EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
FLAG FUND V LLC,
CA ACQUISITION REIT,
CAPITAL AUTOMOTIVE REIT,
CALP MERGER L.P.,
AND
CAPITAL AUTOMOTIVE L.P.
DATED AS OF SEPTEMBER 2, 2005
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TABLE OF CONTENTS
PAGE
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ARTICLE I The Mergers.................................................... 2
1.1 The Mergers...................................................... 2
1.2 Declaration of Trust and Bylaws.................................. 3
1.3 Effective Times.................................................. 3
1.4 Closing.......................................................... 4
1.5 Trustees and Officers of the Surviving REIT...................... 4
1.6 Partnership Matters.............................................. 4
ARTICLE II Merger Consideration; Effect of Mergers on Shares of Capital
Stock of the Constituent Companies, Company Share Options and
Partnership Units............................................. 4
2.1 Effect on Shares................................................. 4
2.2 Effect on Partnership Interests.................................. 6
2.3 Exchange of Certificates......................................... 7
2.4 Withholding Rights............................................... 9
2.5 Dissenters' Rights............................................... 10
2.6 Adjustment of Company Common Share Merger Consideration,
Partnership Merger Consideration or OP LP LLC Membership
Interests........................................................ 10
ARTICLE III Representations and Warranties of the Company................ 10
3.1 Existence; Good Standing; Authority; Compliance with Law......... 10
3.2 Capitalization................................................... 12
3.3 Authority Relative to this Agreement; Shareholder Approval....... 14
3.4 Reports; Financial Statements.................................... 15
3.5 No Undisclosed Liabilities....................................... 16
3.6 Absence of Changes............................................... 16
3.7 Consents and Approvals; No Violations............................ 17
3.8 No Default....................................................... 17
3.9 Litigation....................................................... 18
3.10 Compliance with Applicable Law................................... 18
3.11 Properties....................................................... 18
3.12 Employee Plans................................................... 23
3.13 Labor Matters.................................................... 24
3.14 Environmental Matters............................................ 25
3.15 Tax Matters...................................................... 27
3.16 Material Contracts............................................... 31
3.17 Opinion of Financial Advisor..................................... 33
3.18 Brokers.......................................................... 33
3.19 Takeover Statutes................................................ 33
3.20 Related Party Transactions....................................... 33
3.21 Investment Company Act of 1940................................... 33
3.22 Trademarks, Patents and Copyrights............................... 33
3.23 Insurance........................................................ 34
3.24 Disclosure Controls and Procedures............................... 34
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3.25 Definition of the Company's Knowledge............................ 35
3.26 Proxy Statement; Company Information............................. 35
ARTICLE IV Representations and Warranties of Parent and Merger Sub....... 35
4.1 Corporate Organization........................................... 35
4.2 Authority Relative to this Agreement............................. 36
4.3 Consents and Approvals; No Violations............................ 37
4.4 Litigation....................................................... 37
4.5 Brokers.......................................................... 37
4.6 Available Funds; Guaranty........................................ 37
4.7 Takeover Statutes................................................ 38
4.8 Ownership of Merger Sub and Merger Partnership; No Prior
Activities....................................................... 38
4.9 No Ownership of Company Capital Stock............................ 38
4.10 Proxy Statement.................................................. 38
ARTICLE V Conduct of Business Pending the Mergers........................ 38
5.1 Conduct of Business by the Company............................... 38
5.2 Distribution by Company and Partnership of REIT Taxable Income... 43
ARTICLE VI Covenants..................................................... 43
6.1 Preparation of the Proxy Statement; Shareholders Meeting......... 43
6.2 Other Filings.................................................... 44
6.3 Additional Agreements............................................ 44
6.4 No Solicitations................................................. 45
6.5 Officers' and Directors' Indemnification......................... 46
6.6 Access to Information; Confidentiality........................... 48
6.7 Public Announcements............................................. 49
6.8 Employee Benefit Arrangements.................................... 49
6.9 Certain Tax Matters.............................................. 50
6.10 REIT Opinion..................................................... 50
6.11 Sale of Properties............................................... 51
6.12 Equity Raising Property Sales.................................... 51
6.13 Interim Period Dividends......................................... 52
ARTICLE VII Conditions to the Mergers.................................... 52
7.1 Conditions to the Obligations of Each Party to Effect the
Mergers.......................................................... 52
7.2 Conditions to Obligations of Parent and Merger Sub............... 53
7.3 Conditions to Obligations of the Company......................... 54
7.4 Frustration of Closing Conditions................................ 54
ARTICLE VIII Termination, Amendment and Waiver........................... 55
8.1 Termination...................................................... 55
8.2 Effect of Termination............................................ 56
8.3 Fees and Expenses................................................ 58
8.4 Payment of Amount or Expense..................................... 59
8.5 Amendment........................................................ 60
8.6 Extension; Waiver................................................ 60
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ARTICLE IX General Provisions............................................ 60
9.1 Notices.......................................................... 60
9.2 Certain Definitions.............................................. 62
9.3 Terms Defined Elsewhere.......................................... 63
9.4 Interpretation................................................... 67
9.5 Non-Survival of Representations, Warranties, Covenants and
Agreements....................................................... 67
9.6 Miscellaneous.................................................... 67
9.7 Assignment; Benefit.............................................. 68
9.8 Severability..................................................... 68
9.9 Choice of Law/Consent to Jurisdiction............................ 68
9.10 Counterparts..................................................... 68
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COMPANY DISCLOSURE SCHEDULE
Section Title
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3.1(c) Subsidiaries
3.1(e) Equity or Voting Securities
3.2(b) Debt Instruments
3.2(c) Company Stock Rights
3.2(d) Voting or Transfer Agreements
3.2(e) Company Share Acquisition Obligations
3.2(f) Registration Obligations
3.2(g) List of Holders of Partnership Common Units; Partnership Share
Acquisition Obligations
3.4 Company SEC Reports
3.5 Undisclosed Liabilities
3.6 Absence of Changes
3.7 Consents and Approvals; No Violations
3.9 Litigation
3.10 Compliance with Applicable Law
3.11(a) Properties
3.11(b) Personal Property Transactions
3.11(c) Title Insurance
3.11(d) Permits
3.11(e) Properties: No Violations
3.11(f) Company Leases
3.11(g) Performance; Payments
3.11(h) Lessee Ground Leases
3.11(j) Option Agreements; Rights of First Refusal
3.11(k) Reimbursement Agreements
3.11(m) Third Party Management Agreements
3.11(n) Participation Agreements
3.11(o) Notices from Lenders or Insurance Carriers
3.11(p) Construction or Alterations
3.12(a) Employee Benefit Plans
3.12(f) Continuing Coverage
3.12(h) Effect of REIT Merger on Employee Benefit Plans
3.13(a) Labor Agreements
3.13(b) Labor Organizations
3.13(d) Labor Complaints
3.13(e) Labor Compliance
3.14 Environmental Matters
3.15(a) Appeals of Local Tax Assessments
3.15(h) Tax Extensions
3.15(i) Tax Sharing Agreements
3.15(j) Private Letter Rulings
3.15(n) Tax Protection Agreements
3.16(a) Material Contracts
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3.16(c) Lending Contracts
3.16(d) Derivatives
3.16(e) Continuing Liability
3.20 Related Party Transactions
3.22 Intellectual Property
3.23 Insurance
3.25 Individuals with Company Knowledge
5.1 Permitted Transactions
5.1(c) Existing Property Transactions; Guidelines
5.1(g) Corporate Budget
5.1(j) Change in Employee Benefit Arrangements
6.5(b) Officers' and Directors' Indemnification
6.8(b) Employee Benefit Arrangements
6.12(a) Identified Company Properties
6.12(e) Sales Guidelines
9.2 Material Tenants
Additional Schedules:
Schedule 2.2(a) Term Sheet for Membership Interest Election
EXHIBITS
Exhibit A Form of Membership Interest Election
Exhibit B Form of Guaranty
Exhibit C Form of REIT Opinion
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
2, 2005, is by and among Flag Fund V LLC, a Delaware limited liability company
("Parent"), CA Acquisition REIT, a Maryland real estate investment trust
("Merger Sub"), Capital Automotive REIT, a Maryland real estate investment trust
(the "Company"), CALP Merger L.P., a Delaware limited partnership (the "Merger
Partnership") and Capital Automotive L.P., a Delaware limited partnership (the
"Partnership").
WITNESSETH:
WHEREAS, the parties wish to effect a business combination through a merger
of Merger Sub with and into the Company (the "REIT Merger") on the terms and
conditions set forth in this Agreement and in accordance with Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland, as
amended (the "Maryland REIT Law");
WHEREAS, the parties also wish to effect a merger of the Merger Partnership
with and into the Partnership, immediately following the consummation of the
REIT Merger (the "Partnership Merger" and, together with the REIT Merger, the
"Mergers"), on the terms and subject to the conditions set forth in this
Agreement and in accordance with Section 17-211 of the Delaware Revised Uniform
Limited Partnership Act, as amended ("DRULPA");
WHEREAS, the Company is the sole general partner of the Partnership through
which the Company operates its business;
WHEREAS, as of the date hereof, the Company owns approximately 85% of the
common units of limited partnership interest in the Partnership ("Partnership
Common Units") as well as 100% of the Series A, Series B, Convertible and
Monthly Income Preferred units of limited partnership interest in the
Partnership ("Partnership Preferred Units"). The Partnership Common Units and
Partnership Preferred Units are collectively referred to herein as "Partnership
Units;"
WHEREAS, the Board of Trustees of the Company (the "Company Board"), upon
recommendation of the Special Committee of the Company Board, has approved this
Agreement, the REIT Merger and the other transactions contemplated by this
Agreement and deems it advisable and in the best interests of the Company
shareholders to enter into this Agreement and to consummate the REIT Merger on
the terms and conditions set forth herein;
WHEREAS, Parent, as the sole shareholder of Merger Sub, has approved this
Agreement, the REIT Merger and the transactions contemplated by this Agreement
pursuant to action taken by unanimous written consent in accordance with the
requirements of the Maryland REIT Law and the declaration of trust and bylaws of
Merger Sub;
WHEREAS, the Company, as the sole general partner of the Partnership, has
determined that it is advisable and in the best interests of the Partnership and
the limited partners of the Partnership for the Partnership to enter into this
Agreement and to consummate the Partnership Merger on the terms and conditions
set forth herein;
WHEREAS, prior to the Partnership Merger, the holders of Partnership Common
Units other than the Company (the "Minority Limited Partners") may elect, on the
terms and conditions specified herein, to receive, in exchange for Partnership
Common Units, membership interests ("OP LP LLC Membership Interests") in a newly
created Delaware limited liability company ("OP LP LLC") simultaneously with the
Partnership Merger (each such Minority Limited Partner, an "Electing Limited
Partner"). In the Partnership Merger, any Partnership Common Units held by any
Minority Limited Partners not making the foregoing election will be converted
into the right to receive cash per Partnership Common Unit (each such Minority
Limited Partner, a "Cash-Out Limited Partner") in an amount as described in
Section 2.2(a);
WHEREAS, Merger Sub, the general partner of Merger Partnership, has
approved this Agreement and the Partnership Merger and deems it advisable and in
the best interests of the limited partners of Merger Partnership for Merger
Partnership to enter into this Agreement and consummate the Partnership Merger
on the terms and subject to the conditions set forth herein; and
WHEREAS, Parent, Partnership, Merger Sub, Merger Partnership and the
Company desire to make certain representations, warranties, covenants and
agreements in connection with the Mergers, and also to prescribe various
conditions to the Mergers.
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements set forth herein, and intending to be legally bound,
Parent, Partnership, Merger Sub, Merger Partnership and the Company hereby agree
as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers.
(a) Subject to the terms and conditions of this Agreement, at the REIT
Merger Effective Time (as defined herein), the Company and Merger Sub shall
consummate the REIT Merger, pursuant to which (i) Merger Sub shall be
merged with and into the Company and the separate corporate existence of
Merger Sub shall thereupon cease and (ii) the Company shall be the
surviving REIT in the REIT Merger (the "Surviving REIT") and shall become a
direct Subsidiary of Parent by virtue of ownership of all of the Company
Common Shares, as defined below. The corporate existence of the Company,
with all its purposes, rights, privileges, franchises, powers and objects,
shall continue unaffected and unimpaired by the REIT Merger and, as the
Surviving REIT, it shall be governed by the laws of the State of Maryland.
(b) Subject to the terms and conditions of this Agreement, and in
accordance with Section 17-211 of DRULPA, at the Partnership Merger
Effective Time (as defined herein), Merger Partnership and the Partnership
shall consummate the Partnership Merger pursuant to which (i) Merger
Partnership shall be merged with and into the Partnership
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and the separate existence of Merger Partnership shall thereupon cease and
(ii) the Partnership shall be the surviving partnership in the Partnership
Merger (the "Surviving Partnership"). The Partnership Merger shall have the
effects specified in Section 17-211 of DRULPA.
1.2 Declaration of Trust and Bylaws.
(a) The name of the Surviving REIT shall be "Capital Automotive REIT."
(b) The declaration of trust of the Company, as in effect immediately
prior to the REIT Merger Effective Time, shall be the declaration of trust
of the Surviving REIT until thereafter amended as provided therein or by
Law (as hereinafter defined) (the "Surviving REIT Declaration of Trust").
(c) The bylaws of the Company, as in effect immediately prior to the
REIT Merger Effective Time, shall be the bylaws of the Surviving REIT until
thereafter amended as provided by Law, by the Surviving REIT Declaration of
Trust or by such bylaws (the "Surviving REIT Bylaws").
(d) The name of the Surviving Partnership shall be "Capital Automotive
L.P."
(e) The limited partnership agreement of the Partnership, as amended
pursuant to the term sheet described in Section 2.2(a) hereof, shall be the
limited partnership agreement of the Surviving Partnership until thereafter
amended as provided therein or by Law (the "Surviving Partnership
Agreement").
1.3 Effective Times.
(a) On the Closing Date, Merger Sub and the Company shall duly execute
and file articles of merger (the "Articles of Merger") with the State
Department of Assessments and Taxation of Maryland (the "SDAT") in
accordance with the Maryland REIT Law. The REIT Merger shall become
effective upon the filing date of the Articles of Merger with the SDAT (the
"REIT Merger Effective Time").
(b) On the Closing Date, immediately after the REIT Merger Effective
Time, the Partnership shall file with the Secretary of State of the State
of Delaware (the "DSOS") a certificate of merger (the "Partnership Merger
Certificate"), executed in accordance with the applicable provisions of
DRULPA, and shall make all other filings or recordings required under
DRULPA to effect the Partnership Merger. The Partnership Merger shall
become effective after the REIT Merger Effective Time upon such time as the
Partnership Merger Certificate has been accepted by the DSOS (the
"Partnership Merger Effective Time").
(c) Unless otherwise agreed, the parties shall cause the REIT Merger
Effective Time and the Partnership Merger Effective Time to occur on the
Closing Date (as defined below).
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1.4 Closing. The closing of the Mergers (the "Closing") shall occur as
promptly as practicable (but in no event later than the second (2nd) Business
Day) after all of the conditions set forth in Article VII (other than conditions
that by their terms are required to be satisfied or waived as of the Closing
Date (as hereinafter defined)) shall have been satisfied or, to the extent
permitted by applicable Law, waived by the party entitled to the benefit of the
same (unless extended by the mutual agreement of the parties hereto), and,
subject to the foregoing, shall take place at 10:00 a.m., local time, on such
date (the "Closing Date"), provided that the Closing Date shall not be earlier
than December 1, 2005, at the offices of Blank Rome LLP, 000 Xxxxxxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000, or at such other time and place as mutually
agreed to by the parties hereto.
1.5 Trustees and Officers of the Surviving REIT. The trustees of Merger Sub
immediately prior to the REIT Merger Effective Time shall become the trustees of
the Surviving REIT as of the REIT Merger Effective Time and the officers of
Merger Sub immediately prior to the REIT Merger Effective Time shall become the
officers of the Surviving REIT as of the REIT Merger Effective Time, each to
hold office in accordance with the Surviving REIT Declaration of Trust and
Surviving REIT Bylaws. Resignations shall be tendered for all current trustees
of the Company effective upon the REIT Merger Effective Time.
1.6 Partnership Matters. The Surviving REIT shall be the general partner
and OP LP LLC shall be the limited partner of the Surviving Partnership
following the Partnership Merger Effective Time.
ARTICLE II
MERGER CONSIDERATION; EFFECT OF MERGERS ON SHARES OF CAPITAL STOCK OF
THE CONSTITUENT COMPANIES, COMPANY SHARE OPTIONS AND PARTNERSHIP UNITS
2.1 Effect on Shares. At the REIT Merger Effective Time, by virtue of the
REIT Merger and without any action on the part of any holder thereof:
(a) Shares of Merger Sub. Each common share of beneficial interest,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the REIT Merger Effective Time shall be converted into one (1)
fully paid and nonassessable common share of beneficial interest, par value
$0.01 per share, of the Surviving REIT.
(b) Conversion of Company Common Shares. Each common share of
beneficial interest, par value $0.01 per share, of the Company (each a
"Company Common Share") (other than Excluded Shares, as defined below)
issued and outstanding immediately prior to the REIT Merger Effective Time
shall automatically be converted into the right to receive an amount in
cash equal to Thirty-eight Dollars and Seventy-five Cents ($38.75) (the
"Company Common Share Merger Consideration").
(c) Cancellation of Parent-Owned and Merger Sub-Owned Company Common
Shares. Each issued and outstanding Company Common Share that is owned by
Parent, Merger Sub or any Subsidiary of Parent or Merger Sub immediately
prior to the REIT Merger Effective Time (collectively, the "Excluded
Shares") shall automatically be canceled and retired and shall cease to
exist, and no cash, Company Common Share or other consideration shall be
delivered or deliverable in exchange therefor.
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(d) Cancellation of Company Common Shares. As of the REIT Merger
Effective Time, all Company Common Shares (other than Excluded Shares)
issued and outstanding immediately prior to the REIT Merger Effective Time
shall no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a Company Common Share
shall cease to have any rights with respect to such interest, except, in
all cases, the right to receive the Company Common Share Merger
Consideration, without interest.
(e) Preferred Shares.
(i) The REIT Merger shall have no effect on the Company's 7.5%
Series A Cumulative Redeemable Preferred Shares, par value $0.01 per
share (the "Company Series A Preferred Shares"), issued and
outstanding immediately prior to the REIT Merger Effective Time and,
at and after the REIT Merger Effective Time, the Company Series A
Preferred Shares shall remain outstanding and shall continue to
represent Company Series A Preferred Shares of the Surviving REIT; and
(ii) The REIT Merger shall have no effect on the Company's 8%
Series B Cumulative Redeemable Preferred Shares, par value $0.01 per
share (the "Company Series B Preferred Shares") issued and outstanding
immediately prior to the REIT Merger Effective Time and, at and after
the REIT Merger Effective Time, the Company Series B Preferred Shares
shall remain outstanding and shall continue to represent Company
Series B Preferred Shares of the Surviving REIT.
The Company Common Shares, Company Series A Preferred Shares and Company
Series B Preferred Shares shall be sometimes collectively referred to herein as
the "Company Shares."
(f) Company Share Options. Immediately prior to the REIT Merger
Effective Time, each outstanding qualified or nonqualified option to
purchase Company Common Shares (each, a "Company Share Option") under the
Company's Second Amended and Restated 1998 Equity Incentive Plan (the
"Company Share Option Plan"), all of which are listed on Schedule 3.2(c) of
the Company Disclosure Schedule attached hereto, whether or not then vested
or exercisable and regardless of the exercise price or purchase price, as
the case may be, thereof, shall be cancelled, immediately prior to or at
the REIT Merger Effective Time, in exchange for the holder's right to
receive a single lump sum cash payment from the Company equal to the
product of (x) the number of Company Common Shares subject to such Company
Share Option immediately prior to the REIT Merger Effective Time, whether
or not vested or exercisable, and (y) the excess, if any, of the Company
Common Share Merger Consideration over the exercise price or purchase price
per share of such Company Share Option (the "Option Merger Consideration").
If the exercise price or purchase price per share of any such Company
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Share Option is equal to or greater than the Company Common Share Merger
Consideration, such Company Share Option shall be cancelled without any
cash payment being made in respect thereof. The Company Common Share Merger
Consideration and the Option Merger Consideration shall be collectively
referred to herein as the "Merger Consideration."
(g) Restricted Shares, Phantom Shares, Deferred Restricted Shares and
Deferred Fee Accounts. Immediately prior to the REIT Merger Effective Time,
each restricted share granted under the Company Share Option Plan
("Restricted Shares"), phantom share ("Phantom Shares") issued pursuant to
the Company's Phantom Share Purchase Program (the "Phantom Plan"),
Restricted Shares deferred under a Restricted Share Deferral Agreement
("Deferred Restricted Shares") and phantom shares ("Fee Shares") under the
Company's Deferred Compensation and Stock Plan for Trustees (the "Trustees
Deferred Compensation Plan") shall be fully vested, non-forfeitable and
payable to each participant in full, and all Company Common Shares which
the Company has the option of issuing in settlement of the Phantom Shares
or the Fee Shares shall be considered outstanding for all purposes of this
Agreement, including receipt of the Merger Consideration.
2.2 Effect on Partnership Interests. As of the Partnership Merger Effective
Time, by virtue of the Partnership Merger and without any action on the part of
the holder of any partnership interest of the Partnership:
(a) Each Partnership Common Unit held by a Minority Limited Partner
(the "LP Minority Units"), subject to the terms and conditions set forth
herein, shall be converted into, and shall be cancelled in exchange for,
the right to receive cash in an amount without interest per LP Minority
Unit equal to the product of (A) the Company Common Share Merger
Consideration multiplied by (B) the number of Company Common Shares
issuable upon redemption of each such LP Minority Unit pursuant to the
limited partnership agreement of the Partnership (such product, the
"Partnership Merger Consideration") in consideration for each such LP
Minority Unit; provided that if any Minority Limited Partner has previously
made an election to receive OP LP LLC Membership Interests pursuant to the
Form of Membership Interest Election (in the form attached hereto as
Exhibit A), in lieu of receiving the Partnership Merger Consideration, such
holder shall exchange each LP Minority Unit held by it for OP LP LLC
Membership Interests, in accordance with the procedures and time periods
specified in Section 2.3 hereof and upon such terms as are described in the
term sheet attached hereto as Schedule 2.2(a) (the "Membership Interest
Election").
(b) Each Partnership Common Unit held by the Company or any of its
Subsidiaries immediately prior to the Partnership Merger Effective Time
shall, by virtue of the Partnership Merger, automatically be cancelled and
cease to exist, and the holders thereof shall cease to have any rights with
respect thereto and no payment shall be made with respect thereto.
(c) Each Partnership Preferred Unit outstanding immediately prior to
the Partnership Merger Effective Time shall be unaffected by the
Partnership Merger and shall remain outstanding as units of limited
partnership interest of the Surviving Partnership.
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(d) The general partner interests of the Partnership outstanding
immediately prior to the Partnership Merger Effective Time shall remain
outstanding as general partner interests of the Surviving Partnership,
entitling the holder thereof to such rights, duties and obligations as are
more fully set forth in the Surviving Partnership Agreement.
2.3 Exchange of Certificates
(a) Paying Agent. Prior to the mailing of the Proxy Statement (as
defined herein), Parent shall appoint a bank or trust company reasonably
satisfactory to the Company to act as Paying Agent (the "Paying Agent") for
(i) the payment or exchange in accordance with this Article II of the
Company Common Share Merger Consideration and the Partnership Merger
Consideration (such cash consideration constituting both the Company Common
Share Merger Consideration and the Partnership Merger Consideration being
referred to herein as the "Exchange Fund") and (ii), if Parent wishes the
Paying Agent to so act, in Parent's discretion, the exchange of Partnership
Common Units for OP LP LLC Membership Interests in accordance with this
Article II pursuant to the Membership Interest Election. On or before the
REIT Merger Effective Time, Parent shall deposit with the Paying Agent the
Exchange Fund for the benefit of the holders of Company Common Shares and
Cash-Out Limited Partners, as applicable. The Paying Agent shall make
payments of the Company Common Share Merger Consideration and the
Partnership Merger Consideration out of the Exchange Fund in accordance
with this Agreement, the Articles of Merger and the Partnership Merger
Certificate. The Company shall cooperate with Parent and any title company
escrow agent to facilitate an orderly transfer of funds. The Exchange Fund
shall not be used for any other purpose. Any and all interest earned on
cash deposited in the Exchange Fund shall be paid to the Surviving REIT.
(b) Share and Unit Transfer Books. On the Closing Date, the share
transfer books of the Company shall be closed and thereafter there shall be
no further registration of transfers of the Company Common Shares or
Partnership Common Units. From and after the Closing Date, the holders of
certificates evidencing ownership of the Company Common Shares or
Partnership Common Units outstanding immediately prior to the REIT Merger
Effective Time or Partnership Merger Effective Time, as applicable (each, a
"Certificate") shall cease to have rights with respect to such shares or
units, as applicable, except as otherwise provided for herein. On or after
the Closing Date, any Certificates presented to the Paying Agent, the
Surviving REIT or the transfer agent for any reason shall be exchanged for
the Company Common Share Merger Consideration, Partnership Merger
Consideration or OP LP LLC Membership Interests, as applicable, with
respect to the Company Common Shares or Partnership Common Units formerly
represented thereby.
(c) Exchange Procedures. As soon as possible after the Closing Date
(but in any event within three (3) Business Days), the Surviving REIT shall
cause the Paying Agent to mail to each holder of record of a Certificate or
Certificates that, immediately
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prior to the REIT Merger Effective Time, represented outstanding Company
Common Shares or that, immediately prior to the Partnership Merger
Effective Time, represented Partnership Common Units whose shares or units,
as applicable, were converted into the right to receive or be exchanged for
the Company Common Share Merger Consideration, Partnership Merger
Consideration or OP LP LLC Membership Interests, as applicable, pursuant to
Sections 2.1 and 2.2: (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass to the Paying Agent, only upon delivery of the Certificates to
the Paying Agent, and which letter shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Company Common Share Merger Consideration, Partnership
Merger Consideration or OP LP LLC Membership Interests, as applicable, to
which the holder thereof is entitled. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents
reasonably satisfactory to the Company as may be appointed by Parent,
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the Company Common Share
Merger Consideration, Partnership Merger Consideration or OP LP LLC
Membership Interests, as applicable, payable in respect of the Company
Common Shares or Partnership Common Units, as applicable, previously
represented by such Certificate pursuant to the provisions of this Article
II, and the Certificate so surrendered shall forthwith be canceled. In the
event of a transfer of ownership of Company Common Shares or Partnership
Common Units that is not registered in the transfer records of the Company
or Partnership, payment may be made to a Person other than the Person in
whose name the Certificate so surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a Person other than the
registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.3, each Certificate
shall be deemed at any time after the Closing Date to represent only the
right to receive, upon such surrender, the Company Common Share Merger
Consideration, Partnership Merger Consideration or OP LP LLC Membership
Interests, as applicable, as contemplated by this Section 2.3. No interest
shall be paid or accrue on any cash payable upon surrender of any
Certificate.
(d) No Further Ownership Rights in the Company Common Shares, Company
Share Options or Partnership Common Units. On the Closing Date, holders of
Company Common Shares or Partnership Common Units shall cease to be, and
shall have no rights as, shareholders of the Company or limited partners of
the Partnership other than the right to receive the Company Common Share
Merger Consideration, Partnership Merger Consideration or OP LP LLC
Membership Interests, as applicable, provided under this Article II. The
Company Common Share Merger Consideration, Partnership Merger Consideration
or OP LP LLC Membership Interests, as applicable, paid or delivered upon
the surrender for exchange of Certificates evidencing Company Common Shares
or Partnership Common Units, in accordance with the terms of this Article
II shall be deemed to have been paid or delivered, as the case may be, in
full satisfaction of all rights
8
and privileges pertaining to the Company Common Shares or Partnership
Common Units, exchanged therefor. The Option Merger Consideration paid with
respect to Company Share Options in accordance with the terms of this
Article II shall be deemed to have been paid in full satisfaction of all
rights and privileges pertaining to the canceled Company Share Options and
on and after the REIT Merger Effective Time the holders of a Company Share
Option shall have no further rights with respect to any Company Share
Option, other than the right to receive the Option Merger Consideration as
provided in Section 2.1 (f).
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for twelve
(12) months after the Closing Date, shall be delivered to Surviving REIT
and any holders of Company Common Shares or Partnership Common Units prior
to the REIT Merger or Partnership Merger, as applicable, who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving REIT and only as general creditors thereof for payment of the
Company Common Share Merger Consideration or Partnership Merger
Consideration, as applicable.
(f) No Liability. None of Parent, Merger Sub, the Surviving REIT, the
Partnership, Merger Partnership, Surviving Partnership, the Company or the
Paying Agent, or any employee, officer, trustee, director, agent or
Affiliate thereof, shall be liable to any Person in respect of Company
Common Share Merger Consideration or Partnership Merger Consideration, as
applicable, from the Exchange Fund delivered to a public official pursuant
to any applicable abandoned property, escheat or similar Law.
(g) Investment of Exchange Fund. The Paying Agent shall invest any
cash included in the Exchange Fund, as directed by the Surviving REIT, on a
daily basis. Any interest and other income resulting from such investments
shall be paid to Parent. To the extent that there are losses with respect
to such investments, or the Exchange Fund diminishes for other reasons
below the level required to make prompt payments of the Company Common
Share Merger Consideration and Partnership Merger Consideration as
contemplated hereby, Parent shall promptly replace or restore the portion
of the Exchange Fund lost through investments or other events so as to
ensure that the Exchange Fund is, at all times, maintained at a level
sufficient to make such payments.
(h) 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 the posting
of a bond to the reasonable satisfaction of Parent and the Paying Agent,
the Paying Agent will issue, in exchange for such lost, stolen or destroyed
Certificate, the Company Common Share Merger Consideration, Partnership
Merger Consideration or OP LP LLC Membership Interests, as applicable,
payable in respect thereof, pursuant to this Agreement.
2.4 Withholding Rights. The Surviving REIT, Surviving Partnership or the
Paying Agent, as applicable, shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Company Common Shares, Company Share Options or to any holders of Partnership
Common Units such amounts as it is required to deduct
9
and withhold with respect to the making of such payment under the Code (as
defined herein), and the rules and regulations promulgated thereunder, or any
provision of state, local or foreign tax Law. To the extent that amounts are so
withheld by the Surviving REIT, Surviving Partnership or the Paying Agent, as
applicable, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Company Common Shares,
Partnership Common Units or Company Share Options in respect of which such
deduction and withholding was made by the Surviving REIT, Surviving Partnership
or the Paying Agent, as applicable.
2.5 Dissenters' Rights. No dissenters' or appraisal rights shall be
available with respect to the Mergers.
2.6 Adjustment of Company Common Share Merger Consideration, Partnership
Merger Consideration or OP LP LLC Membership Interests. In the event that,
subsequent to the date of this Agreement but prior to the REIT Merger Effective
Time or Partnership Merger Effective Time, as applicable, the Company Common
Shares or Partnership Common Units issued and outstanding shall, through a
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar change in the capitalization of the Company
or Partnership, as applicable, increase or decrease in number or be changed into
or exchanged for a different kind or number of securities, then an appropriate
and proportionate adjustment shall be made to the Company Common Share Merger
Consideration, Partnership Merger Consideration or OP LP LLC Membership
Interests, provided, however, that nothing set forth in this Section 2.6 shall
be construed to supersede or in any way limit the prohibitions set forth in
Section 5.1 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule attached to this Agreement
(the "Company Disclosure Schedule"), the Company and the Partnership represent
and warrant to Parent, Merger Sub and Merger Partnership as follows:
3.1 Existence; Good Standing; Authority; Compliance with Law.
(a) The Company is a real estate investment trust duly formed, validly
existing and in good standing under the laws of the State of Maryland. The
Amended and Restated Declaration of Trust of the Company, as amended
through the date hereof (the "Company Declaration of Trust") is in effect
and no dissolution, revocation or forfeiture proceedings regarding the
Company have been commenced. The Company is duly qualified or licensed to
do business as a foreign entity and is in good standing under the laws of
any other jurisdiction in which the character of the properties owned,
leased or operated by it therein or in which the transaction of its
business makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed does
not have and would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect (as hereinafter defined). The Company
has all requisite trust power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted.
10
(b) The Partnership is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
certificate of limited partnership of the Partnership is in effect and no
dissolution, revocation or forfeiture proceedings regarding the Partnership
have been commenced. The Partnership is duly qualified or licensed to do
business as a foreign limited partnership and is in good standing under the
laws of any other jurisdiction in which the character of the properties
owned, leased or operated by it therein or in which the transaction of its
business makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed does
not have and would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect. The Partnership has all requisite
partnership power and authority to own, operate, lease and encumber its
properties and carry on its business as now conducted.
(c) Section 3.1(c) of the Company Disclosure Schedule sets forth:
(i) each direct and indirect Subsidiary of the Company;
(ii) the legal form of each of the Company's Subsidiaries
including the state or country of formation;
(iii) the identity and ownership interest of each of the
Company's Subsidiaries that is held by the Company or its
Subsidiaries, and with respect to Third Party (as hereinafter defined)
owners, the identity and ownership interest as set forth in the
operative documents, in each case, including but not limited to the
amount of securities of such Subsidiary owned by such owner;
(iv) each jurisdiction in which each of the Company's
Subsidiaries is qualified or licensed to do business; and
(v) each assumed name under which each of the Company's
Subsidiaries conducts business in any jurisdiction.
Except as listed in Section 3.1(c) of the Company Disclosure Schedule,
the Company does not own, directly or indirectly, beneficially or of
record, any shares of stock or other security of any other entity or any
other investment in any other entity, which would be deemed a Subsidiary of
the Company.
(d) Each of the Company's Subsidiaries is duly qualified or licensed
to do business and in good standing under the laws of each jurisdiction in
which the character of the properties owned, leased or operated by it
therein or in which the transaction of its business makes such
qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed does not have and would
not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect.
11
(e) Except as set forth in Section 3.1(e) of the Company Disclosure
Schedule, all of the outstanding equity or voting securities or other
interests of each of the Company's Subsidiaries have been validly issued
and are (A) fully paid and nonassessable, (B) owned by the Company or by
one of the Company's Subsidiaries, and (C) owned, directly or indirectly,
free and clear of any Lien (as hereinafter defined) (including any
restriction on the right to vote or sell the same, except as may be
provided as a matter of Law), and all equity or voting interests in each of
the Company's Subsidiaries that is a partnership, joint venture, limited
liability company or trust which are owned by the Company, by one of the
Company's Subsidiaries or by the Company and one of the Company's
Subsidiaries are owned free and clear of any Lien (including any
restriction on the right to vote or sell the same, except as may be
provided as a matter of Law). For purposes of this Agreement, "Lien" means,
with respect to any asset (including any security), any mortgage, claim,
lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
(f) The Company has previously provided to Parent true and complete
copies of the Company Declaration of Trust and the Second Amended and
Restated Bylaws of the Company (the "Company Bylaws"), each as amended
through the date hereof, and any other organizational documents (and in
each such case, all amendments thereto) of the Company as currently in
effect.
(g) The Company has previously provided to Parent true and complete
copies of the Partnership's Certificate of Limited Partnership and Second
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"), each as amended through the date hereof, and the other
organizational documents (and in each such case, all amendments thereto) of
the Partnership as currently in effect.
3.2 Capitalization.
(a) The authorized shares of beneficial interest of the Company
consist of 100,000,000 Company Common Shares, of which, as of August 31,
2005, 46,453,994 were issued and outstanding and 20,000,000 Company
Preferred Shares of which, as of August 31, 2005, 3,950,000 designated as
Company Series A Preferred Shares were issued and outstanding and 2,600,000
designated as Company B Preferred Shares were issued and outstanding.
3,092,672 Company Common Shares have been reserved for issuance upon
conversion of the Company's 6% Convertible Notes due 2024 ("Convertible
Notes") and 357,865 Company Common Shares have been
reserved for issuance pursuant to the Company Share Option Plan, Phantom
Share Purchase Program, Restricted Share dividend equivalent rights and
Trustees Deferred Compensation Plan as listed in Section 3.2(c) of the
Company Disclosure Schedule, subject to adjustment on the terms set forth
in such plans and/or agreements, and 208,129 Company Share Options, 141,995
Phantom Shares, 6,506 Fee Shares and 1,235 Restricted Share dividend
equivalent rights were outstanding as of August 31, 2005. As of the date of
this Agreement, the Company had no Company Common Shares reserved for
issuance or required to be reserved for issuance other than as described
above. All such issued and outstanding shares of the Company are, and all
shares subject to issuance as specified above, upon issuance on the terms
and conditions specified in the instruments pursuant to
12
which they are issuable will be, when issued, duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights under any
provisions of the Maryland REIT Law, the Company Declaration of Trust or
Company Bylaws or any agreement to which the Company is a party or is
otherwise bound.
(b) The Company has issued and outstanding the secured and unsecured
debt instruments listed in Section 3.2(b) of the Company Disclosure
Schedule. Section 3.2(b) of the Company Disclosure Schedule sets forth an
accurate list of all such instruments, their outstanding principal amounts
as of June 30, 2005, interest rates and maturity dates. Except as listed in
Section 3.2(b) of the Company Disclosure Schedule, no obligation under such
debt instruments shall be accelerated nor shall any Person have the right
to accelerate such obligation, and none of the other provisions of such
debt instruments shall be affected in any material respect, by virtue of
the REIT Merger. Except for the Convertible Notes, the Company has no
outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable
for securities having the right to vote) with the shareholders of the
Company on any matter.
(c) Except for the Company Share Options, Restricted Shares, Phantom
Shares, Deferred Restricted Shares, Fee Shares and any dividend equivalent
rights thereon (collectively, the "Company Stock Rights"), the Convertible
Notes, the Partnership Common Units and the Partnership Preferred Units,
there are no existing options, warrants, calls, subscription rights,
convertible securities or other rights, agreements or commitments
(contingent or otherwise) which obligate the Company to issue, transfer or
sell any shares of beneficial interest (or similar ownership interest) of
the Company or any investment which is convertible into or exercisable or
exchangeable for any such shares. Section 3.2(c) of the Company Disclosure
Schedule sets forth a true, complete and correct list of the Company Stock
Rights, including the name of the Person to whom such Company Stock Right
has been granted, the number of shares subject to each Company Stock Right,
the type of Company Stock Right, the per share exercise price or purchase
price for each Company Stock Right that is a Company Share Option, whether
the Company Share Option is qualified and the vesting schedule for each
Company Stock Right as of the date of this Agreement. Except for the
Company Stock Rights, the Company has not issued any share appreciation
rights, dividend equivalent rights, performance awards, restricted stock
unit awards or "phantom" shares. True and complete copies of all
instruments (or the forms of such instruments) referred to in this Section
3.2(c) have been furnished or made available to Parent.
(d) Except as set forth in Section 3.2(d) of the Company Disclosure
Schedule and Article VIII of the Company Declaration of Trust, there are no
agreements or understandings to which the Company is a party with respect
to the voting of any shares of beneficial interest of the Company or which
restrict the transfer of any such shares, nor does the Company have
knowledge of any third party agreements or understandings with respect to
the voting of any such shares or which restrict the transfer of any such
shares.
(e) Except as set forth in Section 3.2(c) and Section 3.2(e) of the
Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company to repurchase, redeem, exchange, convert or
otherwise acquire any shares of beneficial interest or any other securities
of the Company.
13
(f) Except as set forth in Section 3.2(f) of the Company Disclosure
Schedule, the Company is under no obligation, contingent or otherwise, by
reason of any agreement to register the offer and sale or resale of any of
its securities under the Securities Act.
(g) The Company is the sole general partner of the Partnership and, as
of the date hereof, owns approximately 85% of the Partnership Common Units
as well as 100% of the Partnership Preferred Units. Section 3.2(g) of the
Company Disclosure Schedule sets forth a list of all other holders of the
Partnership Common Units, such holder's most recent address and the exact
number (e.g., general, limited, etc.) of Partnership Common Units held.
There are no existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Partnership to issue, transfer or sell any partnership interests of such
Partnership. Except as set forth in Section 3.2(g) of the Company
Disclosure Schedule, there are no outstanding contractual obligations of
the Partnership to issue, repurchase, redeem or otherwise acquire any
partnership interests of the Partnership. Except as set forth in Section
3.2(g) of the Company Disclosure Schedule, the partnership interests owned
by the Company are subject only to the restrictions on transfer set forth
in the Partnership Agreement, and those imposed by applicable securities
laws.
(h) As of the date hereof, there are fewer than 300 holders of record,
as such term is defined in Rule 12g5-1 promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of each of the
Company Series A Preferred Shares, the Company Series B Preferred Shares
and the Company's 6.75% Senior Unsecured Monthly Income Notes due 2019.
3.3 Authority Relative to this Agreement; Shareholder Approval.
(a) The Company has all necessary power and authority to execute and
deliver this Agreement and to consummate the REIT Merger and the other
transactions contemplated hereby. No other proceedings on the part of the
Company or any of its Subsidiaries are necessary to authorize this
Agreement or to consummate the REIT Merger and the other transactions
contemplated hereby (other than, with respect to the REIT Merger and this
Agreement, to the extent required by Law, the Company Shareholder Approval
(as hereinafter defined)). This Agreement has been duly and validly
executed and delivered by the Company and, assuming due authorization,
execution and delivery hereof by each of Parent, Merger Sub, and Merger
Partnership, constitutes a valid, legal and binding agreement of the
Company, enforceable against the Company in accordance with and subject to
its terms and conditions, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles.
(b) The Company Board has duly and validly authorized the execution
and delivery of this Agreement and approved the consummation of the REIT
Merger and the
14
other transactions contemplated hereby, and no other actions are required
to be taken by the Company Board for the consummation of the REIT Merger
and the other transactions contemplated hereby. The Company Board has
directed that this Agreement be submitted to the shareholders of the
Company for their approval to the extent required by Law and the Company
Declaration of Trust and, subject to the provisions of Section 6.4(b)
hereof, will recommend to the shareholders that they vote in favor of the
REIT Merger. The affirmative approval of this Agreement and the REIT Merger
by the holders of Company Common Shares voting together as a single class,
representing at least a majority of all votes entitled to be cast by the
holders of all outstanding Company Common Shares as of the record date for
the Company Shareholders' Meeting (the "Company Shareholder Approval") is
the only vote of the holders of any class or series of stock of the Company
necessary to adopt this Agreement and approve the REIT Merger.
(c) The Partnership has all necessary power and authority to execute
and deliver this Agreement and to consummate the Partnership Merger and the
other transactions contemplated hereby. No other proceedings on the part of
the Partnership are necessary to authorize this Agreement or to consummate
the Partnership Merger and the other transactions contemplated hereby
(other than with respect to the Partnership Merger and this Agreement, to
the extent required by Law, the Partnership Approval (as defined below).
This Agreement has been duly and validly executed and delivered by the
Partnership and, assuming due authorization, execution and delivery hereof
by each of Parent, Merger Sub, and Merger Partnership, constitutes a valid,
legal and binding agreement of the Partnership, enforceable against the
Partnership in accordance with and subject to its terms and conditions,
except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar
Laws of general applicability relating to or affecting creditors' rights or
by general equity principles. "Partnership Approval" means the consent of
the holders of at least two-thirds (2/3rd) of the Partnership Common Units,
including Partnership Common Units owned by the Company.
3.4 Reports; Financial Statements. Except as set forth in Section 3.4 of
the Company Disclosure Schedule, the Company and each of its Subsidiaries has
filed all required forms, reports and documents with the SEC from January 1,
2002 through the date hereof, each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, and the rules and
regulations promulgated thereunder applicable to such forms, reports and
documents, each as in effect on the dates such forms, reports and documents were
filed, except to the extent that such forms, reports and documents have been
modified or superceded by later forms, reports and documents filed prior to the
date of this Agreement. The Company has made available to Parent, in the form
filed with the SEC (including any amendments thereto), (i) its Annual Reports on
Form 10-K for each of the fiscal years ended December 31, 2002, 2003 and 2004,
respectively, (ii) all definitive proxy statements relating to the Company's
meetings of shareholders (whether annual or special) held since January 1, 2002,
and (iii) all other reports or registration statements filed by the Company with
the SEC since January 1, 2002 (collectively, the "Company SEC Reports"). Except
as set forth in Section 3.4 of the Company Disclosure Schedule, none of such
forms, reports or documents, including any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to
15
state a material fact required to be stated or incorporated by reference therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except to the extent
that such statements have been modified or superceded by later Company SEC
Reports filed prior to the date of this Agreement. To the extent required, the
Company has complied in all material respects with the requirements of the
Xxxxxxxx-Xxxxx Act of 2002 (the "S-O Act") that are currently in effect,
including, without limitation, those applicable to an "accelerated filer" as
such term is defined thereunder. Except as set forth in Section 3.4 of the
Company Disclosure Schedule, the consolidated financial statements of the
Company and its Subsidiaries included in the Company SEC Reports (except to the
extent such statements have been amended or modified by later Company SEC
Reports filed prior to the date of this Agreement) filed prior to the date of
this Agreement complied as to form in all material respects with applicable
accounting standards and the published rules and regulations of the SEC with
respect thereto and fairly present in all material respects, in conformity with
generally accepted accounting principles ("GAAP") (except, in the case of
interim financial 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), the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the consolidated results of their operations and cash flows
for the periods then ended (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
3.5 No Undisclosed Liabilities. Except (i) as set forth in Section 3.5 of
the Company Disclosure Schedule, (ii) as disclosed in the Company SEC Reports
filed prior to the date hereof and (iii) for fees and expenses incident to the
consummation of the transactions contemplated hereby, none of the Company or its
Subsidiaries had any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth in a
consolidated balance sheet of the Company or in the notes thereto, except for
any such liabilities or obligations which do not have and would not reasonably
be likely to have, individually or in the aggregate, a Material Adverse Effect,
after taking into account any assets acquired or services provided in connection
with the incurrence of such liabilities or obligations.
3.6 Absence of Changes. Except as set forth in Section 3.6 of the Company
Disclosure Schedule or disclosed in the Company SEC Reports, from January 1,
2005 through the date hereof, the Company has conducted its businesses only in
the ordinary course of business and consistent with past practice, and there has
not been: (a) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of beneficial interest of the Company,
except for the payment of dividends in the aggregate amounts of $58,527,456.08
on Company Common Shares, $5,554,687.50 on Company Series A Preferred Shares,
and $3,900,000 on Company Series B Preferred Shares (and corresponding regular
quarterly distributions payable to each class or series of holders of units of
partnership interests in the Partnership); (b) any material commitment,
contractual obligation (including, without limitation, any management or
franchise agreement, any lease (capital or otherwise) or any letter of intent),
borrowing, lending commitment, liability, guaranty, capital expenditure or
transaction (each, a "Commitment") entered into by the Company outside the
ordinary course of business; (c) any split, combination or reclassification of
any Company Shares 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 its beneficial interest or
any issuance of an ownership interest in, any of the Company's Subsidiaries,
except as contemplated
16
by this Agreement or for the issuance or exercise of Company Stock Rights; (d)
any damage, destruction or loss, whether or not covered by insurance, that has
had, would have and would reasonably be likely to have a Material Adverse
Effect; (e) any material change in the Company's accounting principles,
practices or methods except insofar as may have been required by a change in
GAAP; (f) any amendment of any employment, consulting, severance, retention or
any other agreement between the Company and any officer of the Company; or (g)
any event or occurrence of any condition that has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
3.7 Consents and Approvals; No Violations. Assuming the receipt of the
Company Shareholder Approval, and except (a) for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the Securities Act, the Nasdaq
Stock Market, state securities or state "blue sky" laws, the HSR Act (as
hereinafter defined) or any other antitrust law and (b) the filing of the
Articles of Merger, Partnership Merger Certificate, or as otherwise set forth in
Section 3.7 of the Company Disclosure Schedule, none of the execution, delivery
or performance of this Agreement by the Company, the consummation by the Company
of the Mergers or compliance by the Company with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the
organizational documents of the Company or any of its Subsidiaries, (ii) require
any filing by the Company or any of its Subsidiaries with, notice to, or permit,
authorization, consent or approval of, any state or federal government or
governmental authority or by any United States or state court of competent
jurisdiction (a "Governmental Entity"), (iii) require any consent or notice
under, result in a violation or breach by the Company or any of its Subsidiaries
of, constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, amendment, cancellation or
acceleration) under, result in the triggering of any payment, or result in the
creation of any lien or other encumbrance on any property or asset of the
Company or any of its Subsidiaries pursuant to, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement, permit, franchise or other instrument or obligation or Company
Material Contract to which the Company or any of its Subsidiaries is a party or
by which they or any of their respective properties or assets may be bound or
(iv) violate any law, order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets (each, a "Law" and collectively, the "Laws"),
excluding from the foregoing clauses (ii), (iii) and (iv) such filings, notices,
permits, authorizations, consents, approvals, violations, breaches, trigger
events, creation of liens or defaults which, individually or in the aggregate,
(A) would not prevent or materially delay consummation of the Mergers, (B) would
not otherwise prevent or materially delay performance by the Company or the
Partnership of its material obligations under this Agreement or (C) do not have
and would not reasonably be likely to have a Material Adverse Effect.
3.8 No Default. Neither the Company nor any of its Subsidiaries is in
violation of (i) any material term of the Company Declaration of Trust or
Company Bylaws (or other similar organizational documents), (ii) any agreement
or instrument related to indebtedness for borrowed money or any other agreement
to which it is a party or by which it is bound, or (iii) any Law applicable to
the Company, its Subsidiaries or any of their respective properties or assets,
in each case with respect to clauses (ii) and (iii) above, except as do not have
and would not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect.
17
3.9 Litigation. Except (i) as listed in Section 3.9 of the Company
Disclosure Schedule, (ii) as set forth in the Company SEC Reports filed prior to
the date of this Agreement, or (iii) for suits, claims, actions, proceedings or
investigations arising from the usual, regular and ordinary course of operations
of the Company and its Subsidiaries involving (A) collection matters or (B)
personal injury or other tort litigation which are covered by adequate insurance
(subject to customary deductibles), there is no Dispute (as hereinafter defined)
pending or, to the Company's knowledge, threatened in writing against the
Company or any of its Subsidiaries or any of its or their respective properties
or assets that (1) involves amounts in excess of $100,000 individually or in
excess of $1,000,000 in the aggregate, (2) questions the validity of this
Agreement or any action to be taken by the Company or the Partnership in
connection with the consummation of the Mergers or (3) reasonably can be
expected to have a Material Adverse Effect. None of the Company or its
Subsidiaries is subject to any order, judgment, writ, injunction or decree,
except as would not reasonably be expected to have a Material Adverse Effect.
3.10 Compliance with Applicable Law. Except as listed in Section 3.10 of
the Company Disclosure Schedule, the Company and each of its Subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities and third parties necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except for Company Permits
the absence of which do not have and would not reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect. The Company and
each of its Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure to so comply does not have and would not
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect The businesses of the Company and each of its Subsidiaries are
not being conducted in violation of any Law applicable to the Company or its
Subsidiaries except as would not reasonably be expected to have a Material
Adverse Effect. Except as would not reasonably be expected to have a Material
Adverse Effect, no investigation, review or proceeding by any Governmental
Entity with respect to the Company, its Subsidiaries or their operations is
pending nor, to the Company's knowledge is threatened in writing, and to the
Company's knowledge, no Governmental Entity has indicated an intention to
conduct the same.
Notwithstanding the foregoing, nothing contained in this Section 3.10 shall
be construed to limit the statements set forth in Section 3.14 hereof.
3.11 Properties.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth a
correct and complete list and address of all real property owned or leased
by the Company and its Subsidiaries (including its headquarters and leases
of office space) as of the date of this Agreement and a list of expected
construction completion dates of all buildings, structures and other
improvements being funded by or on behalf of the Company (all such real
property, together with all buildings, structures and other improvements
and fixtures located on or under such real property and all easements,
rights and other appurtenances to such real property, are individually
referred to herein as "Company Property" and collectively referred to
herein as the "Company Properties"). Each of the Company Properties is
owned or leased by the Company and its Subsidiaries, as indicated
18
in Section 3.11(a) of the Company Disclosure Schedule. The Company and its
Subsidiaries own or, if so indicated in Section 3.11(a) of the Company
Disclosure Schedule, lease each of the Company Properties, in each case
free and clear of any Liens, title defects, contractual restrictions,
covenants or reservations of interests in title (collectively, "Property
Restrictions"), except for (i) Permitted Liens, (ii) Property Restrictions
imposed or promulgated by Law or by any Governmental Entity which are
customary and typical for similar properties or (iii) Property Restrictions
which do not, individually or in the aggregate, interfere materially with
the current use of such property, except in the case of clauses (i), (ii)
and (iii) above as do not have and would not reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect. There are no
defaults under any of the Property Restrictions, except as do not have and
would not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect. For purposes of this Agreement, "Permitted Liens"
means (i) Liens for Taxes not yet due or delinquent or as to which there is
a good faith dispute and for which there are adequate reserves on the
financial statements of the Company (if such reserves are required pursuant
to GAAP), (ii) with respect to real property, any title exception disclosed
in the Company Title Insurance Policies (as defined herein) made available
to Parent (whether material or immaterial), Liens and obligations arising
under the Company Material Contracts (including any lien securing mortgage
debt disclosed in Section 3.2(b) of the Company Disclosure Schedule), the
Company Leases (as defined herein) and any other Lien which does not,
individually or in the aggregate, interfere materially with the current use
of such property (assuming its continued use in the manner in which it is
currently used) or materially adversely affect the value or marketability
of such property, (iii) inchoate materialmen's, mechanics', carriers',
workmen's and repairmen's liens arising in the usual, regular and ordinary
course and not past due and payable or the payment of which is being
contested in good faith by appropriate proceedings and for which there are
adequate reserves on the financial statements of the Company (if such
reserves are required pursuant to GAAP) and (iv) mortgages and deeds of
trust (which are listed in the Company Disclosure Schedule).
(b) Section 3.11(b) of the Company Disclosure Schedule sets forth a
correct and complete list of all agreements for the pending acquisition,
sale, option to sell, right of first refusal, right of first offer or any
other contractual right to sell, dispose of, or lease (by merger, purchase
or sale of assets or stock or otherwise) any personal property valued at
$50,000 or more. The Company and each of its Subsidiaries have good and
sufficient title to all the material personal and non-real properties and
assets reflected in their books and records as being owned by them
(including those reflected in the consolidated balance sheet of the Company
and its Subsidiaries as of June 30, 2005, except as since sold or otherwise
disposed of in the usual, regular and ordinary course of business), free
and clear of all Liens, except for Permitted Liens.
(c) Except as provided for in Section 3.11(c) of the Company
Disclosure Schedule, to the Company's knowledge, the Company or its
Subsidiaries has good, marketable and insurable fee simple title to or a
valid leasehold interest in the Company Properties and valid policies of
title insurance (each a "Company Title Insurance Policy") have been issued
insuring, as of the effective date of each such Company Title Insurance
Policy, the Company's or the applicable Subsidiary's (or the applicable
predecessor's or
19
acquiror's) fee simple title to or leasehold interest in the Company
Properties, subject only to the matters disclosed on the Company Title
Insurance Policies and Permitted Liens, and to the Company's knowledge,
such policies are, at the date hereof, valid and in full force and effect
and no written claim has been made against any such policy. A correct and
complete copy of each Company Title Insurance Policy has been previously
made available to Parent.
(d) Except as set forth in Section 3.11(d) of the Company Disclosure
Schedule, the Company has no knowledge (i) that any certificate, permit or
license from any Governmental Entity having jurisdiction over any of the
Company Properties or any agreement, easement or other right of an
unlimited duration which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the Company
Properties or which is necessary to permit the lawful use and operation of
all utilities, parking areas, detention ponds, driveways, roads and other
means of egress and ingress to and from any of the Company Properties has
not been obtained, is not in full force and effect and for which a renewal
application has not been timely filed, except for such failures to obtain,
to have in full force and effect or to renew, which do not have and would
not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect, or of any pending written threat of modification
or cancellation of any of same, which have or would reasonably be likely to
have a Material Adverse Effect; (ii) of written notice of any uncured
violation of or liability under any Laws, including Environmental Laws,
affecting any of the Company Properties or operations which have or would
reasonably be likely to have a Material Adverse Effect; (iii) of any
structural defects relating to any Company Properties which have or would
reasonably be likely to have a Material Adverse Effect; (iv) of any Company
Properties whose building systems are not in working order to an extent
which have or would reasonably be likely to have a Material Adverse Effect;
or (v) of any physical damage to any Company Properties to an extent which
have or would reasonably be likely to have a Material Adverse Effect.
(e) Except as provided for in Section 3.11(e) of the Company
Disclosure Schedule, to the Company's knowledge, neither the Company nor
any of the Company's Subsidiaries has received any written notice to the
effect that (i) any condemnation or rezoning proceedings are pending or
threatened with respect to any of the Company Properties, or (ii) any Laws
including, without limitation, any zoning regulation or ordinance, building
or similar law, code, ordinance, order or regulation has been violated for
any Company Property, in the case of clauses (i) and (ii) above which have
or would reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect.
(f) Except as provided for in Section 3.11(f) of the Company
Disclosure Schedule, the rent rolls for the Company Properties dated as of
July 2005 which have previously been made available to Parent, list each
lease, sublease, ground lease or other right of occupancy that the Company
or its Subsidiaries are party to as landlord with respect to each of the
applicable Company Properties including all amendments, modifications,
supplements, renewals, extensions and guarantees related thereto (except
for discrepancies or omissions that do not have and would not reasonably be
likely to have, individually or in the aggregate, a Material Adverse Effect
(the "Company Leases"), and are correct and complete in all respects
(except for discrepancies that do
20
not have and would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect). The Company has made available to
Parent correct and complete copies of all Company Leases, as of the date
hereof. Except as set forth in Section 3.11(f) of the Company Disclosure
Schedule, neither the Company nor any of the Company's Subsidiaries, on the
one hand, nor, to the knowledge of the Company, any other party, on the
other hand, is conducting or has conducted business in violation of or in a
manner which would reasonably be expected to result in liability under any
Environmental Laws at or related to the Company Property that is the
subject of such Company Lease or in default under any Company Lease, except
for violations or defaults that are disclosed in the rent rolls or that do
not have and would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect. No purchase option, option to sell,
right of first refusal, right of first offer, right of first negotiation or
any similar option or right has been exercised under any of the Company
Leases, except options whose exercise has been evidenced by a written
document as described in Section 3.11(f) of the Company Disclosure
Schedule.
(g) Except as provided for in Section 3.11(g) of the Company
Disclosure Schedule, 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 application, submission or agreement the Company or any of
its Subsidiaries has entered into with a Governmental Entity in connection
with a site approval, zoning reclassification or other similar action
relating to any Company Properties (e.g., local improvement district, road
improvement district, environmental compliance and environmental
remediation, abatement and/or mitigation) have been and are being
performed, paid or taken, as the case may be, in accordance with said
application, submission or agreement and with applicable Laws, other than
those where, individually or in the aggregate, the failure does not have
and would not reasonably be likely to have a Material Adverse Effect.
(h) Section 3.11(h) of the Company Disclosure Schedule sets forth a
correct and complete list of each ground lease pursuant to which the
Company or any of its Subsidiaries is a lessee (individually, "Ground
Lease" and collectively, "Ground Leases"). Each Ground Lease is in full
force and effect and is valid, binding and enforceable in accordance with
its terms against (a) the Company or any of its Subsidiaries, and (b) to
the knowledge of the Company, the other parties thereto, except as do not
have and would not reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect. Except as listed in Section 3.11(h)
of the Company Disclosure Schedule or which do not have and would not
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect, the Company or any of its Subsidiaries have performed all
obligations required to be performed by it to date under each of the Ground
Leases and neither the Company nor any of its Subsidiaries, nor to the
knowledge of the Company, any other party, is in default under any Ground
Lease, which default has or would reasonably be expected to have a Material
Adverse Effect (and to the Company's knowledge, no event has occurred
which, with due notice or lapse of time or both, would constitute such a
default). The Company has made available to Parent a correct and complete
copy of each Ground Lease and all amendments thereto.
21
(i) All rent has been properly calculated and billed to tenants in all
material respects pursuant to the Company Leases.
(j) Except as set forth in Section 3.11(j) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has granted any
unexpired option agreements or rights of first refusal with respect to the
purchase of a Company Property or any portion thereof or any other
unexpired rights in favor of any Third Party to purchase or otherwise
acquire a Company Property or any portion thereof or entered into any
contract for sale, ground lease or letter of intent to sell or ground lease
any Company Property or any portion thereof.
(k) Section 3.11(k) of the Company Disclosure Schedule sets forth a
correct and complete list of all of the contracts, documents or other
agreements which are currently in effect whereby the Company or any of its
Subsidiaries is entitled to receive site work or other reimbursements from
any Third Party, pursuant to which the Company or any of its Subsidiaries
is currently entitled to receive in excess of $250,000 (the "Reimbursement
Agreements").
(l) Except for the applicable tenant's management obligations as set
forth in the Company Leases, neither the Company nor any of its
Subsidiaries is a party to any agreement relating to the management of any
of the Company Properties by a party other than the Company or any
wholly-owned Company Subsidiaries (a "Third Party").
(m) Except as set forth in Section 3.11(m) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
agreement pursuant to which the Company or any of its Subsidiaries manages
any real properties for any Third Party.
(n) Except for those contracts or agreements set forth in Section
3.11(n) of the Company Disclosure Schedule, neither the Company nor any of
its Subsidiaries has entered into any contract or agreement (collectively,
the "Participation Agreements") with any Third Party or any employee,
consultant, Affiliate or other person (the "Participation Party") which
provides for a right of such Participation Party to participate, invest,
join, partner, have any interest in whatsoever (whether characterized as a
contingent fee, profits interest, equity interest or otherwise) or have the
right to any of the foregoing in any proposed or anticipated investment
opportunity, joint venture, partnership or any other current or future
transaction or property in which the Company or any Subsidiary has or will
have an interest, including but not limited to those transactions or
properties identified, sourced, produced or developed by such Participation
Party (a "Participation Interest"). Section 3.11(n) of the Company
Disclosure Schedule sets forth the only transactions or Company Properties
for which any Participation Party currently has a Participation Interest
pursuant to such Participation Agreements.
(o) Section 3.11(o) of the Company Disclosure Schedule sets forth a
list of all notices to the Company from lenders or insurance carriers
currently requiring material repairs or other material alterations to
Company Properties.
22
(p) Except as set forth in Section 3.11(p) of the Company Disclosure
Schedule, there is no Company-funded renovation, restoration or other work
in progress (or commitments related thereto) above $500,000 in each case
and $5,000,000 in the aggregate to any Company Properties.
3.12 Employee Plans.
(a) All employees of the Company or any of its Subsidiaries are
employed by the Company or the Partnership. Section 3.12(a) of the Company
Disclosure Schedule sets forth a list of all "employee benefit plans," as
defined in Section 3(3) of the Employment Retirement Income Security Act of
1974, as amended ("ERISA"), and all other material employee benefit plans
or other benefit arrangements or payroll practices including bonus plans,
fringe benefits, executive compensation, consulting or other compensation
agreements, change in control agreements, incentive, equity or equity-based
compensation, deferred compensation arrangements, stock purchase, severance
pay, sick leave, vacation pay, salary continuation, hospitalization,
medical benefits, life insurance, other welfare benefits, scholarship
programs, directors' benefit, bonus or other incentive compensation, which
the Company or the Partnership sponsors, maintains, contributes to or has
any obligation to contribute to (each a "Company Employee Benefit Plan" and
collectively, the "Company Employee Benefit Plans"). None of the Company
Employee Benefit Plans is or has been subject to Title IV of ERISA, or is
or has been subject to Sections 4063 or 4064 of ERISA, nor is the Company,
its Subsidiaries or any ERISA Affiliate obligated to contribute to a
multiemployer plan, as defined in Section 3(37) of ERISA (a "Multiemployer
Plan"). Neither the Company nor any ERISA Affiliate has incurred any
material present or contingent liability under Title IV of ERISA, nor does
any condition exist which could reasonably be likely to result in any such
liability.
(b) Correct and complete copies of the following documents, with
respect to each of the Company Employee Benefit Plans, other than a
Multiemployer Plan, have been made available to Parent by the Company: (i)
plan and related trust documents, and amendments thereto; (ii) the three
most recent Forms 5500 and schedules thereto, if applicable; (iii) the most
recent Internal Revenue Service ("IRS") opinion letter or determination
letter (which resulted from a proper and timely filing with the IRS), if
any; (iv) the three most recent financial statements and actuarial
valuations, if applicable; and (v) summary plan descriptions, if
applicable.
(c) Except as would not have and would not reasonably be likely to
have, a Material Adverse Effect, (i) the Company and the Partnership have
performed all obligations required to be performed by them under all
Company Employee Benefit Plans; (ii) the Company Employee Benefit Plans
have been administered in compliance with their terms and the requirements
of ERISA, the Code and other applicable Laws; (iii) all contributions
(including all employer contributions and employee salary reduction
contributions) required to have been made under any of the Company Employee
Benefit Plans to any funds or trusts established thereunder or in
connection therewith have been made by the due date thereof and all
contributions for any period ending on or before the Closing Date which are
not yet due will have been paid or accrued prior to the Closing
23
Date; (iv) there are no actions, suits, arbitrations, investigations,
audits or claims (other than routine claims for benefits) filed, or to the
knowledge of the Company or the Partnership, threatened in writing with
respect to any Company Employee Benefit Plan; and (v) the Company and the
Partnership have no liability as a result of any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) for any
excise Tax or civil penalty.
(d) Neither the Company nor the Partnership is subject to any
unsatisfied withdrawal liability with respect to any Multiemployer Plan.
(e) Each of the Company Employee Benefit Plans which is intended to be
"qualified" within the meaning of Section 401(a) of the Code has received
an opinion letter or determination letter from the IRS. The Company and the
Partnership know of no fact which would adversely affect the qualified
status of any such Company Employee Benefit Plan or the exemption of such
trust.
(f) Except as set forth in Section 3.12(f) of the Company Disclosure
Schedule, none of the Employee Benefit Plans provide for continuing
post-employment health, life insurance coverage or other welfare benefits
for any participant or any beneficiary of a participant except as may be
required under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, or similar state law ("COBRA").
(g) No stock or other security issued by the Company forms or has
formed a material part of the assets of any tax qualified Company Employee
Benefit Plan.
(h) Except as set forth in Section 3.12(h) of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Mergers will (i) result in any material payment
becoming due, or materially increase the amount of compensation due, to any
current or former employee of the Company or any of its Subsidiaries; (ii)
materially increase any benefits otherwise payable under any Company
Employee Benefit Plan; or (iii) result in the acceleration of the time of
payment or vesting of any such material benefits.
3.13 Labor Matters.
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
list of all temporary staffing, labor or collective bargaining agreements
to which the Company or any Subsidiary is party (excluding personal
services contracts) and, except as set forth therein, there are no such
temporary staffing, labor or collective bargaining agreements that pertain
to the Company or any of its Subsidiaries. The Company has heretofore made
available to Parent correct and complete copies of the labor or collective
bargaining agreements listed on Section 3.13(a) of the Company Disclosure
Schedule, together with all material amendments, modifications, supplements
and side letters affecting the duties, rights and obligations of any party
thereunder.
(b) Except as disclosed in Section 3.13(b) of the Company Disclosure
Schedule, (i) no employees of the Company or any of its Subsidiaries are
represented by any labor organization; (ii) no labor organization or group
of employees of the Company
24
or any of its Subsidiaries has made a written demand for recognition or
certification; (iii) to the Company's knowledge, there are no
representation or certification proceedings or petitions seeking a
representation proceeding presently filed, or to the Company's knowledge,
threatened in writing to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority; (iv) to
the Company's knowledge, there are no organizing activities involving the
Company or any of its Subsidiaries pending with any labor organization or
group of employees of the Company or any of its Subsidiaries, and (v) the
Company and its Subsidiaries are not affected and have not been affected in
the past by any actual or threatened work stoppage strike or other labor
disturbance.
(c) There are no unfair labor practice charges, grievances or
complaints filed or, to the Company's knowledge, threatened in writing by
or on behalf of any employee or group of employees of the Company or any of
its Subsidiaries.
(d) Except as set forth in Section 3.13(d) of the Company Disclosure
Schedule, there are no complaints, charges or claims against the Company or
any of its Subsidiaries filed or, to the knowledge of the Company,
threatened in writing to be brought or filed, with any federal, state or
local Governmental Entity or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or termination of
employment of any individual by the Company or any of its Subsidiaries.
(e) Except as set forth in Section 3.13(e) of the Company Disclosure
Schedule, (i) the Company and each of its Subsidiaries is in compliance in
all material respects with all Laws relating to the employment of labor,
including all such Laws relating to wages, hours, the Worker Adjustment and
Retraining Notification Act and any similar state or local "mass layoff" or
"plant closing" Law ("WARN"), collective bargaining, discrimination, civil
rights, affirmative action, safety and health, workers' compensation and
the collection and payment of withholding and/or social security Taxes and
any similar Tax, except for any non-compliance which does not have and
would not reasonably be likely to have, a Material Adverse Effect; and (ii)
there has been no "mass layoff" or "plant closing" as defined by WARN with
respect to the Company or any of its Subsidiaries within the last six (6)
months.
3.14 Environmental Matters. Except as disclosed in Section 3.14 of the
Company Disclosure Schedule or as does not have and would not reasonably be
likely to have, individually or in the aggregate, a Material Adverse Effect, (i)
each of the Company and its Subsidiaries is and has been, and at all times
during the Company's and each of its Subsidiaries' ownership and operation of
the Company Properties, the Company Properties are and have been (and with
respect to former Subsidiaries and properties formerly owned, leased or operated
by the Company or said former Subsidiaries, to the knowledge of the Company or
any Subsidiary, was during the period owned, leased or operated by any of them)
in compliance with Environmental Laws; (ii) each of the Company and its
Subsidiaries has obtained and currently possess and maintain all Company Permits
required by Environmental Laws (collectively, "Company Environmental Permits")
for each of their respective operations, all such Company Environmental Permits
are in good standing and renewals timely applied for, and each of the Company
and its current Subsidiaries is and has been in compliance with the terms and
25
conditions of such Company Environmental Permits, and each of the Company's
former Subsidiaries was in compliance with the terms and conditions of such
Company Environmental Permits at all times during the periods in which such
former Subsidiaries were Subsidiaries of the Company or prior thereto; (iii)
none of the Company and its Subsidiaries or real property currently or, to the
knowledge of the Company or any Subsidiary, formerly owned, leased or operated
by the Company or its current and former Subsidiaries or any of their respective
predecessors is subject to any pending or, to the knowledge of the Company or
any Subsidiary, threatened Environmental Claim; (iv) none of the Company, its
current Subsidiaries, its former Subsidiaries (pertaining only to the periods in
which such former Subsidiaries were Subsidiaries of the Company or prior
thereto) and, to the knowledge of the Company or any such Subsidiary, no other
party whose liability would be attributable to the Company or any such
Subsidiary, has generated, arranged for the disposal of or otherwise caused to
be disposed of any Hazardous Material at any off-site location at which the
Company or any such Subsidiary would reasonably be expected to be liable for
undertaking or paying for any investigation or any other action to respond to
the release or, to the knowledge of the Company or any such Subsidiary,
threatened release of any Hazardous Material or would reasonably be expected to
be required to pay natural resource damages; (v) no Company Property or any
property currently or, to the knowledge of the Company or any Subsidiary,
formerly owned, leased or operated by the Company and its current and former
Subsidiaries or any of their respective predecessors has been the subject of any
treatment, storage, disposal, accumulation, generation, release or threatened
release of Hazardous Materials in any manner which has given or would reasonably
be expected to give rise to liability under Environmental Laws or need to
undertake any action to respond to such Hazardous Materials or has an adverse
environmental condition that has resulted in or would reasonably be expected to
result in an Environmental Claim against the Company or its Subsidiaries; (vi)
to the knowledge of the Company or any Subsidiary, there are no wetlands (as
that term is defined in Section 404 of the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1254, and applicable state laws) at any of the
Company Properties nor is any Company Property subject to any current or, to the
knowledge of the Company or any Subsidiary, threatened environmental deed
restriction, use restriction, institutional or engineering control or order or
agreement with any Governmental Entity or any other restriction of record; (vii)
no capital expenditures are presently required to maintain or achieve compliance
with Environmental Laws; (viii) to the knowledge of the Company or any
Subsidiary, there are no underground storage tanks, polychlorinated biphenyls
("PCB") or PCB-containing equipment, except for PCB or PCB-containing equipment
owned by utility companies, or asbestos or asbestos-containing materials at any
Company Property; (ix) there have been no material incidents of water damage or
visible evidence of mold, bacteria or toxic growth at any of the Company
Properties; (x) except for customary terms in favor of lenders in mortgages and
trusts, none of the Company or its Subsidiaries has assumed any liability of or
duty to indemnify or pay contribution to any other party for any claim, damage
or loss arising out of any Hazardous Material or pursuant to any Environmental
Law; (xi) no party who has agreed to indemnify, defend and/or hold harmless the
Company or its Subsidiaries with respect to any Environmental Claims or
liabilities under any Environmental Laws has or, to the knowledge of the Company
or any Subsidiary, is reasonably likely to default upon said obligations; (xii)
no filing, notification or other submission to any Governmental Entity or any
approval from any Governmental Entity is required under any Environmental Law
for the execution of this Agreement or for the consummation of the Mergers or
any of the other transactions contemplated hereby; and (xiii) to the knowledge
of the Company or any Subsidiary, neither the Company nor any of its
Subsidiaries has received any request for information from any Governmental
Entity, pursuant to Section 104(e) of CERCLA (as defined below) or any similar
Environmental Law.
26
As used in this Agreement:
"Environmental Claims" means any and all administrative, regulatory,
judicial or third-party claims, demands, notices of violation or non-compliance,
directives, proceedings, investigations, orders, decrees, judgments or other
allegations of noncompliance with or liability or potential liability relating
in any way to any Environmental Law or any Company Environmental Permit, as the
case may be.
"Environmental Laws" means all applicable federal, state, and local Laws,
rules and regulations, orders, judgments, decrees and other legal requirements
including, without limitation, common law relating to pollution or the
regulation and protection of human health, safety, the environment or natural
resources, including, but not limited to, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section
9601 et seq.) ("CERCLA"); the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section. 5101 et seq.); the Federal Insecticide, Fungicide, and
Rodenticide Act, as amended (7 U.S.C. Section. 136 et seq.); the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Section 6901 et seq.); the
Toxic Substances Control Act, as amended (42 U.S.C. Section. 7401 et seq.); the
Clean Air Act, as amended (42 U.S.C. Section 7401 et seq.); the Federal Water
Pollution Control Act, as amended (33 U.S.C. Section 1251 et seq.); the
Occupational Safety and Health Act, as amended (29 U.S.C. Section 651 et seq.);
the Safe Drinking Water Act, as amended (42 U.S.C. Section 300f et seq.); and
their state and local counterparts or equivalents and any transfer of ownership
notification or approval statute.
"Hazardous Material" means all substances, pollutants, chemicals,
compounds, wastes, including, without limitation, petroleum and any fraction
thereof or substances otherwise potentially injurious to human health and the
environment, including without limitation bacteria, mold, fungi or other toxic
growth, regulated under Environmental Laws.
The Company and its Subsidiaries have made available to Parent all material
environmental audits, reports and other material environmental documents and
reports in their possession or control relating to their current and, to the
extent the Company or its Subsidiaries have knowledge that they are potentially
liable, their or any of their respective predecessors' formerly owned or
operated properties, facilities or operations.
3.15 Tax Matters.
(a) All federal and all other material Tax Returns (as hereinafter
defined) required to be filed by or on behalf of the Company or any of its
Subsidiaries have been filed with the appropriate taxing authorities in all
jurisdictions in which such Tax Returns are required to be filed (after
giving effect to any valid extensions of time in which to make such
filings), and all such Tax Returns, as amended, were accurate and complete
in all material respects. Except as and to the extent publicly disclosed by
the Company in the Company SEC Reports filed prior to the date of this
Agreement, (i) all Taxes payable
27
by or on behalf of the Company or any of its Subsidiaries (whether or not
shown in a Tax Return) have been fully and timely paid or adequately
provided for in accordance with GAAP, and (ii) adequate reserves or
accruals for Taxes have been provided in accordance with GAAP with respect
to any period for which Tax Returns have not yet been filed or for which
Taxes are not yet due and owing or for which Taxes are being contested in
good faith. Neither the Company nor any of its Subsidiaries has executed or
filed with the IRS or any other taxing authority any agreement, waiver or
other document or arrangement extending or having the effect of extending
the period for assessment or collection of Taxes (including, but not
limited to, any applicable statute of limitation), and no power of attorney
with respect to any Tax matter is currently in force, except in connection
with the appeals of local tax assessments described in Section 3.15(a) of
the Company Disclosure Schedule.
(b) The Company (i) for all taxable years commencing in 1998, the year
in which the Company first made a REIT tax election, through the most
recent December 31, has been subject to taxation as a real estate
investment trust (a "REIT") within the meaning of Section 856 of the Code
and has satisfied all requirements to qualify as a REIT for such years,
(ii) has operated, and intends to continue to operate, in such a manner as
to qualify as a REIT for the taxable year including the date the REIT
Merger becomes effective and (iii) has not taken or omitted to take any
action which would reasonably be likely to result in a challenge to its
status as a REIT, and, to the Company's knowledge, no challenge to the
Company's status as a REIT is pending or threatened in writing. Each
Subsidiary of the Company that is a partnership, joint venture, or limited
liability company (i) has been since its formation and continues to be
treated for federal income tax purposes as a partnership or disregarded
entity, as the case may be, and not as a corporation or an association
taxable as a corporation and (ii) has not since the later of its formation
or the acquisition by the Company of a direct or indirect interest therein,
owned any assets (including, without limitation, securities) that would
cause the Company to violate Section 856(c)(4) of the Code. Each Subsidiary
of the Company that is a corporation has been since the later of the date
of its formation or the date on which such Subsidiary became a Subsidiary
of the Company a "qualified REIT subsidiary" pursuant to Section 856(i) of
the Code or a "taxable REIT subsidiary" pursuant to Section 856(l) of the
Code. Neither the Company nor any of its Subsidiaries holds any asset (i)
the disposition of which would be subject to rules similar to Section 1374
of the Code, whether or not as a result of (A) an election under IRS Notice
88-19 or Treasury regulations Section 1.337(d)-5T or Section 1.337(d)-6 or
(B) the application of Treasury regulations Section 1.337(d)-7, or (ii)
which is subject to a consent filed pursuant to section 341(f) of the Code
and the regulations thereunder.
(c) Since January 1, 2000, the Company has incurred no liability for
excise taxes under Sections 857(b), 860(c) or 4981 of the Code, including
without limitation any excise tax arising from a prohibited transaction
described in Section 857(b)(6) of the Code or any tax arising from
"redetermined rents, redetermined deductions and excess interest" described
in Section 857(b)(7) of the Code, and neither the Company nor any of its
Subsidiaries has incurred any material liability for Taxes other than in
the usual, regular and 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
the Company or its Subsidiaries.
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(d) There are no material deficiencies asserted or assessments made as
a result of any examinations by the IRS or any other taxing authority of
the Tax Returns of or covering or including the Company or any of its
Subsidiaries, and, to the knowledge of the Company, there are no other
audits relating to any material Taxes by any taxing authority in progress,
nor has the Company or any of its Subsidiaries received any written notice
from any taxing authority that it intends to conduct such an audit.
(e) The Company and its Subsidiaries (i) have complied in all material
respects with all applicable Laws, rules and regulations relating to the
payment and withholding of Taxes; (ii) have duly and timely withheld from
employee salaries, wages and other compensation and have paid over to the
appropriate taxing authorities all material amounts required to be withheld
and paid over on or prior to the due date thereof under all applicable
Laws; and (iii) have in all material respects properly completed and timely
filed all IRS forms W-2 and 1099 required thereof.
(f) The Company has made available to Parent correct and complete
copies of (A) all federal and other Tax Returns of the Company and its
Subsidiaries relating to the taxable periods ending since December 31, 2002
which have been filed and (B) any audit report issued within the last five
years relating to any Taxes due from or with respect to the Company or any
of its Subsidiaries.
(g) Except for written claims involving amounts of less than $100,000
in the aggregate, no claim has been made in writing by a taxing authority
in a jurisdiction where the Company or any of its Subsidiaries does not
file Tax Returns such that the Company or any such Subsidiary is or may be
subject to taxation by that jurisdiction.
(h) Except as set forth in Section 3.15(h) of the Company Disclosure
Schedule, neither the Company nor any other Person on behalf of the Company
or any of its Subsidiaries has requested any extension of time within which
to file any income Tax Return, which income Tax Return has since not been
filed.
(i) Except as set forth in Section 3.15(i) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
Tax sharing or similar agreement or arrangement other than any agreement or
arrangement between the Company and any of its Subsidiaries, pursuant to
which it will have any obligation to make any payments after the Closing.
(j) Except as set forth in Section 3.15(j) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has requested a
private letter ruling from the IRS or comparable rulings from other taxing
authorities.
(k) Except as set forth in Section 3.12(h) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
contract, agreement, plan or arrangement covering any persons that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible by reason of Section 280G of the Code, or
would constitute compensation in excess of the limitations set forth in
Section 162(m) of the Code.
29
(l) Each of the Company and its Subsidiaries have disclosed to the
Internal Revenue Service on the appropriate Tax Returns any Reportable
Transaction in which it has participated. Each of the Company and its
Subsidiaries have retained all documents and other records pertaining to
any Reportable Transaction in which it has participated, including
documents and other records listed in Treasury Regulation Section
1.6011-4(g) and any other documents and other records which are related to
any Reportable Transaction in which it has participated but not listed in
Treasury Regulation Section 1.6011-4(g).
(m) For purposes of this Agreement, "Tax" or "Taxes" shall mean all
taxes, charges, fees, imposts, levies, gaming or other assessments,
including all net income, gross receipts, capital, sales, use, ad valorem,
value added, transfer, franchise, profits, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, together with
any interest and any penalties, fines, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) and shall
include any transferee or successor liability in respect of taxes, any
liability in respect of taxes under Treasury Regulation Section 1.1502-6 or
any similar provision of state, local or foreign Law, or imposed by
contract, tax sharing agreement, tax indemnity agreement or any similar
agreement. "Tax Returns" shall mean any report, return, document,
declaration or any other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including information returns, any document with respect to or
accompanying payments or estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return document, declaration or other information. "Reportable
Transaction" shall have the meaning set forth in Section 1.6011-4(b) of the
Treasury Regulations.
(n) Except as set forth in Section 3.15(n) of the Company Disclosure
Schedule, there are no Tax Protection Agreements. For purposes of this
Section 3.15(n), "Tax Protection Agreements" shall mean any agreement to
which the Company or any of its Subsidiaries is a party pursuant to which
(a) any liability to holders of Partnership Units relating to Taxes may
arise, whether or not as a result of the consummation of the transactions
contemplated by this Agreement; (b) in connection with the deferral of
income Taxes of a holder of Partnership Units, the Company or any of it
Subsidiaries have agreed to; (i) maintain a minimum level of debt or
continue a particular debt, (ii) retain or not dispose of assets for a
period of time that has not since expired, (iii) make or refrain from
making Tax elections, (iv) operate (or refrain from operating) in a
particular manner, and/or (v) only dispose of assets in a particular
manner; (c) limited partners of any Partnership have guaranteed debt of the
Partnership; and/or (d) any other agreement that would require the general
partner of a Partnership to consider separately the interests of the
limited partners.
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(o) The Company has no class of outstanding stock that is not
regularly traded on an established securities market under Section
1445(b)(6) of the Code.
3.16 Material Contracts.
(a) Section 3.16(a) of the Company Disclosure Schedule sets forth a
list of all Company Material Contracts (as hereinafter defined). The
Company has heretofore made available to Parent correct and complete copies
of all written Company Material Contracts and described the principal terms
and conditions of all known oral Company Material Contracts (and in each
case all amendments, modifications and supplements thereto and all side
letters to which the Company or any of its Subsidiaries is a party
affecting the obligations of any party thereunder) to which the Company, or
any of its Subsidiaries is a party or by which any of its properties or
assets are bound. For the purposes of this Agreement, "Company Material
Contracts" means: (i) (A) employment, severance, change in control, labor,
collective bargaining, leasing and property management agreements,
consulting agreement, brokerage agreements and agreements relating to
tenant improvements (but excluding (x) personal service contracts and (y)
contracts which provide for payments of not more than $50,000 individually
and not more than $500,000 in the aggregate), (B) non-competition contracts
which the failure of the Company to have would reasonably be expected to
have a Material Adverse Effect, and (C) indemnification contracts with
officers, trustees, and directors of the Company or any of its
Subsidiaries; (ii) material partnership or material joint venture
agreements entered into with any Third Party; (iii) agreements for the
pending sale, option to sell, right of first refusal, right of first offer
or any other contractual right to sell, dispose of, or lease, by merger,
purchase or sale of assets or stock or otherwise (other than pursuant to
this Agreement), (A) the Company Properties or any other real property or
(B) except as in the usual, regular and ordinary course of business
consistent with past practice, any personal property; (iv) material loan or
credit agreements, letters of credit, bonds, mortgages, indentures,
guarantees, or other material agreements or instruments evidencing
indebtedness for borrowed money by or to the Company or any of its
Subsidiaries or any such agreement pursuant to which indebtedness for
borrowed money may be incurred or credit may be extended, or evidencing
security for any of the foregoing (such agreements may be listed by
cross-reference to Section 3.2(b) of the Company Disclosure Schedule, where
appropriate); (v) agreements that purport to limit, curtail or restrict the
ability of the Company or any of its Subsidiaries to compete in any
geographic area or line of business, other than exclusive lease provisions,
non-compete provisions and other similar leasing restrictions entered into
by the Company in the usual, regular and ordinary course of business
consistent with past practice contained in the Company Leases and in other
recorded documents by which real property was conveyed by the Company to
any user, or to hire or solicit the hire for employment of any individual
or group; (vi) contracts or agreements that would be required to be filed
as an exhibit to the Form 10-K or Forms 10-Q filed by the Company with the
SEC since June 30, 2005; (vii) tax protection agreements; (viii) each
contract (including, without limitation, any brokerage agreements) entered
into by the Company or any of its Subsidiaries, which may result in total
payments by or liability of the Company or any Subsidiary of the Company in
excess of $100,000 annually, other than any Company Leases and any
documents relating to the indebtedness described in Section 3.15(a)(iv);
31
provided, however, any contract under clause (viii) above that, by its
terms, is terminable within thirty (30) days (without termination fee or
penalty) of the date of this Agreement shall not be deemed to be a Company
Material Contract; (ix) the material contracts included in Section 3.11 of
the Company Disclosure Schedule; and (x) contracts and agreements to enter
into any of the foregoing. Section 3.2(b) of the Company Disclosure
Schedule lists, as of June 30, 2005, the outstanding principal balance,
maturity date and applicable interest rate (including the method or formula
for calculating any interest that is not a fixed percentage of the
principal balance) for the indebtedness evidenced by each loan listed on
the Company Disclosure Schedule pursuant to Section 3.16(a)(iv) hereof.
(b) Each of the Company Material Contracts is in full force and effect
and constitutes the valid and legally binding obligation of the Company or
its Subsidiaries, enforceable against the Company or its Subsidiaries, as
the case may be, and, to the knowledge of the Company, the other parties
thereto, in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles). To the Company's
knowledge, there is no default (nor does there exist any condition which
upon the passage of time or the giving of notice or both would cause such a
violation or default) under any Company Material Contract so listed by the
Company as has or would reasonably be likely to have a Material Adverse
Effect.
(c) To the Company's knowledge, the Company Material Contacts in which
the Company is the lender or mortgagee (the "Lending Contracts") are listed
in Section 3.16(c) of the Company Disclosure Schedule. The Lending
Contracts are enforceable against the Company or its Subsidiaries, as the
case may be, and, to the knowledge of the Company, the other parties
thereto, in accordance with their terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium
and similar Laws of general applicability relating to or affecting
creditors' rights or by general equity principles), and the security
interests and liens purported to be executed in favor of the Company
thereby are, to the Company's knowledge, valid, perfected and first
priority security interests and liens.
(d) To the extent not set forth in response to the requirements of
Section 3.16(a) hereof, Section 3.16(d) of the Company Disclosure Schedule
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 the Company or any of its Subsidiaries is a
party or an obligor with respect thereto.
(e) Except as set forth in Section 3.16(e) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has (i) any
continuing material contractual liability for indemnification or otherwise
under any agreement relating to the sale of real estate previously owned,
whether directly or indirectly, by the Company or any of its Subsidiaries,
except for standard indemnification provisions entered into in the normal
course of business, (ii) any continuing liability to make any material
reprorations or adjustments to prorations that may previously have been
made with respect to any property currently or formerly owned by the
Company or any of its Subsidiaries, or (iii) any continuing material
contractual liability to pay any additional purchase price for any of the
Company Properties.
32
3.17 Opinion of Financial Advisor. The Company has received an opinion of
Wachovia Capital Markets, LLC to the effect that the Merger Consideration is
fair to the holders of Company Common Shares from a financial point of view. A
copy of such opinion shall be delivered to Parent promptly after the date
hereof.
3.18 Brokers. The Company has not entered into any contract, arrangement or
understanding with any Person or firm which may result in the obligation of the
Company, Parent, Partnership, Merger Sub or Merger Partnership to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Mergers, except that the Company has retained Wachovia Capital Markets, LLC
as financial advisor to the Special Committee of the Company Board in connection
with the Mergers. The Company has furnished to Parent a true, complete and
correct copy of all agreements between the Company and Wachovia Capital Markets,
LLC relating to the Mergers, which agreements disclose all fees payable by the
Company or any of its Affiliates to Wachovia Capital Markets, LLC.
3.19 Takeover Statutes. The Company has taken all action required to be
taken by it in order to exempt this Agreement and the Mergers from, and this
Agreement and the Mergers are exempt from, the requirements of any "moratorium,"
"control share," "fair price," "affiliate transaction," "business combination"
or other takeover Laws and regulations of the Maryland Business Combination Act
and Maryland Control Share Acquisition Act or any takeover provision in the
Company Declaration of Trust, Company Bylaws or other organizational document to
which the Company is a party (collectively, "Takeover Statutes").
3.20 Related Party Transactions. Except as set forth and identified as
Related Party Transactions in Section 3.16(a) of the Company Disclosure Schedule
or as disclosed in the Company SEC Reports filed prior to the date of this
Agreement and except for usual, regular and ordinary course advances to
employees, set forth in Section 3.20 of the Company Disclosure Schedule is a
list of all agreements and contracts entered into by the Company or any of the
Company's Subsidiaries under which continuing obligations exist with any Person
who is an officer, trustee or Affiliate (as defined below) of the Company or any
of the Company's Subsidiaries, any member of the "immediate family" (as such
term is defined in Item 404 of Regulation S-K promulgated under the Securities
Act) of any of the foregoing or any entity of which any of the foregoing is an
Affiliate. 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.
3.21 Investment Company Act of 1940. Neither the Company nor any of the
Company's Subsidiaries are, or at the Closing Date will be, required to be
registered under the Investment Company Act of 1940, as amended.
3.22 Trademarks, Patents and Copyrights. Except as set forth in Section
3.22 of the Company Disclosure Schedule, neither the Company nor its
Subsidiaries is a party to any material licenses, contracts or agreements with
respect to use by the Company or its Subsidiaries
33
of any trademarks or patents other than licenses, contracts or agreements
arising from the purchase of "off the shelf" products. The intellectual property
that the Company and its Subsidiaries own, license or otherwise possess legally
enforceable rights to use constitutes all of the intellectual property necessary
to carry on the business of the Company and its Subsidiaries as currently
conducted, except where the failure to own, be so licensed or otherwise possess
such intellectual property does not and would not reasonably be expected to have
a Material Adverse Effect. The Company intellectual property is valid and has
not been cancelled, forfeited, expired or abandoned, and neither the Company nor
any Subsidiary has received any written, or to the Company's knowledge,
non-written, notice challenging the validity or enforceability of Company
intellectual property, other than as does not and would not reasonably be
expected to have a Material Adverse Effect. To the Company's knowledge, the
conduct of the business of the Company and its Subsidiaries does not violate,
misappropriate or infringe upon the intellectual property rights of any Third
Party. The consummation of the transactions contemplated by this Agreement will
not result in the material loss or material impairment of the right of the
Company or any Company Subsidiary to own or use any of the Company's
intellectual property, and the Surviving REIT and its Subsidiaries will have
substantially the same rights to own or use the Company intellectual property
following the consummation of such transaction as the Company and its
Subsidiaries had prior to the consummation of such transactions, except such
rights as do not and would not reasonably be expected to have a Material Adverse
Effect.
3.23 Insurance. Section 3.23 of the Company Disclosure Schedule sets forth
a correct and complete list of the insurance policies held by, or for the
benefit of, the Company or any of its Subsidiaries including the underwriter of
such policies and the amount of coverage thereunder. The Company and each of its
Subsidiaries have paid, or caused to be paid, all premiums due under such
policies and are not in default with respect to any obligations under such
policies other than as do not and would not reasonably be expected to have a
Material Adverse Effect. Neither the Company nor any Subsidiary has received any
written notice of cancellation or termination with respect to any existing
insurance policy set forth in Section 3.23 of the Company Disclosure Schedule
that is held by, or for the benefit of, any of the Company or any of its
Subsidiaries or that relates to any Company Property.
3.24 Disclosure Controls and Procedures. Since December 31, 2003, the
Company and each Company Subsidiary has had in place "disclosure controls and
procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the
Exchange Act) designed and maintained to ensure that (i) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets, (ii) all
information (both financial and non-financial) required to be disclosed by the
Company or any Company Subsidiary in the reports that it files or submits to the
SEC is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC and (iii) all such information is
accumulated and communicated to management as appropriate to allow the Chief
Executive Officer and Chief Financial Officer of the Company to make the
certifications required under the Exchange Act with respect to such reports. To
the Company's knowledge, none of the Company or any Company Subsidiary's
records, systems, controls, data or information are recorded, stored,
maintained, operated or otherwise wholly or partly dependent on or held by any
means (including any electronic, mechanical or photographic process, whether
computerized or not) which (including all means of access thereto and
34
therefrom) are not under the exclusive ownership and direct control of Company
or the applicable Company Subsidiary or their accountants.
3.25 Definition of the Company's Knowledge. As used in this Agreement, the
phrase "to the knowledge of the Company," "to the knowledge of the Subsidiary"
or any similar phrase means the actual (as opposed to constructive or imputed)
knowledge of those individuals identified in Section 3.25 of the Company
Disclosure Schedule. All employees of the Company or any of its Subsidiaries not
listed in Section 3.25 of the Company Disclosure Schedule report directly or
indirectly to at least one of the individuals identified in Section 3.25 of the
Company Disclosure Schedule.
3.26 Proxy Statement; Company Information. The information relating to the
Company and its Subsidiaries to be contained in the Proxy Statement (as defined
in Section 6.1) and other documents to be filed with the SEC in connection
herewith will not, on the date the Proxy Statement is first mailed to holders of
Company Common Shares or at the time of the Company Shareholders Meeting contain
any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make statements therein
not false or misleading at the time and in light of the circumstances under
which such statement is made, except that no representation is made by the
Company with respect to the information supplied by Parent, Merger Sub or Merger
Partnership explicitly for inclusion therein. All documents that the Company is
responsible for filing with the SEC in connection with the REIT Merger, the
Partnership Merger or the other transactions contemplated by this Agreement will
comply as to form and substance in all material respects with the applicable
requirements of the Securities Act and the rules and regulations thereunder and
the Exchange Act and the rules and regulations thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent, Merger Sub and Merger Partnership hereby jointly and severally
represent and warrant to the Company as follows:
4.1 Corporate Organization.
(a) Parent is a limited liability company duly formed, validly
existing and in good standing under the laws of the State of Delaware. The
certificate of formation of Parent is in effect and no dissolution,
revocation or forfeiture proceedings regarding Parent have been commenced.
Parent is duly qualified or licensed to do business as a foreign entity and
is in good standing under the laws of any other jurisdiction in which the
character of the properties owned, leased or operated by it therein or in
which the transaction of its business makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed does not have and would not reasonably be likely to
have, individually or in the aggregate, a Material Adverse Effect. Parent
has all requisite power and authority to own, lease and operate its
properties and to carry on its businesses as now conducted and proposed by
Parent to be conducted.
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(b) Merger Sub is a real estate investment trust duly formed, validly
existing and in good standing under the laws of the State of Maryland. The
declaration of trust of Merger Sub is in effect and no dissolution,
revocation or forfeiture proceedings regarding Merger Sub have been
commenced. Merger Sub is duly qualified or licensed to do business as a
foreign entity and is in good standing under the laws of any other
jurisdiction in which the character of the properties owned, leased or
operated by it therein or in which the transaction of its business makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed does not have and would
not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect. Merger Sub has all requisite power and authority
to own, lease and operate its properties and to carry on its businesses as
now conducted and proposed by Merger Sub to be conducted.
(c) Merger Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of
Delaware. The certificate of limited partnership of the Merger Partnership
is in effect and no dissolution, revocation or forfeiture proceedings
regarding the Merger Partnership have been commenced. The Merger
Partnership is duly qualified or licensed to do business as a foreign
limited partnership and is in good standing under the laws of any other
jurisdiction in which the character of the properties owned, leased or
operated by it therein or in which the transaction of its business makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed does not have and would
not reasonably be likely to have, individually or in the aggregate, a
Material Adverse Effect. Merger Partnership has all requisite power and
authority to own, lease and operate its properties and to carry on its
businesses as now conducted and proposed by Merger Partnership to be
conducted.
4.2 Authority Relative to this Agreement.
(a) Each of Parent, Merger Sub and Merger Partnership has all
necessary power and authority to execute and deliver this Agreement and to
consummate the Mergers and the other transactions contemplated hereby. No
other proceedings on the part of Parent, Merger Sub or Merger Partnership,
or any of their respective Subsidiaries, are necessary to authorize this
Agreement or to consummate the Mergers and the other transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent, Merger Sub and Merger Partnership and,
assuming due authorization, execution and delivery hereof by each of the
Company and Partnership, constitutes a valid, legal and binding agreement
of each of Parent, Merger Sub and Merger Partnership, enforceable against
each of Parent, Merger Sub and Merger Partnership in accordance with and
subject to its terms and conditions, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar Laws of general applicability relating to
or affecting creditors' rights or by general equity principles.
(b) The Managers of Parent, Board of Trustees of Merger Sub and
general partner of Merger Partnership have each duly and validly authorized
the execution and delivery of this Agreement and approved the consummation
of the Mergers and the other
36
transactions contemplated hereby, and taken all corporate actions required
to be taken by the Managers of Parent, Board of Trustees of Merger Sub and
general partner of Merger Partnership for the consummation of the Mergers
and the other transactions contemplated hereby.
4.3 Consents and Approvals; No Violations. Except (a) for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Exchange Act, the Securities Act, state
securities or state "blue sky" laws, the HSR Act or any other antitrust law and
(b) for filing of the Articles of Merger, none of the execution, delivery or
performance of this Agreement by Parent, Merger Sub or Merger Partnership, the
consummation by Parent, Merger Sub or Merger Partnership of the Mergers or
compliance by Parent, Merger Sub or Merger Partnership with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the organizational documents of Parent, Merger Sub or Merger
Partnership, (ii) require any filing by Parent, Merger Sub or Merger Partnership
with, notice to, or permit, authorization, consent or approval of, any
Governmental Entity, (iii) require any consent or notice under, result in a
violation or breach by Parent, Merger Sub or Merger Partnership of, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, amendment, cancellation or acceleration) under, result
in the triggering of any payment, or result in the creation of any lien or other
encumbrance on any property or asset of Parent, Merger Sub or Merger Partnership
pursuant to, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement, permit, franchise or
other instrument or obligation or material contract to which Parent, Merger Sub
or Merger Partnership is a party or by which they or any of their respective
properties or assets may be bound or (iv) violate any Laws, excluding from the
foregoing clauses (ii), (iii) and (iv) such filings, notices, permits,
authorizations, consents, approvals, violations, breaches or defaults which,
individually or in the aggregate, (A) would not prevent or materially delay
consummation of the Mergers, (B) would not otherwise prevent or materially delay
performance by Parent, Merger Sub or Merger Partnership of its material
obligations under this Agreement or (C) do not have and would not reasonably be
likely to have a Material Adverse Effect.
4.4 Litigation. There is no Dispute pending or, to Parent's knowledge,
threatened in writing against Parent or any of its Subsidiaries or any of its or
their respective properties or assets that (i) includes amounts in excess of
$100,000 individually or in excess of $1,000,000 in the aggregate, (ii)
questions the validity of this Agreement or any action to be taken by Parent,
Merger Sub or Merger Partnership in connection with the consummation of the
Mergers, or (iii) reasonably can be expected to have a Material Adverse Effect.
4.5 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission payable by the Company in
connection with the Mergers based upon arrangements made by and on behalf of
Parent, Merger Sub or Merger Partnership or any of their Subsidiaries.
4.6 Available Funds; Guaranty.
(a) Parent currently has or has reasonable access to, and on the
Closing Date Merger Sub will have available, all funds necessary to pay the
Merger Consideration and
37
to satisfy its other obligations hereunder and in connection with the
Mergers. The obligations of Parent and Merger Sub hereunder are not subject
to any conditions regarding the ability of Parent or Merger Sub to obtain
financing for the consummation of the transactions contemplated hereby.
(b) Concurrently with the execution of this Agreement, Parent and
Merger Sub have delivered to the Company a guaranty executed by DRA Growth
& Income Fund V LLC ("Guarantor") in the form attached as Exhibit B to this
Agreement, guaranteeing the obligations of Parent, Merger Sub and Merger
Partnership up to and including the Closing Date.
4.7 Takeover Statutes. Each of Parent and Merger Sub has taken all actions
required to be taken by it in order to exempt this Agreement and the Mergers
from, and this Agreement and the Mergers are exempt from, the requirements of
any "moratorium," "control share," "fair price," "affiliate transaction,"
"business combination" or other takeover Laws and regulations of the Maryland
Business Combination Act, Maryland Control Share Acquisition Act, Delaware
General Corporation Law or any takeover provision in the certificate of
organization, limited liability company agreement or other organizational
document or other agreement to which Parent is a party, or the declaration of
trust, bylaws or other organizational document or other agreement to which
Merger Sub is a party.
4.8 Ownership of Merger Sub and Merger Partnership; No Prior Activities.
Merger Sub is a direct wholly-owned Subsidiary of Parent and Merger Partnership
is a direct wholly-owned Subsidiary of Merger Sub. Neither Merger Sub nor Merger
Partnership has conducted any activities other than in connection with its
organization, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby. Neither Merger Sub nor
Merger Partnership has any Subsidiaries except as set forth in the first
sentence above.
4.9 No Ownership of Company Capital Stock. As of the date of this
Agreement, neither Parent nor any of its Subsidiaries, including Merger Sub and
Merger Partnership, own any Company Common Shares or other securities of the
Company or the Partnership.
4.10 Proxy Statement. The information, if any, supplied by Parent, Merger
Sub or Merger Partnership to the Company explicitly for inclusion in the Proxy
Statement or other documents to be filed with the SEC in connection herewith
will not contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make
statements therein not false or misleading at the time and in light of the
circumstances under which such statement is made.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGERS
5.1 Conduct of Business by the Company. During the period (the "Interim
Period") from the date of this Agreement to the earlier of the Closing Date and
the termination of this Agreement in accordance with Section 8.1 hereof, except
as otherwise contemplated or permitted by this Agreement, the Company shall, and
shall cause the Partnership to, in all material
38
respects, carry on their respective businesses in the usual, regular and
ordinary course, consistent with past practice (except as otherwise provided in
the budget set forth in Section 5.1(g) of the Company Disclosure Schedule (the
"Corporate Budget")) in material compliance with all Laws and in material
compliance with the Corporate Budget, and use their reasonable best efforts to
preserve intact (i) their present business organizations, (ii) the services of
their present officers and employees and (iii) their goodwill and relationships
with tenants and others having business dealings with them. The Company shall
confer on a regular basis with Parent, report on material operational matters
and advise Parent orally and in writing of any Material Adverse Effect or any
matter that could reasonably be expected to result in the Company being unable
to deliver the certificate described in Section 7.2(a). Without limiting the
generality of the foregoing, during the Interim Period, the Company will not and
the Company shall cause the Partnership not to (except as expressly permitted by
this Agreement or as contemplated by the transactions contemplated hereby, as
set forth in Section 5.1 of the Company Disclosure Schedule or to the extent
that Parent shall otherwise consent in writing (it being understood that Parent
shall respond within three (3) Business Days to the Company's communications
soliciting such consent from Parent):
(a) (i) split, combine or reclassify any shares of beneficial interest
or partnership interests, as the case may be, of the Company or the
Partnership or (ii) declare, set aside or pay any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof and whether or not out of earnings and profits of the Company or
the Partnership) in respect of any shares of beneficial interest or
partnership interests, as the case may be, of the Company or the
Partnership, except for the payment with respect to quarterly periods
ending prior to the Closing Date, of (A) regular, cash dividends at a rate
not in excess of (1) $0.462 per Company Common Share, declared and paid
quarterly, (2) $0.46875 per Company Series A Preferred Share, declared and
paid quarterly and (3) $0.50 per Company Series B Preferred Share, declared
and paid quarterly, in each case, in accordance with past practice, (B)
corresponding regular quarterly distributions payable to each class or
series of holders of units of partnership interests in the Partnership, (C)
dividends or distributions, declared, set aside or paid by any wholly owned
Company Subsidiary to the Company or any Company Subsidiary that is,
directly or indirectly, wholly owned by the Company, (D) quarterly
distributions in cash or Company Common Shares pursuant to dividend
equivalent rights associated with outstanding Restricted Shares, Deferred
Restricted Shares, Fee Shares and Phantom Shares, in accordance with past
practices, and (E) distributions required for the Company to maintain its
status as a REIT, provided, that except as required under the terms of the
Company Preferred Shares or as required for the Company to maintain its
status as a REIT, Parent will not be obligated to cause the Company to pay
any of the amounts set forth above with respect to any quarterly periods
ending after the Closing Date, it being understood that, in the case of
dividends and distributions referenced in (A) and (B), the Company intends
to pay its quarterly dividends and distributions for the fourth quarter of
2005 to holders of record on February 7, 2006.
(b) except pursuant to Section 6.12, (i) authorize for issuance, issue
or sell or agree or commit to issue or sell (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of beneficial interest (or similar
interest) of any class or any other securities or equity
39
equivalents (including, without limitation, share appreciation rights,
"phantom" stock plans or stock equivalents), other than the (A) issuance of
Company Common Shares under the Company Stock Rights outstanding on the
date of this Agreement or acquired during the Interim Period under the
terms of the Trustees Deferred Compensation Plan or through dividend
equivalent rights in accordance with their present terms, (B) issuance of
Company Common Shares in exchange for Partnership Units pursuant to the
Partnership Agreement, or (C) issuance of Company Common Shares upon the
conversion of outstanding Convertible Notes, or (ii) repurchase, redeem or
otherwise acquire any securities or equity equivalents (including, without
limitation, Company Stock Rights of the Company or the Company's
Subsidiaries) except in connection with the exercise of Company Share
Options, the lapse of restrictions on Restricted Shares, Deferred
Restricted Shares, Fee Shares, Phantom Shares or the redemption of
Partnership Units under Section 8.05 of the Partnership Agreement.
(c) except as set forth in Section 5.1(c) of the Company Disclosure
Schedule (which sets forth all existing obligations in effect to purchase,
mortgage or sell real property and the purchase, mortgage or sale price
thereof and which sets forth guidelines for future such permitted
transactions), acquire, finance construction and improvements, make any
loans, advances or capital contributions, sell, substitute, encumber,
purchase or originate any portfolio of mortgages, transfer or dispose of
any assets which are material to the Company, the Partnership or any of the
Company's current Subsidiaries taken as a whole (whether by asset
acquisition, stock acquisition or otherwise);
(d) except in the ordinary course of business consistent with past
practice pursuant to credit facilities or other arrangements in existence
as of the date hereof including, without limitation, the payment of regular
quarterly dividends as per Section 5.1(a), or in connection with capital
expenditures listed on the Corporate Budget or capital expenditures
consistent with the guidelines set forth in Section 5.1(c) of the Company
Disclosure Schedule, incur any amount of indebtedness for borrowed money,
assume, guarantee, indemnify or endorse or otherwise become directly or
indirectly responsible or liable for any indebtedness of a Third Party,
issue or sell debt securities, mortgage, pledge or otherwise encumber any
material assets, or create or suffer any material lien other than Permitted
Liens thereupon, except in an amount equal to $5,000,000 in the aggregate;
(e) except pursuant to any mandatory payments under any credit
facilities or other similar arrangements in existence on the date hereof,
pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than any
payment, discharge or satisfaction (i) in the ordinary course of business
consistent with past practice, (ii) reflected or reserved against in the
most recent consolidated financial statements (or notes thereto) included
in the Company SEC Reports filed prior to the date of this Agreement or
(iii) of fees, costs and expenses incurred in connection with the
preparation, execution and performance of this Agreement and the
transactions contemplated hereby, including, without limitation, all fees,
costs and expenses of agents, representatives, counsel and accountants,
which shall be paid by the party incurring such fees, costs or expenses;
40
(f) (i) enter into any new lease (or renew or extend any existing
lease) for vacant space at a Company Property except for leases of not more
than $1,000,000 of annualized rent that are on commercially reasonable
terms consistent with the Company's past practices; (ii) terminate, modify
or amend any Company Lease or Ground Lease (provided, however, the Company
may terminate, modify or amend a Company Lease so long as such terminated
Company Lease is promptly replaced and the replacement, and any modified or
amended lease is for commercially reasonable terms consistent with the
Company's past practices); (iii) terminate or grant any reciprocal easement
or similar agreements affecting a Company Property other than in the
ordinary course of business consistent with past practice, which, in any
event, shall not adversely affect the current use or operation of the
Company Property (unless contractually obligated to so terminate or grant
or in connection with a transaction otherwise permitted by this Agreement);
(iv) consent to or enter into the sublease or assignment of any Company
Lease or Ground Lease other than in the ordinary course of business
consistent with past practice; or (v) enter into any construction contract
with respect to any Company Property;
(g) Except in accordance with the guidelines for future permitted
transactions as set forth in Section 5.1(c) of the Company Disclosure
Schedule, (i) authorize, or enter into any commitment for, any new material
capital expenditure relating to the Company Properties, except as otherwise
set forth in Section 5.1(g) of the Company Disclosure Schedule; or (ii)
authorize, or enter into any commitment for, any material expenditure
relating to the Company Properties, except in the usual, regular and
ordinary course of business consistent with past practice in order to
maintain the Company Property in working order; or (iii) authorize, or
enter into, any material commitment, contract or agreement that has a
duration of greater than one year and that may not be terminated (without
termination fee or penalty) by the Company or its Subsidiary, as the case
may be, by notice of ninety (90) days or less;
(h) change in any material respect any of the accounting principles or
practices used by it (except as required by GAAP or change in Law, or as
recommended by the Company's independent auditors, or pursuant to written
instructions, comments or orders from the SEC, in which case written notice
shall be provided to Parent and Merger Sub prior to any such change);
(i) except as required by Law or as otherwise contemplated by this
Agreement, (i) enter into, adopt, amend or terminate any Company Employee
Benefit Plan, (ii) enter into, adopt, amend or terminate any agreement,
arrangement, plan or policy between the Company or any of the Company's
Subsidiaries and one or more of their trustees or executive officers, or
(iii) except for normal increases or payments in the ordinary course of
business consistent with past practice and retention bonuses, increase in
any manner the compensation or fringe benefits of any non-executive officer
or employee or pay to any non-executive officer or employee any benefit not
required by any Company Employee Benefit Plan or arrangement as in effect
as of the date hereof;
(j) except as set forth in Section 5.1(j) of the Company Disclosure
Schedule, the terms of which Parent consents to, and except as otherwise
contemplated by this Agreement, grant to any officer, trustee, director or
employee the right to receive any
41
new severance, change of control or termination pay or termination
benefits, grant any increase in the right to receive any severance, change
of control or termination pay or termination benefits or enter into any new
employment, loan, retention, consulting, indemnification, termination,
change of control, severance or similar agreement with any officer,
trustee, director or employee other than the grant of compensation and
fringe benefits to any non-executive officer or employee hired after the
date of this Agreement;
(k) except to the extent required to comply with its obligations
hereunder or with applicable Law or to make or avoid a change in accounting
treatment recommended by the Company's independent auditors, amend the
Company Declaration of Trust or Company Bylaws, certificate of limited
partnership, Partnership Agreement, or similar organizational or governance
documents;
(l) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization (other
than this Agreement and the Mergers);
(m) settle or compromise any litigation (whether or not commenced
prior to the date of this Agreement) other than settlements or compromises
for litigation where the amount paid (after giving effect to insurance
proceeds actually received) in settlement or compromise does not exceed
$1,000,000 in each case or $5,000,000 in the aggregate and which would not
reasonably be likely to have, individually or in the aggregate, a Material
Adverse Effect;
(n) amend any term of any outstanding security of the Company or any
of the Company's Subsidiaries;
(o) other than in the ordinary course of business or as otherwise
permitted by this Section 5.1, modify or amend any Company Material
Contract or waive, release or assign any material rights or claims under
any such Company Material Contract other than such modifications,
amendments, waivers, releases or assignments which would not result in a
material increase in cost or liability for the Company;
(p) permit any insurance policy issued to the Company or any of its
Subsidiaries naming the Company or any of the Company's Subsidiaries or
officers, directors or trustees as a beneficiary or an insured or a loss
payable payee, or the Company's directors and officers liability insurance
policy, to be canceled, terminated or allowed to expire, unless such entity
shall have obtained an insurance policy with substantially similar terms
and conditions to the canceled, terminated or expired policy;
(q) change in any material respect any of its methods of reporting
income and deductions for Federal income tax purposes except as expressly
required for changes in Law or regulation or as recommended by the
Company's independent auditors or its tax counsel;
(r) create, renew or amend, or take any action that may reasonably
result in the creation, renewal or amendment, of any agreement or contract
or other binding obligation of the Company or any of the Company's
Subsidiaries containing any material restriction on the ability of the
Company or any of the Company's Subsidiaries to conduct its business as it
is presently being conducted;
(s) knowingly take, or fail to take, any action that may reasonably
result in any of the conditions of Article VII not being satisfied; or
(t) enter into an agreement to take any of the foregoing actions.
42
5.2 Distribution by Company and Partnership of REIT Taxable Income. Except
as provided in Section 6.13 of this Agreement, prior to the Closing Date, the
Company and the Partnership may declare and pay a dividend to its shareholders
or holders of Partnership Units distributing cash in an amount reasonably
determined by the Company to be required to be distributed in order for the
Company to qualify as a REIT for such tax year and to avoid to the extent
reasonably possible the incurrence of income or excise tax by the Company.
ARTICLE VI
COVENANTS
6.1 Preparation of the Proxy Statement; Shareholders Meeting.
(a) As soon as practicable following the date of this Agreement, the
Company shall prepare and file with the SEC a proxy statement in
preliminary form (the "Proxy Statement") and the Company shall respond as
promptly as practicable to any comments of the SEC with respect thereto.
Parent, Merger Sub and Merger Partnership shall cooperate with the Company
in connection with the preparation of the Proxy Statement, including, but
not limited to, furnishing to the Company any and all information regarding
Parent, Merger Sub and Merger Partnership and their respective Affiliates
as may be required to be disclosed therein as promptly as possible after
the date hereof. The parties shall notify each other promptly of the
receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or
for additional information and shall supply each other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the
Proxy Statement or the REIT Merger.
(b) If, at any time prior to the receipt of the Company Shareholder
Approval, any event occurs with respect to the Company, Partnership,
Parent, Merger Sub or Merger Partnership or any change occurs with respect
to other information to be included in the Proxy Statement, which is
required to be described in an amendment of, or a supplement to, the Proxy
Statement, the Company or Parent, as the case may be, shall promptly notify
the other party of such event and the Company shall promptly file with the
SEC, with Parent's input and cooperation, any necessary amendment or
supplement to the Proxy Statement.
(c) The Company shall, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of
the holders of the Company Common Shares (the "Company Shareholders
Meeting") for the purpose of
43
seeking the Company Shareholder Approval. The Company shall cause the Proxy
Statement to be mailed to such holders as promptly as practicable after the
date of this Agreement. The Company shall, through the Company Board,
recommend to holders of the Company Common Shares that they give the
Company Shareholder Approval (the "Company Recommendation"), except to the
extent that the Company Board shall have withdrawn or modified its adoption
of this Agreement and its recommendation in the Proxy Statement, as
permitted by and determined in accordance with Section 6.4(b).
Notwithstanding anything to the contrary contained in this Agreement, the
Company may adjourn or postpone the Company Shareholders Meeting to the
extent necessary to ensure that any necessary supplement or amendment to
the Proxy Statement is provided to the holders of Company Common Shares
sufficiently in advance of a vote on this Agreement and the REIT Merger to
ensure that such vote occurs on the basis of full and complete information
as required under applicable Law.
6.2 Other Filings. As soon as practicable following the date of this
Agreement, the Company, Parent and Merger Sub each shall properly prepare and
file any other filings required under the Exchange Act or any other federal,
state or foreign law relating to the Mergers (including filings, if any,
required under the HSR Act) (collectively, the "Other Filings"). Each of the
Company, Parent and Merger Sub shall promptly notify the other of the receipt of
any comments on, or any request for amendments or supplements to, any of the
Other Filings by the SEC or any other Governmental Entity or official, and each
of the Company, Parent and Merger Sub shall supply the other with copies of all
correspondence between it and each of its representatives, on the one hand, and
the SEC or the members of its staff or any other appropriate governmental
official, on the other hand, with respect to any of the Other Filings. The
Company, Parent and Merger Sub each shall promptly obtain and furnish the other
(a) the information which may be reasonably required in order to make such Other
Filings and (b) any additional information which may be requested by a
Governmental Entity and which the parties reasonably deem appropriate.
6.3 Additional Agreements. Subject to the terms and conditions herein
provided, but subject to the obligation to act in good faith, and subject at all
times to the Company's and its trustees' right and duty to act in a manner
consistent with their duties under applicable Law, each of the parties hereto
agrees to use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
Mergers and to cooperate with each other in connection with the foregoing,
including the taking of such actions as are necessary to obtain any necessary
consents, approvals, orders, exemptions and authorizations by or from any public
or private Third Party, including, without limitation, any that are required to
be obtained under any federal, state or local law or regulation or any contract,
agreement or instrument to which the Company is a party or by which any of their
respective properties or assets are bound, to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the Mergers, to
effect all necessary registrations and Other Filings and submissions of
information requested by a Governmental Entity, and use its reasonable best
efforts to cause to be lifted or rescinded any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
Mergers.
44
6.4 No Solicitations.
(a) Except as permitted by this Agreement, the Company shall not, and
shall not authorize or cause any of its Subsidiaries or any of its
officers, trustees or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it, to
(i) solicit, initiate, knowingly encourage or facilitate, (including by way
of furnishing non-public information), any inquiries with respect to an
Acquisition Proposal (as hereinafter defined), or the making of any
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal, or (ii) initiate, participate in or knowingly
encourage any discussions or negotiations regarding an Acquisition
Proposal; provided, however, that, at any time prior to the Company
Shareholder Approval, if the Company receives a bona fide Acquisition
Proposal that was not solicited after the date of this Agreement or that
did not otherwise result from a breach of this Section 6.4(a), the Company
may furnish, or cause to be furnished, non-public information with respect
to the Company to the Person who made such Acquisition Proposal and may
participate in discussions and negotiations regarding such Acquisition
Proposal if (A) the Company Board, or any committee thereof to which the
power to consider such matters has been delegated, determines in good faith
(after having obtained sufficient preliminary information upon which to
make such determination), after consultation with outside counsel, that
failure to do so would be reasonably likely to be inconsistent with its
duties to the Company or its shareholders under applicable Law, (B) prior
to taking such action, the Company enters into a confidentiality agreement
with respect to such Acquisition Proposal that contains provisions no less
restrictive than the Confidentiality Agreement (as defined in Section 6.6
hereof) and (C) the Company Board determines in good faith (after having
obtained sufficient preliminary information upon which to make such
determination), after consultation with its financial advisors, that such
Acquisition Proposal is reasonably likely to lead to a Superior Proposal.
The Company shall promptly, and in any event within two (2) Business Days,
notify Parent orally and in writing after receipt by the Company of any
Acquisition Proposal, including the material terms and conditions thereof,
to the extent known. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be required to disclose to Parent or
Merger Sub the identity of the Third Party making any Acquisition Proposal
and, except as provided in Sections 6.4(b) and 8.1(e), shall have no duty
to notify or update Parent or Merger Sub on the status of discussions or
negotiations (including the status of such Acquisition Proposal or any
amendments or proposed amendments thereto) between the Company and such
Person. Immediately after the execution and delivery of this Agreement, the
Company will, and will instruct its Subsidiaries, and their respective
officers, trustees, directors, employees, investment bankers, attorneys,
accountants and other agents to, cease and terminate any existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to any possible Acquisition Proposal.
(b) Subject to Section 8.1(e) hereof, prior to the Company Shareholder
Approval, the Company Board may not (i) withdraw, qualify or modify in a
manner material and adverse to Parent or Merger Sub, the Company Board's
approval or recommendation, or if applicable, the approval or
recommendation of any committee of the Company Board, of the Mergers, (ii)
approve or recommend, or propose publicly to
45
approve or recommend, an Acquisition Proposal to holders of the Company
Common Shares or (iii) authorize, permit or cause the Company to enter into
any definitive agreement with respect to an Acquisition Proposal, unless,
in each such case, a Superior Proposal has been made and (x) the Company
Board determines in good faith, after consultation with outside counsel,
that failure to take such action would be reasonably likely to be
inconsistent with its duties to the Company or its shareholders under
applicable Law, and (y) the Company provides Parent with notice of its
decision to withdraw or modify its approval or recommendation of this
Agreement and the Mergers. In the event that the Company Board makes such
determination, the Company may enter into a definitive agreement to effect
a Superior Proposal, but not prior to three (3) Business Days after the
Company (A) has provided Parent with written notice that the Company has
elected to terminate this Agreement pursuant to Section 8.1(e) and
otherwise complied with the Company's obligations in the preceding
sentence, and (B) has set forth such other information required to be
included therein as provided in Section 8.1(e).
(c) Upon execution of this Agreement, the Company and its Subsidiaries
shall cease immediately, and cause to be terminated, any and all existing
activities, discussions or negotiations with any parties conducted
heretofore with respect to, or that would reasonably be expected to lead
to, an Acquisition Proposal.
(d) Nothing contained in this Section 6.4 shall prohibit the Company
from at any time taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange
Act or making any disclosure required by Rule 14a-9 promulgated under the
Exchange Act or Item 1012(a) of Regulation M-A.
6.5 Officers' and Directors' Indemnification.
(a) In the event of any threatened or actual claim, action, suit,
demand, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action,
suit, demand, proceeding or investigation in which any Person who is now,
or has been at any time prior to the date hereof, or who becomes prior to
the Closing Date, a director, officer, employee, trustee, fiduciary or
agent of the Company or any of the Company's Subsidiaries (each, an
"Indemnified Party" and collectively, the "Indemnified 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 or she is or
was an officer, director, trustee, employee, fiduciary or agent of the
Company or any of the Company's Subsidiaries, or is or was serving at the
request of the Company as an, officer, director, trustee, employee,
fiduciary or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (ii) the negotiation, execution or
performance of this Agreement, any agreement or document contemplated
hereby or delivered in connection herewith, or any of the transactions
contemplated hereby or thereby, whether in any case asserted or arising at
or before or after the Closing Date, the parties hereto agree to cooperate
and use their reasonable best efforts to defend against and respond
thereto. It is understood and agreed that the Company shall indemnify and
hold harmless, and after the Closing Date, the Surviving REIT shall
indemnify and hold harmless, as and to the fullest extent permitted by
applicable Law,
46
each Indemnified Party against any and all losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and
expenses), judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, demand, proceeding
or investigation, and in the event of any such threatened or actual claim,
action, suit, demand, proceeding or investigation (whether asserted or
arising at or before or after the Closing Date), (A) the Company and, after
the Closing Date, the Surviving REIT shall promptly pay expenses in advance
of the final disposition of any such threatened or actual claim, action,
suit, demand, proceeding or investigation to each Indemnified Party to the
fullest extent permitted by applicable Law, (B) the Indemnified Parties may
retain a single counsel satisfactory to them, and the Company and the
Surviving REIT shall pay all reasonable fees and expenses of such counsel
for the Indemnified Parties within thirty (30) days after statements
therefor are received, and (C) the Company and, after the Closing Date, the
Surviving REIT will use its reasonable best efforts to assist in the
vigorous defense of any such matter; provided, however, that neither the
Company nor the Surviving REIT shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld, conditioned or delayed); and provided further that the Company
and the Surviving REIT shall have no obligation hereunder to any
Indemnified Party when and if a court of competent jurisdiction shall
ultimately determine, and such determination shall have become final and
non-appealable, that indemnification by such entities of such Indemnified
Party in the manner contemplated hereby is prohibited by applicable Law.
Any Indemnified Party wishing to claim indemnification under this Section
6.5, upon learning of any such threatened or actual claim, action, suit,
demand, proceeding or investigation, shall promptly notify the Company and,
after the Closing Date, the Surviving REIT thereof; provided that the
failure to so notify shall not affect the obligations of the Company and
the Surviving REIT except to the extent, if any, such failure to promptly
notify materially prejudices such party.
(b) Parent, Merger Sub and Merger Partnership each agree that all
rights to indemnification existing in favor of, and all limitations on the
personal liability of, each Indemnified Party provided for in the
respective charters or bylaws (or other applicable organizational
documents) of the Company or any of the Company's Subsidiaries or otherwise
in effect as of the date hereof shall survive the Mergers and continue in
full force and effect for a period of six (6) years from the Closing Date
and, at the Closing Date, shall become the obligation of the Surviving
REIT; provided, however, that all rights to indemnification in respect of
any claims (each, a "Claim") asserted or made within such period shall
continue until the final disposition of such Claim. From and after the
Closing Date, the Surviving REIT also agrees to indemnify and hold harmless
the present and former officers and trustees of the Company in respect of
acts or omissions occurring prior to the Closing Date to the extent
provided in any written indemnification agreements between the Company
and/or one of the Company's Subsidiaries and the officers and trustees
listed in Section 6.5(b) of the Company Disclosure Schedule.
(c) Prior to the Closing Date, the Company shall purchase a
non-cancelable extended reporting period endorsement under the Company's
existing directors' and officers' liability insurance coverage for the
Company's directors, officers and trustees in
47
the same form as presently maintained by the Company, with the same or
comparably rated insurers as the Company's current insurer, which shall
provide such directors, officers and trustees with coverage for six (6)
years following the Closing Date of not less than the existing coverage
under, and have other terms not less favorable to, the insured persons than
the directors' and officers' liability insurance coverage presently
maintained by the Company. Parent shall, and shall cause the Surviving REIT
to, maintain such policies in full force and effect, and continue to honor
all obligations thereunder.
(d) Notwithstanding anything in this Agreement to the contrary, the
obligations under this Section 6.5 shall not be terminated or modified in
such a manner as to adversely affect any indemnitee to whom this Section
6.5 applies without the consent of each such affected indemnitee. This
Section 6.5 is intended for the irrevocable benefit of, and to grant third
party beneficiary rights to, the Indemnified Parties and their respective
heirs and shall be binding on all successors of the Surviving REIT. Each of
the Indemnified Parties and their respective heirs shall be entitled to
enforce the provisions of this Section 6.5.
(e) In the event that, following the Closing Date, the Surviving REIT
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, (ii) transfers or
conveys all or substantially all of its properties and assets to any Person
or (iii) commences a dissolution, liquidation, assignment for the benefit
of creditors or similar action, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
REIT, as the case may be, assume the obligations set forth in this Section
6.5.
6.6 Access to Information; Confidentiality.
(a) Between the date hereof and the Closing Date, the Company shall,
and shall cause each of the Company's Subsidiaries to, (i) give Parent and
its authorized representatives (including counsel, environmental
consultants, financial advisors, lenders and auditors) reasonable access
during normal business hours, and upon reasonable advance notice, to all
properties, including interviewing tenants (provided however, that Parent
shall be permitted to conduct environmental inspections only with the
Company's prior written consent which shall not be unreasonably withheld)
and requesting reasonable and customary estoppel letters therefrom and
requesting reasonable and customary estoppel letters from parties to loan
agreements, encumbrances and Property Restrictions (provided that the
obtaining of any such estoppel letter shall in no event be deemed to be a
condition to Closing), facilities and books and records of the Company and
the Company's Subsidiaries (ii) reasonably cooperate with the Parent's
lenders (provided that the Company shall not be required to expend any
funds or incur any liability in connection with such cooperation), (iii)
permit such inspections, subject to the proviso in Section 6.6(a)(i), as
Parent may reasonably require, including environmental and physical
inspections including, without limitation, Phase II examinations, provided
that the performance of such Phase II examinations shall be subject to the
rights of the Company's tenants under the Company Leases, and furnish
Parent with such financial
48
and operating data and other information with respect to the business,
properties and personnel of the Company and the Company's Subsidiaries as
Parent may from time to time reasonably request and (iv) reasonably
cooperate with any reasonable restructuring request of Parent's lenders
(provided, that any such restructuring would not be effected prior to the
Closing Date and nothing herein shall obligate the Company or any of the
Company's Subsidiaries to take any irrevocable action or election prior to
the Closing Date with respect thereto and the Company shall not be required
to expend any funds or incur any liability in connection with such
cooperation); provided, that no investigation pursuant to this Section 6.6
shall affect or be deemed to modify any of the representations or
warranties made by the Company hereto and all such access shall be
coordinated through the Company or its designated representatives, in
accordance with such reasonable procedures as they may establish.
(b) Prior to the Closing Date, Parent and Merger Sub shall hold in
confidence all such information on the terms and subject to the conditions
contained in that certain confidentiality agreement between Parent and the
Company dated April 8, 2005 (the "Confidentiality Agreement"), provided,
that Parent may disclose Evaluation Material thereunder to potential
purchasers of Company Properties only with the Company's prior written
consent, which shall not be unreasonably withheld; provided further that
such Persons are subject to substantially the same confidentiality
obligations as applicable to Parent and as set forth in this Agreement.
6.7 Public Announcements. The Company and Parent shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or the Mergers and shall not issue any such press
release or make any such public statement without the prior consent of the other
party, which consent shall not be unreasonably withheld, conditioned or delayed;
provided, however, that a party may, without the prior consent of the other
party, issue such press release or make such public statement as may be required
by Law or the applicable rules of any stock exchange or quotation system if the
party issuing such press release or making such public statement has used its
reasonable best efforts to consult with the other party and to obtain such
party's consent but has been unable to do so in a timely manner. In this regard,
the parties shall make a joint public announcement of the Mergers contemplated
hereby no later than the opening of trading on the Nasdaq National Market on the
Business Day following the date on which this Agreement is signed.
6.8 Employee Benefit Arrangements.
(a) After the Closing Date, all employees of the Company and the
Company's Subsidiaries ("Company Employees") who are employed by Parent,
including the Surviving REIT, shall, at the option of Parent, either
continue to be eligible to participate in an "employee benefit plan", as
defined in Section 3(3) of ERISA (an "Employee Benefit Plan"), of the
Company which is, at the option of Parent, continued by Parent, or
alternatively shall be eligible to participate in the same manner as other
similarly situated employees of Parent or its Subsidiaries in a similar
Employee Benefit Plan sponsored or maintained by Parent or in which
employees of Parent or its Subsidiaries participate after the Closing Date.
With respect to each such Employee Benefit Plan of Parent, service with the
Company or any of its Subsidiaries and the predecessor of any of them shall
be
49
included for purposes of determining eligibility to participate, vesting
(if applicable) and determination of the level of entitlement to benefits
under such Employee Benefit Plan. Parent shall, or shall cause its
Subsidiaries, as the case may be, to, (i) waive all limitations as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to all Company Employees
under any comparable welfare plan that such Company Employees may be
eligible to participate in after the Closing Date, other than limitations
or waiting periods that are already in effect with respect to such
employees and that have not been satisfied as of the Closing Date under any
comparable welfare plan maintained by the Company for such employees
immediately prior to the Closing Date, and (ii) provide each such Company
Employee with credit for any co-payments and deductibles paid prior to the
Closing Date for the plan year within which the Closing Date occurs in
satisfying any applicable deductible or out-of-pocket requirements under
any welfare plans that such employees are eligible to participate in after
the Closing Date.
(b) At and after the Closing Date, Parent shall cause the Surviving
REIT to honor in accordance with their terms all employment agreements,
severance agreements, retention bonus agreements and other bonus, retention
and severance obligations of the Company or any of its Subsidiaries, all of
which are listed in Section 6.8(b) of the Company Disclosure Schedule, and
as may otherwise be agreed to by the Company and Parent, and the Company
shall pay on the Closing Date to the applicable trustees, officers and
employees any amounts with respect to such agreements and obligations that
are payable by their terms at or before the Closing Date.
6.9 Certain Tax Matters.
(a) The Company shall take all actions, and refrain from taking all
actions, as are necessary to ensure that the Company will qualify for
taxation as a REIT for U.S. federal income tax purposes for its current
taxable year. During the period from the date of this Agreement to the
Closing Date, the Company shall facilitate all reasonable requests of
Parent with respect to maintenance of the Company's REIT status for the
Company's 2005 taxable year and, if applicable, 2006 taxable year.
(b) The Company shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Company and each Company
Subsidiary required to be filed on or prior to the Closing Date, including
applicable extensions (including timely filing of Tax Returns for the
fiscal year ended December 31, 2004). Any such Tax Returns shall be
prepared in a manner consistent with the historic Tax accounting practices
of the Company (except as may be required under applicable Tax Law). The
Company shall pay all Taxes shown as due on such Tax Returns. The Company
shall provide to Parent copies of such Tax Returns that are to be filed on
or prior to the Closing Date at least five (5) calendar days prior to the
due date of such Tax Returns (including applicable extensions) and the
Company shall accept any and all reasonable comments of Parent with respect
to such Tax Returns.
6.10 REIT Opinion. The Company shall use its reasonable best efforts to
obtain the tax opinion described in Section 7.2(c) dated as of the Closing Date.
50
6.11 Sale of Properties. Prior to the Closing Date, the Company shall use
its reasonable best efforts to facilitate the sale, on or after the Closing
Date, of Company Properties identified by Parent and agreed to by the Company on
terms and conditions mutually agreed to by the Company and Parent, each party
agreeing not to unreasonably withhold consent to a proposal by the other with
respect to such sale.
6.12 Equity Raising Property Sales.
(a) Between the date of this Agreement and the thirtieth (30th) day
preceding the date of the Company Shareholders Meeting, Parent agrees, upon
the written request of the Company, to promptly purchase (in no event later
than thirty (30) days following receipt of the Company's written request)
all of the Company's right, title and interest in and to one or more
Company Properties identified by the Company in its sole discretion from
the list of Company Properties in Section 6.12(a) of the Company Disclosure
Schedule (the "Identified Company Properties") for an aggregate purchase
price of up to $25,000,000 payable by wire transfer of immediately
available funds. The Company and Parent agree that the purchase price of
the Identified Company Properties selected for sale by the Company shall be
determined by dividing the then current base rent on such Identified
Company Properties by seven percent (7%). The Company shall deliver a
general warranty deed (to an affiliated entity designated by Parent) and
take and do all such other actions as may be reasonably necessary to carry
out the sale of such Identified Company Properties to Parent consistent
with the terms of this Agreement and customary real estate closings of
similar properties. The Identified Company Properties shall be delivered
free and clear of all mortgages, liens, encumbrances and other title
exceptions not disclosed in the policies of title insurance listed in
Section 6.12(a) and the Company shall pay all transfer taxes, title
insurance premiums and other closing expenses (collectively, "Transaction
Costs") related to the sale.
(b) Notwithstanding anything to the contrary contained in this Section
6.12 or elsewhere in this Agreement, in the event that following Parent's
acquisition of such Identified Company Properties this Agreement is
terminated pursuant to Article VIII hereof:
(i) the Company shall have the right, exercisable in its
discretion by delivery of written notice to Parent on or before the
date which is the six (6) month anniversary of the effective date of
the termination of this Agreement, to require Parent to sell all of
such Identified Company Properties previously purchased by Parent
pursuant to Section 6.12(a) above to the Company at the same purchase
price paid by Parent; and
(ii) Parent shall have the right, exercisable in its discretion
by delivery of written notice to the Company within thirty (30) days
preceding the date which is the six (6) month anniversary of the
effective date of the termination of this Agreement, to require the
Company to repurchase all of such Identified Company Properties
previously purchased by Parent pursuant to Section 6.12(a) above for
the same purchase price paid by Parent.
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(c) In the event that either the Company or Parent exercises its right
under Section 6.12(b) above to repurchase or sell these Identified Company
Properties, as applicable:
(i) the Company shall promptly (but in any event within thirty
(30) days) pay to Parent the purchase price for such Identified
Company Properties by wire transfer of immediately available funds;
(ii) Parent, upon receipt of such payment, shall deliver a
special warranty deed and take and do all such other actions as may be
reasonably necessary to carry out the sale of such Identified Company
Properties consistent with the terms of this Agreement and customary
real estate closings of similar properties. Parent shall deliver such
Identified Company Properties to the Company "as-is", free and clear
of all liens and encumbrances, other than those (x) existing on the
date Parent purchased such Identified Company Properties from the
Company, and (y) created by, or which are the obligation of, the
tenants of any of the Identified Company Properties; and
(iii) Parent shall pay or reimburse the Company for all
Transaction Costs incurred by the Company related to the sale of the
Identified Company Properties.
(d) The rights of the Company and Parent under Section 6.12(b) above
to repurchase or sell these Identified Company Properties, as applicable,
shall automatically terminate unless exercised within the time periods set
forth in Section 6.12(b) above.
(e) Between the date of this Agreement and the Company Shareholders
Meeting and upon written notice to Parent, the Company may sell, in one or
more transactions, all of the Company's right, title and interest in and to
one or more of the Identified Company Properties not previously sold or
then under contract for sale to Parent pursuant to Section 6.12(a) above,
to any Third Parties for an aggregate purchase price of up to $200,000,000
provided such sales meet the guidelines set forth in Section 6.12(e) of the
Company Disclosure Schedule.
6.13 Interim Period Dividends. With the exception of the dividends
contemplated in Section 5.1 of this Agreement, during the Interim Period, the
Company shall not declare a dividend in an amount exceeding the minimum dividend
necessary to avoid the imposition of excise tax under Section 4981 of the Code
for the 2005 taxable year.
ARTICLE VII
CONDITIONS TO THE MERGERS
7.1 Conditions to the Obligations of Each Party to Effect the Mergers. The
respective obligations of each party to effect the Mergers are subject to the
satisfaction or waiver by consent of the other party, at or prior to the Closing
Date, of each of the following conditions:
52
(a) Company Shareholder Approval. The Company shall have obtained the
Company Shareholder Approval.
(b) Other Regulatory Approvals. All material approvals, authorizations
and consents of any Governmental Entity required to consummate the Mergers
shall have been obtained and remain in full force and effect, and all
statutory waiting periods relating to such approvals, authorizations and
consents shall have expired or been terminated.
(c) No Injunctions, Orders or Restraints; Illegality. No preliminary
or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, and no
Law shall have been enacted or promulgated, which would have the effect of
(i) making the consummation of the Mergers illegal, or (ii) otherwise
prohibiting the consummation of the Mergers; provided, however, that prior
to a party asserting this condition such party shall, in the case of an
injunction or order, have used its reasonable best efforts to prevent the
entry of any such injunction or other order and to appeal as promptly as
possible any such injunction or other order that may be entered.
7.2 Conditions to Obligations of Parent and Merger Sub. The obligations of
Parent, Merger Sub and Merger Partnership to effect the Mergers are further
subject to the satisfaction of the following conditions, any one or more of
which may be waived by Parent at or prior to the Closing Date:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and
correct (determined without regard to any materiality or material adverse
effect qualification contained in any representation or warranty) at and as
of the Closing Date, as if made at and as of such time (except to the
extent a representation or warranty is made as of a time other than the
Closing Date, in which case such representation or warranty shall be true
and correct at and as of such time), except where the failure of such
representations and warranties to be true and correct does not have or
would not reasonably be likely to have a Material Adverse Effect. Parent
shall have received a certificate signed on behalf of the Company, dated as
of the Closing Date, to the foregoing effect.
(b) Performance and Obligations of the Company. The Company shall have
performed or complied in all material respects with all material agreements
and material covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date; provided, however,
that the Company shall not be deemed to have failed to so perform or comply
with such material agreements or material covenants if it cures such
non-performance or non-compliance within a reasonable period of time (not
to exceed five (5) business days of the occurrence of such event). Parent
shall have received a certificate signed on behalf of the Company, dated as
of the Closing Date, to the foregoing effect.
(c) Opinion. Parent shall have received a tax opinion of Pillsbury
Xxxxxxxx Xxxx Xxxxxxx LLP, tax counsel to the Company, or such other law
firm as may be
53
reasonably approved by Parent as to the REIT Merger dated as of the Closing
Date in the form of Exhibit C attached hereto, which opinion concludes
(subject to customary assumptions, qualifications and representations,
including representations made by the Company and its Subsidiaries) that
(A) the Company qualified as a REIT under the Code for all taxable years
since 1998, the year in which the Company first made a REIT tax election,
through December 31, 2004, and (B) the Company is organized in conformity
with the requirements for qualification as a REIT under the Code, and its
current method of operation and ownership will enable it to meet the
requirements for qualification as a REIT for the current taxable year
assuming for these purposes that the Company will continue, following the
Closing, to be organized and operated in accordance with the requirements
for qualification and taxation as a REIT under the Code.
(d) Absence of Material Adverse Change. There shall not have occurred
an event, change or occurrence that, individually or in the aggregate, has
had a Material Adverse Effect.
7.3 Conditions to Obligations of the Company. The obligations of the
Company and Partnership to effect the Mergers are further subject to the
satisfaction of the following conditions, any one or more of which may be waived
by the Company at or prior to the Closing Date:
(a) Representations and Warranties. Each of the representations and
warranties of Parent, Merger Sub and Merger Partnership contained in this
Agreement shall be true and correct (determined without regard to any
materiality or material adverse effect qualification contained in any
representation or warranty) at and as of the Closing Date, as if made at
and as of such time (except to the extent a representation or warranty is
made as of a time other than the Closing Date, in which case such
representation or warranty shall be true and correct at and as of such
time), except where the failure of such representations and warranties to
be true and correct does not have or would not reasonably be likely to have
a Material Adverse Effect. The Company shall have received a certificate
signed on behalf of Parent, Merger Sub and Merger Partnership, dated the
Closing Date, to the foregoing effect.
(b) Performance of Obligations of Parent, Merger Sub and Merger
Partnership. Each of Parent, Merger Sub and Merger Partnership shall have
performed or complied in all material respects with all material agreements
and material covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, and the Company shall
have received a certificate signed on behalf of Parent, Merger Sub and
Merger Partnership, dated as of the Closing Date, to the foregoing effect.
7.4 Frustration of Closing Conditions. No party may rely on the failure of
any condition set forth in this Article VII to be satisfied if such failure was
caused by such party's failure to use its own commercially reasonable efforts to
consummate the Mergers and the other transactions contemplated hereunder.
54
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and abandoned at any time
prior to the Closing Date, whether before or after the receipt of Company
Shareholder Approval:
(a) by the mutual written consent of Parent, Merger Sub and the
Company;
(b) by either of the Company, on the one hand, or Parent or Merger
Sub, on the other hand, by written notice to the other:
(i) if, upon a vote at a duly held meeting of holders of the
Company Common Shares (or at any adjournment or postponement thereof),
held to obtain the Company Shareholder Approval, the Company
Shareholder Approval is not obtained;
(ii) if any Governmental Entity of competent jurisdiction shall
have issued an order, decree, judgment, injunction or taken any other
action (which order, decree, judgment, injunction or other action the
parties hereto shall have used their reasonable best efforts to lift),
which permanently restrains, enjoins or otherwise prohibits or makes
illegal the consummation of the Mergers, and such order, decree,
judgment, injunction or other action shall have become final and
non-appealable, provided, however, that the party terminating this
Agreement pursuant to this Section 8.1(b)(ii) shall have used
commercially reasonable efforts to have such offer, decree, judgment,
injunction or other action vacated; or
(iii) if the consummation of the Mergers shall not have occurred
on or before February 3, 2006, provided, however, that in the event
that, on or before December 26, 2005, the Proxy Statement has not been
cleared by the SEC for dissemination, such date may be extended by
Parent or the Company through a date on or before March 31, 2006 (the
"Drop Dead Date"); provided, further, however, that in such event the
Closing shall not occur prior to March 15, 2006; provided, further,
however, that the right to terminate this Agreement under this Section
8.1(b)(iii) shall not be available to either party if such party's
failure to comply with any provision of this Agreement in a material
respect has been the proximate cause of, or resulted in, the failure
of the Mergers to occur on or before the Drop Dead Date.
(c) by written notice from Parent to the Company, if the Company
breaches or fails to perform in any material respect any of its
representations, warranties or covenants contained in this Agreement, which
breach or failure to perform would give rise to the failure of a condition
set forth in Section 7.2(a) or 7.2(b) and such condition is incapable of
being satisfied by the Drop Dead Date;
(d) by written notice from the Company to Parent if Parent or Merger
Sub breaches or fails to perform in any material respect any of its
representations, warranties or covenants contained in this Agreement, which
breach or failure to perform would give rise to the failure of a condition
set forth in Section 7.3(a) or 7.3(b) and such condition is incapable of
being satisfied by the Drop Dead Date;
55
(e) by written notice from the Company to Parent, in connection with
entering into a definitive agreement to effect a Superior Proposal in
accordance with Section 6.4; provided, however, that prior to terminating
this Agreement pursuant to this Section 8.1(e), the Company shall have
provided Parent with at least three (3) Business Days prior written notice
of the Company's decision to so terminate. Such notice shall indicate in
reasonable detail the material terms and conditions of such Superior
Proposal, including the amount and form of the proposed consideration and
whether such Superior Proposal is subject to any material conditions and
provided further that an election by the Company to terminate this
Agreement pursuant to this Section 8.1(e) shall not be effective until the
Company shall have paid the Break-up Fee to Parent as provided in Section
8.2(b);
(f) by written notice of Parent or Merger Sub to the Company, if the
Company Board shall (A) fail to include a recommendation in the Proxy
Statement that the holders of the Company Common Shares vote to approve the
REIT Merger and this Agreement, (B) withdraw or modify, in a manner
material and adverse to Parent or Merger Sub, such recommendation, or (C)
recommend that the holders of the Company Common Shares accept or approve
any Acquisition Proposal; or
(g) by written notice of Parent or Merger Sub to the Company, if the
Company shall fail to obtain the opinion of counsel described in Section
7.2(c) hereof.
8.2 Effect of Termination.
(a) Subject to the remainder of this Section 8.2 and to Section 8.3,
in the event of the termination of this Agreement pursuant to Section 8.1,
this Agreement shall forthwith become null and void and have no effect,
without any liability on the part of Parent, Merger Sub, the Company,
Partnership or Merger Partnership and each of their respective directors,
trustees, officers, employees, partners, stockholders or shareholders and
all rights and obligations of any party hereto shall cease, except for the
agreements contained in Sections 6.6 (Confidentiality), 6.7 (Public
Announcements), 8.2 (Effect of Termination), 8.3 (Fees and Expenses) and
Article IX (General Provisions); provided, however, that nothing contained
in this Section 8.2(a) shall relieve any party from liabilities or damages
arising out of any fraud or willful breach by such party of any of its
representations, warranties, covenants or other agreements contained in
this Agreement or a failure or refusal by such party to consummate the
transactions contemplated hereby when such party was obligated to do so in
accordance with the terms of this Agreement.
(b) If this Agreement is terminated by the Company pursuant to Section
8.1(e), or by Parent or Merger Sub pursuant to Section 8.1(f), then the
Company shall pay to Parent, subject to the provisions of Section 8.4(a),
an amount in cash equal to $40,000,000 (the "Break-Up Fee"). In addition,
if (A) prior to the Company Shareholder Meeting, an Acquisition Proposal
shall have been publicly made (and not subsequently withdrawn), (B) this
Agreement is terminated by the Company or Parent pursuant to
56
Section 8.1(b)(i), or by Parent pursuant to Section 8.1(c), at a time when
the Company Shareholder Approval has not been obtained, and (C) the Company
consummates an Acquisition Proposal within twelve (12) months of such
termination, then the Company shall pay to Parent the Break-Up Fee. For the
avoidance of doubt, the amount of any fees or expenses paid to Parent
pursuant to Section 8.3(c) shall be deducted from the payment of any
Break-Up Fee required by this Section 8.2(b) such that the maximum amount
payable by the Company in the event of a termination under Section
8.1(b)(i), 8.1(c), 8.1(e) or 8.1(f) shall be $40,000,000. Payment of the
Break-Up Fee required by this Section 8.2(b) shall be payable by the
Company to Parent by wire transfer of immediately available funds (i) in
the case of termination of this Agreement by the Company under Section
8.1(e), concurrently with the effective date of such termination (i.e.
following the three Business Days waiting period), (ii) in the case of
termination of this Agreement by Parent or Merger Sub under Section 8.1(f),
within three (3) Business Days after the date of termination, or (iii) in
case of a situation contemplated by the second sentence of this Section
8.2(b), on the same Business Day as the consummation of such Acquisition
Proposal.
(c) Notwithstanding anything to the contrary in this Agreement, Parent
and Merger Sub hereby expressly acknowledge and agree that, with respect to
any termination of this Agreement pursuant to Section 8.1(e), Section
8.1(f), Section 8.1(b)(i) or Section 8.1(c), in circumstances where the
Break-Up Fee is payable in accordance with Section 8.2(b), the payment of
the Break-Up Fee shall constitute liquidated damages with respect to any
claim for damages or any other claim which Parent or Merger Sub would
otherwise be entitled to assert against the Company or any of its
Subsidiaries or any of their respective assets, or against any of their
respective trustees, officers, employees, partners, managers, members or
shareholders, with respect to this Agreement and the transactions
contemplated hereby and shall constitute the sole and exclusive remedy
available to Parent and Merger Sub, except for the recovery of costs and
expenses pursuant to Section 8.3(c). The parties hereto expressly
acknowledge and agree that, in light of the difficulty of accurately
determining actual damages with respect to the foregoing upon any
termination of this Agreement pursuant to Section 8.1(e), Section 8.1(f),
Section 8.1(b)(i) or Section 8.1(c), in circumstances where the Break-Up
Fee is payable in accordance with Section 8.2(b), the rights to payment
under Section 8.2(b): (i) constitute a reasonable estimate of the damages
that will be suffered by reason of any such proposed or actual termination
of this Agreement pursuant to Section 8.1(e), Section 8.1(f), Section
8.1(b)(i) or Section 8.1(c), and (ii) shall be in full and complete
satisfaction of any and all damages arising as a result of the foregoing.
Except for nonpayment of the amounts set forth in Section 8.2(b) or 8.3,
Parent and Merger Sub hereby agree that, upon any termination of this
Agreement pursuant to Section 8.1(e), Section 8.1(f), Section 8.1(b)(i) or
Section 8.1(c), in circumstances where the Break-Up Fee is payable in
accordance with Section 8.2(b), in no event shall Parent or Merger Sub, (i)
seek to obtain any recovery or judgment against the Company, the Company's
Subsidiaries, or any of their respective assets, or against any of their
respective trustees, officers, employees, partners, managers, members or
shareholders, or (ii) be entitled to seek or obtain any other damages of
any kind, including, without limitation, consequential, indirect or
punitive damages.
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8.3 Fees and Expenses.
(a) Except as set forth in Sections 8.3(b), 8.3(c) and 8.2, whether or
not the Mergers are consummated, all fees, costs and expenses incurred in
connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees, costs and expenses of agents, representatives,
counsel and accountants shall be paid by the party incurring such fees,
costs or expenses.
(b) If this Agreement is terminated by the Company pursuant to Section
8.1(d), Parent shall pay to the Company within three (3) Business Days
after the date of termination all documented, reasonable out-of-pocket
costs and expenses, including, without limitation, the reasonable fees and
expenses of lawyers, accountants, financial advisors and investment
bankers, incurred by the Company or Partnership solely in connection with
the entering into of this Agreement and the carrying out of any and all
acts contemplated hereunder, provided that such fees and expenses to be
paid by Parent hereunder shall not exceed seven and one-half million
dollars ($7,500,000).
(c) If this Agreement is terminated (i) by the Company or by Parent
because the Company Shareholder Approval shall not have been obtained or
(ii) by Parent or the Company pursuant to Sections 8.1(c), 8.1(e), 8.1(f)
or 8.1(g), the Company shall pay to Parent within three (3) Business Days
after the date of termination, all documented, reasonable out-of-pocket
costs and expenses, including, without limitation, the reasonable fees and
expenses of lawyers, lenders, accountants, financial advisors, and
investment bankers, incurred by Parent, Merger Sub or Merger Partnership
solely in connection with the entering into of this Agreement and the
carrying out of any and all acts contemplated hereunder, provided that the
amount of such fees and expenses to be paid by the Company hereunder shall
not exceed five million dollars ($5,000,000) in the case of clause (i) of
this Section 8.3(c), and seven and one-half million dollars ($7,500,000) in
the case of clause (ii) of this Section 8.3(c). As provided in Section
8.2(b), the amount of any fees or expenses paid to Parent pursuant to this
Section 8.3(c) shall be deducted from the payment of any Break-Up Fee
required by Section 8.2(b) such that the maximum amount payable by the
Company in the event of a termination under Section 8.1(b)(i), 8.1(c),
8.1(e) or 8.1(f) shall be $40,000,000.
(d) If either party fails to pay to the other party any amounts due
under Section 8.2 or 8.3, the party so failing shall pay the reasonable
costs and expenses (including, without limitation, reasonable legal fees
and expenses) in connection with any action, including, without limitation,
the filing of any lawsuit or other legal action, taken to collect payment.
The payment of expenses set forth herein is not an exclusive remedy, but is in
addition to any other rights or remedies available to the parties hereto
(whether at law or in equity).
58
8.4 Payment of Amount or Expense.
(a) In the event that the Company is obligated to pay Parent the
Break-Up Fee pursuant to Section 8.2(b) or the Company or Parent is
obligated to pay the other the expenses set forth in Section 8.3
(collectively, the "Section 8.2 Amount"), the Company or Parent (the
"Payor") shall pay to the other party (the "Payee") from the applicable
Section 8.2 Amount deposited into escrow, if any, in accordance with the
next sentence, an amount equal to the lesser of (i) the Section 8.2 Amount
and (ii) the sum of (1) the maximum amount that can be paid to the Payee
without causing the Payee to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such amount
did not constitute income described in Sections 856(c)(2)(H) or
856(c)(3)(I) of the Code ("Qualifying Income"), as determined by the
Payee's independent certified public accountants, plus (2) in the event the
Payee receives either (X) a letter from the Payee's counsel indicating that
the Payee has received a ruling from the IRS described in Section
8.4(b)(ii) or (B) an opinion from the Payee's outside counsel as described
in Section 8.4(b)(ii), an amount equal to the Section 8.2 Amount less the
amount payable under clause (1) above. To secure the Payor's obligation to
pay these amounts, the Payor shall deposit into escrow an amount in cash
equal to the Section 8.2 Amount with an escrow agent selected by the Payor
and on such terms (subject to Section 8.4(b)) as shall be mutually agreed
upon by the Company, Parent and the escrow agent, provided that in the case
where the Payor is the Company and the Payee is Parent, the payment or
deposit into escrow shall be at Parent's option. The payment or deposit
into escrow of the Section 8.2 Amount pursuant to this Section 8.4(a) shall
be made at the time the Payor is obligated to pay the Payee such amount
pursuant to Section 8.3 or Section 8.2(b), as applicable, by wire transfer
or bank check.
(b) The escrow agreement shall provide that the Section 8.2 Amount in
escrow or any portion thereof shall not be released to the Payee unless the
escrow agent receives any one or combination of the following: (i) a letter
from the Payee's independent certified public accountants indicating the
maximum amount that can be paid by the escrow agent to the Payee without
causing the Payee to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute Qualifying Income or a subsequent letter from the Payee's
accountants revising that amount, in which case the escrow agent shall
release such amount to the Payee, or (ii) a letter from the Payee's counsel
indicating that the Payee received a ruling from the IRS holding that the
receipt by the Payee of the Section 8.2 Amount would either constitute
Qualifying Income or would be excluded from gross income within the meaning
of Sections 856(c)(2) and (3) of the Code (or alternatively, the Payee's
outside counsel has rendered a legal opinion to the effect that the receipt
by the Payee of the Section 8.2 Amount would either constitute Qualifying
Income or would be excluded from gross income within the meaning of
Sections 856(c)(2) and (3) of the Code), in which case the escrow agent
shall release the remainder of the Section 8.2 Amount to the Payee. The
Payor agrees to amend this Section 8.4 at the reasonable request of the
Payee in order to (x) maximize the portion of the Section 8.2 Amount that
may be distributed to the Payee hereunder without causing the Payee to fail
to meet the requirements of Sections 856(c)(2) and (3) of the Code, (y)
improve the Payee's chances of securing a favorable ruling described in
this Section 8.4(b) or (z) assist the Payee in
59
obtaining a favorable legal opinion from its outside counsel as described
in this Section 8.4(b). The escrow agreement shall also provide that any
portion of the Section 8.2 Amount held in escrow for five years shall be
released by the escrow agent to the Payor. The Payor shall not be a party
to such escrow agreement and shall not bear any cost of or have liability
resulting from the escrow agreement.
8.5 Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed on behalf of each of the parties hereto at any time
before or after any approval hereof by holders of the Company Common Shares;
provided, however, that after any such approval, no amendment shall be made
which by Law requires further approval by such shareholders without obtaining
such approval.
8.6 Extension; Waiver. At any time prior to the Closing Date, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
parties contained herein or in any document delivered pursuant hereto and (c)
waive compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of the party against which such waiver or extension is to be
enforced. Except as so waived, no action taken or omitted to be taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or sent if delivered personally or sent by facsimile
(providing confirmation of transmission) or sent by prepaid overnight carrier
(providing proof of delivery) to the parties at the following addresses or
facsimile numbers (or at such other addresses or facsimile numbers as shall be
specified by the parties by like notice):
(a) if to Parent, Merger Sub or Merger Partnership:
c/o DRA Advisors LLC
000 Xxxx 00xx Xxxxxx (00xx Xxxxx)
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Xxxx Xxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
60
with a copy (for informational purposes only) to:
Blank Rome LLP
The Chrysler Building
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxx, Esq.
Xxxxxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
(000) 000-0000
(b) if to the Company or the Partnership:
Capital Automotive REIT
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
or
Capital Automotive L.P.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy (for informational purposes only) to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Attention: R. Xxxxxx Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxxxx LLP
00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
61
9.2 Certain Definitions. For purposes of this Agreement, the term:
"ACQUISITION PROPOSAL" shall mean any inquiry, offer or proposal regarding
any (a) merger, consolidation or similar business combination transaction
involving the Company, the Partnership or any Significant Subsidiary of the
Company (as defined in Rule 1-02 of Regulation S-X, but substituting 30% for the
references to 10% therein), (b) sale or other disposition, directly or
indirectly (including by way of merger, consolidation, share exchange or any
similar transaction), of any assets of the Company or its Subsidiaries
representing 30% or more of the consolidated assets of the Company and its
Subsidiaries, (c) issue, sale or other disposition of (including by way of
merger, consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 30% or more of the votes associated with the
outstanding securities of the Company, (d) tender offer or exchange offer in
which any Person or "group" (as such term is defined under the Exchange Act)
shall acquire beneficial ownership (as such term is defined in Rule 13d-3 under
the Exchange Act), or the right to acquire beneficial ownership, of 30% or more
of the outstanding Company Common Shares, (e) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or (f) transaction which is similar in form, substance or purpose to
any of the foregoing transactions; provided, however, that the term "Acquisition
Proposal" shall not include the Mergers or the other transactions contemplated
by this Agreement.
"BUSINESS DAY" shall mean any day other than (a) a Saturday or Sunday or
(b) a day on which banking and savings and loan institutions are authorized or
required by law to be closed.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DISPUTE" means in respect of any Person, any suit, claim, action,
proceeding or investigation against such Person or any of its subsidiaries or
any of its or their respective properties or assets.
"ERISA AFFILIATE" means any trade or business that is considered a single
employer together with the Company under ERISA Section 4001(b) or part of the
same "controlled group" with the Company for purposes of ERISA Section
302(d)(8)(C).
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder.
"MATERIAL ADVERSE EFFECT" means, when used in connection with the Company
or Parent, as the case may be, any change, effect or circumstance that
materially and adversely affects the business, properties, assets, financial
condition or results of operations of, as the case may be, the Company and its
Subsidiaries or Parent and its Subsidiaries, in each case taken as a whole,
including, without limitation, the filing of any bankruptcy, insolvency or
similar proceeding by or against any of the tenants of the Company or its
Subsidiaries listed in Section 9.2 of the Company Disclosure Schedule, but
excluding any changes, effects or circumstances arising from (A) conditions in,
or events affecting, the United States or global economy or capital or financial
markets generally, including changes in interest or exchange rates, (B) changes
in Laws or GAAP, (C) general changes in conditions (including changes in legal,
regulatory, political,
62
economic or business conditions) in or otherwise affecting automotive real
estate properties generally, unless such changes have a materially
disproportionate effect, relative to other industry participants, on the Company
and its Subsidiaries or Parent and its Subsidiaries, each taken as a whole, as
the case may be, but do not have a substantially comparable effect on the
Company and Parent and their respective Subsidiaries, in each case taken as a
whole, (D) this Agreement, the negotiation, execution, announcement or
performance hereof and the Mergers and the transactions contemplated by this
Agreement and the Mergers, including any claim or litigation relating thereto or
the impact thereof on relationships, contractual or otherwise, with tenants,
lenders, partners, suppliers or employees, (E) acts of war, sabotage or
terrorism, or any escalation or worsening of any such acts of war, sabotage or
terrorism threatened or underway as of the date of this Agreement, (F)
earthquakes, hurricanes or other natural disasters or (G) any decline in the
market price, or change in the trading volume, of the capital stock of the
Company or any failure by the Company to meet internal or publicly announced
revenue or earnings projections.
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Exchange Act).
"SEC" means the Securities and Exchange Commission.
"SUBSIDIARY" means any corporation more than 50% of whose outstanding
voting securities, or any partnership, limited liability company, joint venture
or other entity more than 50% of whose total equity interest, is directly or
indirectly owned by Parent or the Company, as the case may be. Without limiting
the generality of the foregoing, the Partnership is a Subsidiary of the Company
for purposes of this Agreement.
"SUPERIOR PROPOSAL" means a bona fide written Acquisition Proposal which
the Company Board determines in good faith, after consultation with its
financial advisors, is reasonably likely to be consummated and will be more
favorable to holders of the Company Common Shares than the REIT Merger (taking
into account all of the terms and conditions of such Acquisition Proposal,
including the financial terms, any conditions to consummation and the likelihood
of such Acquisition Proposal being consummated). For purposes of this
definition, the term "Acquisition Proposal" shall have the meaning set forth in
the above definition of Acquisition Proposal, except that all references to 30%
shall be deemed references to 50%.
9.3 Terms Defined Elsewhere. The following terms are defined elsewhere in
this Agreement, as indicated below:
"AGREEMENT" Preamble
"AFFILIATE" Section 3.20
"ARTICLES OF MERGER" Section 1.3
"BREAK-UP FEE" Section 8.2(b)
"CASH-OUT LIMITED PARTNER" Recitals
"CERCLA" Section 3.14
63
"CERTIFICATE" Section 2.3(b)
"CLAIM" Section 6.5(b)
"CLOSING" Section 1.4
"CLOSING DATE" Section 1.4
"COBRA" Section 3.12(f)
"COMMITMENT" Section 3.6
"COMPANY" Preamble
"COMPANY BOARD" Recitals
"COMPANY BYLAWS" Section 3.1(f)
"COMPANY COMMON SHARE" Section 2.1(b)
"COMPANY COMMON SHARE MERGER Section 2.1(b)
CONSIDERATION"
"COMPANY DISCLOSURE SCHEDULE" Article III
"COMPANY DECLARATION OF TRUST" Section 3.1(a)
"COMPANY EMPLOYEES" Section 6.8(a)
"COMPANY EMPLOYEE BENEFIT PLAN" Section 3.12(a)
"COMPANY ENVIRONMENTAL PERMITS" Section 3.14
"COMPANY MATERIAL CONTRACTS" Section 3.16(a)
"COMPANY PERMITS" Section 3.10
"COMPANY PROPERTY" Section 3.11(a)
"COMPANY RECOMMENDATION" Section 6.1(c)
"COMPANY SEC REPORTS" Section 3.4
"COMPANY SERIES A PREFERRED SHARES" Section 2.1(e)
"COMPANY SERIES B PREFERRED SHARES" Section 2.1(e)
"COMPANY SHARE OPTION" Section 2.1(f)
"COMPANY SHARE OPTION PLAN" Section 2.1(f)
"COMPANY SHAREHOLDER APPROVAL" Section 3.3(b)
"COMPANY SHAREHOLDERS MEETING" Section 6.1(c)
"COMPANY SHARES" Section 2.1(e)
"COMPANY STOCK RIGHTS" Section 3.2(c)
"COMPANY LEASES" Section 3.11(f)
"COMPANY TITLE INSURANCE POLICY" Section 3.11(c)
"CONFIDENTIALITY AGREEMENT" Section 6.6(b)
"CONVERTIBLE NOTES" Section 3.2(a)
"CORPORATE BUDGET" Section 5.1
"DEFERRED RESTRICTED SHARES" Section 2.1(g)
64
"DROP DEAD DATE" Section 8.1(b)
"DRULPA" Recitals
"DSOS" Section 1.3(b)
"ELECTING LIMITED PARTNER" Recitals
"EMPLOYEE BENEFIT PLAN" Section 6.8(a)
"ENVIRONMENTAL CLAIMS" Section 3.14
"ENVIRONMENTAL LAWS" Section 3.14
"ERISA" Section 3.12(a)
"EXCHANGE ACT" Section 3.2(h)
"EXCHANGE FUND" Section 2.3(a)
"EXCLUDED SHARES" Section 2.1(c)
"FEE SHARES" Section 2.1(g)
"GAAP" Section 3.4
"GOVERNMENTAL ENTITY" Section 3.7
"GROUND LEASE" Section 3.11(h)
"HAZARDOUS MATERIAL" Section 3.14
"IDENTIFIED COMPANY PROPERTIES" Section 6.12(a)
"INDEMNIFIED PARTY" Section 6.5(a)
"INTERIM PERIOD" Section 5.1
"IRS" Section 3.12(b)
"LAWS" Section 3.7
"LENDING CONTRACTS" Section 3.16(c)
"LIEN" Section 3.1(e)
"LP MINORITY UNITS" Section 2.2(a)
"MARYLAND REIT LAW" Recitals
"MEMBERSHIP INTEREST ELECTION" Section 2.2(a)
"MERGERS" Recitals
"MERGER CONSIDERATION" Section 2.1(f)
"MERGER PARTNERSHIP" Preamble
"MERGER SUB" Preamble
"MINORITY LIMITED PARTNERS" Recitals
"MULTIEMPLOYER PLAN" Section 3.12(a)
"NEW YORK COURTS" Section 9.9
"OP LP LLC" Recitals
"OP LP LLC MEMBERSHIP INTERESTS" Recitals
65
"OPTION MERGER CONSIDERATION" Section 2.1(f)
"OTHER FILINGS" Section 6.2
"PARENT" Preamble
"PARTICIPATION AGREEMENT" Section 3.11(n)
"PARTICIPATION INTEREST" Section 3.11(n)
"PARTICIPATION PARTY" Section 3.11(n)
"PARTNERSHIP" Recitals
"PARTNERSHIP AGREEMENT" Section 3.2(a)
"PARTNERSHIP APPROVAL" Section 3.3(c)
"PARTNERSHIP COMMON UNITS" Recitals
"PARTNERSHIP MERGER CERTIFICATE" Section 1.3(b)
"PARTNERSHIP MERGER CONSIDERATION" Section 2.2(a)
"PARTNERSHIP MERGER EFFECTIVE TIME" Section 3.1
"PARTNERSHIP MERGER" Recitals
"PARTNERSHIP PREFERRED UNITS" Recitals
"PARTNERSHIP UNITS" Recitals
"PAYEE" Section 8.4(a)
"PAYING AGENT" Section 2.3(a)
"PAYOR" Section 8.4(a)
"PCB" Section 3.14
"PERMITTED LIENS" Section 3.11(a)
"PHANTOM PLAN" Section 2.1(g)
"PHANTOM SHARES" Section 2.1(g)
"PROPERTY RESTRICTIONS" Section 3.11(a)
"PROXY STATEMENT" Section 6.1(a)
"QUALIFYING INCOME" Section 8.4(a)
"REIMBURSEMENT AGREEMENTS" Section 3.11(k)
"REIT" Section 3.15(b)
"REIT MERGER" Recitals
"REIT MERGER EFFECTIVE TIME" Section 1.3
"REPORTABLE TRANSACTIONS" Section 3.15(m)
"RESTRICTED SHARES" Section 2.1(g)
"S-O ACT" Section 3.4
"SDAT" Section 1.3
"SECTION 8.2 AMOUNT" Section 8.4(a)
66
"SECURITIES ACT" Section 3.4
"SURVIVING PARTNERSHIP" Section 1.1(b)
"SURVIVING PARTNERSHIP AGREEMENT" Section 1.2(e)
"SURVIVING REIT" Section 1.1(a)
"SURVIVING REIT BYLAWS" Section 1.2(c)
"SURVIVING REIT DECLARATION OF TRUST" Section 1.2(b)
"TAKEOVER STATUTES" Section 3.19
"TAX" AND "TAXES" Section 3.15(m)
"TAX PROTECTION AGREEMENTS" Section 3.15(n)
"TAX RETURNS" Section 3.15(m)
"TRANSACTION COSTS" Section 6.12(a)
"TRUSTEES DEFERRED COMPENSATION PLAN" Section 2.1(g)
"THIRD PARTY" Section 3.11(l)
"WARN" Section 3.12(e)
9.4 Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever used herein, a pronoun in the
masculine gender shall be considered as including the feminine gender unless the
context clearly indicates otherwise and the word "including" shall mean
"including without limitation."
9.5 Non-Survival of Representations, Warranties, Covenants and Agreements.
Except for Articles I and II, Sections 6.5, 6.8, 6.9 and 6.12 and any covenant
or agreement of the parties which by its terms contemplates performance after
the Closing Date (a) none of the representations, warranties, covenants and
agreements contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Closing Date and (b) thereafter there shall
be no liability on the part of any of Parent, Merger Sub, the Company,
Partnership or Merger Partnership or any of their respective officers, trustees,
directors, stockholders or shareholders in respect thereof. Except as expressly
set forth in this Agreement, there are no representations or warranties of any
party hereto, express or implied.
9.6 Miscellaneous. This Agreement (a) constitutes, together with the
Confidentiality Agreement and the Company Disclosure Schedule, the entire
agreement and supersedes all of the prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (b) shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns and is not intended to confer
upon any other Person (except as set forth below) any rights or remedies
hereunder and (c) may be executed in two or more counterparts which together
shall constitute a single agreement. The parties hereto 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 hereof in the federal and state courts
located in New York, this being in addition to any other remedy to which they
are entitled at law or in equity.
67
9.7 Assignment; Benefit. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties; provided that either Parent or Merger Sub may assign its
rights and interests hereunder, upon three (3) Business Days prior written
notice to the Company, to any entity at least 75% owned, directly or indirectly,
by Parent or Guarantor; provided, further, that no assignment by Parent shall be
made to an entity if such entity's being a party to this Agreement will
adversely affect the ability of the Company and the Partnership to consummate
the Mergers. Notwithstanding anything contained in this Agreement to the
contrary (except for the provisions of Sections 6.5 and 6.8 hereof which shall
inure to the benefit of the Persons or entities benefiting therefrom who are
expressly intended to be third-party beneficiaries thereof and who may enforce
the covenants contained therein), nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.8 Severability. If any provision of this Agreement, or the application
thereof to any Person or circumstance is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
Persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
9.9 Choice of Law/Consent to Jurisdiction.
(a) All disputes, claims or controversies arising out of or relating
to this Agreement, or the negotiation, validity or performance of this
Agreement, or the transactions contemplated hereby shall be governed by and
construed in accordance with the laws of the State of New York, except to
the extent that the Maryland REIT Law shall apply, in each case without
regard to its rules of conflict of laws.
Each of the Company, Parent and Merger Sub hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the State of New York located in New York County, or the federal
courts of the United States located in New York County ("New York Courts") for
any litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the transactions contemplated
hereby (and agrees not to commence any litigation relating thereto except in
such courts), waives any objection to the laying of venue of any such litigation
in the New York Courts and agrees not to plead or claim in any New York Court
that such litigation brought therein has been brought in any inconvenient forum.
9.10 Counterparts. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered to the other party. Facsimile transmission of any signed original
document shall be deemed the same as delivery of an original. At the request of
any party, the parties will confirm facsimile transmission by signing a
duplicate original document.
68
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
FLAG FUND V LLC
By: DRA G&I Fund V Real Estate
Investment Trust, Member
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
CA ACQUISITION REIT
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Trustee
CAPITAL AUTOMOTIVE REIT
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
-------------------------------
Title: President and Chief Executive Officer
------------------------------
CALP MERGER L.P.
By: Flag Fund V LLC, its general
partner
By: DRA G&I Fund V Real Estate
Investment Trust, Member
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
CAPITAL AUTOMOTIVE L.P.
By: Capital Automotive REIT, its
general partner
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxx
-------------------------------
Title: President and Chief Executive Officer
------------------------------
