AGREEMENT AND PLAN OF MERGER
Exhibit 10.3
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into as of , by and among ExchangeRight Net Leased Portfolio DST, a Delaware statutory trust (“DST”), and ExchangeRight Income Fund Operating Partnership, LP, a Delaware limited partnership (the “Operating Partnership”).
WHEREAS, prior to the Closing Date (as defined below) the Operating Partnership will form a wholly-owned, member-managed Delaware limited liability company (such entity, “Merger Sub”), which will merge with and into DST in a transaction (the “Merger”), in which the Class 1 Beneficial Interests in DST (the “DST Interests”) will be converted automatically into the right to receive consideration in cash, without interest, or common partnership units in the Operating Partnership (the “OP Units”), pursuant to an election to be made by the holders of DST Interests (each, a “DST Investor”), as provided in this Agreement;
WHEREAS, in accordance with the Delaware Statutory Trust Act (the “Trust Act”) and the Trust Agreement of DST, dated , (the “DST Agreement”), DST may merge with another entity, subject to the requisite approvals as provided in the Trust Act and the DST Agreement;
WHEREAS, ExchangeRight Income Fund, a Maryland statutory trust (“EIF”), acting in its capacity as the sole general partner of the Operating Partnership, has authorized and approved the Merger, this Agreement, the issuance of OP Units in connection with the Merger and the other transactions contemplated hereby on substantially the terms described in this Agreement.
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ARTICLE I
Section 1.02 EFFECTIVE TIME. At such date and time as may be determined by the Operating Partnership, in its sole and absolute discretion, Merger Sub and DST shall file a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware providing that the Merger shall become effective upon the filing of such Certificate of Merger or at such later date and time set as is set forth therein, which shall not be more than thirty (30) days after the filing of the Certificate of Merger (such time, the “Effective Time”), together with any certificates and other filings or recordings related thereto, in such forms as are required by, and executed in accordance with the relevant provisions of applicable Laws.
Section 1.03 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Certificate of Merger, the Trust Act and the Delaware Limited Liability Company Act.
Section 1.05 EFFECT ON SECURITIES.
(a) Under and subject to the terms and conditions of this Agreement, each DST Investor is irrevocably bound to accept and entitled to receive, as a result of and upon consummation of the Merger, the Merger Consideration (as defined below) in the form of cash or OP Units as set forth in this Section 1.05.
(b) At the Effective Time, by virtue of the Merger and without any action on the part of the parties hereto, each DST Interest shall be converted automatically into the right to receive (collectively, the “Merger Consideration”) (i) an amount of cash and/or (ii) a number of OP Units with an aggregate value equal to the Percentage Share (as defined in the DST Agreement) of the Aggregate Value of the DST represented by such DST Interest. The Merger Consideration shall be determined in accordance with Section 1.05(c) and otherwise in accordance with this Agreement and, from and after the Effective Time, each DST Interest so converted into the right to receive the Merger Consideration pursuant to this Section 1.05 shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of such DST Interest so converted shall thereafter cease to have any rights as a beneficial interest holder of DST except the right to receive the Merger Consideration applicable thereto.
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(c) Subject to Section 2.03, the amount of cash and/or number of OP Units to be delivered to each DST Investor with respect to his, her or its DST Interest shall be as follows:
(i) | Cash. The Merger Consideration to be received by a DST Investor in the Merger shall be an amount of cash equal to the Aggregate Value of the DST multiplied by the Percentage Share held by such DST Investor immediately before the Effective Time, and the Merger Consideration to be received by a DST Investor in the Merger shall be payable in cash pursuant to this Section 1.05(c)(i) if such DST Investor (A) does not return a fully-executed and completed Election Form on or before the date specified therein; (B) is not, as determined in the sole discretion of the Operating Partnership, an Accredited Investor; or (C) timely returns a fully- executed and completed Election Form indicating such DST Investor’s election to receive the Merger Consideration in the form of cash. |
(ii) | OP Units. The Merger Consideration to be received by a DST Investor in the Merger shall be a number of OP Units equal to the Aggregate Value of the DST multiplied by the Percentage Share held by such DST Investor immediately before the Effective Time divided by the Current Offering Price, and the Merger Consideration to be received by a DST Investor in the Merger shall be payable in OP Units pursuant to this Section 1.05(c)(ii) so long as such DST Investor timely returns a fully-executed and completed Election Form indicating such DST Investor’s election to receive the Merger Consideration in the form of OP Units and that such DST Investor is an Accredited Investor; provided, that, if the Operating Partnership has, in its sole discretion, determined that such DST Investor is not an Accredited Investor, such DST Investor shall receive the Merger Consideration solely in cash in accordance with Section 1.05(c)(i). |
(iii) | Cash and OP Units. The Merger Consideration to be received by a DST Investor in the Merger shall be (A) a number of OP Units equal to (I) such DST Investor’s Elected OP Unit Percentage multiplied by (II) the Aggregate Value of the DST divided by the Current Offering Price multiplied by (III) the Percentage Share held by such DST Investor immediately before the Effective Time and (B) an amount of cash equal to (I) such DST Investor’s Elected Cash Percentage multiplied by (II) the Aggregate Value of the DST multiplied by (III) the Percentage Share held by such DST Investor immediately before the Effective Time, and the Merger Consideration to be received by a DST Investor in the Merger shall be payable in cash and OP Units pursuant to this Section 1.05(c)(iii) so long as such DST Investor timely returns a fully-executed and completed Election Form indicating such DST Investor’s election to |
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receive the Merger Consideration in the form of OP Units and cash, specifying both the Elected OP Unit Percentage and the Elected Cash Percentage and that such DST Investor is an Accredited Investor; provided, that, if the Operating Partnership has, in its sole discretion, determined that such DST Investor is not an Accredited Investor, such DST Investor shall receive the Merger Consideration solely in cash in accordance with Section 1.05(c)(i).
(d) At the Effective Time, by virtue of the Merger and without any action on the part of the parties hereto, each membership interest in Merger Sub shall be converted automatically into the right to receive an equivalent percentage of DST Interests such that, following the effectiveness of the Merger, the Operating Partnership shall be the sole owner of outstanding DST Interests.
Section 1.06 ADMISSION OF DST INVESTORS AS LIMITED PARTNERS. Each DST Investor that receives OP Units in the Merger shall, upon the recordation by the Operating Partnership of the issuance of such OP Units to such DST Investor, be admitted automatically as a limited partner of the Operating Partnership in accordance with the Delaware Revised Uniform Limited Partnership Act (the “Partnership Act”) and the Amended and Restated Agreement of Limited Partnership of the Operating Partnership in the form attached hereto as Exhibit A (the “Operating Partnership Agreement”)
ARTICLE II
Section 2.02 PAYMENT OF MERGER CONSIDERATION.
(a) As soon as reasonably practicable after the Effective Time, DST shall deliver to each DST Investor, whose DST Interests have been converted into the right to receive the Merger Consideration pursuant to Section 1.05(a) hereof, the Merger Consideration payable to such holder in the amounts and form provided in Section 1.05(a) hereof.
(b) DST shall not be liable to any holder of a DST Interest for any portion of the Merger Consideration delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.
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Section 2.05 TERM OF THE AGREEMENT. This Agreement shall terminate:
(a) automatically if the Merger shall not have been consummated on or prior to _______, which date may be extended as mutually determined by the parties (such date is hereinafter referred to as the “Outside Date”);
(b) by notice by the Operating Partnership to DST; or
(c) by DST, if a breach of any representation or warranty or failure to perform any obligation, covenant or agreement on the part of Operating Partnership or Merger Sub has occurred that would cause any of the conditions set forth in Section 7.01 or Section 7.02 not to be satisfied, which breach or failure to perform cannot be cured, or, if capable of cure, has not been cured by the earlier of twenty (20) days following written notice thereof from DST to Operating Partnership and two (2) Business Days before the Outside Date; provided, that DST shall not have the right to terminate this Agreement pursuant to this Section 2.05(c) if a breach of any representation, warranty or failure to perform any obligation, covenant or agreement on the part of DST that would cause any of the conditions set forth in Section 7.01 or Section 7.03 not to be satisfied shall have occurred and be continuing at the time DST delivers notice of its election to terminate this Agreement pursuant to this Section 2.05(c).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE OPERATING
The Operating Partnership hereby represents and warrants to DST as follows:
Section 3.01 ORGANIZATION; AUTHORITY.
(a) The Operating Partnership has been duly formed and is validly existing and in good standing under the laws of the State of Delaware and, subject to the terms set forth herein, has all requisite power and authority to enter into this Agreement and to carry out the transactions contemplated hereby and thereby, and to own, lease and/or operate its property and to carry on its business as presently conducted and, to the extent required under applicable Laws, is qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the character of its property make such qualification necessary. As of the Closing Date, the Operating Partnership Agreement, in substantially the form attached hereto as Exhibit A, shall have been executed and delivered by the partners of the Operating Partnership and shall be in full force and effect, except for any amendments thereto or changes therein permitted without the consent of any Limited Partner in accordance with the terms thereof.
(b) Merger Sub will be duly formed, validly existing and in good standing under the Laws of the State of Delaware prior to the Closing Date and, subject to the terms set forth herein, will have, as of the Closing Date, all requisite power and authority to carry out the transactions contemplated hereby, to own, lease and/or operate its property and to carry on its business as then conducted and, to the extent required under applicable Laws, will be qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the character of its property make such qualification necessary.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DST
DST represents and warrants to the Operating Partnership as follows:
Section 4.01 ORGANIZATION; AUTHORITY. DST has been duly organized and is validly existing and in good standing under the Laws of the State of Delaware and has all requisite power and authority to enter into this Agreement and each agreement contemplated hereby and to carry out the transactions contemplated hereby and thereby, and to own, lease and/or operate any property owned, leased and/or operated by it and to carry on its business as presently conducted. DST, to the extent required under applicable Laws, is qualified to do business and is in good standing in each jurisdiction in which the nature of its business or the character of a property make such qualification necessary.
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ARTICLE V
COVENANTS AND OTHER AGREEMENTS
Section 5.01 PRE-CLOSING COVENANTS. During the period from the date hereof to the Closing Date (except as otherwise provided for or contemplated by this Agreement), DST shall use commercially reasonable efforts to conduct its business and operate and maintain its properties in the ordinary course of business consistent with past practice, pay its debt obligations as they become due and payable, and use commercially reasonable efforts to preserve intact its current business organizations and preserve its relationships with customers, tenants, suppliers and others having business dealings with it, in each case consistent with past practice. In addition, and without limiting the generality of the foregoing, during the period from the date hereof to the Closing Date, DST shall not, without the prior written consent of the Operating Partnership, which consent may be withheld by the Operating Partnership in its sole discretion:
(a) (i) other than distributions to holders required by the DST Agreement, declare, set aside or pay any dividends or distributions in respect of DST Interests, except in the ordinary course of business consistent with past practice and in accordance with the Organizational Documents, (ii) issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any DST Interests or make any other changes to the equity capital structure of DST, or (iii) purchase, redeem or otherwise acquire any DST Interests;
(b) issue, deliver, sell, transfer, dispose, mortgage, pledge, assign or otherwise encumber, or cause the issuance, delivery, sale, transfer, disposition, mortgage, pledge, assignment or otherwise encumbrance of, DST Interests or any other assets of DST;
(c) amend, modify or terminate any lease, contract or other instruments relating to any property owned by DST, except in the ordinary course of business consistent with past practice;
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(d) amend the Organizational Documents;
(e) adopt a plan of liquidation, dissolution, merger, consolidation, restructuring, recapitalization or reorganization;
(f) materially alter the manner of keeping DST’s books, accounts or records or the accounting practices therein reflected;
(g) make or change any Tax elections; settle or compromise any claim, notice, audit report or assessment in respect of Taxes; change any annual Tax accounting period; adopt or change any method of Tax accounting; file any amended Tax return; enter into any tax allocation agreement, tax sharing agreement, tax indemnity agreement or closing agreement relating to any Tax; surrender of any right to claim a Tax refund; or consent to any extension or waiver of the statute of limitations period applicable to any Tax claim or assessment;
(h) terminate or amend any existing insurance policies affecting any property owned by DST that results in a material reduction in insurance coverage for such property;
(i) knowingly violate or permit the violation of, or fail to use commercially reasonable efforts to cure any violation of, any applicable Laws; or
(j) authorize, commit or agree to take any of the foregoing actions.
ARTICLE VI
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effect such holder’s admission as a limited partner of the Operating Partnership in accordance with the Partnership Act and the Operating Partnership Agreement, and (iv) such other representations, warranties and agreements as the Operating Partnership and DST may determine to be necessary or appropriate. The Operating Partnership shall cause the Offer to remain open to DST Investors for at least 20 Business Days from the date that the 721 PPM and the Election Form are first sent to DST Investors by DST. Each of DST and Operating Partnership shall furnish all information concerning itself, its Affiliates and its beneficial owners or partners to the other party and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of the 721 PPM and the Election Form. The Operating Partnership shall prepare, as promptly as practicable upon request therefor by DST, any amendments, supplements or updates to the 721 PPM or the Election Form as may be necessary or advisable in connection with the Offer, and DST shall cause any such amendments, supplements or updates to be delivered promptly to each DST Investor. Each of DST and Operating Partnership shall use commercially reasonable efforts to take any action required to be taken under the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder in connection with the Offer, and to furnish all information as may be reasonably requested in connection with any such actions.
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of the Code; and (c) with respect to a DST Investor receiving its share of the Merger Consideration in both cash and OP Units pursuant to Section 1.05(c)(iii), a taxable sale of an undivided interest (equal to such DST Investor’s Elected Cash Percentage) in each property held by the DST by such DST Investor to the Operating Partnership under Section 1001 of the Code and a non-taxable transfer of an undivided interest (equal to such DST Investor’s Elected OP Unit Percentage) in each property held by the DST by such DST Investor to the Operating Partnership in exchange for interests in the Operating Partnership under Section 721 of the Code. The Operating Partnership and each DST Investor shall file all tax returns in a manner consistent with the foregoing unless otherwise required by a final, non-appealable determination by an applicable Governmental Authority.
ARTICLE VII
Section 7.01 CONDITION TO EACH PARTY’S OBLIGATIONS. The respective obligation of each party to effect the Merger and to consummate the other transactions contemplated by this Agreement to occur on the Closing Date is subject to the satisfaction or waiver on or prior to the Effective Time of the following conditions:
(a) NO INJUNCTION. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, executive order, decree, judgment, injunction, stay or other order (whether temporary, preliminary or permanent), in any case which is in effect and which prevents or prohibits consummation of any of the transactions contemplated in this Agreement nor shall any of the same brought by a Governmental Authority of competent jurisdiction be pending or threatened that seeks the foregoing.
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ARTICLE VIII
if to the Operating Partnership, to:
ExchangeRight Income Fund Operating Partnership
c/o ExchangeRight Real Estate, LLC
0000 X. Xxxxxxxx Xxxx., Xxxxx 000
Pasadena, CA 91106
Attn: ________
if to DST, to:
ExchangeRight Net Least Portfolio ___ DST
c/o ExchangeRight Real Estate, LLC
0000 X. Xxxxxxxx Xxxx., Xxxxx 000
Pasadena, CA 91106
Attn: ________
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(a) “Accredited Investor” shall have the meaning set forth in Rule 501 of Regulation D promulgated under the Securities Act.
(b) “Affiliate” means, with respect to any Person, a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the specified Person. For the purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.
(a) “Aggregate Value of the DST” means $_________ plus the total amount of reserves as of the Closing Date minus the total amount of the Loan as of the Closing Date minus the total costs associated with the Merger to be deducted from the total amount of Merger Consideration pursuant to Section 1.07 hereof. Such Aggregate Value of the DST reflects an expectation that all properties that are currently open and operating in the normal course of business will still be on the Closing Date. Should the status of any tenants change between the date of this Merger and as of the time of the desired acquisition, the Operating Partnership will have the option to either extend the closing date or adjust the price, as mutually determined by the parties.
(b) “Business Day” means any day that is not a Saturday, Sunday or legal holiday in the State of Delaware.
(c) “Code” means the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated or issued thereunder.
(d) “Current Offering Price” means the offering price per common share of beneficial interest, par value $0.01 per share, of ExchangeRight Income Fund, a Maryland statutory trust, as of the Effective Date, pursuant to the Private Placement Memorandum of ExchangeRight Essential Income Strategy, dated _______ as amended and supplemented from time to time.
(e) “Elected Cash Percentage” means one minus such DST Investor’s Elected OP Unit Percentage.
(f) “Elected OP Unit Percentage” means a number between zero and one, expressed as a percentage, for which a DST Investor has made an irrevocable election to receive all or a portion of its Percentage Share in the form of OP Units as indicated on the properly completed and timely received Election Form.
(g) “Governmental Authority” means any government or agency, bureau, board, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign.
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(h) “Laws” means laws, statutes, rules, regulations, codes, orders, ordinances, judgments, injunctions, decrees and policies of any Governmental Authority, including, without limitation, zoning, land use or other similar rules or ordinances.
(i) “Lender” means _____ ______, or any Affiliate thereof.
(j) “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity.
(k) “Tax” means all federal, state, local and foreign income, gross receipts, license, property, withholding, sales, franchise, employment, payroll, goods and services, stamp, environmental, customs duties, capital stock, social security, transfer, alternative minimum, excise and other taxes, tariffs or governmental charges of any nature whatsoever, including estimated taxes, together with penalties, interest or additions to Tax with respect thereto, whether or not disputed.
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Section 8.09 RULES OF CONSTRUCTION.
(a) The parties hereto agree that they have had the opportunity to be represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.
(b) The words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article, section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of this Agreement unless otherwise specified. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” All terms defined in this Agreement shall have the defined meanings contained herein when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. Unless explicitly stated otherwise herein, any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time, amended, qualified or supplemented, including (in the case of agreements and instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.
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“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
DST acknowledges that it later may discover Claims or facts in addition to or different from those which DST now knows or believes to exist with respect to the subject matter of this Section 8.11 and which, if known or suspected at the time of executing this Agreement, may have materially affected its terms. Nevertheless, with respect to any matter released pursuant to this Section 8.11, DST hereby waives any and all Claims that might arise as a result of such different or additional Claims or facts.
[SIGNATURE PAGE FOLLOWS]
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EXCHANGERIGHT INCOME FUND OPERATING PARTNERSHIP, LP, | ||||||
a Delaware limited partnership | ||||||
By: EXCHANGERIGHT INCOME FUND, a Maryland statutory trust, its sole general partner | ||||||
By: | /S/ Xxxxxx Xxxxxx | |||||
Name: Xxxxxx Xxxxxx | ||||||
Title: Secretary |
EXCHANGERIGHT NET LEASED PORTFOLIO __ DST, | ||
a Delaware statutory trust | ||
By: EXCHANGERIGHT ASSET MANAGEMENT, LLC, | ||
a California limited liability company, its sole manager |
By: EXCHANGERIGHT REAL ESTATE, LLC, a California limited liability company, its sole manager | ||||||||
|
By: | /S/ Xxxxxx Xxxxxx | ||||||
Name: Xxxxxx Xxxxxx | ||||||||
Title: Manager |
[Signature Page to DST ___ Merger] Agreement]