to the same terms and conditions as such Xxxxx Stock
Option. For purposes of expiration and otherwise, the date of grant of the
Substituted Option shall be the date on which the corresponding Xxxxx Stock
Option was granted. As soon as practicable after the date hereof and subject to
applicable law, Archstone shall offer to purchase, subject to consummation of
the Mergers, all outstanding Xxxxx Stock Options from the holders thereof for an
amount in cash in respect thereof equal to the product of (i) the excess, if
any, of (A) $49.48 over (B) the exercise price of such Xxxxx Stock Option and
(ii) the number of shares of Xxxxx Common Stock subject thereto. If the holder
of any such Xxxxx Stock Option tenders such option prior to 11:59 p.m., Mountain
Time, on the second business day following the Effective Time of the Merger,
then within seven business days after the Effective Time of the Merger,
Archstone shall, subject to reduction for required withholding taxes, pay to
each such tendering former holder of Xxxxx Stock Options the purchase price
thereof. As promptly as reasonably practicable after the Effective Time of the
Merger, New Archstone shall issue to each holder of an outstanding Xxxxx Stock
Option a document evidencing the foregoing assumption by New Archstone. In
respect of each Xxxxx Stock Option assumed by New Archstone, but not tendered
for cash, and converted into a substituted option, and the New Archstone Common
Shares underlying such Substituted Option, New Archstone shall, as soon as
practicable after the Effective Time of the Merger, file and keep current a
Registration Statement on Form S-8 or other appropriate registration statement
for as long as Substituted Options remain outstanding.
(d) Xxxxx Stock Rights. All Xxxxx Stock Rights set forth in Schedule
5.8(d) of the Xxxxx Disclosure Letter shall, by virtue of this Agreement and
without further action of Xxxxx, Archstone or the holder of such Xxxxx Stock
Rights, to the extent required in the plan, agreement or instrument pursuant to
which such shares of restricted stock were granted, vest and become free of all
restrictions immediately prior to the Effective Time of the Merger and shall be
converted into the Merger Consideration upon the Effective Time of the Merger
pursuant to Section 1.12.
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5.9 Indemnification.
(a) From and after the Effective Time of the Merger, the Surviving
Trust and the Surviving entity (collectively, the "Indemnifying Parties") shall
provide exculpation and indemnification for each individual who is now or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time of the Merger, an officer or director of Xxxxx or any Xxxxx Subsidiary (the
"Indemnified Parties") which is the same as the exculpation and indemnification
provided to the Indemnified Parties by Xxxxx and the Xxxxx Subsidiaries
immediately prior to the Effective Time of the Merger in its charter, Bylaws or
in its partnership, operating or similar agreement, as in effect on the date
hereof.
(b) In addition to the rights provided in Section 5.9(a) above, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any action by or on behalf of any or all security holders of Xxxxx,
New Archstone, or Archstone Surviving Subsidiary or any Xxxxx Subsidiary or
Archstone Subsidiary, or by or in the right of Xxxxx, Archstone, New Archstone,
the Surviving Trust, the Surviving Entity or Archstone Surviving Subsidiary or
any Xxxxx Subsidiary or Archstone Subsidiary, or any claim, action, suit,
proceeding or investigation in which any individual who is now, or has been, at
any time prior to the date hereof, or who becomes prior to the Effective Time of
the Merger, an officer, employee or director of Xxxxx or any Xxxxx Subsidiary
(the "Indemnification Parties") is, or is threatened to be, made a party based
in whole or in part on, or arising in whole or in part out of, or pertaining to
(i) the fact that he is or was an officer, employee or director of Xxxxx or any
of the Xxxxx Subsidiaries or any action or omission by such individual in his
capacity as a director, or (ii) this Agreement or the transactions contemplated
by this Agreement, whether in any case asserted or arising before or after the
Effective Time of the Merger, the Indemnifying Parties shall, from and after the
Effective Time of the Merger, indemnify and hold harmless, as and to the full
extent permitted by applicable law, each Indemnification Party against any
losses, claims, liabilities, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in accordance
herewith in connection with any such threatened or actual claim, action, suit,
proceeding or investigation. Any Indemnification Party proposing to assert the
right to be indemnified under this Section 5.9(b) shall, promptly after receipt
of notice of commencement of any action against such Indemnification Party in
respect of which a claim is to be made under this Section 5.9(b) against the
Indemnifying Parties, notify the Indemnifying Parties of the commencement of
such action, enclosing a copy of all papers served; provided, however, that the
failure to provide such notice shall not affect the obligations of the
Indemnifying Parties except to the extent such failure to notify materially
prejudices the Indemnifying Parties' ability to defend such claim, action, suit,
proceeding or investigation; and provided further, however, that, in the case of
any action pending at the Effective Time of the Merger, notification pursuant to
this Section 5.9(b) shall be received by Archstone prior to such Effective Time.
If any such action is brought against any of the Indemnification Parties and
such Indemnification Parties notify the Indemnifying Parties of its
commencement, the Indemnifying Parties will be entitled to participate in and,
to the extent that they elect by delivering written notice to such
Indemnification Parties promptly after receiving notice of the commencement of
the action from
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the Indemnification Parties, to assume the defense of the action and after
notice from the Indemnifying Parties to the Indemnification Parties of their
election to assume the defense, the Indemnifying Parties will not be liable to
the Indemnification Parties for any legal or other expenses except as provided
below. If the Indemnifying Parties assume the defense, the Indemnifying Parties
shall have the right to settle such action without the consent of the
Indemnification Parties; provided, however, that the Indemnifying Parties shall
be required to obtain such consent (which consent shall not be unreasonably
withheld) if the settlement includes any admission of wrongdoing on the part of
the Indemnification Parties or any decree or restriction on the Indemnification
Parties; provided further, however, that no Indemnifying Parties, in the defense
of any such action shall, except with the consent of the Indemnification Parties
(which consent shall not be unreasonably withheld), consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnification
Parties of a release from all liability with respect to such action. The
Indemnification Parties will have the right to employ their own counsel in any
such action, but the fees, expenses and other charges of such counsel will be at
the expense of such Indemnification Parties unless (i) the employment of counsel
by the Indemnification Parties has been authorized in writing by the
Indemnifying Parties, (ii) the Indemnification Parties have reasonably concluded
(based on written advice of counsel to the Indemnification Parties) that there
may be legal defenses available to them that are different from or in addition
to and inconsistent with those available to the Indemnifying Parties, (iii) a
conflict or potential conflict exists (based on written advice of counsel to the
Indemnification Parties) between the Indemnification Parties and the
Indemnifying Parties (in which case the Indemnifying Parties will not have the
right to direct the defense of such action on behalf of the Indemnification
Parties) or (iv) the Indemnifying Parties have not in fact employed counsel to
assume the defense of such action within a reasonable time after receiving
notice of the commencement of the action from the Indemnification Parties, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the Indemnifying Parties and shall promptly be
paid by each Indemnifying Party as they become due and payable in advance of the
final disposition of the claim, action, suit, proceeding or investigation to the
fullest extent and in the manner permitted by law; provided, however, that in no
event shall any contingent fee arrangement be considered reasonable.
Notwithstanding the foregoing, the Indemnifying Parties shall not be obligated
to advance any expenses or costs prior to receipt of an undertaking by or on
behalf of the Indemnification Party to repay any expenses advanced if it shall
ultimately be determined that the Indemnification Party is not entitled to be
indemnified against such expense. It is understood that the Indemnifying Parties
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees, disbursements and other charges
of more than one separate firm admitted to practice in such jurisdiction at any
one time for all such Indemnification Parties unless (a) the employment of more
than one counsel has been authorized in writing by the Indemnifying Parties, (b)
any of the Indemnification Parties have reasonably concluded (based on written
advice of counsel to the Indemnification Parties) that there may be legal
defenses available to them that are different from or in addition to and
inconsistent with those available to other Indemnification Parties or (c) a
conflict or potential conflict exists (based on written advice of counsel to the
Indemnification Parties) between any of the Indemnification Parties and the
other Indemnification Parties, in each case of which the Indemnifying Parties
shall be obligated to pay the reasonable fees and expenses of such additional
counsel or counsels.
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Notwithstanding anything to the contrary set forth in this Agreement, the
Indemnifying Parties (i) shall not be liable for any settlement effected without
their prior written consent and (ii) shall not have any obligation hereunder to
any Indemnification Party to the extent that a court of competent jurisdiction
shall determine in a final and non-appealable order that such indemnification is
prohibited by applicable law. In the event of a final and non-appealable
determination by a court that any payment of expenses is prohibited by
applicable law, the Indemnification Parties shall promptly refund to the
Indemnifying Parties the amount of all such expenses theretofore advanced
pursuant hereto.
(c) At or prior to the Effective Time of the Merger, Archstone and New
Archstone shall purchase directors' and officers' liability insurance covering
acts or omissions occurring prior to the Effective Time of the Merger for a
period of six years with respect to those individuals who are currently covered
by Xxxxx'x directors' and officers' liability insurance policy on terms with
respect to such coverage and amount, taken together, no less favorable to
Xxxxx'x directors and officers currently covered by such insurance than those of
such policy in effect on the date hereof.
(d) This Section 5.9 is intended for the irrevocable benefit of, and
to grant third-party rights to, the Indemnified Parties, the Indemnification
Parties and their successors, assigns and heirs and shall be binding on all
successors and assigns of Archstone and New Archstone. Each of the Indemnified
Parties and the Indemnification Parties shall be entitled to enforce the
covenants contained in this Section 5.9 and Archstone and New Archstone
acknowledge and agree that each Indemnified Party and Indemnification Party
would suffer irreparable harm and that no adequate remedy at law exists for a
breach of such covenants and such Indemnified Party or such Indemnification
Party shall be entitled to injunctive relief and specific performance in the
event of any breach of any provision in this Section 5.9.
(e) If the Surviving Trust or the Surviving Entity or any of their
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each such case the successors
and assigns of such entity shall assume the obligations set forth in this
Section 5.9, which obligations are expressly intended to be for the irrevocable
benefit of, and shall be enforceable by, each director and officer covered
hereby.
5.10 Declaration of Dividends and Distributions. From and after the date of
this Agreement, neither Xxxxx, Archstone nor, following the Archstone Merger,
New Archstone shall make any dividend or distribution to its respective
shareholders without the prior written consent of the other party; provided,
however, the written consent of the other party shall not be required for the
authorization and payment of (a) distributions at their respective stated
dividend or distribution rates with respect to Archstone Existing Preferred
Shares or any series of Xxxxx Preferred Stock, (b) quarterly distributions with
respect to the Xxxxx Common Stock of $0.585 per share for the quarter ending
June 30, 2001 and each quarter thereafter and (c) quarterly distributions with
respect to the Archstone Common Shares of up to $0.41 per share for the quarter
ending June 30, 2001 and for each quarter thereafter; provided, however, the
record date
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for each distribution with respect to the Xxxxx Common Stock shall
be the same date as the record date for the quarterly distribution for the
Archstone Common Shares, as provided to Xxxxx by notice not less than twenty
(20) business days prior to the record date for any quarterly Archstone
distribution. From and after the date of this Agreement, Xxxxx Partnership
shall not make any distribution to the holders of Xxxxx OP Units except a
distribution per Xxxxx OP Unit in the same amount as a dividend per share of
Xxxxx Common Stock permitted pursuant to this Section 5.10, with the same record
and payment dates as such dividend on the Xxxxx Common Stock. The foregoing
restrictions shall not apply, however, to the extent a distribution (or an
increase in a distribution) by Xxxxx or Archstone is necessary for Xxxxx or
Archstone, as the case may be, to maintain REIT status, avoid the incurrence of
any taxes under Section 857 of the Code, avoid the imposition of any excise
taxes under Section 4981 of the Code, or avoid the need to make one or more
extraordinary or disproportionately larger distributions to meet any of the
three preceding objectives, (ii) to Archstone with respect to any Corresponding
Archstone Dividend or (iii) to Xxxxx and Xxxxx Partnership with respect to any
Xxxxx Dividends and Xxxxx Partnership Distributions.
5.11 Transfer or Recapitalization of Xxxxx Non-Controlled Subsidiaries. At
the Closing and pursuant to the Stock Purchase Agreement, the SMCI Voting Stock
Owner shall transfer to such Person or Persons as Archstone shall designate by
written notice delivered prior to the Merger Closing, or shall authorize a
merger that will result in such a transfer of all of the shares of SMCI which
are not owned by Xxxxx Partnership, for an aggregate consideration in an amount
equal to the purchase price per share set forth in the Stock Purchase Agreement
multiplied by the number of outstanding shares of voting capital stock of SMCI.
Archstone shall use commercially reasonable efforts to cause the Person or
Persons so designated to perform its obligations under the Stock Purchase
Agreement. At or prior to the Merger Closing and pursuant to the
Recapitalization Agreement, the CESI Voting Stock Owner shall vote all of its
shares of voting capital stock in CESI in favor of the recapitalization of CESI
and CESI shall have been recapitalized such that Xxxxx Partnership will have
voting control of CESI as of the Merger Closing as provided in the
Recapitalization Agreement.
5.12 Notices. Archstone shall provide such notice to its preferred
shareholders of the Mergers, the Archstone Merger and other transactions
contemplated by this Agreement as is required under Maryland law or the
Archstone Declaration of Trust. Xxxxx shall provide such notice to its preferred
shareholders of the Mergers and other transactions contemplated by this
Agreement as is required under Maryland law or the Xxxxx Articles of
Incorporation.
5.13 Resignations. On the Merger Closing Date, Xxxxx shall cause the
directors and officers of Xxxxx and of each of the Xxxxx Subsidiaries to submit
their resignations from such positions, effective as of the Effective Time of
the Merger.
5.14 Assumption of Existing Tax Protection Agreements. Effective as of the
Effective Time of the Partnership Merger, New Archstone and Archstone Surviving
Subsidiary shall assume the obligations of Xxxxx, Xxxxx Partnership and/or the
applicable Xxxxx Subsidiary, as the case may be, under the Tax Protection
Agreements as described in Schedule 2.18(j) to the Xxxxx Disclosure Letter.
Immediately prior to the Effective Time of the Partnership Merger,
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New Archstone and Archstone Surviving Subsidiary shall enter into agreements
with Xxxxx and Xxxxx Partnership, for the benefit of and enforceable by the
individuals and entities who are intended to be protected by the provisions of
the Tax Protection Agreements, confirming such assumption effective as of the
Effective Time of the Partnership Merger.
5.15 Registration Rights Agreements. At the Merger Closing, Xxxxx shall
assign and New Archstone shall assume by appropriate instrument the Registration
Rights Agreements described on Schedule 5.16 to the Xxxxx Disclosure Letter.
5.16 Exemption from Liability Under Section 16(b).
(a) Provided that Xxxxx delivers to New Archstone the Section 16
Information with respect to Xxxxx prior to the Effective Time of the Merger, the
Board of Trustees of New Archstone, or a committee thereof consisting of Non-
Employee Directors (as such term is defined for purposes of Rule 16b-3(d) under
the Exchange Act), shall adopt a resolution in advance of the Effective Time of
the Merger providing that the receipt by the Xxxxx Insiders of the New Archstone
Common Shares in exchange for shares of Xxxxx Common Stock, New Archstone
Preferred Shares in exchange for Xxxxx Preferred Stock and of options to
purchase New Archstone Common Shares upon assumption and conversion of Xxxxx
Stock Options, in each case pursuant to the transactions contemplated hereby and
to the extent such securities are listed in Section 16 Information, are intended
to be exempt from liability pursuant to Rule 16b-3 under the Exchange Act.
(b) For purposes of this Section 5.16, "Section 16 Information" shall
mean information accurate in all respects regarding the Xxxxx Insiders and the
number of shares of Xxxxx Common Stock, Xxxxx Preferred Stock or other Xxxxx
equity securities deemed to be beneficially owned by each such Xxxxx Insider and
expected to be exchanged for New Archstone Common Shares or New Archstone
Preferred Shares in connection with the Merger.
(c) For purposes of this Section 5.16, "Xxxxx Insiders" shall mean
those officers and directors of Xxxxx who are subject to the reporting
requirements of Section 16(a) of the Exchange Act who are listed in the Section
16 Information.
5.17 Restructuring of Assets of Archstone. Prior to the Merger Closing
Date, Archstone shall restructure all assets in which it or any Archstone
Subsidiary owns a direct or indirect interest that on the day following the
Merger Closing Date would be considered owned by New Archstone pursuant to
Treasury Regulations (S) 1.856-3(g) for purposes of applying the asset
prohibitions applicable to REITs under Section 856(c)(4)(B) of the Code and that
would cause New Archstone to fail to satisfy one or more of the asset
requirements applicable to REITs on that date if such date were the last day of
a calendar quarter (determined without regard to any curative period that
otherwise might be available under such Section of the Code) (the "Asset
Restructuring").
5.18 Stockholder Rights Plan. As soon as practicable after the date hereof,
Archstone shall take all action necessary to terminate the exceptions to the
issuance of the rights to be issued
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pursuant to that certain Rights Agreement, dated as of July 21, 1994, as amended
by First Amendment, dated as of February 8, 1995, between Archstone and Chemical
Bank as rights agent.
ARTICLE 6
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Mergers. The
obligations of each party to effect the Mergers and to consummate the other
transactions contemplated by this Agreement to occur on the Merger Closing Date
shall be subject to the fulfillment at or prior to the Merger Closing Date of
the following conditions:
(a) Shareholder and Xxxxx Partner Approvals. The Xxxxx Stockholder
Approvals, the Archstone Shareholder Approvals and the Xxxxx Partner Approvals
shall have been obtained; provided, however, that, in the case of an Archstone
Merger effectuated in the form of the Alternative Archstone Merger, the
Archstone Shareholder Approvals shall not include the approval by the holders of
Archstone Common Shares of the Proposed Archstone Charter Amendments.
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Archstone Merger, the Partnership Merger, the Merger or the transactions
contemplated by the Stock Purchase Agreement or the Recapitalization Agreement
under the HSR Act, if applicable to the Archstone Merger, the Partnership
Merger, the Merger or the transactions contemplated by the Stock Purchase
Agreement or the Recapitalization Agreement, shall have expired or been
terminated.
(c) Listing of Shares. The NYSE shall have approved for listing the
New Archstone Common Shares, New Archstone Series A Preferred Shares, New
Archstone Series C Preferred Shares and New Archstone Series D Preferred Shares
to be issued in the Merger, subject to official notice of issuance, prior to the
Effective Time of the Merger.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings by
the SEC seeking a stop order.
(e) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Archstone Merger, the Mergers or any of the other
transactions contemplated hereby shall be in effect.
(f) Blue Sky Laws. Archstone Surviving Subsidiary and New Archstone
shall have received all state securities or "blue sky" permits and other
authorizations necessary to issue the Archstone Surviving Subsidiary Common
Shares, the Archstone Surviving Subsidiary Preferred Shares, the New Archstone
Common Shares and the New Archstone Preferred Shares issuable in the Archstone
Merger and the Mergers.
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6.2 Conditions to Obligations of Archstone and New Archstone. The
obligations of Archstone and New Archstone to effect the Mergers and to
consummate the other transactions contemplated to occur on the Merger Closing
Date are further subject to the following conditions, any one or more of which
may be waived by Archstone:
(a) Representations and Warranties. Each of the representations and
warranties of Xxxxx and Xxxxx Partnership set forth in this Agreement,
disregarding all qualifications and exceptions contained therein relating to
materiality or Xxxxx Material Adverse Effect, shall be true and correct as of
the date of this Agreement and as of the Merger Closing Date as though made on
and as of the Merger Closing Date (except to the extent that such
representations and warranties are expressly limited by their terms to another
date, in which case such representations and warranties shall be true and
correct as of such other date), except where the failure of such representations
and warranties to be true and correct would not, individually or in the
aggregate, reasonably be expected to have a Xxxxx Material Adverse Effect; and
New Archstone shall have received a certificate (which certificate may be
qualified by "knowledge" to the same extent as the representations and
warranties of Xxxxx and Xxxxx Partnership contained herein are so qualified)
signed on behalf of Xxxxx by the chief executive officer or the chief financial
officer of Xxxxx, in such capacity, to such effect.
(b) Performance of Obligations of Xxxxx and Xxxxx Partnership. Xxxxx
and Xxxxx Partnership shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Effective Time of the Merger, and Archstone shall have received a
certificate signed on behalf of Xxxxx by the chief executive officer or the
chief operating officer of Xxxxx, in such capacity, to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, there
shall have been no Xxxxx Material Adverse Effect and Archstone shall have
received a certificate of the chief executive officer or chief operating officer
of Xxxxx, in such capacity, certifying to such effect.
(d) Tax Opinions Relating to REIT Status and Partnership Status. New
Archstone shall have received (i) an opinion of Xxxxx & Xxxxxxx L.L.P. or other
counsel to Xxxxx reasonably satisfactory to Archstone, dated as of the Merger
Closing Date, to the effect that, (w) commencing with its taxable year ended
December 31, 1994 through and including its taxable year ending as of the Merger
Closing Date, Xxxxx was organized and has operated in conformity with the
requirements for qualification as a REIT under the Code (with customary
exceptions, assumptions and qualifications and based on customary
representations); and (x) Xxxxx Partnership has been since June 30, 1994 through
and including its taxable year ending as of the Merger Closing Date treated for
federal income tax purposes as a partnership and not as a corporation or
association taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations); and (ii) an opinion of
Xxxxx, Xxxxx & Xxxxx or other counsel to Archstone reasonably satisfactory to
Xxxxx, dated as of the Merger Closing Date, to the effect that, (I) in the event
the Primary Archstone Merger is consummated, commencing with Archstone's taxable
year ended December 31, 1994, until the time the Election is effective,
Archstone was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code and that New Archstone's organization and
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code commencing with its taxable
year ending December 31, 2001 (with customary exceptions, assumptions and
qualifications and based upon customary representations and based upon and
subject to the opinions of counsel to Xxxxx described in clause (i) above) or
(II) in the event the Alternative Archstone Merger is consummated, (1)
commencing with Archstone's taxable year ended December 31, 1994, until the
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time that the ACS Merger is effective, Archstone was organized and has operated
in conformity with the requirements for qualification as a REIT under the Code,
(2) that New Archstone's organization and proposed method of operation will
enable it to meet the requirements for qualification and taxation as a REIT
under the Code commencing with its taxable year ending December 31, 2001, and
(3) that commencing with Archstone REIT's formation until the time of the
Election, Archstone REIT was treated for federal income tax purposes as an
entity disregarded as a separate entity and not as a corporation or an
association taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations and based upon and
subject to the opinions of counsel to Xxxxx described in clause (i) above).
(e) Tax Opinion Relating to the Mergers. New Archstone shall have
received an opinion dated the Merger Closing Date from Xxxxx, Xxxxx & Xxxxx or
other counsel reasonably satisfactory to Archstone, based upon customary
certificates and letters, which letters and certificates are to be in a form to
be agreed upon by the parties and dated the Merger Closing Date, and with
customary exceptions, assumptions and qualifications, to the effect that (i) if
the Merger is consummated in accordance with the terms of this Agreement, the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Code, (ii) if the Archstone Merger is consummated in accordance with the
terms of this Agreement, the Archstone Merger will qualify as one or more
reorganizations under the provisions of Section 368(a)(1)(F) of the Code and
(iii) the Partnership Merger will not result in the recognition of taxable gain
or loss at the time of the Partnership Merger to a holder of Xxxxx OP Units or
Xxxxx Preferred OP Units, as applicable, (A) who is a "U.S. person" (as defined
for purposes of Sections 897 and 1445 of the Code); (B) who does not exercise
its redemption right with respect to Archstone Class A-1 Shares under the
Archstone Surviving Subsidiary Declaration of Trust on a date sooner than the
date two years after the Effective Time of the Partnership Merger; (C) who does
not receive a cash distribution in connection with the Partnership Merger (or a
deemed cash distribution resulting from relief or a deemed relief from
liabilities, including as a result of the prepayment of indebtedness of Xxxxx
Partnership in connection with or following the Partnership Merger) in excess of
such holder's adjusted basis in its Xxxxx OP Units or its Xxxxx Preferred OP
Units, as applicable, at the time of the Partnership Merger); (D) who is not
required to recognize gain by reason of the application of Section 707(a) of the
Code and the Treasury Regulations thereunder to the Partnership Merger, with the
result that the Partnership Merger is treated as part of a "disguised sale" by
reason of any transactions undertaken by Xxxxx Partnership prior to or in
connection with the Partnership Merger or any debt of Xxxxx Partnership that is
assumed or repaid in connection with the Partnership Merger; and (E) whose "at
risk" amount does not fall below zero as a result of the Mergers.
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(f) "Comfort" Letter. Archstone shall have received a "comfort" letter
from Xxxxxx Xxxxxxxx LLP, as described in Section 5.1(b).
(g) NCS Agreements. The transactions contemplated by the NCS
Agreements shall have been consummated in the manner contemplated by such NCS
Agreements.
(h) Shareholders Agreement. Each of Xxxxxx X. Xxxxx and Xxxxxx X.
Xxxxx shall have entered into the Shareholders Agreement.
6.3 Conditions to Obligations of Xxxxx and Xxxxx Partnership. The
obligations of Smith and Smith Partnership to effect the Mergers and to
consummate the other transactions contemplated to occur on the Merger Closing
Date is further subject to the following conditions, any one or more of which
may be waived by Smith:
(a) Representations and Warranties. Each of the representations and
warranties of Archstone and New Archstone set forth in this Agreement,
disregarding all qualifications and exceptions contained therein relating to
materiality or Archstone Material Adverse Effect, shall be true and correct as
of the date of this Agreement and as of the Merger Closing Date as though made
on and as of the Merger Closing Date (except to the extent that such
representations and warranties are expressly limited by their terms to another
date, in which case such representations and warranties shall be true and
correct as of such other date), except where the failure of such representations
and warranties to be true and correct would not, individually or in the
aggregate, reasonably be expected to have an Archstone Material Adverse Effect;
and Smith shall have received a certificate (which certificate may be qualified
by "knowledge" to the same extent as the representations and warranties of
Archstone and New Archstone contained herein are so qualified) signed on behalf
of Archstone and New Archstone by the chief executive officer or the chief
financial officer of Archstone and New Archstone, in such capacity, to such
effect.
(b) Performance of Obligations of Archstone and New Archstone.
Archstone and New Archstone shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior to
the Effective Time of the Merger, and Smith shall have received a certificate of
Archstone and New Archstone signed on behalf of Archstone and New Archstone by a
duly authorized executive officer of Archstone and New Archstone, in such
capacity, to such effect.
(c) Material Adverse Effect. Since the date of this Agreement, there
shall have been no Archstone Material Adverse Effect and Smith shall have
received a certificate of a duly authorized executive officers of Archstone and
New Archstone, in such capacity, certifying to such effect.
(d) Tax Opinions Relating to REIT Status, Archstone Merger and
Partnership Status. Smith shall have received the opinion of Mayer, Brown &
Platt or other counsel to Archstone reasonably satisfactory to Smith, dated as
of the Merger Closing Date, that, (i) (I) in the event the Primary Archstone
Merger is consummated commencing with its taxable year
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ended December 31, 1994 until the time of the Election is effective, Archstone
was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code and that New Archstone's organization and
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code commencing with its taxable
year ending December 31, 2001 (with customary exceptions, assumptions and
qualifications and based upon customary representations and based upon and
subject to the opinions of counsel to Smith described in Section 6.2(d) of this
Agreement), or (II) in the event the Alternative Archstone Merger is
consummated, (1) commencing with Archstone's taxable year ended December 31,
1994, until the time that the ACS Merger is effective, Archstone was organized
and has operated in conformity with the requirements for qualification as a REIT
under the Code, (2) that New Archstone's organization and proposed method of
operation will enable it to meet the requirements for qualification and taxation
as a REIT under the Code commencing with its taxable year ending December 31,
2001, and (3) that commencing with Archstone REIT's formation until the time of
the Election, Archstone REIT was treated for federal income tax purposes as an
entity disregarded as a separate entity and not as a corporation or an
association taxable as a corporation (with customary exceptions, assumptions and
qualifications and based upon customary representations and based upon and
subject to the opinions of counsel to Smith described in clause (i) above); (ii)
if the Archstone Merger is consummated in accordance with the terms of this
Agreement, the Archstone Merger will qualify as one or more reorganizations
under the provisions of Section 368(a)(1)(F) of the Code (with customary
exceptions, assumptions and qualifications and based upon customary
representations), and (iii) immediately prior to, and at the time of, the
Partnership Merger, Archstone Surviving Subsidiary is and will be treated for
federal income tax purposes pursuant to Treasury Regulation (S)301.7701-3 as a
partnership or an entity disregarded as a separate entity and not as a
corporation or association taxable as a corporation (with customary exceptions,
assumptions and qualifications and based upon customary representations).
(e) Tax Opinion Relating to the Mergers. Smith shall have received an
opinion dated the Merger Closing Date from Hogan & Hartson L.L.P. or other
counsel reasonably satisfactory to Smith, based upon customary certificates and
letters, which letters and certificates are to be in a form to be agreed upon by
the parties and dated the Merger Closing Date, and with customary assumptions,
exceptions and qualifications, to the effect that (i) if the Merger is
consummated in accordance with the terms of this Agreement, the Merger will
qualify as a reorganization under the provisions of Section 368(a) of the Code
and (ii) the Partnership Merger will not result in the recognition of taxable
gain or loss at the time of the Partnership Merger to a holder of Smith OP Units
or Smith Preferred OP Units, as applicable, (A) who is a "U.S. person" (as
defined for purposes of Sections 897 and 1445 of the Code); (B) who does not
exercise its redemption right with respect to Archstone Class A-1 Shares under
the Archstone Surviving Subsidiary Declaration of Trust on a date sooner than
the date two years after the Effective Time of the Partnership Merger; (C) who
does not receive a cash distribution in connection with the Partnership Merger
(or a deemed cash distribution resulting from relief or a deemed relief from
liabilities, including as a result of the prepayment of indebtedness of Smith
Partnership in connection with or following the Partnership Merger) in excess of
such holder's adjusted basis in its Smith OP Units or its Smith Preferred OP
Units, as applicable, at the time of the Partnership Merger; (D) who is not
required to recognize gain by reason of the application of
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Section 707(a) of the Code and the Treasury Regulations thereunder to the
Partnership Merger, with the result that the Partnership Merger is treated as
part of a "disguised sale" by reason of any transactions undertaken by Smith
Partnership prior to or in connection with the Partnership Merger or any debt of
Smith Partnership that is assumed or repaid in connection with the Partnership
Merger; and (E) whose "at risk" amount does not fall below zero as a result of
the Mergers.
(f) "Comfort" Letter. Smith and Smith Partnership shall have received
a "comfort" letter from KPMG LLP, as described in Section 5.1 (b).
(g) Entity Election. Archstone Surviving Subsidiary shall have
properly filed with the Internal Revenue Service, and the Internal Revenue
Service shall have received, Archstone Surviving Subsidiary's election on Form
8832 to be treated as either a domestic eligible entity with a single owner
electing to be disregarded as a separate entity or a partnership, as applicable,
as described in Section 5.4(b).
(h) Archstone Merger. The Archstone Merger shall have been completed
in the manner contemplated by this Agreement not less than two (2) days prior to
the Merger Closing Date.
(i) Asset Restructuring. The Asset Restructuring of Archstone
Surviving Subsidiary shall have been completed and neither New Archstone nor
Archstone Surviving Subsidiary shall not own any assets that, if the day
following the Merger Closing Date were the last day of a calendar quarter, would
cause New Archstone to fail to satisfy one or more of the asset requirements
applicable to REITs set forth in Section 856(c)(4)(B) of the Code (determined
without regard to any curative period that otherwise might be available under
such Section of the Code).
(j) Shareholders Agreement. Each of the Surviving Trust and the
Surviving Entity shall have entered into the Shareholders Agreement.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the Merger, whether such action occurs before or after any of
the Smith Stockholder Approvals, the Archstone Shareholder Approvals or the
Smith Partner Approvals are obtained:
(a) by mutual written consent duly authorized by the Board of Trustees
of Archstone (or following the Archstone Merger, New Archstone) and the Board of
Directors of Smith;
(b) by Archstone (or following the Archstone Merger, New Archstone),
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(i) upon a breach of or failure to perform any covenant, obligation or agreement
on the part of Smith or Smith Partnership set forth in this Agreement, or (ii)
upon a breach of or in the event that any representation or warranty of Smith or
Smith Partnership is or shall have become untrue, in either case such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be,
would be incapable of being satisfied by March 31, 2002 (or as otherwise
extended);
(c) by Smith, (i) upon a breach of or failure to perform any covenant,
obligation or agreement on the part of Archstone or New Archstone set forth in
this Agreement, or (ii) upon a breach of or in the event that any representation
or warranty of Archstone or New Archstone is or shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would be incapable of being satisfied by March 31,
2002 (or as otherwise extended);
(d) by either Archstone (or following the Archstone Merger, New
Archstone) or Smith, if any judgment, injunction, order, decree or action by any
Governmental Entity of competent authority preventing the consummation of the
Archstone Merger or either of the Mergers shall have become final and non-
appealable;
(e) by either Archstone (or following the Archstone Merger, New
Archstone) or Smith, if the Mergers shall not have been consummated before March
31, 2002; provided, however, that a party may not terminate pursuant to this
clause (e) if the terminating party shall have breached in any material respect
its obligations under this Agreement in any manner that shall have caused either
of the Mergers not to have been consummated by such date;
(f) by either Archstone (or following the Archstone Merger, New
Archstone) or Smith (unless Smith or Smith Partnership is in breach in any
material respect of its obligations under Section 5.1) if, upon a vote at a duly
held Smith Stockholders Meeting or any adjournment thereof, the Smith
Stockholder Approvals shall not have been obtained as contemplated by Section
5.1 or if the Smith Partner Approvals have not been obtained as contemplated by
Section 5.1;
(g) by either Smith or Archstone (unless Archstone is in breach in any
material respect of its obligations under Section 5.1) if, upon a vote at a duly
held Archstone Shareholders Meeting or any adjournment thereof, the Archstone
Shareholder Approvals shall not have been obtained as contemplated by Section
5.1;
(h) by Smith (i) if the Board of Directors of Smith shall have
withdrawn, modified, amended or qualified in any manner adverse to Archstone its
approval or recommendation of either of the Merger or this Agreement in
connection with, or approved or recommended, any Superior Acquisition Proposal,
or, (ii) in order to enter into a binding written agreement with respect to a
Superior Acquisition Proposal, provided that, in each case, Smith shall have
complied with the terms of Section 4.3 and, contemporaneous with or prior to
terminating pursuant to this Section 7.1(h), has paid to Archstone the Break-Up
Fee (as defined herein) as provided by Section 7.2 hereof; and
85
(i) by Archstone (or following the Archstone Merger, New Archstone),
if (1) the Board of Directors of Smith shall have failed to recommend or
withdrawn, modified, amended or qualified, or proposed publicly not to recommend
or to withdraw, modify, amend or qualify, in any manner adverse to Archstone (or
following the Archstone Merger, New Archstone) its approval or recommendation of
either of the Mergers or this Agreement or approved or recommended any Superior
Acquisition Proposal, (2) following the announcement or receipt of an
Acquisition Proposal, Smith shall have failed to call the Smith Stockholders
Meeting in accordance with Section 5.1 (a) or failed to prepare and mail to its
stockholders the Joint Proxy Statement in accordance with Section 5.1(a) or
5.1(b), or (3) the Board of Directors of Smith or any committee thereof shall
have resolved to do any of the foregoing.
7.2 Certain Fees and Expenses. If this Agreement shall be terminated
pursuant to Section 7.1(h), 7.1(i)(1) or 7.1(i)(3), then Smith and Smith
Partnership theretofore or thereupon shall pay to Archstone (or following the
Archstone Merger, New Archstone) a fee equal to the Break-Up Fee (as defined
herein). If this Agreement shall be terminated pursuant to Section 7.1(b) or
7.1(f), then Smith and Smith Partnership shall pay to Archstone (or following
the Archstone Merger, New Archstone) (provided that Smith was not entitled to
terminate this Agreement pursuant to Section 7.1(c) at the time of such
termination) an amount equal to the Break-Up Expenses (as defined herein). If
this Agreement shall be terminated pursuant to Section 7.1 (c) or 7.1 (g), then
Archstone shall pay to Smith Partnership (provided that Archstone was not
entitled to terminate this Agreement pursuant to Section 7.1(b) at the time of
such termination) an amount equal to the Break-Up Expenses. If this Agreement
shall be terminated pursuant to Section 7.1(b), 7.1(f), or 7.1(i)(2) and prior
to the time of such termination an Acquisition Proposal has been received by
Smith or Smith Partnership, and either prior to the termination of this
Agreement or within twelve (12) months thereafter, Smith or Smith Partnership
enters into any written agreement to consummate a transaction or series of
transactions which, had such agreement been proposed or negotiated during the
term of this Agreement, would have constituted an Acquisition Proposal pursuant
to Section 4.3 (each, a "Smith Acquisition Agreement"), which is subsequently
consummated (whether or not any Smith Acquisition Agreement relates to the same
Acquisition Proposal which had been received at the time of the termination of
this Agreement), then Smith and Smith Partnership shall pay the Break-Up Fee to
Archstone (or following the Archstone Merger, New Archstone) upon consummation.
If (a) this Agreement shall be terminated by Smith pursuant to Section 7.1(e),
(b) prior to the time of such termination an Acquisition Proposal has been
received by Smith or Smith Partnership, (c) during the period following the
receipt of an Acquisition Proposal as described in clause (b) and prior to
termination of this Agreement, Archstone (or following the Archstone Merger, New
Archstone) does not announce, enter into or agree to effect any merger,
acquisition, exchange offer, consolidation, reorganization, or other business
combination with any third party, and (d) either prior to the termination of
this Agreement or within twelve (12) months thereafter, Smith or Smith
Partnership enters into a Smith Acquisition Agreement which is subsequently
consummated (whether or not any Smith Acquisition Agreement relates to the same
Acquisition Proposal which had been received at the time of the termination of
this Agreement), then Smith and Smith Partnership shall pay the Break-Up Fee to
Archstone (or following the Archstone Merger, New Archstone) upon consummation.
For purposes of this Section 7.2, "Acquisition Proposal" shall have the meaning
assigned to the term "Acquisition
86
Proposal", except that all references to 15% in such definition shall be deemed
to be a reference to 25%.
The payment of the Break-Up Fee shall be compensation for the loss suffered
by Archstone as a result of the failure of the Mergers to be consummated
(including, without limitation, opportunity costs and out-of-pocket costs and
expenses) and to avoid the difficulty of determining damages under the
circumstances. The Break-Up Fee shall be paid by Smith and Smith Partnership to
Archstone, or the Break-Up Expenses shall be paid by the party required to pay
the Break-Up Expenses (the "Payor") to the party entitled to receive the Break-
Up Expenses (the "Recipient") in immediately available funds within two (2)
business days after the date the event giving rise to the obligation to make
such payment occurred (except as otherwise provided in Section 7.1(h) or
7.1(i)). Each of Archstone and Smith acknowledges that the agreements contained
in this Section 7.2 are integral parts of this Agreement; accordingly, if Smith
or Smith Partnership fail to promptly pay the Break-Up Fee or Break-Up Expenses
due pursuant to this Section 7.2 and, in order to obtain payment, Archstone (or
following the Archstone Merger, to New Archstone) commences a suit which results
in a judgment against Smith or Smith Partnership for any amounts owed pursuant
to this Section 7.2, Smith and Smith Partnership shall pay to Archstone (or
following the Archstone Merger, to New Archstone) its costs and expenses
(including attorneys' fees and expenses) in connection with such suit, together
with interest on the amount owed at the rate on six-month U.S. Treasury
obligations in effect on the date such payment was required to be made plus 300
basis points.
As used in this Agreement, "Break-Up Fee" shall be an amount equal to
$95,000,000 less Break-Up Expenses paid or payable under this Section 7.2 (the
"Base Amount"). Notwithstanding the prior sentence, to the extent that the
right to receive a "Break-Up Fee" (the "Break-Up Fee Payment") in a taxable year
would create excessive bad income ("EBI") for Archstone (or following the
Archstone Merger, to New Archstone), the right to receive the portion of the
Break-Up Fee Payment that would create EBI shall be deferred, or potentially
extinguished, as set forth below. The right to receive a Break-Up Fee Payment
shall be treated as creating EBI for Archstone (or following the Archstone
Merger, to New Archstone) to the extent that the right to receive the amount,
when taken into account with other gross income of Archstone (or following the
Archstone Merger, to New Archstone) for that year, would cause Archstone (or if
after the Archstone Merger, to New Archstone) to violate for that taxable year
either the 75% or 95% gross income tests described in Sections 856(c)(2) or
856(c)(3) of the Code.
Any amounts deferred in a particular year pursuant to the preceding
paragraph shall become payable in the next succeeding year(s); but only to the
extent that it would not then create EBI. To the extent that any deferred
amount would continue to create EBI after it has been carried forward for seven
years (applying first in, first out principles), that portion shall no longer be
an obligation of Smith or Smith Partnership. Notwithstanding the foregoing,
Break-Up Fee Payments that would otherwise be considered EBI under the preceding
provisions shall be made if and to the extent that Archstone (or following the
Archstone Merger, to New Archstone), as a condition precedent, obtains an
opinion of tax counsel or private ruling from the IRS that the receipt of such
excess amounts would not adversely affect Archstone's (or following the
87
Archstone Merger, New Archstone's) ability to qualify as a REIT. If a Break-Up
Fee Payment is inadvertently made in an amount in excess of the limitations set
forth above, such excess payments shall be treated as a loan from Smith or Smith
Partnership to Archstone (or following the Archstone Merger, to New Archstone),
to be repaid as soon as practicable following discovery of the overpayment. The
purpose of these provisions dealing with EBI is to protect the REIT status of
Archstone (or if after the Archstone Merger, to New Archstone), and these
provisions shall be interpreted and applied so as to accomplish that purpose.
The "Break-Up Expenses" payable to the Recipient shall be an amount equal
to the lesser of (i) $7,500,000 or (ii) the Recipient's out-of-pocket expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, all attorneys', accountants' and
investment bankers' fees and expenses). If the Break-Up Expenses payable to the
Recipient exceed the maximum amount that can be paid to the Recipient without
causing the Recipient 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 under such sections of the Code, as determined by independent
accountants to the Recipient (the "Maximum Amount"), the amount initially
payable to the Recipient shall be limited to the Maximum Amount. If, however,
within the seven-year period commencing on the date of this Agreement, the
Recipient receives a tax opinion indicating that it has received a ruling from
the IRS holding that the Recipient's receipt of the Break-Up Expenses would
either constitute qualifying income under Sections 856(c)(2) or (3) of the Code
("Qualifying Income") or would be excluded from gross income of the Recipient
within the meaning of such sections of the Code or that receipt by the Recipient
of the balance of the Break-Up Expenses above the Maximum Amount following the
receipt of and pursuant to such ruling would not be deemed constructively
received prior thereto, the Recipient shall be entitled to have payable to it
the full amount of the Break-Up Expenses. The obligation of the Payor to pay
any unpaid portion of the Break-Up Expenses shall terminate seven years from the
date of this Agreement. In the event that the Recipient is not able to receive
the full Break-Up Expenses, the Payor shall place the unpaid amount in escrow
and shall not release any portion thereof to the Recipient unless and until the
Payor receives either one or both of the following: (i) a letter from the
independent accountants of the Recipient indicating the maximum amount that can
be paid at that time to the Recipient without causing it to fail to comply with
Sections 856(c)(2) and (3) of the Code or (ii) a tax opinion indicating that the
Recipient has received a ruling from the IRS holding that the Recipient's
receipt of such income would constitute "qualifying income" under Section
856(c)(2) or (3) of the Code or would be excluded from gross income under such
sections, in either of which events the Payor shall pay to the Recipient the
unpaid Break-Up Expenses or, if less and either there is no tax opinion or the
ruling described above does not hold that the Base Amount either would
constitute qualifying income or would be excluded from gross income for purposes
of those rules, the maximum amount stated in the letter referred to in (i)
above. Subject to satisfaction of the conditions set forth in the immediately
preceding sentence, there is no limitation on the number of distributions that
can be made from the escrow prior to the seventh anniversary of the date of this
Agreement.
7.3 Effect of Termination. In the event of termination of this Agreement by
either Smith or Archstone as provided in Section 7.1, this Agreement shall
forthwith become void and
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have no effect, without any liability or obligation on the part of Archstone,
New Archstone, Smith or Smith Partnership, other than the last sentence of
Section 5.2, Section 7.2, this Section 7.3 and Article 8, and except to the
extent that such termination results from a material breach by any party of any
of its representations, warranties, covenants or agreements set forth in this
Agreement.
7.4 Amendment. This Agreement may be amended by the parties in writing by
action of the respective Board of Trustees or Board of Directors of Archstone
and Smith at any time before or after any Shareholder Approvals are obtained and
prior to the filing of the Articles of Merger with the Department; provided,
however, that, after the Shareholder Approvals and the Smith Partner Approvals
are obtained, no such amendment, modification or supplement shall be made which
by law requires the further approval of shareholders or partners without
obtaining such further approval. The parties agree to amend this Agreement in
the manner provided in the immediately preceding sentence to the extent required
to (a) continue the status of each party as a REIT or (b) preserve the Merger as
a reorganization under Section 368(a) of the Code.
7.5 Extension; Waiver. At any time prior to the Effective Time of the
Merger, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other party, (b) waive any inaccuracies in the
representations and warranties of the other party contained in this Agreement or
in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 7.4, waive compliance with any of the agreements or
conditions of the other party contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement confirming the representations and warranties in this
Agreement shall survive the Effective Time of the Merger. This Section 8.1 shall
not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
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(a) if to Archstone or New Archstone, to:
Archstone Communities Trust
7670 South Chester Street
Suite 100
Englewood, Colorado 80112
Attention: General Counsel
Fax No.: (303) 858-0021
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Edward J. Schneidman
Michael T. Blair
Fax No.: (312) 701-7711
(b) if to Smith or Smith Partnership, to:
Charles E. Smith Residential Realty, Inc.
2345 Crystal Drive
Crystal Park #4
Arlington, VA 22202
Attention: General Counsel
Fax No.: (703) 769-1312
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: J. Warren Gorrell, Jr.
Bruce W. Gilchrist
Fax No.: (202) 637-5910
All notices shall be deemed given only when actually received.
8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all
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of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the
Smith Disclosure Letter, the Archstone Disclosure Letter, the Confidentiality
Agreement, the Voting Agreements, the Shareholders Agreement and the other
agreements entered into in connection with the Mergers constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral between the parties with respect to the subject matter of this
Agreement. Except as provided in Section 5.9, no provision of this Agreement is
intended to confer upon any Person other than the parties hereto any rights or
remedies.
8.6 Governing Law. THE PARTNERSHIP MERGER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE (AS TO THE
CERTIFICATE OF MERGER) AND THE STATE OF MARYLAND (AS TO THE PARTNERSHIP ARTICLES
OF MERGER), REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICT OF LAWS THEREOF. EXCEPT AS PROVIDED IN THE IMMEDIATELY
PRECEDING SENTENCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
8.7 Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties; provided, however, that, if the Archstone
Merger is effectuated in the form of the Alternative Archstone Merger, then all
of Archstone's rights, interests and obligations under this Agreement shall
become rights, interests and obligations of Archstone Corporate Subsidiary and
Archstone REIT by operation of law. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
8.8 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in
Maryland or in any state court located in Maryland this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself (without making such
submission exclusive) to the personal jurisdiction of any federal court located
in Maryland or any state court located in Maryland in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement and (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court.
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8.9 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
8.10 Exculpation. This Agreement shall not impose any personal liability on
any shareholder, trustee, trust manager, officer, employee or agent of Archstone
or Smith, and all Persons shall look solely to the property of Archstone or
Smith for the payment of any claim hereunder or for the performance of this
Agreement.
8.11 Joint and Several Obligations. In each case where both Smith and Smith
Partnership are obligated to perform the same obligation hereunder, such
obligation shall be joint and several. In each case where both Archstone and New
Archstone (or the Surviving Trust and the Surviving Entity) are obligated to
perform the same obligation hereunder, such obligation shall be joint and
several.
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IN WITNESS WHEREOF, Archstone, New Archstone, Smith and Smith Partnership
have caused this Agreement to be signed by their respective officers (or general
partners) thereunto duly authorized all as of the date first written above.
ARCHSTONE COMMUNITIES TRUST
By: /s/ Charles E. Mueller, Jr.
-------------------------------
Name: Charles E. Mueller, Jr.
Title: Chief Financial Officer
NEW GARDEN RESIDENTIAL TRUST
By: /s/ Charles E. Mueller, Jr.
-------------------------------
Name: Charles E. Mueller, Jr.
Title: Chief Financial Officer
CHARLES E. SMITH RESIDENTIAL REALTY, INC.
By: /s/ Wesley D. Minami
-------------------------------
Name: Wesley D. Minami
Title: President
CHARLES E. SMITH RESIDENTIAL REALTY,
L.P.
By: Charles E. Smith Residential Realty, Inc.,
its sole general partner
By: /s/ Wesley D. Minami
-------------------------------
Name: Wesley D. Minami
Title: President
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